TaxTMI Updates e-Newsletter
May 31,2018

Renting in relation to immovable property - rental or leasing services involving non-residential property - taxability of rent under GST - exemption of healthcare services under GST - no automatic exemption of input services where output is exempt

Renting in relation to immovable property - rental or leasing services involving non-residential property - taxability of rent under GST - no automatic exemption of input services where output is exempt - GST leviability on rent paid/payable by a specialised hospital for premises taken on lease - HELD THAT: - The Authority applied the definition of renting in relation to immovable property as set out in Notification No. 12/2017-Central Tax (Rate), which encompasses letting, leasing or similar arrangements in respect of immovable property. The leasing of the premises by the applicant falls squarely within that definition. Rental or leasing services involving own or leased non residential property are classifiable under the relevant SAC (997212) and are taxable under GST. The Authority further noted the absence of any specific exemption notification covering the impugned rental service and observed that there is no provision in the Act that exempts an input service merely because the recipient's output services are themselves exempt. Applying these principles to the material facts, the rent paid/payable by the hospital for the leased premises is taxable under GST. [Paras 7, 8]

GST is leviable on the rent paid/payable for premises taken on lease by the applicant.

Final Conclusion: The Authority ruled that rent payable by the specialised hospital for leased premises is taxable under GST; no exemption applies to the rental service merely because the hospital's healthcare services are GST exempt.

Estimation of taxable turnover on basis of panchnama - exercise of power under Section 67(6) of the U.P. Goods and Services Tax Act, 2017 - proof and production of books of account as affecting seizure - verification of actual stock against panchnama - deposit and security as condition for release of seized goods - interim relief pending adjudication

Proof and production of books of account as affecting seizure - verification of actual stock against panchnama - exercise of power under Section 67(6) of the U.P. Goods and Services Tax Act, 2017 - Whether the order passed under Section 67(6) on an estimation basis without considering the books of account produced required further scrutiny and reconsideration by the authority. - HELD THAT: - The Court recorded that the books of account were not produced at the time of search because the custodian (accountant) was not present, but were later produced with the petitioner's reply. The impugned order, however, was passed on estimates without verification of actual stock or consideration of the subsequently produced books. The matter raises a prima facie question which the Court directed be examined by the respondents by filing a counter affidavit; the petitioner was permitted to file a rejoinder. Thus the Court did not finally adjudicate the validity of the order on merits but required the respondents to reconsider the issue after giving opportunity to respond and verifying records and stock as appropriate.

Remanded for fresh consideration and verification by the authority; respondents to file counter affidavit and the petitioner may file rejoinder before further orders.

Deposit and security as condition for release of seized goods - interim relief pending adjudication - seizure and release of goods - Whether the seized goods could be released pending further adjudication and on what conditions. - HELD THAT: - Balancing the need for protection of revenue and the petitioner's right to carry on business, the Court directed interim relief. The respondents were ordered to release the goods seized on 25.04.2018 upon the petitioner depositing a specified sum and providing adequate security for the balance amount in a form other than cash or bank guarantee. Upon deposit and production of the receipt the respondents were directed to permit the petitioner to resume business operations. This direction was issued as an interim measure without prejudicing the merits of the adjudication which was to be reconsidered pursuant to the filing of affidavits.

Seized goods to be released subject to deposit and provision of security; petitioner permitted to carry on business pending further proceedings.

Final Conclusion: The Court granted interim relief by directing release of seized goods on deposit and security and remanded the substantive question of the validity of the estimation based order for reconsideration by the authority after exchange of affidavits.

Seizure under section 129(1) and imposition of tax and penalty under section 129(3) - release of seized goods and vehicle without security - availability of benefit of earlier judgment - state e-way bill downloaded though not required prior to interception

Seizure under section 129(1) and imposition of tax and penalty under section 129(3) - availability of benefit of earlier judgment - release of seized goods and vehicle without security - Whether the seizure of goods and vehicle and the consequential imposition of tax and penalty should be quashed and the goods and vehicle released in view of the Court's earlier judgment dated 13.4.2018 in Writ Petition No.5536 (M/B) of 2018. - HELD THAT: - The petition was disposed of by the Court on the ground that the matter is squarely covered by the Court's earlier decision dated 13.4.2018 in Writ Petition No.5536 (M/B) of 2018 (annexed as part of the petition). Applying the precedent in the earlier judgment, the Court granted the petitioner the benefit of that decision. In consequence, the reliefs sought in the present petition concerning quashing of the seizure and the imposition of tax and penalty, and the direction for release of the goods and vehicle, were disposed in terms of the said earlier judgment. The Court further directed the Registry to supply a copy of the earlier judgment and the present order to the petitioner.

Petition disposed of in terms of the Court's judgment dated 13.4.2018 in Writ Petition No.5536 (M/B) of 2018; petitioner granted the benefits of that judgment and reliefs consequential thereto.

Final Conclusion: The writ petition is disposed of by extending to the petitioner the benefits of this Court's earlier judgment dated 13.4.2018 in Writ Petition No.5536 (M/B) of 2018; consequential reliefs regarding the seizure, imposition of tax and penalty, and release of goods and vehicle shall follow as directed in that earlier judgment, and the Registry is directed to furnish copies of the judgments to the petitioner.

Composite supply - Principal supply - Ancillary or incidental services - Single source responsibility contract - Place of supply for goods involving movement - Illustration to Section 2(30) - goods packed and transported with insurance - Taxability under Section 8(a) of the GST Act - Exemption for transportation of goods by road except goods transport agency

Composite supply - Principal supply - Ancillary or incidental services - Single source responsibility contract - Place of supply for goods involving movement - Taxability under Section 8(a) of the GST Act - Exemption for transportation of goods by road except goods transport agency - Whether the lump-sum consideration payable under the Second Contract for inland/local transportation, in-transit insurance and loading/unloading is taxable as part of a composite supply with the supply of goods and, if so, whether it is taxable under Section 8(a) of the GST Act. - HELD THAT: - The two NOAs (First and Second Contracts) are interdependent and cannot be performed independently: the First Contract (ex-works supply) lacks delivery to place of supply and is expressly made contingent on performance under the Second Contract. The cross-fall breach clauses render the two contracts a single source responsibility contract, so the promises to supply goods and to deliver/transport them are not separately enforceable and are naturally bundled. Where goods are supplied together with services of transportation and insurance such supplies fall within the legislative illustration to the definition of composite supply and the supply of goods is the principal supply. The applicant is not itself a transporter or insurer but procures those services for delivery; the exemption for road transportation except GTA does not apply to the applicant's position because the contractual arrangement results in a composite supply with supply of goods as principal. Consequentially, the lump-sum consideration for transportation, in-transit insurance and loading/unloading being ancillary to the principal supply of goods must be treated as taxable in accordance with the provision applicable to composite supplies and taxed under Section 8(a) of the GST Act. [Paras 9, 10, 11, 12]

The services of transportation, in-transit insurance and loading/unloading are ancillary to the principal supply of goods and are taxable as part of the composite supply under Section 8(a) of the GST Act.

Final Conclusion: The Advance Ruling holds that the lump-sum consideration for inland/local transportation, in-transit insurance and loading/unloading, being ancillary to the principal supply of goods under the linked contracts, shall be taxed as part of the composite supply in terms of Section 8(a) of the GST Act.

Revenue expenditure vs capital expenditure - enduring benefit test - commercial sense test for capitality - entirely possible view of fact-finding

Revenue expenditure vs capital expenditure - enduring benefit test - entirely possible view of fact-finding - Deletion of disallowance of software expenditure of Rs. 38,90,369 treated by AO as capital expenditure - HELD THAT: - Both the Commissioner (Appeals) and the Tribunal found as a fact that the software purchased from CA (India) Technologies Pvt. Ltd. improved operational efficiency and addressed specific user problems, and that software requires regular updating in view of rapidly changing technology. Applying the principle in Empire Jute Co. Ltd., the Court held that an advantage of enduring nature does not ipso facto render an expenditure capital; what matters is the nature of the advantage in a commercial sense and whether it adds to fixed capital or merely facilitates trading operations or makes business more efficient. On the material facts the view taken by the Tribunal that the payment was revenue in nature is an entirely possible view, and therefore does not give rise to a substantial question of law warranting interference. [Paras 3]

Tribunal's deletion of the disallowance of the software expenditure upheld; question does not raise a substantial question of law and is not entertained.

Revenue expenditure vs capital expenditure - enduring benefit test - commercial sense test for capitality - entirely possible view of fact-finding - Deletion of disallowance of miscellaneous expenditure of Rs. 7,82,250 incurred towards occupational health & safety measures treated by AO as capital expenditure - HELD THAT: - The Tribunal and the CIT(A) found that the expenditure was incurred to ensure employee health and a safe, accident-free working environment thereby facilitating smooth running of business. The Court observed that one-time payment or alleged enduring benefit is not a conclusive test; expenditure that merely assists in providing a hassle-free environment and does not add to or expand the profit making apparatus falls in the revenue field under the test in Empire Jute Co. Ltd. Given these factual findings, the Tribunal's view that the expense is revenue in nature is a possible view and does not present a substantial question of law for this Court to entertain. [Paras 4]

Tribunal's deletion of the disallowance upheld; question does not raise a substantial question of law and is not entertained.

Revenue expenditure vs capital expenditure - Admissibility of the Revenue's challenge to the deletion under section 40(a)(ia) (question no. 3) - HELD THAT: - The Court recorded that Appeal No. (3) is admitted on the substantial question of law, without deciding the merits. The order directs that papers be made available to the Tribunal and lists the appeal for hearing along with another Income Tax Appeal, thereby leaving the substantive adjudication of question (3) to be considered on its merits in further proceedings. [Paras 5, 6]

Question (3) is admitted for consideration; merits remitted for further hearing.

Final Conclusion: The Court upholds the Tribunal's factual conclusion that the software and occupational health and safety expenditures are revenue in nature - finding no substantial question of law in respect of Questions (1) and (2) - while admitting Question (3) for further adjudication and directing necessary records to be made available to the Tribunal.

Invalid return under Section 139(9) - condonation of delay under Section 119(2)(b) - obligation to provide opportunity of hearing before rejecting an application - duty to scrutinize return and determine entitlement to refund - limitation for issuance of notice under Section 143(2) - quashing administrative communications and orders

Invalid return under Section 139(9) - duty to scrutinize return and determine entitlement to refund - Returns filed by the assessee were wrongly declared invalid and the returns must be scrutinized to determine entitlement to refund. - HELD THAT: - The Court found that the Department incorrectly treated the returns as invalid under the stated provision and that it was incumbent on the Department to verify whether the returns were filed within time and otherwise in order. Having held the declaration of invalidity to be erroneous, the Court directed the assessing authority to undertake scrutiny of the returns and, if on scrutiny the assessee is found entitled to a refund, to pass appropriate orders in accordance with law. This directs the assessing authority to reconsider the returns on merits rather than leave the declaration of invalidity intact. [Paras 2, 6]

Quashed the declaration of invalidity and directed respondent No.2 to scrutinize the returns and pass appropriate orders regarding any refund.

Condonation of delay under Section 119(2)(b) - obligation to provide opportunity of hearing before rejecting an application - quashing administrative communications and orders - The application under Section 119(2)(b) for condonation of delay was rejected without affording an opportunity of hearing and that rejection was quashed. - HELD THAT: - The Court recorded that the Principal Commissioner rejected the assessee's application for condonation of delay without granting an opportunity of hearing. The absence of an opportunity of hearing rendered the rejection procedurally infirm. For that reason the Court quashed the impugned communications and order which recorded such rejection, concluding that the rejection could not stand without affording the petitioner a hearing. [Paras 3, 6]

Quashed the rejection of the condonation application for want of opportunity of hearing.

Limitation for issuance of notice under Section 143(2) - duty to scrutinize return and determine entitlement to refund - Scrutiny of the returns was ordered to be completed within a specified period, subject to the assessee's undertaking not to raise limitation objections in subsequent assessment proceedings. - HELD THAT: - The Court directed respondent No.2 to scrutinize the returns relating to assessment year 2011-2012 within eight weeks from receipt of the certified copy of the order and to pass appropriate orders in accordance with law. The petitioner gave an express undertaking that it would not raise any objection regarding limitation for issuance of notice under Section 143(2) or for framing any consequential assessment, and the Court recorded that undertaking and proceeded to dispose of the petition on that basis. [Paras 4, 7, 8]

Directed scrutiny within eight weeks and recorded the assessee's undertaking waiving limitation objections; disposed of the writ petition accordingly.

Final Conclusion: The impugned communications and order were quashed; the assessing authority is directed to scrutinize the returns for assessment year 2011-2012 within eight weeks and to pass appropriate orders, with the petitioner having undertaken not to raise limitation objections in any resulting assessment proceedings.

Revisional jurisdiction under section 264 - bar on revision where appeal lies or is pending - mandatory electronic filing of appeals under amended rule 45 - treatment of manually filed appeal as non-est where e-appeal not filed within prescribed time - special audit under section 142(2A) - scope and limits of interference by revisional authority in assessment orders - maintainability of departmental writ after administrative approval

Revisional jurisdiction under section 264 - bar on revision where appeal lies or is pending - mandatory electronic filing of appeals under amended rule 45 - treatment of manually filed appeal as non-est where e-appeal not filed within prescribed time - Whether the Commissioner could validly entertain and dispose of the revision petition dated 07.07.2016 notwithstanding an earlier manually filed appeal by the assessee. - HELD THAT: - The court examined subsection (4) of section 264 which bars revision where an appeal lies or is pending. The amended rule 45 made electronic filing of appeals compulsory from 01.03.2016 and the concessionary period for filing e-appeals ended on 15.06.2016. The Commissioner verified that no e-appeal had been received in the office; the manually filed appeal therefore stood defective and could be treated as if no appeal had been filed. In those circumstances the Commissioner was justified in exercising revisional jurisdiction on 07.07.2016. The Appellate Commissioner's later conduct in treating the manual appeal as non-est and yet deciding and dismissing it created conflicting outcomes, but that did not render the revisional exercise invalid where the statutory bar in subsection (4) did not operate because no valid appeal was pending. [Paras 13, 14, 15]

Commissioner was not in error in entertaining and disposing of the revision petition on 07.07.2016 because no valid electronically filed appeal was on record within the prescribed period.

