TaxTMI Updates e-Newsletter
Jun 04,2018

Valuation between distinct persons under Rule 28 - open market value - First Proviso to Rule 28 - option to value at 90% of price for goods for further supply as such - Second Proviso to Rule 28 - invoice value deemed to be open market value - eligibility for full input tax credit

Valuation between distinct persons under Rule 28 - First Proviso to Rule 28 - option to value at 90% of price for goods for further supply as such - Second Proviso to Rule 28 - invoice value deemed to be open market value - Whether supplies of trading goods from the Head Office to independently registered branches in other States can be valued under the Second Proviso to Rule 28 instead of under the First Proviso - HELD THAT: - Supplies from the Head Office to separately registered business establishments in other States qualify as supplies between distinct persons and thus attract Rule 28. The First Proviso applies where goods are intended for further supply as such and affords the supplier an option to declare value at 90% of the price charged by the recipient to its non-related customer; exercise of that 90% option is discretionary for the supplier. The Second Proviso, which deems the value declared in the invoice to be the open market value where the recipient is eligible for full input tax credit, is not limited to goods intended for further supply as such and therefore applies to transfers both for further resale and for use in business. Consequently the supplier may elect not to adopt the First Proviso and may value such inter-establishment supplies by applying the Second Proviso where its branches are eligible for full input tax credit. [Paras 3, 4, 5, 6]

The Applicant has the option to value supplies to its branches by applying the Second Proviso to Rule 28 instead of the First Proviso.

Eligibility for full input tax credit - Section 16(2)(a) read with Section 17(1) - Meaning of the expression "where the recipient is eligible for full input tax credit" in the Second Proviso to Rule 28 - HELD THAT: - Input tax credit provisions in Chapter V (Sections 16-21) show that eligibility to take credit depends on possession of an invoice or a document of like nature as specified in Section 16(2)(a). Where goods are transferred to independently registered branches, such invoices or documents of like nature qualify the recipient to claim input tax credit. The qualifying phrase in the Second Proviso must therefore be read in light of Section 17(1) and Section 16(2)(a) to mean that the recipient is eligible to take full input tax credit of the amount of tax paid by the supplier as shown in the respective invoice or other document valid under Section 16(2)(a). [Paras 4, 7]

The expression means that the recipient will be eligible to take full input tax credit of the amount of tax paid by the supplier as mentioned in the respective invoice or any other document valid under Section 16(2)(a).

Final Conclusion: The Authority rules that inter State transfers to separately registered branches are supplies between distinct persons; the supplier may, at its option, value such supplies under the Second Proviso to Rule 28 (invoice value deemed open market value) rather than under the First Proviso (90% option), and "eligible for full input tax credit" in the Second Proviso means eligibility to claim full input tax credit for the tax shown in the supplier's invoice or other document valid under Section 16(2)(a).

Writ in the nature of mandamus - transitional input tax credit - reopening of online portal for filing - manual acceptance of Trans-1 return - speaking order - opportunity of hearing - administrative decision in accordance with law

Writ in the nature of mandamus - transitional input tax credit - reopening of online portal for filing - manual acceptance of Trans-1 return - administrative decision in accordance with law - speaking order - opportunity of hearing - Respondent No.2 to decide the petitioner's letter dated 8.3.2018 seeking relief in relation to filing/acceptance of Trans-1 and carry forward of transitional ITC - HELD THAT: - The Court did not express any opinion on the merits of the petitioner's claim for reopening the portal, acceptance of Trans-1 or credit of transitional input tax credit. Having considered the petition and the communications exchanged, the Court directed administrative action: respondent No.2 is required to deal with the petitioner's representation dated 8.3.2018 by passing a reasoned (speaking) order after affording the petitioner an opportunity of hearing. The direction is procedural and mandates a decision in accordance with law within the specified timeframe; the Court refrained from adjudicating the substantive entitlement to relief. [Paras 4]

Respondent No.2 directed to decide the letter dated 8.3.2018 by a speaking order after hearing the petitioner within one week from receipt of certified copy of the order.

Final Conclusion: Writ petition disposed by directing respondent No.2 to consider and decide the petitioner's representation dated 8.3.2018 in accordance with law by passing a speaking order after affording an opportunity of hearing within one week of receipt of the certified copy of this order; no adjudication on merits.

Penalty under section 271(1)(c) of the Income tax Act - rejection of books of account and substitution by estimated income - unverifiable/bogus purchases and accommodation entries - distinction between addition and substitution/estimation for levy of penalty - precedential effect of coordinate bench and High Court decisions on penalty deletion

Penalty under section 271(1)(c) of the Income tax Act - rejection of books of account and substitution by estimated income - distinction between addition and substitution/estimation for levy of penalty - Validity of the penalty imposed under section 271(1)(c) where income was determined by estimating profit after rejection of books of account and additions were made on account of unverifiable purchases. - HELD THAT: - The Assessing Officer rejected the assessee's books and applied a 25% gross profit on specific unverifiable purchases, resulting in an addition; the CIT(A) confirmed the addition and sustained the penalty. The Tribunal examined coordinate bench decisions and the jurisdictional High Court principle that substitution of an estimated income after rejecting trading results is not an "addition" of a specific amount in the strict sense for the purposes of levy of penalty under section 271(1)(c). Respectfully following the coordinate bench decision (Deepak Dalela v. ITO) and the High Court reasoning in Shiv Lal Tak cited therein, the Tribunal held that where the assessment reflects substitution by estimation consequent to rejection of books, the statutory test for imposing penalty under section 271(1)(c) is not satisfied and the penalty cannot be sustained.

Penalty under section 271(1)(c) deleted.

Final Conclusion: Appeal allowed; penalty of Rs. 1,72,981/- under section 271(1)(c) set aside for Assessment Year 2007-08.

Disclosure of jewellery by prior wealth tax returns as evidence of possession - presumption of continuity of disclosed assets at the time of search - partial partition of HUF and transfer of ancestral jewellery - CBDT instruction no.1914 relief for specified quantity of jewellery - addition as unexplained cash under section 69A - burden on assessee to explain source and availability of cash

Disclosure of jewellery by prior wealth tax returns as evidence of possession - presumption of continuity of disclosed assets at the time of search - CBDT instruction no.1914 relief for specified quantity of jewellery - partial partition of HUF and transfer of ancestral jewellery - Whether jewellery seized during search could be treated as explained by reference to earlier wealth tax returns, valuation reports and claim of partition - HELD THAT: - The Tribunal accepted that substantial quantities of the seized jewellery had been shown earlier in wealth tax returns of the assessee's wife and of the larger HUF and that a partial partition had been claimed to have transferred specified jewellery to the assessee. The mere lapse of years between the earlier wealth tax filings and the search does not, without contrary material discovered during search, displace the presumption that disclosed jewellery continued to be in possession. The assessee filed valuation documents, wealth tax returns and a reconciliation showing retention/reconversion of disclosed jewellery. On this basis the Tribunal found the reason given by the CIT(A) - that returns were old - insufficient to sustain the addition for the total jewellery. The Tribunal also accepted relief permitted by CBDT instruction no.1914 for specified quantities and accordingly deleted the addition relating to the jewellery held as shown and bequeathed by partition, directing that the addition upheld by lower authorities be deleted to that extent. [Paras 7]

Addition in respect of jewellery deleted to the extent that it was shown in earlier wealth tax returns or attributable to partition; the assessee's ground on jewellery is allowed.

Addition as unexplained cash under section 69A - burden on assessee to explain source and availability of cash - Whether the cash of Rs.5,25,000 found at the time of search was adequately explained and liable to be deleted - HELD THAT: - The assessee claimed the cash represented household withdrawals, old savings and pin money of his wife and placed before the Tribunal a year wise reconciliation of bank withdrawals, household expenditure and residual balances. The Tribunal observed that the explanations and charts were not fully verifiable against books or records, and that the CIT(A) was entitled to disbelieve the claimed household expenses to the extent they were implausibly low. Nonetheless, the Tribunal accepted that some part of the cash could legitimately be explained by withdrawals and the wife's savings and, on a factual assessment, treated part of the seized cash as explained while confirming the remainder as unexplained income under the relevant provision. Accordingly the Tribunal treated Rs.2,25,000 as explained and upheld an addition of Rs.3,00,000 as unexplained. [Paras 10]

Part relief granted: Rs.2,25,000 treated as explained; balance of Rs.3,00,000 confirmed as unexplained cash and added to income.

Final Conclusion: The appeal is partly allowed: the additions in respect of jewellery seized in the search are deleted to the extent supported by earlier wealth tax disclosure and partition, and CBDT instruction relief is applied; in respect of seized cash the Tribunal allowed part relief by treating a portion as explained and confirmed the remaining addition, resulting in a partly successful appeal for the assessee for Assessment Year 2011-12.

Allowability of business expenditure - agency and commission payments to a related party - proof of rendition of services and probative value of enquiries under section 133(6) - apportionment of common expenses between units for deduction under section 80IA(4) for captive power producers - reliance on coordinate bench precedent in identical fact situation

Allowability of business expenditure - agency and commission payments to a related party - proof of rendition of services and probative value of enquiries under section 133(6) - Claim for commission paid to sister concern M/s. A. M. Ispat Ltd. allowed as bona fide business expenditure - HELD THAT: - The Tribunal accepted the assessee's case that commission was paid to procure iron ore from new suppliers located in disturbed mining regions, that TDS was deducted and the recipient accounted for and taxed the commission. The AO's reliance on non-response or denial by some suppliers to notices issued under section 133(6) was held not conclusive, because the commission agent acted for the assessee and suppliers therefore might not record payments to the agent. The surrounding facts - volatility of iron/steel market, reduced quantity of purchases versus preceding year, supply from entirely new parties, and the recipient being experienced in the trade - were held to be strong indicators of genuine services rendered. On this totality the Tribunal found the disallowance unjustified and directed deletion of the addition. [Paras 11]

Disallowance of commission payment deleted and the commission expenditure allowed.

Apportionment of common expenses between units for deduction under section 80IA(4) for captive power producers - reliance on coordinate bench precedent in identical fact situation - Validity of CIT(A)'s reversal of AO's apportionment adjustment reducing deduction under section 80IA(4) upheld and Revenue's appeal dismissed - HELD THAT: - The Tribunal noted that the identical issue for AY 2008-09 had been considered by a coordinate bench and the CIT(A)'s approach was endorsed. Examination of the nature of shared expenses, the technical and factual position of the power plant (automatic, under warranty, uses steam/waste coal), and comparative market data on electricity charges led the earlier appellate view to exclude several allocations made by the AO. On parity with that reasoning and the factual matrix in the assessee's case, the Tribunal found no reason to interfere with the CIT(A)'s order and declined the Revenue's challenge. [Paras 17, 18]

Revenue's appeal against the reversal of the apportionment and reduction of deduction under section 80IA(4) dismissed.

Final Conclusion: The assessee's appeal allowing the commission expenditure is allowed; the Revenue's appeal on apportionment relating to deduction under section 80IA(4) is dismissed; overall the Tribunal directs deletion of the commission disallowance and upholds CIT(A)'s apportionment decision.

Condonation of delay in filing appeal - Validity of memorandum of appeal - signature in terms of section 140(c) - Remand for de novo consideration by the appellate authority - Assessee held liable under section 201(1) for failure to deduct tax at source

Validity of memorandum of appeal - signature in terms of section 140(c) - Whether the appeal filed before the CIT(A) is duly signed in terms of section 140(c) of the Income-tax Act and hence a valid appeal - HELD THAT: - The Tribunal observed that there was delay in filing the appeal before the CIT(A) but recorded that the CIT(A) must first consider whether the appeal filed by the assessee is duly signed in terms of section 140(c) of the Act. The Tribunal did not decide the question of signature itself but directed that the matter be examined afresh by the CIT(A); if the CIT(A) finds the appeal to be validly filed and signed, further steps would follow. The Tribunal therefore remitted the question of validity of the memorandum of appeal to the CIT(A) for de novo determination. [Paras 6]

Remitted to the CIT(A) to determine, de novo, whether the appeal is duly signed and thus a valid appeal.

Condonation of delay in filing appeal - Remand for de novo consideration by the appellate authority - Assessee held liable under section 201(1) for failure to deduct tax at source - Whether the delay in filing the appeal before the CIT(A) should be condoned and, if condoned, whether the appeal should be decided on merits against the order under section 201(1) - HELD THAT: - The Tribunal noted the existence of a condonation petition and the explanation for delay submitted by the assessee, but it did not adjudicate the sufficiency of that explanation. Instead, the Tribunal directed that if the CIT(A) finds the appeal validly filed (including compliance with signature requirements), the CIT(A) must then decide the condonation petition and, if delay is condoned, proceed to decide the appeal on merits against the assessment/order passed under section 201(1) for non-deduction of tax at source. The Tribunal thereby remitted both the condonation question and adjudication on merits to the CIT(A) for fresh consideration. [Paras 6]

Remitted to the CIT(A) to decide, de novo, the condonation of delay and thereafter to hear and decide the appeal on merits if the appeal is held to be valid.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and remitted the matter to the CIT(A) for de novo consideration: first to determine whether the memorandum of appeal is duly signed and hence valid; and if so, to consider the condonation petition and decide the appeal on merits against the order passed under section 201(1).