Special audit under section 142(2A) - scope and limits of interference by revisional authority in assessment orders - Whether the Commissioner was justified in remanding the assessment for fresh adjudication after directing a special audit under section 142(2A). - HELD THAT: - The Commissioner remanded the assessment on two stated grounds: (i) the large quantum of alleged additions and (ii) that the assessee had requested a special audit. The court held both grounds unsustainable. Exercise of revisional powers must be justified by legal infirmity in the assessment order and not merely by the quantum of addition; the size of additions alone is not a proper criterion for interference. Further, section 142(2A) empowers the Assessing Officer to call for a special audit only with prior approval of the concerned authority and for specific statutory purposes (nature/complexity/volume/doubts about correctness/multiplicity/specialised transactions). It is not a remedy the assessee can insist upon so as to compel a revisional remand. The Commissioner therefore misapplied the provision and placed undue reliance on the assessee's request for special audit. [Paras 18, 19, 20]

Remand for fresh assessment and direction for special audit under section 142(2A) were unsustainable; the revisional order on these grounds was legally erroneous.

Maintainability of departmental writ after administrative approval - Whether the petition filed by the Assessing Officer was maintainable notwithstanding that the AO is subordinate to the Commissioner. - HELD THAT: - The court considered the department's averments and the administrative approval produced on record. The filing of the petition was shown to have been authorised by the competent departmental authority (Principal Chief Commissioner/Chief Commissioner), and therefore the fact that the Assessing Officer is subordinate did not render the petition incompetent. The petition was not the AO's unilateral action but was instituted pursuant to administrative sanction. [Paras 12]

The writ petition filed by the Assessing Officer was maintainable having regard to departmental approval placed on record.

Treatment of manually filed appeal as non-est where e-appeal not filed within prescribed time - bar on revision where appeal lies or is pending - Validity of the order dated 21.09.2017 passed by the Appellate Commissioner dismissing the manually filed appeal. - HELD THAT: - The Appellate Commissioner had earlier communicated that manually filed appeals would be treated as non-est unless e-appeal was furnished within seven days; the assessee informed that he elected not to pursue the e-appeal because he had pursued revision. Having treated the manual appeal as defective, the Appellate Commissioner lacked jurisdiction to proceed to decide and dismiss that same manual appeal, thereby creating inconsistent outcomes with the revisional order which had set aside the assessment. The court found that the Appellate Commissioner's order in that context was unsustainable and inoperative. [Paras 15, 22]

Order dated 21.09.2017 passed by the Appellate Commissioner is unsustainable and inoperative.

Final Conclusion: Impugned revisional order dated 07.07.2016 is set aside on the ground that the remand and direction for special audit were unsustainable; the revision petition is placed back before the Commissioner of Income Tax for fresh disposal in accordance with law. The Appellate Commissioner's order dated 21.09.2017 is declared unsustainable and inoperative. The writ petition is disposed accordingly.

Deemed registration under section 12A - date of grant of registration - reckoning from date of original application - obligation to pass order within six months - consequences of failure - issue of certificate under section 12AA - application of authoritative precedent on deemed registration

Deemed registration under section 12A - date of grant of registration - reckoning from date of original application - obligation to pass order within six months - consequences of failure - application of authoritative precedent on deemed registration - Registration under section 12A/12AA is to be treated as deemed granted from the date of filing of the original application dated 25.03.2002 where no order was passed within the statutory period. - HELD THAT: - The Tribunal found that the trust filed an original application for registration under section 12A on 25.03.2002 which remained undisposed. Applying the legal principle that an order granting or refusing registration must be passed within six months from the end of the month in which the application was received, and that failure to pass such order results in deemed grant of registration, the Tribunal relied on the authority cited in the record, CIT, Kanpur Vs. Society for Promotion of Education , as governing precedent. The Assessing Officer had reopened assessment for AY 2003-04 on the ground of non-registration but ultimately completed the assessment accepting computations under sections 11 and 12 as if registration existed. The Tribunal held that the Commissioner erred in granting registration only w.e.f. Financial year 2016-17, and directed that registration be treated as deemed granted w.e.f. the date of the original application (25.03.2002). [Paras 7, 8]

Order of the Commissioner granting registration from Financial year 2016-17 is set aside; registration deemed granted from 25.03.2002 and Commissioner directed to grant registration accordingly.

Issue of certificate under section 12AA - reasonable opportunity of hearing - The Commissioner is directed to issue a speaking certificate of registration under section 12AA in accordance with the deemed grant and to afford the assessee reasonable opportunity of hearing. - HELD THAT: - Having held that registration is deemed granted from the date of the original application, the Tribunal directed the Commissioner to record a speaking order consistent with that conclusion and to issue the certificate of registration under section 12AA. The Commissioner is to afford the assessee a reasonable opportunity of hearing before issuing the certificate, thereby completing the statutory administrative act in accordance with the Tribunal's direction. [Paras 7, 8]

Commissioner to issue certificate of registration under section 12AA w.e.f. 25.03.2002 after affording reasonable opportunity of hearing and to pass a speaking order.

Mutatis mutandis application of decision - The decision in ITA No.779/PUN/2016 is to apply mutatis mutandis to ITA No.780/PUN/2016. - HELD THAT: - Facts and legal questions in ITA No.780/PUN/2016 were identical to those in ITA No.779/PUN/2016. The Tribunal accordingly held that the conclusions reached in ITA No.779/PUN/2016 apply equally to the second appeal. [Paras 9]

Decision in ITA No.779/PUN/2016 applies mutatis mutandis to ITA No.780/PUN/2016; both appeals allowed.

Final Conclusion: The Tribunal allowed both appeals, holding that registration under section 12A is deemed granted from the original application date 25.03.2002; the Commissioner is directed to pass a speaking order, afford reasonable opportunity of hearing and issue the certificate of registration under section 12AA accordingly, and the same relief is applied to the connected appeal.

Disallowance under section 40(a)(ia) - obligation to deduct tax at source under section 194H - intermediary/distributor not liable where payment made directly by principal - contra entries and revenue neutral book entries - assessment of income where there is no actual receipt

Disallowance under section 40(a)(ia) - obligation to deduct tax at source under section 194H - intermediary/distributor not liable where payment made directly by principal - Deletion of disallowance of Rs. 16,41,989 under section 40(a)(ia) in respect of commission/discount shown as paid to retailers. - HELD THAT: - The Tribunal found on the material on record, including confirmation from M/s. Vodafone Digilink Pvt. Ltd., that the alleged commission/discount was actually paid by the mobile operator directly to retailers and that the assessee merely recorded contra entries in its books as a dealer/distributor. The quantum and percentage of the commission/discount were determined and controlled by the operator and not by the assessee. Merely showing the amount as paid in the assessee's accounts for accounting completeness did not make the assessee the payer for purposes of attracting the obligation to deduct tax under section 194H. The Coordinate Bench's reasoning in Chocopack Enterprises (adopted here) and the principles in Bharat Sanchar Nigam Ltd. (supra) were applied to hold that where the distributor is only an intermediary and the principal actually pays the commission, the burden to deduct TDS is on the service provider and not on the distributor; accordingly the disallowance under section 40(a)(ia) was unwarranted and deleted. [Paras 4]

Disallowance under section 40(a)(ia) set aside and deleted.

Assessment of income where there is no actual receipt - contra entries and revenue neutral book entries - intermediary/distributor not liable where payment made directly by principal - Deletion of addition of Rs. 1,56,787 treated as bogus commission/undisclosed receipts. - HELD THAT: - The Tribunal noted the business model where mobile operators make payments of discounts/commissions directly to retailers and the assessee, as a dealer, only reflected these transactions by contra entries for completeness. There was no actual receipt of the amounts in the assessee's bank account and the assessee had no role or discretion in determining the quantum of payments. Viewing the transaction holistically, the AO erred in making additions by relying on entries in the operator's books without recognising that the assessee had not actually received or paid the sums and that the entries were revenue neutral. Consequently the additions were unjustified and were deleted. [Paras 7]

Additions on account of alleged bogus commission/undisclosed receipts deleted.

Final Conclusion: Both the disallowance under section 40(a)(ia) and the additions on account of alleged bogus commission were set aside and deleted; the assessee's appeal is allowed.

Deletion of addition in reassessment - reopening of assessment under section 147 of the Income-tax Act - bogus accommodation entries - burden of proof on assessee to demonstrate genuineness of purchases - reliability of a retracted statement as evidence - precedential value of a Division Bench/Tribunal decision

Deletion of addition in reassessment - bogus accommodation entries - reliability of a retracted statement as evidence - precedential value of a Division Bench/Tribunal decision - Deletion of addition of purchases treated as bogus and included in income - HELD THAT: - The Tribunal followed the Division Bench decision in M/s. M.B. Jewellers and Sons vs DCIT where materially similar facts - purchases from M/s. Vitrag Jewels and reliance by the revenue on the statement of Shri Rajendra Jain - were considered. That decision held that the only direct evidence for the revenue (the statement of Shri Rajendra Jain) had been retracted by him and therefore could not constitute reliable proof that cash was returned to the assessee in lieu of cheques. The Tribunal noted supporting factual matters: the assessee maintained regular books, furnished purchase bills, tax/audit records and particulars of movement of stock; payments to the supplier were by account payee cheques, and in the comparable decision timing of payments made it impossible to infer receipt of cash in the year of purchases. In the circumstances, applying the precedent and on the record before it, the Tribunal concluded there was no case made out for treating the purchases as bogus and accordingly directed deletion of the addition confirmed by the lower authorities. [Paras 5]

Addition on account of alleged bogus purchases is deleted and grounds 3 and 4 of the appeal are allowed.

Final Conclusion: The Tribunal allowed the appeal by deleting the addition made on account of alleged bogus purchases for Asst. Year 2007-08; the challenge to the validity of reopening was rendered academic and not adjudicated.

Reopening of assessment - reason to believe - survey under section 133A - impounded documents as tangible material - statement recorded under section 131 - right to cross-examine adverse witness - remand for cross-examination

Reopening of assessment - reason to believe - impounded documents as tangible material - survey under section 133A - Validity of reopening assessment under section 147/148 for A.Y. 2006-07 - HELD THAT: - The return filed for A.Y. 2006-07 did not disclose transactions in real estate. During a survey under section 133A at the business premises of a third party, incriminating documents (Annexure-AA) were impounded which recorded investments and a profit entry in respect of Balaji Vihar transactions and entries showing deposits from the assessee. The AO recorded these impounded entries as fresh material and obtained prior approval before issuing notice under section 148. The Tribunal applied the principle that at the stage of reopening a prima facie belief that income chargeable to tax has escaped assessment is sufficient and the AO is not required to establish the correctness of the material forming the basis of such belief. Given that the impounded documents specifically referenced the assessee in land dealing entries and disclosed an alleged profit not declared in the return, the Tribunal found these to constitute tangible material forming a reason to believe that income had escaped assessment and therefore upheld the reopening. [Paras 4]

Reopening of assessment for A.Y. 2006-07 held valid; impugned reopening and CIT(A) order on this point affirmed.

Statement recorded under section 131 - right to cross-examine adverse witness - remand for cross-examination - Sustainability of additions based on impounded material corroborated by statement of a third party (Shri Rajesh Tambi) - HELD THAT: - The impounded material did not, by itself, fully establish the nature of the transactions or the assessee's exact share of profits; the statement of Shri Rajesh Tambi recorded under section 131 supplied the explanatory link relied upon by the AO. It was undisputed that the assessee was not given an opportunity to cross-examine Shri Tambi. In view of the Supreme Court authority reproduced in the order, which holds that reliance on witnesses' statements without affording the affected party an opportunity to cross-examine them is a serious defect, the Tribunal directed that the matter be set aside to the file of the AO for providing the assessee an opportunity to cross-examine Shri Rajesh Tambi. After affording that opportunity, the AO is to adjudicate the claim of additions in accordance with law. [Paras 6]

Additions sustained provisionally are set aside and remanded to the AO for further proceedings after affording the assessee opportunity to cross-examine Shri Rajesh Tambi; adjudication to follow thereafter.

Final Conclusion: Appeal partly allowed for statistical purposes: reopening of assessment for A.Y. 2006-07 upheld; additions founded on the impounded material and the third party's statement set aside and remanded to the Assessing Officer for fresh adjudication after permitting the assessee to cross-examine the said witness.

Carry forward of excess expenditure of charitable trust - application of income for charitable purposes under section 11(1)(a) - adjustment of prior-year deficits against subsequent-year income - self-contained code of sections 11 to 13

Carry forward of excess expenditure of charitable trust - application of income for charitable purposes under section 11(1)(a) - adjustment of prior-year deficits against subsequent-year income - Direction of CIT(A) to allow carry forward of excess expenditure/deficit of earlier years to be set off against surplus of current and subsequent years and to treat such set-off as application of income for charitable purposes - HELD THAT: - The Tribunal followed the coordinate-bench decision in the assessee's own case which, relying on the Bombay High Court in Institute of Banking Personnel and supporting Gujarat High Court authority, held that where commercial principles are applied to compute income of a trust, adjustment in a subsequent year of expenditure incurred in earlier years will amount to application of income of the trust in the year of adjustment and therefore falls within the benevolent exclusion under section 11(1)(a). The CIT(A)'s direction to the AO to allow carry forward and set off of the deficit after due verification of facts was accordingly upheld. The Revenue's contention that the code in sections 11-13 precludes such adjustment was rejected as lacking merit in view of the authorities relied upon and the coordinate-bench precedent. [Paras 6, 7]

Appeal of the Revenue dismissed; CIT(A)'s direction to allow carry forward and set off of earlier-year deficit as application of income upheld.

Restoration for fresh decision in light of judicial precedent - Assessee's cross-objection seeking deletion of excess income shown on account of interest (alleged double inclusion) - direction to AO to decide afresh - HELD THAT: - The Tribunal found that the assessee had brought to the AO's notice during assessment that certain interest income was already included in gross receipts, but both the AO and CIT(A) had declined relief citing procedural grounds. In the interests of justice and noting the AR's reliance on the jurisdictional High Court decision in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., the Tribunal restored the matter to the file of the AO with a direction to decide the claim afresh in the light of the said decision. [Paras 13]

Cross-objection allowed for statistical purposes by restoring the issue to the AO for fresh consideration in light of the cited precedent.