Penalty under Section 271AAA - search and seizure under Section 132 - admission and specification of manner of undisclosed income in statement under Section 132(4) - substantiation of the manner in which undisclosed income was derived - payment of tax together with interest on undisclosed income

Penalty under Section 271AAA - admission and specification of manner of undisclosed income in statement under Section 132(4) - substantiation of the manner in which undisclosed income was derived - Assessee failed to specify and substantiate in its statement under section 132(4) the manner in which the undisclosed income of Rs. 21 crores was derived and therefore was not entitled to immunity from penalty under section 271AAA(2). - HELD THAT: - Undisputedly, during the search under section 132(1) the assessee surrendered undisclosed income of Rs. 21 crores and declared the same in the return for AY 2010-11 and paid tax with interest. However, the statement recorded under section 132(4) in reply to a specific query showed the assessee's inability to reconcile discrepancies in stock and expressly stated that the inventory accepted was part of a surrender made "to buy peace of mind and avoid litigation". Section 271AAA(2) requires that the assessee, in the course of the search in a statement under section 132(4), admit the undisclosed income and specify and substantiate the manner in which such income was derived, and pay tax with interest. The Tribunal found that the assessee did not specify or substantiate the manner of derivation in the required statement but instead made a voluntary surrender aimed at avoiding penalties and prosecution. Reliance on authorities favourable to the assessee was distinguished on facts; the decision of the Delhi High Court in Pr. CIT v. Smt. Ritu Singal supporting the requirement to specify and substantiate was held to be applicable. In these circumstances the conditions of section 271AAA(2) were not satisfied and the assessee was not entitled to escape the ten percent penalty prescribed by section 271AAA(1).

Penalty under section 271AAA imposed by the Assessing Officer is restored.

Final Conclusion: The Tribunal allows the Revenue's appeal, holding that the assessee did not satisfy the conditions of section 271AAA(2) by specifying and substantiating the manner of derivation of the surrendered income in the statement under section 132(4); the penalty imposed is accordingly restored.

Adjustment of seized cash against tax liability - treatment of seized cash as advance tax from date of application - credit in P.D. account - interest under sections 234A, 234B and 234C - reliance on judicial precedent for adjustment of seized cash

Adjustment of seized cash against tax liability - treatment of seized cash as advance tax from date of application - credit in P.D. account - Whether the Assessing Officer was justified in refusing to adjust the balance seized cash against the assessee's advance tax liability from the date of the assessee's application dated 10.04.2012. - HELD THAT: - The Tribunal noted that cash totaling the seized amount was deposited in the Department's P.D. account and that the assessee had, by letter dated 10.04.2012, requested adjustment of the entire seized amount towards advance tax for AY 2012-13. The Assessing Officer had adjusted part of the seized cash but denied credit of the balance. The Tribunal held that where the Department has the seized cash in its custody and the assessee has made a timely request for adjustment, the seized cash is capable of being adjusted against the assessee's tax liability. The character and nature of the amounts adjusted and those denied were identical, and there was no justification for partial adjustment; consequently the Assessing Officer ought to have adjusted the entire seized cash against tax dues with effect from the date of the application. The Tribunal also placed reliance on precedent treating adjustment of seized cash against advance tax as permissible where the amount was available with the Department and the assessee had sought adjustment. [Paras 7, 8]

The Assessing Officer's refusal to give credit of the balance seized cash was set aside and the balance amount was to be adjusted against the assessee's advance tax liability with effect from the date of the application.

Interest under sections 234A, 234B and 234C - treatment of seized cash as advance tax from date of application - Whether interest under sections 234A, 234B and 234C is payable where the assessee had requested adjustment of seized cash held in the Department's P.D. account towards advance tax. - HELD THAT: - The Tribunal observed that because the seized cash was available in the Department's custody and the assessee had made a request for its adjustment towards advance tax prior to the relevant dates, interest for default in furnishing return or payment of advance tax would not be leviable. In these circumstances there was no deferment attracting section 234C, and no basis for interest under sections 234A or 234B where the Department had not acted on the timely request to adjust the cash in its possession. [Paras 8]

No interest under sections 234A, 234B or 234C is to be charged in respect of the amounts which were in the Department's P.D. account and which the assessee had requested to be adjusted towards advance tax.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s allowance of credit for the entire seized cash against the assessee's advance tax liability with effect from the date of the assessee's application and held that no interest under sections 234A, 234B or 234C is payable in respect of those amounts.

Interest on post-dated cheques - Computation of interest after six months or at time of extension of PDCs - Allowability of additional payments for land acquisition as business expenditure under Explanation to Section 37(1) - Cash payments outside books treated as undisclosed income

Interest on post-dated cheques - Computation of interest after six months or at time of extension of PDCs - Cash payments outside books treated as undisclosed income - Addition on account of interest paid to vendors on post-dated cheques and the correct period for computation of such interest - HELD THAT: - The Tribunal followed its earlier decisions in which the CIT(A) had not deleted the addition but directed recomputation of interest either for the actual period of extension of the PDCs or, where that could not be worked out, after six months from the date of issue of the PDCs. The facts-payment of part consideration at sale-deed and balance by PDCs with cash interest paid to vendors for the intervening period-are identical to those earlier adjudications. In that factual matrix the Tribunal found no justification to interfere with the CIT(A)'s direction to recompute interest as indicated and accordingly dismissed the Revenue's ground. The Tribunal therefore rejected the Assessing Officer's addition treating such cash interest as undisclosed income to the extent the recomputation direction applied. [Paras 7]

Addition on account of interest on PDCs set aside to the extent directed by the CIT(A); Revenue's ground dismissed.

Allowability of additional payments for land acquisition as business expenditure under Explanation to Section 37(1) - Addition of alleged 'made up' additional payments to farmers and its disallowance under the Explanation to Section 37(1) - HELD THAT: - Relying on the Tribunal's reasoning in ACIT vs. Vasundra Promoters Pvt. Ltd. and the subsequent affirmation by the High Court, the Tribunal held that where the assessee has not claimed the sums as business expenditure and the accounting shows that the assessee effectively received a commission (Rs. 35,000 per acre) with the land cost passed on, there is no occasion to make a disallowance by treating such payments as expenses under the Explanation to Section 37(1). The Tribunal noted that the Explanation applies only where an infraction of law attracts a penal consequence as envisaged by that provision; a broad interpretation extending revenue powers beyond the Income-tax Act was not warranted. On these precedents and the facts that the payments were not routed through profit & loss as assessee's expenditure, the Tribunal dismissed the Revenue's contention and upheld the CIT(A)'s finding in favour of the assessee. [Paras 8]

Addition of alleged additional payments to farmers deleted; Revenue's ground dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Assessing Officer's additions on account of interest on PDCs are to be recomputed as directed by the CIT(A), and the disallowance of additional payments to land owners is rejected.

Exist solely for educational purposes and not for purposes of profit - ancillary or incidental objects - objects in memorandum of association to be determinative of institutional character - no provision for conditional grant of approval

Exist solely for educational purposes and not for purposes of profit - objects in memorandum of association to be determinative of institutional character - Whether the presence of non-educational objects in the Memorandum of Association disentitles the assessee from approval under section 10(23C)(vi) of the Act - HELD THAT: - Section 10(23C)(vi) requires that an educational institution must exist solely for educational purposes and not for purposes of profit. The CIT(E) found that the assessee's memorandum contains objects which are other than educational and are not ancillary or incidental to educational objects. The Tribunal noted that the assessee's authorised representative failed to controvert the CIT(E)'s finding that those objects are independent and dominant. Reliance placed on jurisdictional and other High Court decisions supports the principle that inclusion of non-educational objects, which permit application of income for non-educational purposes, precludes entitlement to approval under section 10(23C)(vi). Applying that principle to the facts, the Tribunal held that the assessee does not satisfy the statutory requirement of existing solely for educational purposes. [Paras 5, 6, 10]

Assessee is not entitled to approval under section 10(23C)(vi) because its memorandum contains non-educational objects that are not ancillary or incidental to education.

Ancillary or incidental objects - no provision for conditional grant of approval - Whether the objects pleaded by the assessee are ancillary or incidental to its educational objects and whether conditional approval can be granted - HELD THAT: - The High Court had earlier remitted the matter for the CIT to verify if non-educational objects were ancillary or incidental. On reconsideration the CIT(E) concluded that the specified objects (encouraging sportsmanship/adventurous spirit, printing/publishing for diffusion of knowledge, providing residential accommodation and assistance) are primary and distinctive in nature and cannot be inferred to be ancillary or incidental to educational purposes. The Tribunal accepted that finding as not rebutted by the assessee. The Tribunal further observed that the statute does not permit grant of conditional approval; approval must be granted only where the institution exists solely for educational purposes. [Paras 3, 5, 9]

The objects are not ancillary or incidental to education, and conditional approval is not permissible under the statute.

Final Conclusion: The order of the Commissioner of Income Tax (Exemptions) rejecting approval under section 10(23C)(vi) is upheld and the assessee's appeal is dismissed for AY 2014-15.

Estimation of income on the basis of unexplained bank deposits - application of Section 145(3) - rejection of books of account and estimation of profit - remand for fresh hearing and verification - charging of interest under Sections 234A and 234B - interest leviable only on the returned income and not on assessed income

Estimation of income on the basis of unexplained bank deposits - application of Section 145(3) - rejection of books of account and estimation of profit - remand for fresh hearing and verification - Grounds relating to estimation of profit and additions based on bank deposits and alleged deployment of additional capital were remitted to the CIT(A) for fresh adjudication after affording opportunity to the assessee. - HELD THAT: - The Tribunal recorded that the AO had rejected the books of account and made additions by estimating profit and treating certain bank deposits as undisclosed turnover; the CIT(A) proceeded ex parte. In the interests of substantial justice and fair play the Tribunal provided the assessee an additional opportunity to substantiate its claims before the CIT(A). The matter is remitted to the file of the CIT(A) with directions to examine and verify the disputed issues, to hear the assessee on the evidence already filed and any further material submitted, and to pass a speaking order. [Paras 8]

Grounds 1 to 3 are remitted to the CIT(A) for fresh consideration after affording adequate opportunity to the assessee.

Charging of interest under Sections 234A and 234B - interest leviable only on the returned income and not on assessed income - Interest under Sections 234A and 234B was held to be leviable only on the income declared in the return and not on the income as assessed by the AO; interest must be recomputed accordingly. - HELD THAT: - Relying on the jurisdictional High Court decision cited in the record and a coordinate bench of the Tribunal, the Tribunal held that interest under Sections 234A and 234B cannot be levied on the assessed income in excess of the returned income. The Tribunal followed the High Court's reasoning that the statutory scheme permits levy of interest only on the total income declared in the return and directed recomputation of interest in accordance with that principle. [Paras 9, 10, 11, 12]

Interest under Sections 234A and 234B shall be recomputed on the basis of the income declared in the return and not on the assessed income.

Final Conclusion: Appeal allowed for statistical purposes: grounds 1-3 remitted to the CIT(A) for fresh adjudication after affording opportunity to the assessee; interest under Sections 234A/234B held leviable only on returned income and to be recomputed accordingly.

Allowability of deduction under section 80IC - manufacturing versus job-work - relevance of employee statements in assessment - evaluation of substantial expansion of plant and machinery - finality of appellate order and its preclusive effect in subsequent years - classification as manufacturer under Central Excise - reopening under section 148

Allowability of deduction under section 80IC - manufacturing versus job-work - evaluation of substantial expansion of plant and machinery - finality of appellate order and its preclusive effect in subsequent years - classification as manufacturer under Central Excise - relevance of employee statements in assessment - Deduction under section 80IC allowed for Assessment Year 2009-10 (and applied mutatis mutandis to AYs 2006-07, 2007-08 and 2008-09). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee was engaged in manufacturing of plastic packaging material and was therefore entitled to deduction under section 80IC. The CIT(A)'s allowance was supported by the remand report under section 250(4) which, after examination of books, bills of plant and machinery, certificates of expansion and approvals, recorded that plant and machinery had increased by more than 50% in the relevant period. The Assessing Officer's contrary conclusion rested heavily on statements of two employees that the assessee performed job-work for packaging; the Tribunal found those statements of limited probative value because one witness admitted joining after the relevant year and because the assessee had produced process charts, details of raw materials, machine lists and statutory registrations (including Central Excise classification and District Industries Centre approvals) demonstrating technical and machine-driven processes (dies, moulds, thermoforming, thermal/pneumatic/hydraulic controls) which go beyond mere packing. Given the prior appellate acceptance (AY 2005-06) based on the remand inquiry and absence of any departmental appeal against that order, the allowability for the earlier year attained finality and the same conclusion governs the subsequent years. The Tribunal dismissed the Revenue's contention that the activity was only job-work and sustained the deletion of the addition. [Paras 9, 10, 12, 13, 14]

Order of the CIT(A) allowing deduction under section 80IC for AY 2009-10 is upheld; same finding applied to AYs 2006-07, 2007-08 and 2008-09.

Reopening under section 148 - Cross objections challenging validity of reopening under section 148 were not pressed and dismissed accordingly. - HELD THAT: - The assessee raised grounds in cross objections against reopening for AYs 2006-07, 2007-08 and 2008-09. At hearing the learned counsel did not press those grounds; the Tribunal therefore dismissed the cross objections as not pressed without adjudicating the validity of reopening on merits. [Paras 15, 16]

Cross objections on reopening under section 148 dismissed as not pressed; appeals and cross objections otherwise dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and the assessee's cross objections (as not pressed on the reopening point), upholding the CIT(A)'s allowance of deduction under section 80IC for AY 2009-10 and applying that conclusion mutatis mutandis to AYs 2006-07, 2007-08 and 2008-09.

Accrual basis taxation of interest on non-performing assets - Recognition of income on recovery basis for banking institutions - Suspense account treatment of overdue interest - Application of RBI/NABARD guidance on income recognition - Deductibility of provisions for statutory audit fees

Accrual basis taxation of interest on non-performing assets - Suspense account treatment of overdue interest - Application of RBI/NABARD guidance on income recognition - Deletion of addition made by AO of accrued interest on loans classified as non-performing assets. - HELD THAT: - The Tribunal affirmed the view taken by the Ld. CIT(A) that overdue interest not realized during the year and credited to a suspense interest account cannot be taken to be the income of the assessee. The decision follows the coordinate-bench ITAT order in the assessee's own case for an earlier year, which relied on RBI/NABARD guidance that income recognition for such banks should be based on record of recovery and on the statutory principle reflected in the judgment that unrealized interest should not be brought to profit and loss. Having regard to that precedent and the Ld. CIT(A)'s reasoning, the Tribunal found no reason to interfere with deletion of the addition made by the AO.

Grounds challenging the addition on account of accrued interest on NPA accounts are dismissed; the deletion by the Ld. CIT(A) is upheld.