Final Conclusion: The Revenue appeal was dismissed upholding the CIT(A)'s allowance of carry forward and set-off of earlier-year deficits as application of income under section 11(1)(a); the assessee's cross-objection concerning alleged double-included interest income was restored to the AO for fresh decision in light of the cited High Court authority.

Trade deposits - revenue receipt versus security deposit - consistent method of accounting - double taxation - principle of accountancy

Trade deposits - revenue receipt versus security deposit - consistent method of accounting - double taxation - principle of accountancy - Whether the trade deposits of Rs. 80,00,000/- shown in the assessee's books for AY 2012-13 are taxable as revenue receipt or are security deposits not exigible to tax until corresponding sales are effected - HELD THAT: - The Tribunal accepted the factual finding that the assessee received trade deposits from Authorized Representative Dealers and Sales Service Providers as security for vehicles kept with them for display and test drives, and that as and when sales occurred the corresponding deposits were refunded while sales proceeds were accounted as income. The Tribunal noted that the method of accounting was consistently followed in earlier years and had been accepted by the Revenue in scrutiny proceedings, and that treating such security deposits as sales proceeds would run counter to basic accounting principles and result in double taxation. The Tribunal further relied on an identical decision in the assessee's own case for an earlier assessment year, where the appellate forum had upheld deletion of such addition and the Revenue did not place any material to overturn those findings. On these grounds, the Tribunal found no reason to interfere with the CIT(A)'s deletion of the addition made by the AO. [Paras 6, 7]

Addition of Rs. 80,00,000/- on account of trade deposits deleted; Revenue appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletion of the addition treating the trade deposits as revenue, holding them to be security deposits accounted for consistently and not taxable until corresponding sales are recognised.

Reopening under section 147 of the Income Tax Act - quashing of reassessment proceedings - application of precedent of the High Court - treatment of suppressed sales for assessment

Reopening under section 147 of the Income Tax Act - quashing of reassessment proceedings - application of precedent of the High Court - treatment of suppressed sales for assessment - Validity of the proceedings initiated under section 147 of the Income Tax Act for Assessment Year (AY) 2006-07. - HELD THAT: - The Tribunal examined whether the reopening of assessment for AY 2006-07 could be sustained. The facts for AY 2006-07 were found to be identical to those in AY 2007-08, in which the Hon'ble Gujarat High Court had quashed the notice/reopening. Having regard to the High Court's decision - which held that the impugned notice was inherently illegal and that the entire suppressed sale proceeds could not be treated as income in the absence of a finding about undisclosed investment/costs - the Tribunal held that the same legal proposition squarely applied. Consequently, the reassessment proceedings initiated under section 147 for AY 2006-07 were not sustainable. As the reopening was quashed, the Tribunal declined to decide the merits of the additions made in the reassessment order. [Paras 9, 10, 11]

Proceedings initiated under section 147 for AY 2006-07 are quashed; the Revenue's appeal is dismissed and the merits are not adjudicated.

Final Conclusion: The Tribunal, applying the High Court's decision in the identical matter for AY 2007-08, quashed the reassessment proceedings under section 147 for AY 2006-07 and dismissed the Revenue's appeal without adjudicating the substantive additions.

Registration under Section 12AA - Scope of inquiry at registration stage - objects versus application of income - Charitable purpose - education as charitable - Genuineness of activities

Registration under Section 12AA - Genuineness of activities - Validity of rejection of registration solely because charitable activities had not yet commenced - HELD THAT: - The Tribunal found that the Commissioner (Exemption) rejected the assessee's registration only on the ground that charitable activities were yet to commence. Relying on coordinate decisions and various High Court rulings, the Tribunal held that non-commencement of activities, without more, is not a valid ground to deny registration under Section 12AA. The reasoning emphasises that registration is an enabling pre-condition to claim exemption and refusal on the sole basis that activities have not yet started is unsustainable. Applying these principles to the facts, the Tribunal accepted the assessee's substantive ground and concluded that the CIT(E)'s sole reason did not justify rejection of registration. [Paras 2]

CIT(E)'s rejection of registration solely because activities had not commenced was set aside and the assessee's ground on merits accepted.

Scope of inquiry at registration stage - objects versus application of income - Charitable purpose - education as charitable - Extent of enquiry permissible while granting registration under Section 12AA - whether the CIT must examine books, vouchers or application of income - HELD THAT: - The Tribunal reiterated settled law that at the stage of granting registration under Section 12AA the Commissioner's examination is confined to procedural compliance and whether the objects of the trust/institution are charitable and activities genuine. The CIT is not required at that stage to examine application of income, produce and scrutinise books and vouchers, or determine year to year application of funds; such scrutiny is for the Assessing Officer when exemption under Sections 11/12 is claimed. The Tribunal relied on several decisions which hold that education per se is a charitable purpose and that examination of financial application is not a precondition for registration. Applying this legal principle, the Tribunal directed the CIT(E) to grant registration. [Paras 2]

At registration stage CIT need only satisfy himself about objects and genuineness; he need not examine application of income or require production of books to deny registration.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(E)'s order rejecting registration, and directed grant of registration under Section 12AA, holding that refusal solely for non-commencement of activities or for lack of production of books was unsustainable and that the registration stage requires satisfaction as to objects and genuineness only.

Reopening of assessment - limitation for reopening under section 149 - extension of time under section 150(1) subject to restrictions of section 150(2) - assessment framed in wrong hands and its effect on limitation - jurisdictional vires of notice under section 148

Reopening of assessment - limitation for reopening under section 149 - extension of time under section 150(1) subject to restrictions of section 150(2) - assessment framed in wrong hands and its effect on limitation - jurisdictional vires of notice under section 148 - Validity of the notice issued under section 148 to reopen assessment of the assessee for AY 2006-07 in view of limitation and interplay of sections 149 and 150. - HELD THAT: - The Tribunal held that section 150(1) operates as an exception to the limitation prescribed by section 149 where a notice under section 148 is issued to give effect to a finding or direction contained in an order passed by an appellate or revisional authority. That exception, however, is not unlimited: section 150(2) restricts the benefit by reference to whether an assessment, reassessment or recomputation could have been made at the time the order which was the subject-matter of appeal, reference or revision was made. The correct temporal point for computing limitation under section 150(2) is the date of the order which was the subject-matter of appeal (or the assessment order in which the income was assessed in the wrong hands), and not the date when the section 148 notice was issued. If, on the date when the income was assessed in the wrong hands, the Assessing Officer did not have the power to reopen the correct assessee's assessment because limitation under section 149 had already expired, then the subsequent appellate proceedings and directions cannot enlarge the AO's power to reopen beyond that date. Applying these principles, the Tribunal found that the partner's assessment was passed on 27th February, 2014 and on that date the limitation to reopen the assessee firm's assessment under section 149 had already expired; consequently the notice dated 3rd March, 2015 was without jurisdiction and the reassessment consequent thereto was quashed. Because the reopening was quashed as barred by limitation, the Tribunal did not adjudicate the merits of the addition.

Reopening and reassessment quashed as barred by limitation; appeal allowed.

Final Conclusion: The section 148 notice issued to reopen assessment for AY 2006-07 was held to be barred by limitation in view of sections 149 and 150(1)/(2); the reopening and consequent reassessment are quashed and the appeal of the assessee is allowed.

Penalty under section 271(1)(c) - Penalty under section 271AAA - voluntary disclosure by filing revised return in response to notice under section 153A - requirement of Assessing Officer's satisfaction before imposing penalty for inaccurate particulars - distinguishing the ratio of MAK Data in cases of voluntary disclosure

Penalty under section 271(1)(c) - voluntary disclosure by filing revised return in response to notice under section 153A - requirement of Assessing Officer's satisfaction before imposing penalty for inaccurate particulars - distinguishing the ratio of MAK Data in cases of voluntary disclosure - Levy of penalty under section 271(1)(c) in respect of additional income declared in revised returns filed during assessment proceedings under section 153A (assessee's AYs 2009-10, 2010-11 and 2011-12). - HELD THAT: - The Tribunal found that in the present cases the assessee himself offered additional income in revised returns which were accepted by the Assessing Officer. The authorities below did not record any satisfaction that the return particulars were incorrect, erroneous or false. The decision in MAK Data was distinguishable because there the transactions were not recorded in books and the Assessing Officer had recorded satisfaction of concealment. Reliance on the principle in Reliance Petroproducts was held appropriate: penalty under section 271(1)(c) requires a finding by the Assessing Officer that the return contains inaccurate particulars. Absent such a recorded finding, and where the revised returns were accepted and there was no revenue loss or evasion shown, penalty is not leviable. Applying that reasoning the Tribunal set aside the penalties confirmed by the Commissioner (Appeals) in the matters considered. [Paras 6, 11, 16]

Penalties under section 271(1)(c) sustained by lower authorities were deleted for the assessment years in question; the assessee's appeals on these points are allowed.

Penalty under section 271AAA - voluntary disclosure by filing revised return in response to notice under section 153A - Levy of penalty under section 271AAA in respect of undisclosed jewellery income admitted during search and included subsequently in the return under section 153A (AY 2011-12). - HELD THAT: - The Tribunal noted that the assessee had declared the undisclosed jewellery value during the search, specified in his statement that it was derived from brokerage and financial advisory business, and furnished a letter further substantiating the manner of derivation. The Assessing Officer's penalty order did not refer to the contents of the statement under section 132(4) or to the assessee's explanatory letter; the first appellate authority also did not dispute those materials but required documentary evidence. The Tribunal observed that the assessee had discharged his onus of substantiation and that the Commissioner (Appeals) could have inquired into the genuineness of the TDS and other matters. On that basis the Tribunal held the penalty under section 271AAA was not justified and set it aside. [Paras 21, 22, 23]

Penalty under section 271AAA confirmed by lower authorities was deleted; the assessee's appeal on this point is allowed.

Final Conclusion: All appeals by the assessee are allowed: penalties under section 271(1)(c) for AYs 2009-10, 2010-11 and 2011-12, and penalty under section 271AAA for AY 2011-12, as confirmed by the lower authorities, are set aside for the reasons given by the Tribunal.

Deemed consideration under section 50C - Adjustment for disputes and encumbrances (30%) - Guidelines for valuation of immovable properties, 2009 - Admissibility of expenditure supported by self-made vouchers - Remand for verification of documentary proof - Determination of cost of improvements with assistance of DVO

Deemed consideration under section 50C - Adjustment for disputes and encumbrances (30%) - Guidelines for valuation of immovable properties, 2009 - Whether the value adopted from the Sub-Registrar (SRO) for the purpose of section 50C should be adjusted by 30% on account of disputes/encumbrances affecting the property. - HELD THAT: - Tribunal found on record that the property was sold while litigation existed both within the family and with outside parties claiming ownership; the existence of pending proceedings was demonstrated during remand proceedings and acknowledged in the AO's remand report. The CIT(A) had confined his conclusion to disputes within the family and did not appreciate the material showing unsettled disputes with outside parties. Applying the adjustments contemplated in the Directorate's 2009 valuation guidelines (Chapter 5, item 5.2.1.3) for disputes and encumbrances, the Tribunal held that a 30% reduction in the SRO value was appropriate and allowable. [Paras 10]

Adjustment of the SRO value under section 50C allowed to be reduced by 30% in view of the disputes/encumbrances; ground allowed.

Admissibility of expenditure supported by self-made vouchers - Remand for verification of documentary proof - Evidence by confirmation from legal practitioners - Whether the advocate fees claimed (partly supported by self-made vouchers) are admissible as deduction. - HELD THAT: - The Tribunal noted that legal services were plausibly incurred in defending multiple litigations relating to the property, but the documentary support before the authorities consisted largely of self-prepared vouchers. Rather than decide on the merits, the Tribunal remitted the matter to the AO directing the assessee to furnish proper confirmations from the respective advocates (including address and PAN) and directed the AO to verify such confirmations; if found in order, the claimed expenditure is to be allowed. [Paras 12]

Issue remitted to the AO for fresh verification on production of proper confirmations from the lawyers; no final admission by the Tribunal.

Admissibility of expenditure supported by self-made vouchers - Determination of cost of improvements with assistance of DVO - Remand for verification of documentary proof - Whether expenditure claimed towards land levelling, construction of compound wall and a room is admissible. - HELD THAT: - The Tribunal observed that material was placed on record during remand proceedings indicating existence of the compound wall and room (including an affidavit from the builder and portions of an FIR). Given the deficiencies in the documentary proof considered by the authorities, the Tribunal remitted the claim to the AO for fresh consideration and directed that the AO may call for assistance from the District Valuation Officer (DVO) to determine value/reasonableness and allow the cost if established. The Tribunal allowed the ground for statistical purposes but left quantification to the AO with DVO assistance. [Paras 15]

Claim remitted to the AO to re-examine with the assistance of DVO and to admit the expenditure if satisfactorily established; ground allowed for statistical purposes.

Final Conclusion: Appeals allowed for statistical purposes: SRO value under section 50C to be reduced by 30% on account of disputes/encumbrances as per the 2009 valuation guidelines; claims for advocate fees and for cost of compound wall/room remitted to the AO for verification (advocate confirmations and DVO assistance) with directions to admit amounts if properly established.

Entertainment expenditure disallowance - ad-hoc disallowance - disallowance under section 40(a)(i) for non-deduction of tax at source - fees for technical services - 'make available' test under tax treaty - AIR as a starting point for inquiry but not conclusive evidence - transfer pricing - comparability and selection of comparables under TNMM - working capital adjustment and risk adjustment in transfer pricing - remand for fresh adjudication

Entertainment expenditure disallowance - ad-hoc disallowance - Deletion of 25% ad hoc disallowance of entertainment expenditure. - HELD THAT: - The Assessing Officer disallowed 25% of claimed entertainment expenses on an ad hoc basis alleging lack of specific purpose. The Tribunal, applying reasoning in the assessee's earlier year appeal, found that the assessee had produced documentary evidence in the assessment proceedings and that neither the AO nor the DRP properly examined that evidence. A prior acceptance or disallowance in an earlier year cannot, by itself, justify identical disallowance in a subsequent year where evidence of genuineness is produced. In view of the absence of a basis for part disallowance and failure to examine the record, the disallowance was deleted.