Deductibility of provisions for statutory audit fees - Provision for audit fees - deductibility - Deletion of addition by AO disallowing the provision of audit fees (provision of Rs. 1.50 lakhs). - HELD THAT: - The Tribunal accepted the Ld. CIT(A)'s finding that the provision related to audit fees actually incurred or payable to the statutory auditor, with the amount computed in accordance with NABARD-prescribed audit fees and the number of branches operated by the assessee. On that factual and legal foundation the Tribunal found no infirmity in deleting the disallowance made by the AO and declined to interfere with the CIT(A)'s categorical finding that the expenditure was genuine and properly provided for.

Ground challenging the disallowance of the provision for CA audit fee is dismissed; the deletion by the Ld. CIT(A) is upheld.

Final Conclusion: The departmental appeal is dismissed; the Tribunal upholds the Ld. CIT(A)'s deletions of the additions/disallowance relating to accrued interest on NPAs and the provision for audit fees for assessment year 2012-13.

Disallowance under Section 40A(3) - unexplained expenditure under Section 69C - double taxation arising from overlapping tax-audit disallowance - seized documents (cash panna) and their evidentiary value - proceedings under Section 153A - tax audit disallowance recorded in Form 3CD

Disallowance under Section 40A(3) - double taxation arising from overlapping tax-audit disallowance - tax audit disallowance recorded in Form 3CD - Validity of the addition made by AO by disallowing expenses under Section 40A(3) in respect of amounts already disallowed by the tax auditor. - HELD THAT: - The Tribunal accepted the reasoning of the CIT(A) that the tax auditor had already disallowed expenses amounting to Rs. 74,39,986/- in Form No. 3CD (clause 17(e)), and that the AO's further disallowance of Rs. 73,70,000/- under Section 40A(3) pertained to the same expenses. Applying the principle that a second disallowance in assessment would lead to double taxation of the same expense, the CIT(A) deleted the AO's additional disallowance. The Revenue did not place any new evidence before the Tribunal to rebut the CIT(A)'s factual finding that the disputed items were included in the tax-audit disallowance; accordingly there was no basis to interfere with the deletion. [Paras 7]

Deletion of the AO's disallowance of Rs. 73,70,000/- under Section 40A(3) upheld.

Unexplained expenditure under Section 69C - seized documents (cash panna) and their evidentiary value - proceedings under Section 153A - Sustainability of addition treated as unexplained expenditure based on entries in seized cash panna when matched with regular books and bank withdrawals. - HELD THAT: - The CIT(A) found on the evidence produced by the assessee that the entries on the seized cash panna corresponded to entries in the assessee's regular cash book and to bank withdrawals and branch transfers shown in bank statements. The AO had selectively treated right hand entries as unexplained without accounting for the left hand source notations and corroborative bank/book records. On this factual matrix the CIT(A) concluded that the seized cash panna records were part of regular books/accounts and therefore the addition of Rs. 1,85,42,100/- as unexplained expenditure was not sustainable. The Revenue failed before the Tribunal to present fresh material to overturn this factual conclusion. [Paras 8]

Deletion of the addition of Rs. 1,85,42,100/- as unexplained expenditure under Section 69C upheld.

Final Conclusion: Both impugned additions - the disallowance under Section 40A(3) and the addition as unexplained expenditure based on seized cash panna - were deleted by the CIT(A) on the stated factual findings (tax audit disallowance in Form 3CD and reconciliation with regular books and bank statements respectively); the Tribunal finds no reason to interfere and dismisses the Revenue's appeal.

Deemed dividend under section 2(22)(e) of the Income Tax Act - trade advances in the normal course of business - application of CBDT Circular No.19/2017 - remand for verification and fresh examination by assessing officer - interest under section 234A and section 234B of the Income Tax Act - calculation of interest following the jurisdictional High Court precedent 2013(1) TMI 140

Deemed dividend under section 2(22)(e) of the Income Tax Act - trade advances in the normal course of business - application of CBDT Circular No.19/2017 - remand for verification and fresh examination by assessing officer - Whether the advances of Rs. 28,68,000/- fall within the meaning of 'deemed dividend' under section 2(22)(e) or are trade advances in the normal course of business requiring fresh verification. - HELD THAT: - The Tribunal examined the factual matrix and the CBDT Circular No.19/2017, which records settled views that trade advances in the nature of commercial transactions do not fall within the ambit of section 2(22)(e). In view of the Circular and the factual contentions raised by the assessee about business expediency and inter-company transactions, the Tribunal found that the question cannot be finally decided on the record before it and requires fresh verification and examination by the Assessing Officer. The AO is directed to consider the Circular, verify the nature and commercial justification of the advances, afford the assessee an opportunity of hearing, and pass a fresh order after such verification. [Paras 8]

The issue is remitted to the file of the Assessing Officer for fresh verification and decision after giving the assessee an opportunity of hearing.

Interest under section 234A and section 234B of the Income Tax Act - calculation of interest following the jurisdictional High Court precedent 2013(1) TMI 140 - Method of computing interest under sections 234A and 234B consequential to the assessment. - HELD THAT: - The Tribunal directed that the computation of interest under sections 234A and 234B is consequential and must be carried out in accordance with the law as declared by the jurisdictional High Court in Ajay Prakash Verma (ITA No.38 of 2010) reported in 2013(1) TMI 140. The Assessing Officer is therefore required to recalculate interest applying the principles laid down in that precedent. [Paras 9]

AO directed to calculate interest under sections 234A and 234B in accordance with the cited jurisdictional High Court decision.

Final Conclusion: The appeal is allowed for statistical purposes: the question whether the advances constitute deemed dividend under section 2(22)(e) is remitted to the Assessing Officer for fresh verification in light of CBDT Circular No.19/2017 after affording opportunity of hearing, and the AO is directed to compute interest under sections 234A and 234B in accordance with the jurisdictional High Court decision 2013(1) TMI 140.

Entitlement to interest on interest - compensation for inordinate delay in refund - statutory entitlement to interest - inherent jurisdiction to award compensation

Entitlement to interest on interest - compensation for inordinate delay in refund - statutory entitlement to interest - inherent jurisdiction to award compensation - Whether the assessee was entitled to interest on the interest refunded pursuant to appellate order, or to compensation for the delay in payment of that interest. - HELD THAT: - The Tribunal examined the assessee's claim for interest on the amount of interest (interest-on-interest) which became refundable pursuant to the Tribunal's earlier order. Reliance placed on the decision of the Hon'ble Allahabad High Court was considered. The Tribunal observed that the Allahabad High Court did not lay down a rule entitling an assessee to interest on interest as a statutory right; instead, compensation granted in that case flowed from the High Court's exercise of inherent jurisdiction to compensate for prejudice caused by inordinate delay in refund. In the absence of any specific provision in the Income-tax Act creating a right to interest on interest or a statutory mechanism to award compensation for delayed refund of interest, the Tribunal held that no statutory entitlement arose to permit payment of interest on the interest refunded. Consequently, the claim for compensation or interest-on-interest could not be allowed by the assessing officer or CIT(A) under the Act. [Paras 3, 5, 6, 7]

Claim for interest on the refunded interest and for compensation for delay refused; appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal: in the absence of a statutory provision entitling the assessee to interest on interest or to compensation under the Income tax Act for delayed payment of interest, the claim was not maintainable and was refused.

Deduction under section 80IC - income derived from industrial undertaking - nexus between income and business/manufacturing activities - incidental or remote receipts not eligible for industry-specific deduction - precedential effect of earlier Tribunal and High Court decisions

Deduction under section 80IC - nexus between income and business/manufacturing activities - incidental or remote receipts not eligible for industry-specific deduction - precedential effect of earlier Tribunal and High Court decisions - Interest earned on fixed deposits (FDRs) pledged as security/performance guarantees for contracts is not eligible for deduction under section 80IC of the Income-tax Act. - HELD THAT: - The Tribunal examined whether interest on FDRs, deposited as security in relation to tenders/contracts, could be treated as income 'derived from' the industrial undertaking so as to qualify for deduction under section 80IC. The revenue and the authorities below uniformly held that such interest is merely incidental to the industrial undertaking and not the direct and immediate source of the income. The Tribunal noted that earlier decisions of the Tribunal in the assessee's own cases and the Uttarakhand High Court's judgment on identical facts have held that interest on fixed deposits kept as security, though related to the business, has nothing to do with the carrying on of the manufacturing and sale business and therefore does not qualify for section 80IC deduction. The assessee's reliance on the Supreme Court decision in CIT v. Meghalaya Steels Ltd. was considered and distinguished: in Meghalaya Steels subsidies had a direct nexus with manufacturing costs and profits of the undertaking, whereas here the interest on security deposits was not found to form part of the cost structure from which profits of the industrial undertaking were derived. In view of the binding precedents on the identical facts, the Tribunal found no merit in the claim and declined to interfere with the authorities below. [Paras 2, 3, 10]

Claim of deduction under section 80IC in respect of interest on FDRs pledged as security/performance guarantees is disallowed; appeal dismissed on merits.

Condonation of delay - Delay of four months in filing the appeal was condoned. - HELD THAT: - The assessee explained that a partner who handled finance and maintained files for income-tax matters was incapacitated by illness and subsequently died, which prevented timely filing. The Tribunal, upon considering this explanation and the submissions, was satisfied that sufficient cause existed to excuse the delay and accordingly granted condonation. [Paras 4, 6]

Delay in filing the appeal is condoned.

Final Conclusion: Delay in filing the appeal was condoned, but on the merits the claim for deduction under section 80IC in respect of interest on FDRs pledged as security/performance guarantees was rejected in view of the absence of a direct nexus with the industrial undertaking and the binding precedents; the appeal is dismissed.

Provisional assessment of duty - payment of interest on delayed refund under Section 18(4) of the Customs Act, 1962 - limitation under Section 27 of the Customs Act, 1962 - Board circular time limits for finalization of provisional assessment - doctrine of unjust enrichment in provisional assessments - tribunal cannot award compensation not provided by statute - interpretation of plain statutory language and limits of judicial supplementation

Payment of interest on delayed refund under Section 18(4) of the Customs Act, 1962 - provisional assessment of duty - Entitlement to interest where refunds arising from provisional assessments were sanctioned within three months of finalization of assessment - HELD THAT: - The Tribunal held that Section 18(4) prescribes interest only when a refundable amount is not refunded within three months from the date of assessment of duty finally. On the facts the provisional assessments were finalized on 10.10.2015 and the refunds were sanctioned within three months of that finalization. The statutory language is plain and unambiguous and does not permit treating an earlier date (such as the date by which the department 'ought to have' finalized assessments) as the operative date for computing interest. Litigation pending before higher fora, and earlier directions to finalize assessments, do not alter the statutory trigger for payment of interest under Section 18(4). Consequently, there was no liability to pay interest as envisaged by that provision where the refunds were sanctioned within three months of finalization. [Paras 8, 10]

Claim for interest under the statute is not maintainable as refunds were granted within three months of finalization of assessment.

Tribunal cannot award compensation not provided by statute - interpretation of plain statutory language and limits of judicial supplementation - Board circular time limits for finalization of provisional assessment - doctrine of unjust enrichment in provisional assessments - Whether the Tribunal can award interest or other compensation beyond what the statute provides because of prolonged departmental delay in finalizing provisional assessments - HELD THAT: - The Tribunal reiterated that it is a creature of statute and cannot grant general compensation or amounts not authorized by the Customs Act. Though administrative instructions and Board circulars prescribe time limits for finalizing provisional assessments and the Tribunal had earlier directed expeditious finalization, those do not supplant the statutory scheme for payment of interest. Decisions granting compensation in exceptional circumstances (as discussed in cited authorities) do not justify the Tribunal awarding amounts not provided by the statute where the statute's prescription is clear. The existence of administrative delay, litigation or departmental non compliance with circulars does not empower the Tribunal to create a remedy of compensation outside the statutory framework. [Paras 9, 10]

Tribunal cannot award compensation or interest beyond statutory provision; claim for such compensation is rejected.

Final Conclusion: The appeal is dismissed; the impugned order refusing interest on the delayed refund is upheld and the appellant's claim for compensation or additional interest beyond the statutory entitlement is rejected.

Exemption notification covering parts of dredgers - interpretation of exemption notifications vis-a -vis classification notes - note to Section XVII and exclusion of headings 8401 to 8479 for classification purposes - treatment of engines as capital goods - requirement of licence for import of used capital goods - confiscation under section 111(d) of the Customs Act, 1962 - penalty and fine under section 112 of the Customs Act, 1962

Exemption notification covering parts of dredgers - interpretation of exemption notifications vis-a -vis classification notes - note to Section XVII and exclusion of headings 8401 to 8479 for classification purposes - Whether the imported 'second hand diesel engine with turbocharger' qualifies as a 'part of dredger' and is eligible for exemption under notification no. 21/2002-Cus despite classification note exclusions - HELD THAT: - The Tribunal rejected the adjudicating authority's reliance on the note to Section XVII (which excludes headings 8401-8479 for classification) as a basis to deny exemption. The note, designed solely to assist classification, cannot be used to construe or restrict an exemption notification. The exemption's description must be read in its entirety and harmoniously; accordingly, parts of dredgers- including engines-fall within the scope of the notification and are entitled to the claimed exemption. The adjudicating authority's use of classification rules to interpret and exclude goods from an exemption was held to be legally improper. [Paras 3]

Parts of dredgers, including the imported engine, are covered by the exemption notification and the classification-note exclusion could not be used to deny that benefit.

Treatment of engines as capital goods - requirement of licence for import of used capital goods - confiscation under section 111(d) of the Customs Act, 1962 - penalty and fine under section 112 of the Customs Act, 1962 - Whether the imported engine is a capital good (thereby not requiring a licence for used goods) and whether confiscation under section 111(d) and penalties under section 112 were sustainable - HELD THAT: - The Tribunal held that engines used in dredgers are capital goods; capital goods are not confined to manufacturing and include items used in rendering services such as dredging. The adjudicating authority's view that the engine amounted to a generator or was excluded on the basis of the Foreign Trade Policy's treatment of generating sets was not accepted, particularly because the goods were presented and assessed as engines. As import of used capital goods does not require a licence, confiscation under section 111(d) was unsustainable. Accordingly, the consequential imposition of fine and penalty under section 112, which flowed from the confiscation, could not be sustained. [Paras 4, 5]

The engine is a capital good; no licence was required for its import as a used capital good; confiscation under section 111(d) and the penalties under section 112 were unwarranted.