Disallowance deleted; ground allowed in favour of the assessee.

Disallowance under section 40(a)(i) for non-deduction of tax at source - fees for technical services - 'make available' test under tax treaty - Deletion of addition under section 40(a)(i) in respect of global support service fee paid to EMCAP; payment not held to be fees for technical services taxable in India. - HELD THAT: - AO treated the global support service fee as fees for technical services (FTS) and disallowed under section 40(a)(i) for non deduction of tax. The Tribunal examined Article 12(4) of the India-Singapore treaty and applied the 'make available' test: FTS requires that the service make available technical knowledge, experience, skill or know how enabling the recipient to apply the technology independently and derive enduring benefit. The agreement showed provision of management, administrative and support services but did not establish that EMCAP made available technical knowledge or know how enabling the assessee to apply technology independently after the contract. Further, the same contract and treatment in preceding years militated against a unilateral departure. Applying treaty interpretation and the rule of consistency, the Tribunal concluded the payment was not FTS within the treaty and deleted the disallowance.

Disallowance under section 40(a)(i) deleted; ground allowed in favour of the assessee.

AIR as a starting point for inquiry but not conclusive evidence - remand for fresh adjudication - Restoration of the issue concerning unreconciled sales tax/professional tax entries in AIR to the Assessing Officer for fresh adjudication after providing necessary information to the assessee. - HELD THAT: - AO added the unreconciled amount from AIR to assessee's income without obtaining corroborative evidence after the assessee challenged the AIR entries and sought further details. The Tribunal held that AIR is a useful starting point but not conclusive; where the assessee disputes AIR entries and has requested particulars, AO/FAA should verify with the concerned departments and furnish details before making an addition. As AO/FAA had not produced sufficient evidence to displace the assessee's explanations, the matter requires further investigation. The Tribunal therefore restored the matter to the AO with directions to provide the assessee necessary information about the differences and to adjudicate afresh.

Issue remanded to the Assessing Officer for fresh adjudication; effective ground decided in part for the assessee.

Transfer pricing - comparability and selection of comparables under TNMM - working capital adjustment and risk adjustment in transfer pricing - remand for fresh adjudication - Transfer pricing adjustments were not finally sustained; matter remanded to AO/TPO for further verification and determination of ALP after applying principles of comparability and adjustments. - HELD THAT: - TPO made TP adjustments for Technical Services (TS) and Back Office Support Services (BOSS) by selecting and rejecting various comparables and computing arithmetic means. The assessee challenged inclusion/exclusion and the margins computed, raised objections about functional comparability, related party transaction thresholds, abnormally high margins, working capital and risk adjustments. The Tribunal, having considered prior-year appellate findings (including acceptance of certain comparables and rejection of others) and the contested comparability issues, found that further verification and re computation are necessary. The Tribunal directed AO/TPO to determine ALP after considering the Tribunal's earlier order for the relevant earlier assessment year, to examine comparability objections, compute margins correctly, and consider working capital and risk adjustments after affording the assessee opportunity of hearing.

TP issues restored to AO/TPO for fresh adjudication and ALP determination; last ground allowed in part for the assessee.

Final Conclusion: The appeal is partly allowed: ad hoc entertainment disallowance and the section 40(a)(i) addition were deleted in favour of the assessee; the AIR based sales tax/professional tax discrepancy and transfer pricing adjustments were remanded to the Assessing Officer/ TPO for fresh adjudication and verification with directions to furnish information and afford opportunity of hearing.

Customised Software vs Packaged/Canned Software - Exemption under Notification No. 6/2006-Central Excise - Intellectual property retention does not determine software nature - Non exclusive licence and absence of source code not decisive - Remand for fresh examination of the nature of software

Intellectual property retention does not determine software nature - Non exclusive licence and absence of source code not decisive - Whether retention of intellectual property rights by the supplier, non receipt of source code by the importer, and grant of a non exclusive right to use the software conclusively establish that the imported software is "Packaged/Canned" and not "Customised" for purposes of exemption under Notification No. 6/2006-Central Excise. - HELD THAT: - The Tribunal found that mere retention by the supplier of copyrights, trademarks or other intellectual property, non transfer of source code, and grant of a non exclusive right to use are features that can exist both in "Packaged" and in "Customised" software arrangements. The adjudicating authority erred in treating the existence of these contractual terms as conclusive of the software being "Packaged/Canned." The nature of the software must be determined by examining its features and how it was developed and tailored to the user's requirements, not solely by the contractual allocation of intellectual property rights or licensing terms. The Tribunal also distinguished the precedent relied upon by Revenue on the ground that that case involved transfer of exclusive rights, which is not the fact here. [Paras 5, 6]

Findings based solely on retention of IP rights, absence of source code transfer, and non exclusive licence are not proper bases to classify the imported software as "Packaged/Canned"; those factors are not decisive.

Customised Software vs Packaged/Canned Software - Remand for fresh examination of the nature of software - Exemption under Notification No. 6/2006-Central Excise - Whether the matter requires fresh adjudication on the question whether the imported software is "Customised" (and thus entitled to exemption) or "Packaged/Canned". - HELD THAT: - The Tribunal observed that the Order in Original and the impugned order did not examine the distinguishing features relied upon by the appellant to demonstrate that the software was customised for specific users (HPCL and ICICI) and could not be deployed for others. Since the adjudicating authority did not make findings on those feature based contentions and applied incorrect determinative criteria, the Tribunal set aside the impugned order and remitted the matter to the original Adjudicating Authority. On remand the authority is directed to examine all documents and the technical/material features of the software and pass a reasoned order determining whether the software is "Customised" or "Packaged" for the purpose of claiming exemption under Notification No. 6/2006. [Paras 7]

Impugned order set aside; matter remitted to the original Adjudicating Authority for fresh, feature based examination and reasoned determination on whether the software is "Customised" or "Packaged," with opportunity to the appellant.

Final Conclusion: The Tribunal held that contractual retention of IP, non transfer of source code and non exclusive licensing are not decisive to classify software as "Packaged/Canned;" the impugned order is set aside and the matter is remitted for fresh, document based and feature focused adjudication on whether the imported software is "Customised" and eligible for exemption under Notification No. 6/2006 Central Excise.

Condonation of delay for pursuing appeal before wrong forum - Confiscation of smuggled goods - Burden of proof to establish smuggling - Corroboration of accused's statement - Significance of foreign marking on imported jewellery

Condonation of delay for pursuing appeal before wrong forum - Application for condonation of delay in filing the appeal - HELD THAT: - The Revenue explained the delay by showing that the jurisdictional authority initially treated the matter as baggage and the matter was pursued before the Revisionary Authority, which later held the issue to be outside its purview. The Tribunal accepted that the delay occurred on account of pursuing the remedy before the wrong authority and accordingly condoned the delay and admitted the appeal. [Paras 3]

Delay of 1043 days was condoned and the appeal was admitted.

Confiscation of smuggled goods - Burden of proof to establish smuggling - Corroboration of accused's statement - Significance of foreign marking on imported jewellery - Whether the gold jewellery in the passenger's possession was liable for confiscation as smuggled goods - HELD THAT: - The Tribunal examined the material: recovery of four packets of gold jewellery (18 carat) from the passenger, the passenger's statement that the jewellery was brought from Dubai by an Indigo flight, absence of foreign markings on the jewellery, and the lack of any corroborative evidence besides the passenger's statement. The Commissioner (Appeals) had found that there was no evidence apart from the appellant's statement to prove that the goods were brought from Dubai and that the passenger had offered a plausible alternative explanation (that the jewellery had been handed over to him at Delhi for carriage to Mumbai), supported by domestic purchase invoices. In these circumstances the Tribunal found no reason to interfere with the concurrent findings that the requirement to prove smuggling was not discharged and that confiscation could not be sustained. [Paras 8, 9, 10]

The impugned order setting aside confiscation is upheld and the Revenue's appeal is rejected.

Final Conclusion: Delay in filing the appeal was condoned for having pursued the wrong forum; on merits, in absence of corroborative evidence and foreign markings, the finding that the seized gold jewellery was not proved to be smuggled is sustained and the Revenue's appeal is dismissed.

Penalty under Section 114A of the Customs Act - Penalty under Section 112(a) of the Customs Act - 5th proviso to Section 114A - bar on levy of penalty under Section 112 or 114 where penalty under Section 114A is levied - Redemption fine - proportionality and margin of profit - Customs valuation - transaction value under Rule 3 of the Customs Valuation Rules, 2007 read with Section 14 of the Customs Act, 1962

Penalty under Section 114A of the Customs Act - Penalty under Section 112(a) of the Customs Act - 5th proviso to Section 114A - bar on levy of penalty under Section 112 or 114 where penalty under Section 114A is levied - Validity of simultaneous imposition of penalties under Section 114A and Section 112(a) and which penalty must prevail in view of the proviso to Section 114A - HELD THAT: - The Tribunal found that the proviso to Section 114A precludes levy of a penalty under Section 112 or Section 114 where a penalty has been levied under Section 114A. The appellate authority erred in setting aside the penalty under Section 114A while sustaining the penalty under Section 112(a). Applying the statutory bar in the proviso, the Tribunal held that the penalty under Section 112(a) must be set aside and the penalty under Section 114A sustained. [Paras 6]

Penalty under Section 112(a) is set aside; penalty under Section 114A is sustained.

Redemption fine - proportionality and margin of profit - Customs valuation - transaction value under Rule 3 of the Customs Valuation Rules, 2007 read with Section 14 of the Customs Act, 1962 - Validity and reasonableness of the redemption fine imposed by the original authority and upheld on appeal - HELD THAT: - The Tribunal recorded that the original authority re-determined the assessable value after considering documents and the proprietor's admissions and that the proprietor accepted the re-determined value and paid the differential duty. Having accepted the valuation as the transaction value for assessment under Rule 3 read with Section 14, the Tribunal found no infirmity in the quantum of the redemption fine. The appellate authority's approach-that the fine should equal the margin of profit and dismissal of the appellant's lack of evidence of a lower margin-was noted, and on the material before it the Tribunal sustained the redemption fine. [Paras 6]

Redemption fine upheld as reasonable in view of the accepted transaction value and the material on record.

Final Conclusion: Appeal partly allowed: penalty under Section 112(a) set aside; penalty under Section 114A and the redemption fine are sustained. Appeal disposed of accordingly.

Business Auxiliary Service - service tax on facilitation charges for RTO registration - penalty under Section 78 of the Finance Act, 1994 - invocation of Section 80 of the Finance Act, 1994 - precedent of Tribunal in Arpanna Automotive Pvt. Ltd.

Business Auxiliary Service - service tax on facilitation charges for RTO registration - precedent of Tribunal in Arpanna Automotive Pvt. Ltd. - Whether amounts retained by the appellant from customers for facilitating RTO vehicle registration are chargeable to service tax as Business Auxiliary Service. - HELD THAT: - The Tribunal followed its earlier decision in M/s Arpanna Automotive Pvt. Ltd. which held that assisting purchasers with mandatory RTO registration does not fall within the definition of Business Auxiliary Service. The appellate bench noted that the appellant only facilitated statutory registration under the Motor Vehicles Act and retained part of the aggregate sum collected; such activity is not within the activities enumerated as Business Auxiliary Service either before or after 10-9-2004. Applying that precedent, the Tribunal held that service tax cannot be levied on amounts retained for RTO handling/registration facilitation and set aside the demand confirmed in the impugned order. [Paras 3, 4]

Amount retained by the appellant for facilitating RTO registration is not chargeable to service tax under Business Auxiliary Service; the demand is set aside.

Penalty under Section 78 of the Finance Act, 1994 - invocation of Section 80 of the Finance Act, 1994 - precedent of Tribunal in Arpanna Automotive Pvt. Ltd. - Whether the penalty imposed on the appellant in relation to the impugned service tax demand is sustainable. - HELD THAT: - Relying on the Tribunal's reasoning in the cited precedent, which observed contradictory streams of decisions and applied Section 80 of the Finance Act, 1994 to set aside penalties where tax and interest had been discharged or the position required larger-bench resolution, the Tribunal treated the penalty aspect as unsustainable in the circumstances. Having found the underlying service-tax demand on RTO facilitation to be untenable, the Tribunal accordingly set aside the penalties imposed by the adjudicating authority. [Paras 3, 4]

Penalties imposed in respect of the impugned demand are set aside.

Final Conclusion: The appeal is allowed: the charges retained by the appellant for facilitating RTO registration are not taxable as Business Auxiliary Service and the related penalties are set aside, following the Tribunal's earlier decision in Arpanna Automotive Pvt. Ltd.; the impugned order-in-appeal is set aside.

Goods Transport Agency - consignment note requirement - Rule 10 CESTAT (Procedure) Rules, 1982 - leave to urge additional grounds - extended period of limitation for service tax (suppression) - penalty under section 78 of the Finance Act, 1994 - interest under section 75 of the Finance Act, 1994

Rule 10 CESTAT (Procedure) Rules, 1982 - leave to urge additional grounds - Appellant permitted to raise at appeal stage the additional ground that GTA services were not taxable despite not being in the memorandum of appeal. - HELD THAT: - The Tribunal noted Rule 10 permits new grounds by leave and that the question of service tax on GTA formed a component of the total demand with direct bearing on interest and penalty. Revenue was afforded sufficient opportunity to contest the point and, on the record, leave was granted to entertain the additional ground. [Paras 6]

Additional ground on non-liability for GTA accepted and taken up for adjudication.

Goods Transport Agency - consignment note requirement - Appellant not liable to pay service tax on Goods Transport Agency services. - HELD THAT: - Relying on the Tribunal's Principal Bench ratio, mere hiring of trucks for transportation without issuance of consignment notes/GRs/billies as prescribed by Rule 4B does not constitute service by a Goods Transport Agency. The factual position showed transportation akin to hiring trucks and absence of consignment notes, bringing the case within that ratio; consequently the demand under GTA was set aside. [Paras 7]

Demand of service tax under Goods Transport Agency rejected and set aside.