Final Conclusion: The appeal was allowed: the imported second hand engine was held to be a part of a dredger eligible for exemption and to be a capital good for which no licence was required; the order of confiscation and the consequential fine and penalty were set aside.

Commercial Coaching and Training Services - recognition by law of degree/certificate/diploma - inclusion of charitable and society-registered institutions within 'commercial' - remand for fresh consideration - principles of natural justice

Commercial Coaching and Training Services - recognition by law of degree/certificate/diploma - All India Council for Technical Education (AICTE) recognition - remand for fresh consideration - principles of natural justice - Reconsideration by the adjudicating authority of whether the degree/certificate/diploma issued by the appellant is recognised by law (including recognition by AICTE) so as to attract or exclude the service from the category of Commercial Coaching and Training Services - HELD THAT: - The Tribunal allowed the appellant's miscellaneous application to raise an additional ground that the appellant's training certificates might be recognised by law (AICTE) and therefore not taxable as Commercial Coaching and Training Services for the period 1.07.2003 to 31.03.2006. The Tribunal observed that the definition of "Commercial Coaching and Training Services" during the period included an explanation encompassing charitable institutions and institutions registered under the Societies Act, and that if an institute issues a degree/certificate/diploma recognised by law, the service tax liability may not arise. The Tribunal noted that the adjudicating authority had not considered the appellant's plea regarding AICTE recognition. Without expressing any view on the merits, the Tribunal granted liberty to the appellant to file a reply to the show cause notice on the question of recognition, set aside the impugned order, and remitted the matter to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice. All substantive issues were left open for fresh adjudication. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the adjudicating authority for fresh consideration on whether the appellant's issued degree/certificate/diploma is recognised by law (including AICTE recognition), with liberty to the appellant to file a reply and subject to principles of natural justice; no observation on merits.

Final Conclusion: The appeal is disposed of by setting aside the adjudicating order and remitting the matter to the adjudicating authority for fresh consideration of whether the appellant's certificates/degrees are recognised by law (including AICTE recognition) for the period 1.07.2003 to 31.03.2006; liberty granted to the appellant to file a reply and all issues left open.

Refund under Rule 5 of CENVAT Credit Rules - time-bar / limitation for refund claims - relevant date for computation of limitation - end of the quarter in which the FIRC is received - export of services

Relevant date for computation of limitation - end of the quarter in which the FIRC is received - time-bar / limitation for refund claims - refund under Rule 5 of CENVAT Credit Rules - export of services - Whether the relevant date for computing limitation for a refund claim in respect of export of services is the date shown in the invoice or the date when the FIRC is received (taken as the end of the quarter in which the FIRC is received) where refund claims are filed quarterly. - HELD THAT: - The Tribunal applied the Larger Bench decision which held that, for refund claims filed on a quarterly basis, the relevant date for determining the time limit under Rule 5 of the CENVAT Credit Rules is the end of the quarter in which the FIRC is received and not the invoice date. The Larger Bench considered principles of retrospective application of beneficial amendments and observed that treating the receipt of foreign exchange as the relevant date prospectively would impose a burden; accordingly, for export of services the end-of-quarter rule where FIRCs are received during that quarter is the appropriate reference point. The Tribunal also noted consistent precedent including Bechtel India Pvt. Ltd. and the jurisdictional High Court decision relied upon by the appellant, and found the adjudicating authority's reliance on invoice date to be incorrect. [Paras 6, 7]

The rejection of the refund claim as time-barred is set aside; the relevant date is the end of the quarter in which the FIRC is received for quarterly refund claims in respect of export of services.

Final Conclusion: The appeals are allowed; the impugned orders rejecting part of the refund claims on the ground of time-bar are set aside and the appellant is entitled to consequential relief consistent with the Tribunal's conclusion that the relevant date is the end of the quarter in which the FIRC is received.

Interest on delayed refunds - Section 11B/11BB refund regime - Maturity of refund on appellate order - Principle of restitution - Statutory limits on adjudicatory powers of the Tribunal

Interest on delayed refunds - Section 11B/11BB refund regime - Maturity of refund on appellate order - Entitlement to interest from date of deposit vis-a -vis statutory interest under Section 11BB. - HELD THAT: - The Tribunal found that the refund in the present case was governed by the statutory scheme for refunds under Section 11B and the provision for interest is specifically contained in Section 11BB. On a plain reading of Section 11BB interest becomes payable only where the duty ordered to be refunded is not refunded within three months from the date of receipt of the refund application; accordingly interest runs from the expiry of three months after receipt of the application until the date of refund. The Tribunal further noted that where duty becomes refundable as a consequence of an appellate order the relevant date for maturity of refund is the date of such appellate order, and therefore no question of interest arises for the period prior to that date. Since the refund matured only upon the Tribunal's order setting aside the demand, and the refund was sanctioned within three months of the application, interest from the date of deposit was not allowable under the statutory provision. [Paras 4, 5, 6]

Interest from date of deposit is not payable; interest under Section 11BB is payable only after three months from date of application and the refund matured only on the appellate order.

Principle of restitution - Statutory limits on adjudicatory powers of the Tribunal - Whether the Tribunal could, by reference to the principle of restitution or inherent powers, award interest from date of deposit as done by the Supreme Court in ONGC. - HELD THAT: - The Tribunal distinguished the Supreme Court's decision in ONGC, which applied the principle of restitution under the apex court's inherent powers to award interest from the date of deposit. This Tribunal held that it is a creature of statute and cannot exercise the inherent powers of the Supreme Court to go beyond the specific refund and interest provisions enacted in the Central Excise statute. Decisions relying on ONGC or following it were not applicable where the statutory refund scheme prescribes a different relevant date and mechanism for payment of interest. [Paras 4]

Tribunal cannot invoke the principle of restitution or inherent powers to grant interest from date of deposit where the statute prescribes the mode and relevant date for interest under Section 11BB.

Final Conclusion: The appeal is dismissed: the appellant is not entitled to interest from the date of deposit; interest, if any, is governed by Section 11BB and arises only after three months from the date of the refund application with the refund maturing on the appellate order.

Extended period of limitation - Cenvat credit reversal before utilisation - liability to pay interest on inadmissible Cenvat credit - imposition of penalty for suppression or willful mis statement - disallowance and recovery of inadmissible Cenvat credit under Rule 14 read with Section 11A - penalty under Rule 15 read with Section 11AC - non-maintenance of segregated accounts for dutiable and exempted clearances under Rule 6(1) of the Cenvat Credit Rules, 2004

Cenvat credit reversal before utilisation - liability to pay interest on inadmissible Cenvat credit - Demand of interest on inadmissible Cenvat credit reversed before utilisation is unsustainable. - HELD THAT: - The Tribunal found, and this Court agrees, that the assessee reversed the impugned service tax Cenvat credit prior to its utilisation. The accounts (opening and closing balances) corroborated that reversal before utilisation. Following the principle applied by this Court in Commissioner of Central Excise, Ludhiana Vs. Jagatjit Industries Limited and consistent judicial authorities (including the Karnataka High Court decision in CCE, ST and LTU, Bangalore Vs. Bill Forge Pvt. Ltd relied on by the Tribunal), reversal of wrongly availed credit prior to utilisation means the credit was not effectively taken and therefore does not attract interest. The Tribunal confined its consideration to interest and penalty and, on the material before it, rightly held the interest demand unsustainable.