Interest under section 75 of the Finance Act, 1994 - Appellant liable to pay interest on the service tax demand as applicable. - HELD THAT: - The appellant conceded non-payment in time and had paid interest for certain services when pointed out in audit. The Tribunal held there was no dispute that interest is payable on the service tax liability and upheld the demand for interest (except insofar as it related to the set-aside GTA component). [Paras 8]

Interest demand on the confirmed service tax upheld (excluding interest linked to GTA which is set aside).

Extended period of limitation for service tax (suppression) - Extended period for recovery of service tax is invokable by reason of suppression of facts in ST-3 returns. - HELD THAT: - Section 73 permits invocation of the extended period where there is suppression of facts. The Tribunal found the appellant, being a registered service provider, filed ST-3 returns without disclosing the full value of taxable services and service tax payable/paid, thereby suppressing facts. Once suppression is established, the extended period can be invoked without separate proof of intent to evade; accordingly the extended period was held applicable to the remaining demands. [Paras 9]

Extended period of limitation for recovery invoked on the ground of suppression and extended demand upheld (subject to exclusion of GTA).

Penalty under section 78 of the Finance Act, 1994 - extended period of limitation for service tax (suppression) - Penalty under section 78 is imposable on the appellant for suppression of facts. - HELD THAT: - Having found suppression in the returns, the Tribunal held that penalty under section 78 is imposable. The Tribunal noted that suppression of facts is sufficient for invoking penalties under the provision and therefore sustained the penalty (except insofar as it related to the GTA component which was set aside). [Paras 9]

Penalty under section 78 upheld in respect of the confirmed demands; penalty relating to GTA component set aside.

Final Conclusion: Appeal partly allowed. Demand of service tax, interest and penalty confirmed for the assessed services except that the demand, corresponding interest and penalty in respect of Goods Transport Agency services were set aside; remaining portions of the Order-in-Original/Order-in-Appeal are upheld.

Refund of pre-deposit consequent upon appellate order - Section 35FF of the Central Excise Act - Interest on delayed refund - Mandatory payment of interest where refund not made within three months from communication of appellate order - Discretion of assessee to make application for refund - Circular recognising entitlement to interest on refunded deposits

Refund of pre-deposit consequent upon appellate order - Section 35FF of the Central Excise Act - Interest on delayed refund - Entitlement to interest on refund of the pre-deposit when an appellate authority allows the appeal. - HELD THAT: - The Tribunal held that Section 35FF mandates payment of interest where an amount deposited under the proviso to Section 35F is required to be refunded consequent upon an appellate authority's order and is not refunded within three months from the date of communication of that order to the adjudicating authority. The use of the word "shall" in the provision renders payment of interest obligatory once the statutory conditions are satisfied. Reliance on the CBEC Circular affirming that a party entitled to refund on successful appeal shall receive interest from the date of deposit to the date of refund reinforces that the departmental withholding of interest in the present case was not justified. The Tribunal applied this principle to the facts, observing that the appellate order in favour of the appellant existed since 08.12.2011 and the refund, though processed much later, attracted interest under Section 35FF. [Paras 4, 5]

The appellant is entitled to interest on the refunded pre-deposit under Section 35FF.

Discretion of assessee to make application for refund - Mandatory payment of interest where refund not made within three months from communication of appellate order - Whether the departmental contention that interest is not payable because the assessee filed a written application for refund only in 2016 is tenable. - HELD THAT: - The Tribunal rejected the Department's submission that entitlement to interest depended on the timing of the assessee's written application. While acknowledging that an assessee must apply for refund, the Tribunal noted that Section 11B (referred to in the judgment) leaves the making of an application to the assessee's discretion and does not negate the statutory obligation under Section 35FF to pay interest where refund is not made within the prescribed three-month period following communication of the appellate order to the adjudicating authority. Hence, delay in seeking implementation did not justify withholding interest once the statutory conditions for interest under Section 35FF were met. [Paras 5]

The Department cannot withhold interest on the ground that the assessee filed a refund application in 2016; interest is payable under Section 35FF once the statutory criteria are met.

Final Conclusion: The appeal is allowed and the appellant is entitled to interest on the refund of its pre-deposit under Section 35FF of the Central Excise Act; the departmental refusal to pay interest is set aside.

Manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 - business auxiliary service as defined under Section 65(19) of the Finance Act, 1994 - exclusion of activities amounting to manufacture from service tax - use of principal's raw material and transformation into a product of new name, character and use as indicia of manufacture

Manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 - business auxiliary service as defined under Section 65(19) of the Finance Act, 1994 - exclusion of activities amounting to manufacture from service tax - Whether the rubber backing and rubber edging of polypropylene carpets carried out by the appellant on job-work basis amounts to manufacture and is therefore outside the levy of service tax as a Business Auxiliary Service. - HELD THAT: - The Tribunal examined the nature of the activity performed by the appellant - rubber backing and edging of polypropylene sheets supplied by the principal - and concluded that the work results in rubber mats falling under Tariff Heading 4016 9100. The transformation involved the use of supplied polypropylene sheets together with materials procured by the appellant to produce a resultant product having a different name, character and use, which aligns with the concept of "manufacture" under Section 2(f) of the Central Excise Act. The Tribunal placed weight on the fact that the appellant pays VAT on the product and on the Government clarification (letter dated 12.5.2005) that service tax is not leviable where the activity amounts to manufacture. The Tribunal also noted that on identical facts Revenue had earlier held in the case of M/s. Dolphin Rubber Products that the activity amounted to manufacture and accordingly dropped the service tax demand. Applying these considerations, the Tribunal found that the activity is manufacturing activity and not a taxable Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. [Paras 6]

The demand of service tax, interest and penalties confirmed by the lower authorities is set aside; the appeal is allowed with consequential relief.

Final Conclusion: Appeal allowed: activity of rubber backing and edging on supplied polypropylene sheets held to be manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944 and therefore not exigible to service tax as Business Auxiliary Service; demand set aside with consequential relief.

Business Auxiliary Service - composite service - vivisection of composite contract - jurisdiction of assessing authority - registration for service tax - penalty for non-registration

Jurisdiction of assessing authority - Jurisdiction of Indore Central Excise Authorities to adjudicate the service tax demand. - HELD THAT: - The appellant's business premises for service tax registration were located in Ratlam (M.P.), which falls within the territorial jurisdiction of the Indore Commissionerate. The fact that the physical activities were performed from premises made available by the Jodhpur Division of Railways did not oust the jurisdiction determined by the geographic address of the assessee's business. Therefore the adjudication and appellate proceedings conducted by the Indore authorities were not without jurisdiction. [Paras 9]

Ground of lack of jurisdiction raised by the appellant is dismissed.

Business Auxiliary Service - composite service - vivisection of composite contract - Classification of the appellant's activities (collection, washing/dry-cleaning, ironing and on-board distribution of bed rolls, towels, blankets) and liability to service tax under Business Auxiliary Service. - HELD THAT: - The contract obligations - collection of linen, washing/dry-cleaning, ironing and distribution to passengers by deploying personnel - form a composite service. The Tribunal held that it is improper to vivisect the contract into separate components for denying tax liability merely because the contract specifies different components and charges. As the services were rendered to the customers of Railways (passengers) on behalf of the Railways, they fall within the scope of Business Auxiliary Service. The Tribunal also followed its earlier decision in R.C. Goel which treated similar services as business auxiliary/customer care services provided on behalf of the client, supporting the classification adopted in the impugned order. [Paras 10, 11]

Classification under Business Auxiliary Service is upheld and the consequential demand of service tax is sustained.

Registration for service tax - penalty for non-registration - Validity of imposition of penalty for failure to register and pay service tax. - HELD THAT: - The appellant had not obtained registration for their taxable services and therefore could not escape liability. In view of the confirmed classification of the services as taxable under Business Auxiliary Service and absence of registration, the Tribunal found no infirmity in imposing penalties as directed in the impugned order. [Paras 11]

Penalties imposed for non-registration and non-payment of service tax are sustained.

Final Conclusion: The appeals are dismissed; the impugned Order-in-Appeal is sustained, the classification of services as Business Auxiliary Service and the consequential demand of service tax along with penalties for the period 2007-2008 to 2012-2013 are upheld.

Inclusion of reimbursable expenses in value for service tax - constitutional validity of Rule 5 of the Service Tax Rules - ultra vires of Sections 66 and 67 of the Finance Act, 1994

Inclusion of reimbursable expenses in value for service tax - constitutional validity of Rule 5 of the Service Tax Rules - ultra vires of Sections 66 and 67 of the Finance Act, 1994 - Reimbursable expenses received by the service provider are not includable in the taxable value for service tax and Rule 5 of the Service Tax Rules is unconstitutional and ultra vires Sections 66 and 67 of the Finance Act, 1994. - HELD THAT: - The Tribunal accepted and applied the decision of the Hon'ble Supreme Court in Union of India v. M/s. International Consultants and Technocrafts Pvt. Ltd., wherein the High Court's view was upheld that reimbursable expenditures cannot be added to the value of consideration for levy of service tax. That decision also held Rule 5 of the Service Tax Rules to be unconstitutional and ultra vires the charging and valuation provisions under Sections 66 and 67 of the Finance Act, 1994. Following this binding precedent, the Tribunal found no justification to include the reimbursed expenses in the respondent's taxable value and therefore affirmed the orders of the authorities below which had set aside the demands based on such inclusion.

Appeal by Revenue dismissed; demands based on inclusion of reimbursable expenses set aside in accordance with the Supreme Court precedent.

Final Conclusion: The Tribunal, applying the Supreme Court's ruling that reimbursed expenses are not includable and that Rule 5 is unconstitutional and ultra vires Sections 66 and 67, dismissed the Revenue's appeal and upheld the orders excluding reimbursable expenses from the taxable value for the period 1.10.2006 to 31.03.2008.

Levy of service tax on consideration for maintenance or repair services - Treatment of reimbursement of electricity charges as consideration - Sale of electricity as supply of goods versus supply of service - Inclusion of amounts received as security deposit or interest free advance in taxable consideration - Cenvat credit entitlement and restriction under Rule 6(3) - apportionment between services - Remand for verification and re examination of quantification, computation and limitation

Treatment of reimbursement of electricity charges as consideration - Sale of electricity as supply of goods versus supply of service - Levy of service tax on consideration for maintenance or repair services - Whether electricity charges reimbursed by tenants and charges for electricity generated and supplied by the appellant are includible in maintenance charges and liable to service tax. - HELD THAT: - The Tribunal applied earlier authority holding that reimbursement of electricity charges paid to the electricity board by tenants is not exigible to service tax because supply of electricity constitutes goods. Consequently the claim for reimbursement of grid supplied electricity collected from tenants and paid to the electricity board is to be allowed and not subjected to service tax. However, the lease/maintenance agreements also provide for electricity generated by the appellant (generator supply) which is charged to tenants; such amounts constitute consideration for maintenance service and are liable to service tax. The appellate forum could not, from the figures before it, determine the quantum of generator supplied electricity charged to tenants; accordingly the adjudicating authority is directed to allow reimbursement claims in respect of grid supplied electricity and to require the appellant to furnish details of electricity generated and supplied by them and the charges recovered therefor, for assessment and levy of service tax on that component.

Reimbursement of grid electricity paid to the supply undertaking is not liable to service tax; amounts charged for electricity generated and supplied by the appellant form part of maintenance consideration and are taxable - quantification remitted to the adjudicating authority after submission of details by the appellant.

Inclusion of amounts received as security deposit or interest free advance in taxable consideration - Levy of service tax from date of receipt of advance consideration - Whether interest free maintenance advance and security deposit recovered from tenants are includible in taxable consideration for maintenance/renting services. - HELD THAT: - The appellant conceded that interest free maintenance advances were adjusted month to month and that service tax liability arises from the date of receipt; the Tribunal upheld the admitted liability and the payment of tax with interest. As to security deposits collected (interest free and repayable), the Tribunal followed precedent holding that such security deposits are not consideration for renting of immovable property so long as they remain repayable and unadjusted; therefore they cannot be included in taxable consideration unless actually adjusted towards maintenance charges. The adjudicating authority is directed to verify, on production of Chartered Accountant certified details, whether any security deposits were in fact adjusted during the disputed period and to raise demand only to the extent of such adjustments.

Tax on interest free maintenance advances is upheld from the date of receipt and has been paid with interest; security deposits are not includible unless actually adjusted - verification remitted to the adjudicating authority.

Cenvat credit entitlement and restriction under Rule 6(3) - apportionment between services - Remand for verification and re examination of quantification, computation and limitation - Whether restriction under Rule 6(3) on availment of cenvat credit applies to input services procured for maintenance where renting of immovable property was brought into levy at a later date, and whether the claim of credit should be restricted. - HELD THAT: - The Tribunal accepted the appellant's contention that if the subcontracted services pertain solely to maintenance services (taxable in earlier period) and not to renting of immovable property, the statutory restriction in Rule 6(3) would not apply. Given the factual nature of the claim, the matter was remitted to the adjudicating authority for de novo examination of the appellant's submissions and supporting Chartered Accountant certification. The adjudicating authority is also directed to consider the appellant's limitation plea under section 73 of the Finance Act, 1994 in the course of the remand.

Claim of cenvat credit to be re examined by the adjudicating authority; restriction under Rule 6(3) not to be automatically applied if subcontracted services relate only to maintenance - remitted for fresh adjudication, including consideration of limitation.

Final Conclusion: Appeals disposed: reimbursement of grid electricity charges recovered from tenants is not exigible to service tax while charges for electricity generated and supplied by the appellant are taxable and quantification is remitted; service tax on interest free maintenance advances upheld from receipt (paid with interest); security deposits are not taxable unless adjusted (verification remitted); cenvat credit entitlement and applicability of Rule 6(3), and the limitation plea, are remitted to the adjudicating authority for de novo examination.

Composite works contract - vivisecting a composite contract - classification as Commercial or Industrial Construction Services versus Works Contract Services - pre-01.06.2007 taxability of works contracts - ratio in Larsen & Toubro regarding bifurcation by eight heads of deduction

Composite works contract - vivisecting a composite contract - pre-01.06.2007 taxability of works contracts - ratio in Larsen & Toubro regarding bifurcation by eight heads of deduction - Whether the appellant's execution of the Madikheda Hydel project (a composite works contract) for the period September, 2004 to July, 2006 was taxable as Commercial or Industrial Construction Services or was non-taxable as a works contract. - HELD THAT: - The Tribunal accepted that the projects were executed under composite contracts and applied the legal principle laid down by the Apex Court in Larsen & Toubro that a composite/indivisible works contract cannot be separated and taxed under other service heads unless the charging provision itself specifies bifurcation. The Larsen & Toubro ratio requires determining the service element by working from the entire contract value and deducting amounts relatable to transfer of property in goods by applying the eight heads of deduction; absent such statutory prescription prior to 01.06.2007, vivisecting a composite contract to fasten tax under CICS would be impermissible. Applying that principle to the facts, the Tribunal found the First Appellate Authority's conclusion - that the activity was works contract services and not taxable as CICS for the period in question - to be correct and not requiring interference. [Paras 7]

Revenue's appeals are rejected; the impugned orders holding the activity to be works contract services and not taxable for the period are upheld.

Remand - academic determination - Whether the appeals filed by the assessee against Orders in Appeal dated 20.01.2009 required independent adjudication by the Tribunal after remand proceedings. - HELD THAT: - On remand the Adjudicating Authority again rejected refund claims but the First Appellate Authority thereafter allowed the appeals holding the activity to be works contract services. Since the First Appellate Authority ultimately disposed of the issue in favour of the assessee, any further adjudication on merits by the Tribunal would be academic. The Tribunal therefore recorded that deciding merits afresh was unnecessary. [Paras 8]

Assessee's appeals are dismissed as academic in view of the First Appellate Authority's favourable disposal on remand.

Final Conclusion: Applying the Apex Court's Larsen & Toubro ratio, the Tribunal rejected the Revenue's challenge and upheld the finding that the works executed under composite contracts for September, 2004 to July, 2006 were not taxable as Commercial or Industrial Construction Services; the assessee's appeals were disposed of as academic in view of the First Appellate Authority's orders.

Refund of unutilized CENVAT credit - relevant date for computation of limitation under Section 11B of the Central Excise Act - computation of time limit under Rule 5 of CENVAT Credit Rules - export of services versus export of goods - remand for disposal in accordance with Larger Bench decision

Refund of unutilized CENVAT credit - relevant date for computation of limitation under Section 11B of the Central Excise Act - computation of time limit under Rule 5 of CENVAT Credit Rules - export of services versus export of goods - Remand of the refund claim to the original authority for decision in accordance with the Larger Bench ruling on the relevant date for computing limitation. - HELD THAT: - The Commissioner(Appeals) dismissed the appeal as barred by limitation relying on a Madras High Court decision applicable to export of goods. The appellant contended that for export of services the relevant date for computing one year is different and relied on various Tribunal decisions and a reference Larger Bench. The Larger Bench in CCE & CST, Bangalore v. Span Infotech (India) Pvt. Ltd. held that where refund claims are filed quarterly the relevant date may be taken as the end of the quarter in which the FIRCs are received. Having regard to that authoritative clarification, the present appeal cannot be sustained on the basis of the earlier High Court ratio applied by the Commissioner(Appeals). The matter is therefore remitted to the original authority for disposal of the refund claim in conformity with the Larger Bench decision, permitting reconsideration of limitation and merits as per that ratio.

Appeal disposed of by remand to the original authority to decide the refund claim in accordance with the Larger Bench ruling on the relevant date for limitation.

Final Conclusion: The appeal is allowed in part by remanding the matter to the original authority for fresh disposal of the refund claim in accordance with the Larger Bench decision on the relevant date for computing the time limit; the Commissioner(Appeals) order is set aside to that extent.

Requirement of reasoned and speaking order by quasi judicial authorities - independent application of mind by appellate tribunal in fact finding - remand for fresh adjudication where appellate order merely reproduces findings of lower authority - treatment of deposits as pre deposit under Section 35F of the Central Excise Act

Requirement of reasoned and speaking order by quasi judicial authorities - independent application of mind by appellate tribunal in fact finding - remand for fresh adjudication where appellate order merely reproduces findings of lower authority - Whether the impugned order of the Tribunal meets the legal requirement of a reasoned, independent adjudication or requires remand for fresh decision. - HELD THAT: - The Court held that the Tribunal, being the final fact finding appellate authority under the Central Excise Act, was required to independently examine statements, documentary evidence and the effect of retraction and to apply its mind afresh even if it agreed with the order in original. The impugned order merely reproduced and adopted the reasoning of the order in original without specific, independent consideration or elucidation of the diverse factual and legal contentions raised by the appellants. Reliance upon precedents emphasising the necessity of cogent and intelligible reasons for quasi judicial decisions (including the principles summarized from Kranti Associates Pvt. Ltd.) warranted that the matter be re heard and decided afresh by the Tribunal. For these reasons the substantial questions framed were answered in favour of the appellants and against the respondent and the matter was remitted to the Tribunal for fresh adjudication on merits without being influenced by the impugned order. [Paras 8, 9, 10, 11]

Impugned order set aside insofar as it fails to independently and specifically deal with the contentions; matter remanded to the Tribunal for fresh decision on merits.

Treatment of deposits as pre deposit under Section 35F of the Central Excise Act - Whether amounts deposited by the appellants in the course of these appeals are to be treated as pre deposit under Section 35F. - HELD THAT: - The Court recorded that the appellant company had deposited the entire amount of excise duty and penalty under protest. Counsel for the individual appellants undertook that fifty per cent of the penalty amounts would be deposited within six weeks. The Court directed that such deposits, made in terms of the statement in Court, shall be treated as pre deposit under Section 35F. The Court also noted that these appeals were preferred before the amendment to Section 35F which came into effect from 6th August, 2014, and clarified the limited operative effect of its order. [Paras 12]

Deposits made in terms of the appellants' undertaking shall be treated as pre deposit under Section 35F.

Final Conclusion: The Tribunal's order is set aside to the extent it fails to independently and specifically consider the appellants' contentions; the substantial questions of law are answered in favour of the appellants and the matters are remitted to the Tribunal for fresh adjudication on merits without being influenced by the impugned order. Deposits made in Court in terms of the appellants' undertaking shall be treated as pre deposits under Section 35F.

Penalty under Section 11AC of the Central Excise Act - payment of differential duty not a defence to penalty - conditions for imposition of penalty: fraud, misrepresentation and suppression of facts - no discretion in quantification once Section 11AC applies - redemption fine and personal penalty

Penalty under Section 11AC of the Central Excise Act - payment of differential duty not a defence to penalty - Whether the Tribunal was right in upholding levy of 100% penalty under Section 11AC notwithstanding that the appellant had paid the disputed duty on or before passing of the order-in-original. - HELD THAT: - The Court held that payment of the differential duty, whether made before or after issuance of the show cause notice or before the order-in-original, does not itself defeat liability for penalty under Section 11AC. The decision in Union of India v. Rajasthan Spinning and Weaving Mills was followed to the effect that the applicability of Section 11AC depends on satisfaction of the statutory conditions in the section, and payment of duty is not a determinative factor in negating penalty. The Tribunal's conclusion upholding the penalty was therefore sustained. [Paras 3, 7, 8, 13]

Tribunal rightly upheld imposition of 100% penalty under Section 11AC despite payment of disputed duty; substantial question answered against the appellant.

Conditions for imposition of penalty: fraud, misrepresentation and suppression of facts - no discretion in quantification once Section 11AC applies - Whether the pre-conditions for invoking Section 11AC (fraud, misrepresentation or suppression of facts) were present in the appellant's case. - HELD THAT: - The Court recorded that the appellant did not contest the satisfaction of the conditions in Section 11AC and the factual findings-based on search, statements and material recovered-affirmed the presence of fraud/misrepresentation/suppression. The Supreme Court's exposition that once the statutory conditions are fulfilled the authority has no discretion to reduce the penalty below the duty determined (as explained in Rajasthan Spinning) was applied. [Paras 6, 10]

Findings support that the statutory conditions for Section 11AC were satisfied; penalty therefore properly attracted and not amenable to reduction below the determined duty.

Redemption fine and personal penalty - no discretion in quantification once Section 11AC applies - Whether failure to pay 25% of penalty within the stipulated 30 days attracted liability for 100% penalty. - HELD THAT: - The Court noted the appellant's admission of non-payment of 25% of the penalty within the stipulated time, which under the statutory scheme results in demand for the full 100% penalty. The Tribunal's order reducing certain redemption fines and personal penalties was noted, but the primary consequence of non-payment of the initial 25% was affirmed. [Paras 12]

Admission of failure to pay 25% within time renders the appellant liable for 100% penalty; Tribunal's imposition upheld.

Final Conclusion: The appeal is dismissed; the Tribunal's imposition of penalty under Section 11AC is upheld on the ground that the statutory conditions were satisfied and payment of the disputed duty did not preclude levy of the penalty; no order as to costs.

Evidence requirement for clandestine removal - probability standard (not mathematical precision) - corroboration of oral statements with contemporaneous records - set-off of excesses and shortages in stock verification - benefit of doubt in stock measurement - confiscation and redemption fine for excess goods

Evidence requirement for clandestine removal - probability standard (not mathematical precision) - corroboration of oral statements with contemporaneous records - Sustainability of demand, interest and penalty based solely on statements and private documents of the folding contractor for alleged clandestine manufacture and removal. - HELD THAT: - The Court examined whether the Department could fasten duty liability on the basis of the contractor's programme sheets and his statements. While recognising the jurisprudential principle that the Department need not prove clandestine activity with mathematical precision, the Tribunal held that some corroborative evidence was nevertheless necessary. The contractor's concession that he was paid separately for grey-stage and finished-stage folding (and that combined charges matched the respondent's account) undermined the inference of clandestine extra production. In the absence of corroborative contemporaneous records proving manufacture and clandestine removal, the demand of duty, interest and penalty on this account was not sustainable and was correctly dropped by the Commissioner in the denovo order. [Paras 5, 7]

Demand, interest and penalty based solely on the folding contractor's statements and seized private documents are dropped.

Corroboration of oral statements with contemporaneous records - set-off of excesses and shortages in stock verification - Liability for duty in respect of goods alleged to have been cleared to distributors (stocks found with distributors) and consequent effect on factory demand for the same goods. - HELD THAT: - The Tribunal noted that the Commissioner had dropped the charges of confiscation and penalty against the distributors and that the Department did not appeal those findings, which had attained finality. Once the charge that fabrics were cleared to and held by distributors without payment of duty was dropped as between the Department and the distributors, the corresponding demand against the factory in respect of the same fabrics could not be sustained. The finding that distributor-related charges stood finally dropped accordingly defeats the asserted factory liability for those goods. [Paras 8]

Demand in respect of goods allegedly cleared to distributors is unsustainable and dropped; factory demand for the same goods does not stand.

Set-off of excesses and shortages in stock verification - benefit of doubt in stock measurement - Validity of demand in respect of alleged shortages in factory stocks where corresponding excesses were recorded in other stages. - HELD THAT: - The Tribunal analysed the mahazar figures and accepted that when the stocks across stages (grey, in-process, finished) are aggregated the alleged shortages are negated by corresponding excesses. The Commissioner had relied on a passing remark about approximate measurements to drop the demand, but the Tribunal found that the mahazar (a contemporaneous on-site record) and the aggregated computations established no net shortage in either width category. Consequently the demand founded on alleged shortages at the factory was not sustainable and was to be dropped. [Paras 8, 9]

Demand in respect of alleged shortages at the factory is dropped.

Confiscation and redemption fine for excess goods - benefit of doubt in stock measurement - Liability for duty, confiscation and redemption fine in respect of excess fabric found in vehicle No. AP 9T 8688. - HELD THAT: - On interception the officers recorded an excess quantity of sarees in the vehicle over and above documentary records. The respondent's contention that marked 5-metre sarees actually measured 4.2-4.3 metres was accepted by the Commissioner without adequate basis. The Tribunal rejected that approach as unreasonable and held that the officers were not obliged to re-measure every bundle; the recorded excess therefore supports imposition of duty. The Tribunal upheld duty demand on the excess, ordered confiscation of the excess fabric and imposed a reasonable redemption fine, concluding the Commissioner erred in granting benefit of doubt in this instance. [Paras 10]

Duty on excess goods in the vehicle is payable; the excess quantity is liable to confiscation and a redemption fine is imposed.

Confiscation and redemption fine for excess goods - set-off of excesses and shortages in stock verification - Confiscation and imposition of redemption fine in respect of excess fabrics found in the factory despite the Commissioner's denovo finding. - HELD THAT: - Although the Commissioner dropped the demand by relying on an observation about approximate measurements, the Tribunal held that the mahazar recorded excess quantities which, after accounting for shortages in other stages, resulted in net excesses (specified metreages for the two width categories). The Tribunal found that the excess quantities as thus computed are liable to confiscation and that a redemption fine is appropriate. Consequently the Tribunal upheld confiscation of the excess factory stock and imposed a redemption fine on the respondent. [Paras 11]

Excess fabrics in the factory are liable for confiscation and a redemption fine is imposed.

Final Conclusion: Appeal partly allowed: demands, interest and penalty based on the folding contractor's statements and on alleged factory shortages are set aside; demands relating to excess goods in the intercepted vehicle and confiscation of net excess fabrics in the factory are sustained, duty and confiscation ordered and redemption fines imposed as directed by the Tribunal.

Confiscation under Rule 25 of the Central Excise Rules - applicability of Central Excise provisions to imported goods - penalty under Rule 15 of the Cenvat Credit Rules - liability of director for penalty under Cenvat regime - definition of "excisable goods" and its territorial scope

Confiscation under Rule 25 of the Central Excise Rules - applicability of Central Excise provisions to imported goods - definition of "excisable goods" and its territorial scope - Whether imported goods seized from the appellant were liable to confiscation under Rule 25 of the Central Excise Rules, 2002 - HELD THAT: - The Tribunal examined Rule 25 and the statutory definition of "excisable goods" and concluded that the provisions of Rule 25 apply only to goods that are "excisable" as defined under the Central Excise Act. The seized consignments were admitted to be imported goods and the show cause notice did not apply Customs provisions to make Central Excise rules applicable to those imports. As the notice did not charge applicability of Customs provisions or demonstrate that the imported goods had become excisable goods (for example, by being used in manufacture in India), Rule 25 could not be invoked. The Tribunal therefore found no contravention of Central Excise provisions justifying confiscation of the imported hand showers under Rule 25. [Paras 10]

Confiscation under Rule 25 in respect of the seized imported goods is not sustainable; appeal allowed on this ground.

Penalty under Rule 15 of the Cenvat Credit Rules - liability of director for penalty under Cenvat regime - applicability of Central Excise provisions to imported goods - Whether penalty imposed under Rule 15 of the Cenvat Credit Rules (read with the Central Excise Rules) on the assessee and on the director was maintainable in respect of the seized imported goods - HELD THAT: - Because the Tribunal held that the seized items were imported goods to which the Central Excise rules (including Rule 25) did not apply on the facts and the show cause notice, the parallel imposition of penalty under the Cenvat Credit Rules and penalties on the director could not be sustained. The record did not establish that Cenvat provisions applied to the seized consignments nor did the adjudication establish any contravention of Central Excise obligations as required to attract the Cenvat/penalty provisions. On that basis the Tribunal set aside the penalties imposed on the company and on the director. [Paras 11]

Penalties under the Cenvat Credit Rules and related provisions as imposed on the appellant and the director are unsustainable; appeal allowed on this ground.

Final Conclusion: The appeals are allowed: the confiscation of the imported goods under Rule 25 of the Central Excise Rules and the penalties imposed under the Cenvat Credit Rules (including penalty on the director) are set aside because the Central Excise/Cenvat provisions were not applicable to the seized imported consignments on the facts and charges framed in the show cause notice.

CENVAT credit on input services - interpretation of the word "includes" in definition of input services - eligibility of credit for security services not rendered within factory premises - eligibility of credit for mandap keeper services for statutory company meetings - eligibility of credit for public relations / market research services connected with advertisement - nexus with manufacturing activity

CENVAT credit on input services - eligibility of credit for security services not rendered within factory premises - nexus with manufacturing activity - Credit for security services availed to protect the appellant's product image and to conduct raids against manufacturers of duplicate products is eligible as input service credit. - HELD THAT: - The Tribunal accepted that the definition of "input services" contains an "includes" clause which must be interpreted expansively. Security services are specifically mentioned and are not confined to physical guarding within factory premises. Where security agencies are engaged to protect the image of the appellant's branded products and to conduct raids against manufacturers of counterfeit products, such services have a direct and proximate connection with the manufacturing activity and with safeguarding the commercial value of the products. Consequently, disallowance solely because the service was not consumed within the factory premises is unsustainable.

Disallowance of credit on security services set aside; appellants eligible for CENVAT credit.

CENVAT credit on input services - eligibility of credit for mandap keeper services for statutory company meetings - nexus with manufacturing activity - Credit for mandap keeper services availed to conduct the company's Annual General Meeting is eligible as input service credit. - HELD THAT: - The Tribunal noted that holding an AGM is an indispensable statutory requirement under the Companies Act and that services procured for conducting such obligatory corporate meetings are integrally connected with the company's activity. Therefore, mandap keeper services engaged for the AGM have sufficient nexus with the manufacturing activity to qualify as input services eligible for credit. The Commissioner (Appeals)'s disallowance on the ground that the services were availed outside factory premises was held to be unjustified.

Disallowance of credit on mandap keeper services set aside; appellants eligible for CENVAT credit.

CENVAT credit on input services - eligibility of credit for public relations / market research services connected with advertisement - nexus with manufacturing activity - Credit for public relations management services used to analyse regional advertising potential and procure advertisement is eligible as input service credit. - HELD THAT: - The Tribunal held that the phrase "input services" encompasses market research and advertising-related services when such services are utilized to plan and procure region-specific advertisement to promote the appellant's products. Market analysis and advertisement procurement aimed at augmenting manufacture and marketability have a direct nexus with the manufacturing activity. Accordingly, the disallowance of credit on public relations/market research services was found to be unjustified.

Disallowance of credit on public relations management / market research services set aside; appellants eligible for CENVAT credit.

Final Conclusion: The impugned order disallowing CENVAT credit on security services, mandap keeper services and public relations/market research services is set aside; the appeals are allowed with consequential relief.

Reversal/payment under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 for manufacture of exempted goods - Electricity generated from by-product (bagasse) not being excisable goods - Non availment of Cenvat credit on inputs used for generation of electricity - Scope of Rule 6 where common inputs are used for both dutiable and exempted final products - Effect of Explanation 1 to Rule 6 treating non excisable goods as exempted goods

Reversal/payment under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 for manufacture of exempted goods - Electricity generated from by-product (bagasse) not being excisable goods - Non availment of Cenvat credit on inputs used for generation of electricity - Scope of Rule 6 where common inputs are used for both dutiable and exempted final products - Whether demand under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 for payment equal to 6% of value of electricity sold is sustainable in respect of electricity generated from bagasse. - HELD THAT: - The Tribunal held that Rule 6(3)(i) applies only where a common cenvatable input is used in the manufacture of both dutiable (excisable) and exempted final products, necessitating proportionate reversal or payment. In the present facts electricity is generated solely from bagasse, a by product/waste arising in sugar manufacture, and no cenvatable inputs or input services were used in generating the electricity. Electricity produced from bagasse therefore does not qualify as excisable goods and the condition precedent for invocation of Rule 6 is absent. Reliance was placed on the reasoning in the cited decisions which treat bagasse based electricity as not falling within excisable/exempted goods for the purposes of Rule 6. Consequently, the Revenue's contention that Explanation 1 (Notification No.06/2015 CE(NT)) renders non excisable goods as 'exempted goods' so as to attract Rule 6 was held inapplicable on the facts where no cenvat credit had been availed on inputs used for generation and no common cenvatable input existed between dutiable and exempted manufacture.

Demand under Rule 6(3)(i) does not sustain in respect of electricity generated from bagasse; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that electricity generated solely from bagasse (a by product) with no cenvatable inputs used is not subject to reversal/payment under Rule 6(3)(i) of the Cenvat Credit Rules, 2004, and therefore the demand was set aside.

Doctrine of unjust enrichment - refund governed by Section 11B - pre deposit - suo moto re credit - right to refund subject to unjust enrichment test

Pre deposit - suo moto re credit - Characterisation of the amount paid in compliance with the High Court order as a pre deposit and the lawful basis for taking suo moto re credit - HELD THAT: - The Tribunal recorded that admissibility of the proforma credit itself was finally decided in favour of the appellant by the Hon'ble Supreme Court, entitling the appellant in principle to refund of the amount paid during litigation. However, the amount was deposited in compliance with the High Court order which had denied proforma credit; such payment was not made as a statutory pre deposit for prosecution of an appeal to the Supreme Court (for which no pre deposit was required). Consequently the payment cannot be characterised as a pre deposit. Notwithstanding that the appellants took suo moto re credit, the nature of the payment precludes treating it automatically as a pre deposit entitling unconditional refund without further scrutiny.

The amount paid in compliance with the High Court order is not a pre deposit and suo moto re credit taken by the appellant is not thereby automatically insulated from challenge.

Doctrine of unjust enrichment - refund governed by Section 11B - right to refund subject to unjust enrichment test - Applicability of the doctrine of unjust enrichment to the claimed refund and whether the claimed duty incidence was passed on to others - HELD THAT: - The Tribunal held that refunds of excise duty are governed by Section 11B and that the equitable doctrine of unjust enrichment, which Section 11B recognises, is available to the department to deny refunds where appropriate. Invocation of the doctrine is not dependent on the literal presence of a statutory provision because the statute gives legislative recognition to the equitable principle; in any event Section 11B applies to the present refund. Although the appellant is in principle entitled to refund because the Supreme Court allowed proforma credit, that entitlement is subject to the unjust enrichment test. The record did not contain a determination whether the incidence of the duty had been passed on to any other person; given the factual nature of that enquiry the Tribunal considered it appropriate in the interests of justice to remit the matter for fresh adjudication limited to the issue of unjust enrichment and proof whether the incidence of duty was passed on.

Doctrine of unjust enrichment applies to the refund claim; matter remitted to the adjudicating authority to decide, after giving the appellant an opportunity, whether the incidence of the duty claimed as refund was passed on to any other person.

Final Conclusion: Both appeals allowed in part: admissibility of proforma credit affirmed in principle but the payment made in compliance with the High Court order is not a pre deposit; the claim is subject to the doctrine of unjust enrichment and the matter is remanded to the adjudicating authority for determination solely on whether the incidence of duty was passed on.

Payment of interest on delayed refund - Refund under Section 11B - Interest payable on delayed refund under Section 11BB - Date from which interest runs - refund application date vs appellate order date

Interest payable on delayed refund under Section 11BB - Refund under Section 11B - Date from which interest runs - refund application date vs appellate order date - Whether interest on the refund is payable from the date of the Commissioner (Appeals) order or from the date of filing of the refund application under Section 11B/11BB. - HELD THAT: - Section 11BB makes interest payable only if the duty ordered to be refunded under sub-section (2) of Section 11B is not refunded within three months from the date of receipt of the refund application under sub-section (1) of that section. Although the appellant became entitled to a reduced demand by the Commissioner (Appeals) order dated 05.11.2009, the statutory trigger for computation of interest under Section 11BB is the date of receipt of the refund application. The appellant filed the refund application on 01.02.2017 and the refund was paid on 27.04.2017, i.e., within three months of the application. Consequently, interest under Section 11BB is not attracted. [Paras 8, 9]

No interest is payable because the refund was paid within three months from the date of the refund application; the Commissioner (Appeals) was correct in rejecting the claim for interest.

Final Conclusion: Appeal dismissed; no interference with the Commissioner (Appeals) order refusing interest, since the refund was paid within three months of the refund application and Section 11BB therefore does not apply.

Inclusion of government subsidy in assessable value for central excise - Transaction value and deduction of sales tax/VAT actually paid - Validity of using VAT 37B challans/subsidy credits as actual payment of VAT - Remission of tax/subsidy under investment promotion schemes and effect on excise valuation

Inclusion of government subsidy in assessable value for central excise - Validity of using VAT 37B challans/subsidy credits as actual payment of VAT - Remission of tax/subsidy under investment promotion schemes and effect on excise valuation - Whether subsidy amounts received under a State investment promotion scheme in the form of VAT 37B challans/cash credits are required to be included in the assessable value of goods for Central Excise duty. - HELD THAT: - The Tribunal applied its earlier reasoning in Shree Cement Ltd. and Welspun Corporation Ltd. and held that where a State's investment promotion scheme operates by remitting a portion of VAT back to the assessee in the form of legally recognised VAT 37B challans which can be utilised for discharge of VAT liability in subsequent periods, such utilisation amounts constitute payment of VAT for the purposes of transaction value. Distinguishing the requirement in the Apex Court's decision concerning actual payment, the Tribunal accepted that under the scheme the credited challans are equivalent to cash for payment of tax and are therefore to be treated as discharging VAT liability; consequently, the subsidy so received need not be included in the assessable value for excise duty. The Tribunal followed precedent where remission-based subsidies tied to statutory incentive schemes were held not to form part of transaction value.

Impugned orders set aside and appeals allowed; subsidy represented by VAT 37B challans not includible in assessable value for excise.

Final Conclusion: Appeals allowed by following earlier Tribunal decisions: subsidies received as VAT 37B challans under the State investment promotion scheme are treated as discharge of VAT and are not includible in the assessable value for Central Excise; impugned orders set aside.

Admissibility of CENVAT credit on structural items as inputs or capital goods - Verification of usage of goods for capital purposes by original authority - Remand for fresh consideration and verification of documentary evidence - Penalty under CENVAT Credit Rules for wrongful availing of credit

Admissibility of CENVAT credit on structural items as inputs or capital goods - Verification of usage of goods for capital purposes by original authority - Remand for fresh consideration and verification of documentary evidence - Whether the matter should be remanded to the original authority for verification of the usage of structural items (angles, coils, channels, MS plates) and consequent admissibility of CENVAT credit and related consequences including penalty. - HELD THAT: - The appellant asserted that the impugned credits were taken on items which were used in fabrication of crane girders, platforms for furnace and concast machines, and other capital assemblies, and placed invoices and an itemwise usage table on record. The departmental appellate representative raised no objection to remand. The Tribunal noted that the appellant offered to establish itemwise usage if the matter were returned to the original authority. In these circumstances, the Tribunal found it appropriate to remit the matter to the original authority to verify the actual usage of the items in the factory and to consider any documents the appellant may produce, and thereafter to pass a fresh order on admissibility of credit and any consequential interest or penalty claims. The Tribunal did not adjudicate the merits of admissibility or the validity of the penalty on the present record but directed fresh consideration after verification. [Paras 6]

Appeal allowed by way of remand; impugned order set aside and matter remitted to the original authority for itemwise verification of usage and fresh adjudication.

Final Conclusion: The Tribunal set aside the Commissioner (A)'s order and remitted the case to the original authority for verification of the usage of the structural items and fresh decision on admissibility of CENVAT credit and consequential interest/penalty for the period November 2012 to December 2013.

Clandestine removal - third-party records as evidence - corroborative evidence requirement - reliance on admissions of third parties

Clandestine removal - third-party records as evidence - corroborative evidence requirement - reliance on admissions of third parties - Whether demands of duty and penalties based solely on documents recovered from a third party and admissions recorded from that third party suffice to sustain findings of clandestine removal against the appellant. - HELD THAT: - The Tribunal held that allegations of clandestine removal cannot be sustained merely on the basis of third-party records recovered from another premises and admissions of the third party's director, in the absence of any independent inquiry or corroborative evidence linking the materials to the assessee. Following earlier tribunal precedents, the adjudicatory conclusion requires evidence such as investigations at the assessee's unit, proof of transportation or delivery to the assessee, material proof of actual manufacture into final products at the assessee's premises, flow of consideration, or other corroboration; mere entries in a third party's registers and their admission do not by themselves establish clandestine clearance. Applying this principle to the present case, where the demand rests on documents recovered from the third party and the third party's admission while there is no evidence of verification concerning transportation, manufacture or corroborative linkage to the appellant, the orders confirming demand and imposing penalties were found to be unsustainable.

Impugned orders confirming duty demand and imposing penalties set aside; both appeals allowed with consequential relief to the appellants.

Final Conclusion: The appeals succeed: demands and penalties founded solely on third party records and admissions, without corroborative inquiry or evidence linking clandestine removal to the appellant, are unsustainable and the impugned orders are set aside.

Clandestine removal - corroborative evidence - third-party records - remand directions - opportunity of hearing

Remand directions - opportunity of hearing - Whether the adjudicating authority complied with the Tribunal's remand directions and afforded the mandated opportunity to lead corroborative evidence. - HELD THAT: - The Tribunal had earlier remanded the matter directing the original authority to decide afresh and to admit additional evidence, if necessary, while providing opportunity of hearing. In the de novo proceedings the Principal Commissioner again rested the major part of the demand on the same material without conducting the investigations or procuring corroborative evidence as directed. The adjudicating authority therefore failed to comply with the Tribunal's directions to undertake fresh enquiry and to permit appropriate evidence and hearing before confirming demand. [Paras 5, 6, 7]

Remand directions were not complied with; the impugned order suffers for non-compliance and is set aside.

Clandestine removal - corroborative evidence - third-party records - Whether entries in the records recovered from a third party (M/s Monu Steels) without further investigation or corroboration can sustain a finding of clandestine removal against the assessee. - HELD THAT: - The adjudication relied predominantly on documents seized from the premises of a commission agent and on entries in those private records. The Tribunal's established line of decisions, followed in the present order, holds that allegations of clandestine removal cannot be sustained on the basis of third-party records alone in the absence of independent enquiries at the assessee's unit or other corroborative material such as evidence of procurement, transport, manufacture, or flow of funds. Even admissions by a director, or recovery of private records, are insufficient without such corroboration. Applying that principle, the impugned confirmation of duty, interest and penalty based solely on third-party entries and without requisite corroboration is unsustainable. [Paras 5, 6]

Entries in third-party records without further investigation or corroborative evidence do not sustain a finding of clandestine removal; the demand and consequential penalties confirmed on that basis cannot be upheld.

Final Conclusion: The impugned order confirming duty, interest and imposing penalty largely on the basis of third-party records and without compliance with the Tribunal's remand directions is set aside; the appeal is allowed with consequential relief.

Erroneously granted refund - recovery under Section 11A - limitation for refund claims - effect of appellate court setting aside a tribunal order - utilisation of Cenvat credit during a period of forfeiture

Erroneously granted refund - recovery under Section 11A - effect of appellate court setting aside a tribunal order - Whether the refund sanctioned earlier could be recovered as an erroneously granted refund under Section 11A in view of the subsequent setting aside of the Tribunal's order by the High Court. - HELD THAT: - The Tribunal had earlier allowed Revenue's appeal and restored the order of the original adjudicating authority, which formed the basis for treating the sanctioned refund as erroneous and recoverable under Section 11A. The appellant challenged the Tribunal's order before the High Court, which set aside the Tribunal's decision and restored the Commissioner (Appeals) order that had held the refund to be within limitation. Once the High Court set aside the Tribunal's order, the foundational finding on which recovery proceedings under Section 11A were based ceased to exist. The Assistant Commissioner's sanction of the refund, being in accordance with the Commissioner (Appeals) order upheld by the High Court, could not be treated as erroneous for the purpose of recovery under Section 11A.

The impugned orders directing recovery of the refund under Section 11A are set aside and the appeal is allowed.

Limitation for refund claims - utilisation of Cenvat credit during a period of forfeiture - Whether the refund claim filed by the appellant was time-barred and whether payment through Cenvat credit during the forfeiture period was in accordance with law. - HELD THAT: - The Commissioner (Appeals) had earlier held that the payments through the Cenvat credit account were in accordance with law and that the refund claim was within the limitation period. Although the Assistant Commissioner initially rejected the refund on time-bar grounds, subsequent appellate orders accepted the claim as within limitation. The High Court's setting aside of the Tribunal's contrary order restored the Commissioner (Appeals) findings that the refund was not barred by limitation and that utilisation of Cenvat credit was permissible in the circumstances.

The refund claim is not time-barred and the payments through the Cenvat credit account were held to be in accordance with law.

Final Conclusion: The High Court's setting aside of the Tribunal's order restored the Commissioner (Appeals) findings that the refund was within limitation and that Cenvat credit utilisation was lawful; accordingly, the recovery proceedings treating the sanctioned refund as erroneous under Section 11A cannot be sustained, the impugned orders are set aside and the appeal is allowed.

Third party evidence - corroborative evidence - clandestine removal / clandestine clearance - confirmation of demand - penalty confirmation

Third party evidence - corroborative evidence - clandestine removal / clandestine clearance - confirmation of demand - Sufficiency of third party records and statements to uphold demand and penalty for clandestine clearance of ingots. - HELD THAT: - The Tribunal held that the Revenue's case rested entirely on documents recovered from the premises of a third party (M/s Pankaj Ispat Ltd.) and the statement of that third party's representative. The same body of third party evidence had earlier been held by the Commissioner (Appeals) to be insufficient to sustain a demand in respect of TMT bars; the Tribunal found no reason to treat the identical evidence differently for the allegation of clandestine clearance of ingots. The Tribunal reiterated the established principle, reflected in its prior decisions, that third party records alone, without independent corroboration, are insufficient to support charges of clandestine removal. The Tribunal referred to a recent decision in Shree Consultants Pvt. Ltd. & others CCE & ST, Raipur Vs. Final Order No. 51225-51226/2018 dated 4.4.2018 as consistent with this approach. Concluding that there was no corroborative evidence linking the appellant to clandestine clearances, the Tribunal found the impugned confirmations of demand, interest and penalties unsustainable.

Impugned orders confirming demand, interest and penalties were set aside and the appeals were allowed with consequential relief.

Final Conclusion: The appeals were allowed; the adjudicating authority's confirmations of demand, interest and penalties based solely on third party records and statements-without corroboration-were held unsustainable and set aside, with consequential relief to the appellant.

Remission of duty - reversal of Cenvat Credit - no condition of credit reversal can be imposed as a term of remission - inputs considered as put to intended use where goods destroyed by natural cause/unavoidable accident - binding effect of Tribunal Larger Bench decision approved by High Court

Remission of duty - reversal of Cenvat Credit - no condition of credit reversal can be imposed as a term of remission - Whether the Commissioner could make remission of duty conditional upon reversal of Cenvat credit in respect of inputs contained in goods destroyed by fire. - HELD THAT: - The Tribunal applied the ratio of its Larger Bench in Grasim Industries and the subsequent approval by the High Court of Madras, holding that the rules providing for remission of duty for goods lost or destroyed by natural cause or by unavoidable accident do not contemplate reversal of credit for inputs used in manufacture of such goods. Inputs used in goods destroyed by accident are to be regarded as having been put to their intended use and remission may not be made conditional on reversing Cenvat credit. Applying that principle, the Tribunal found that the condition imposed by the Commissioner to reverse Cenvat credit as a prerequisite for remission was not sustainable and therefore the demand founded on that condition could not stand. [Paras 4, 5]

The condition of reversal of Cenvat credit as a term of remission was held unsupported and accordingly could not be sustained.

Reversal of Cenvat Credit - demand set aside - Whether the demand for reversal of Cenvat credit confirmed by the Commissioner pursuant to the conditional remission order is maintainable. - HELD THAT: - Having held that remission cannot be made conditional on reversal of Cenvat credit, the Tribunal examined the impugned demand and found it unsustainable. The appeal seeking to the extent of the condition of reversal of credit was allowed and the order confirming recovery of Cenvat credit was set aside. [Paras 5]

The demand for reversal of Cenvat credit confirmed by the Commissioner was set aside and the appeal was allowed to that extent.

Final Conclusion: The Tribunal allowed the appeal to the extent it imposed reversal of Cenvat credit as a condition for remission of duty in respect of inputs contained in goods destroyed by fire, set aside the demand for reversal of credit, and held that such a condition is not permissible under the applicable remission provisions as interpreted by the Larger Bench and approved by the High Court.

Limitation for suo motu revision - Power of revision by Commissioner - Requirement to initiate proceeding within three calendar years - One calendar year for passing order from date of initiation - Limitation to be computed from original assessment date - Department cannot travel beyond the show-cause notice

Limitation for suo motu revision - Requirement to initiate proceeding within three calendar years - Limitation to be computed from original assessment date - Department cannot travel beyond the show-cause notice - Show cause notices dated 14-7-2015 invoking suo motu revision under Section 49(3) of the Chhattisgarh VAT Act seeking revision of original assessment orders dated 1-5-2009, 1-5-2010 and 22-1-2008 were within time or barred by limitation. - HELD THAT: - The proviso (a) to sub section (3) of Section 49 creates an embargo that no suo motu revision proceeding may be initiated after the expiry of three calendar years from the date of the order sought to be revised. The Court applied the principle that the department cannot travel beyond the show cause notice and must be confined to the order identified in that notice. Relying on analogous authority which holds that limitation for revisional jurisdiction runs from the date of the original assessment (and not from any subsequent reassessment), the Court concluded that the notices dated 14-7-2015 sought revision of original assessment orders dated in 2008-2010 and therefore were issued after the three year period had expired. Consequently the initiation of revision was time barred and without jurisdiction. [Paras 10, 11, 12, 13]

The show cause notices dated 14-7-2015 are barred by limitation and are quashed.

Power of revision by Commissioner - One calendar year for passing order from date of initiation - Validity of final revisional orders passed under Section 49(3) consequent to the quashed show cause notices. - HELD THAT: - Because the initiating show cause notices were held to be beyond the three year limitation and therefore null, any final orders made pursuant to those defective proceedings necessarily suffer from the same illegality. The Court therefore held that the revisional orders passed under Section 49(3) in consequence of the time barred initiation cannot stand. [Paras 13]

Final revisional orders passed under Section 49(3) consequential to the quashed notices are illegal and are quashed.

Final Conclusion: Writ appeals and writ petitions allowed; the show cause notices dated 14-7-2015 and the consequent revisional orders under Section 49(3) of the Chhattisgarh VAT Act in respect of assessment years 2006-07, 2007-08 and 2008-09 are quashed. No order as to costs.

Revision of assessment - remand for fresh consideration - procedural fairness and opportunity of personal hearing - inspection by Enforcement Wing vis-a -vis VAT audit under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006 - treatment of assessment findings as a show cause notice - input tax credit reversal on purchases from cancelled registrants and cross verification of buyer seller annexures - addition for commission received, repairs and replacement charges, and sales suppression on turnover difference

Inspection by Enforcement Wing vis-a -vis VAT audit under Section 64(4) of the Tamil Nadu Value Added Tax Act, 2006 - power of Joint Commissioner to authorise inspection - The contention that the entire revision was without jurisdiction because only the Commissioner can authorise an inspection under Section 64(4) is rejected. - HELD THAT: - The Court held that the action in the present case was an inspection conducted by the Enforcement Wing and not a VAT audit as contemplated under Section 64(4). Independent of the joint commissioner/commissioner nomenclature, inspection by the Enforcement Wing does not attract the requirement said to be exclusive to a VAT audit, and Section 65 permits officers of the Department to call for details from the assessing officer. Therefore the challenge to jurisdiction based on authorisation under Section 64(4) does not sustain in these proceedings. [Paras 6]

Petitioner's jurisdictional objection rejected and the challenge to the revision on that ground dismissed.

Addition for commission received, repairs and replacement charges, and sales suppression on turnover difference - remand for fresh consideration - procedural fairness and opportunity of personal hearing - treatment of assessment findings as a show cause notice - Assessing officer's confirmations on (i) commission received, (ii) repairs and replacement charges, and (iii) sales suppression are not set aside but are remitted for fresh consideration after affording the assessee opportunity to file objections and produce documents; the findings are to be treated as show cause notices. - HELD THAT: - The Court noted that the petitioner had filed objections and produced records, and that some proposals were deleted by the assessing officer while others were confirmed. Rather than quashing the confirmations, the Court directed that the matters be reconsidered: the petitioner is to file objections within fifteen days treating the impugned assessment orders as show cause notices; thereafter the assessing officer shall afford personal hearing, consider the documents relied upon by the petitioner and redo the assessment in accordance with law. The remand is for fresh consideration and verification, including opportunity to produce corroborative records, not a final adjudication on merits by this Court. [Paras 5, 7, 8]

Matters pertaining to commission received, repairs and replacement charges, and sales suppression remitted to the assessing officer for fresh consideration after giving opportunity; findings to be treated as show cause notices and objections to be filed within fifteen days.

Input tax credit reversal on purchases from cancelled registrants and cross verification of buyer seller annexures - application of judicial precedent at pre-revision stage - The assessing officer deleted the proposals relating to ITC reversal for purchases from cancelled registrants and ITC reversal on cross verification of buyer and seller annexure, and also deleted proposals to levy penalty on those heads; the Court recorded and accepted that deletion. - HELD THAT: - On consideration of the objections and judicial decisions relied upon by the petitioner, the assessing officer applied the law and deleted the proposals and related penalty proposals at the pre revision stage. The Court observed this as a proper application of judicial pronouncements by the assessing officer and noted it with approval, without further interference. [Paras 4, 5]

Deletion of proposals and penalties on ITC reversal (cancelled registrants and cross verification) recorded and noted; no interference.

Final Conclusion: Writ petitions disposed by (a) rejecting the jurisdictional challenge to the revision on the ground of authorisation under Section 64(4), (b) recording the deletion by the assessing officer of ITC reversal proposals and related penalties, and (c) remitting the remaining three heads (commission received; repairs and replacement charges; sales suppression on turnover difference) to the assessing officer for fresh consideration after treating the findings as show cause notices and affording the petitioner an opportunity to file objections within fifteen days, followed by personal hearing and reassessment in accordance with law.