Demand of interest set aside as unsustainable.

Extended period of limitation - imposition of penalty for suppression or willful mis statement - disallowance and recovery of inadmissible Cenvat credit under Rule 14 read with Section 11A - penalty under Rule 15 read with Section 11AC - Extended period of limitation was not invokable and penalty for suppression or mis statement was unwarranted. - HELD THAT: - The Tribunal observed the department became aware of the wrongful availment on 09.08.2007 and issued the show cause notice dated 24.01.2008, which was within limitation; no grounds existed to invoke the extended period. On the merits of penalty, the Tribunal recorded that the assessee had, on 04.07.2006, communicated the manner of availing credit and furnished details when called upon by the department. There was no evidence of suppression or willful mis statement with intent to evade duty. In those circumstances the Tribunal rightly concluded that imposition of penalty was not justified. The High Court finds no illegality or perversity in these findings and declines to interfere.

Invocation of the extended period rejected and penalty set aside as unwarranted.

Final Conclusion: The appeal is dismissed; the Tribunal's order setting aside the demand of interest and quashing the penalty is affirmed and no substantial question of law arises.

Eligibility of CENVAT credit on works contract services used for setting up factory - eligibility of CENVAT credit on goods transport agency services for outward transportation from place of removal to buyer - eligibility of CENVAT credit on capital goods/components used in manufacture (including pollution control devices) - eligibility of CENVAT credit on renting of immovable property and security services where plant temporarily non-operational - eligibility of CENVAT credit on liaison, erection and allied labour services provided to the manufacturing unit - penalty for erroneous availment of CENVAT credit where eligibility is contested

Eligibility of CENVAT credit on works contract services used for setting up factory - CENVAT credit on works contract services used for structural construction of the factory after 01.04.2011 is ineligible. - HELD THAT: - The services in question were works contract services for structural construction received after 01.04.2011. Post amendment, such services are excluded from the definition of input services under the CENVAT Credit Rules and therefore credit on those works contract services cannot be availed. The Tribunal concurs with the impugned order and rejects the appellant's claim on this point. [Paras 5]

Credit on works contract services for setting up factory after 01.04.2011 denied; appeal rejected on this point.

Eligibility of CENVAT credit on goods transport agency services for outward transportation from place of removal to buyer - CENVAT credit on GTA services for outward transportation (period June 2011 to March 2012) is ineligible. - HELD THAT: - The GTA services relate to outward transportation from place of removal to customers post 01.04.2008. The Tribunal accepts the legal position relied upon by the Department (as reflected in Ultra Tech Cement Ltd.), that such outward transportation services are not eligible as input services for CENVAT credit. The orders of the lower authorities denying credit on this ground are upheld. [Paras 6]

Credit on GTA outward transportation services denied; appeal rejected on this point.

Eligibility of CENVAT credit on capital goods/components used in manufacture (including pollution control devices) - CENVAT credit on certain capital items is ineligible while credit on dust collection bags used for pollution control is eligible. - HELD THAT: - Foundation bolts, washer blanks and similar items used for structural construction were held ineligible as they pertain to building/structural works. However, dust collection bags supplied as part of machinery environment control were used in the manufacturing process for controlling dust and pollution; therefore the Central Excise duty paid on those bags is eligible for CENVAT credit. The Tribunal allows credit in respect of the dust collection bags while disallowing credit on the structural items. [Paras 7]

Credit allowed for dust collection bags as eligible capital/input; credit denied for foundation/structural items.

Eligibility of CENVAT credit on renting of immovable property and security services where plant temporarily non-operational - CENVAT credit on renting of immovable property and related security services is allowable despite temporary suspension of production at the leased unit. - HELD THAT: - Although production at the Bollaram unit was suspended due to labour trouble, the appellant retained the leased premises with the intention to restart production and continued to maintain the premises. The definition of inputs and input services requires that the service be used directly or indirectly in or in relation to manufacture. The Tribunal finds the lower authorities misconstrued this requirement by treating temporary suspension as disentitling credit. On the facts, credit for renting and security services used in relation to the manufacturing unit is allowable. [Paras 8]

Credit on renting of immovable property and security services allowed; impugned denial set aside.

Eligibility of CENVAT credit on liaison, erection and allied labour services provided to the manufacturing unit - CENVAT credit on liaison services and labour charges for laying cables and allied activities is allowable though invoices were raised on another unit. - HELD THAT: - Invoices were raised by suppliers on the appellant's other unit, but the services (licence renewals, laying cables, erection activities) related to the Bollaram unit and its licences. The Tribunal holds that such services were in relation to the manufacturing activities of the Bollaram unit and therefore credit availed is eligible. [Paras 9]

Credit on liaison and labour/erection services allowed; appeal allowed on this point.

Penalty for erroneous availment of CENVAT credit where eligibility is contested - Penalties imposed are unwarranted where disputed credits largely turned on interpretation and the appellant had filed returns and informed authorities. - HELD THAT: - Given that a substantial part of the CENVAT credit claimed by the appellant has been allowed on interpretation of eligibility and the appellant had been filing returns and communicating with Revenue, the imposition of penalties is not justified. The Tribunal views the denials and allowances as issues of interpretation rather than clear fraud or gross negligence warranting penalty. [Paras 10]

Penalties set aside as unwarranted.

Final Conclusion: The appeal is partly allowed and partly rejected: credits denied for works contract services and GTA outward transportation are upheld; credits allowed for dust collection bags, renting of immovable property, security services, and liaison/erection-related labour charges; penalties are set aside. Appellant is directed to reverse/pay the amounts of CENVAT credit denied along with applicable interest.

Application of Section 11AC(1)(b) for reduction of penalty to 25% - penalty under Rule 15(1) of the CENVAT Credit Rules - payment within thirty days of communication of adjudication order - availability of reduced penalty where penalty is imposed post 14.05.2015

Application of Section 11AC(1)(b) for reduction of penalty to 25% - penalty under Rule 15(1) of the CENVAT Credit Rules - availability of reduced penalty where penalty is imposed post 14.05.2015 - Whether the reduced penalty under Section 11AC(1)(b) - permitting payment of twenty-five per cent. of the penalty if paid within thirty days - is available in respect of penalty imposed under Rule 15(1) of the CENVAT Credit Rules where the penalty is imposed after 14.05.2015. - HELD THAT: - The Tribunal examined the text of Rule 15(1) as amended post 14.05.2015 and the provisions of Section 11AC(1)(a) and (b). Rule 15(1) as amended makes penalty liability referable to the amounts specified in clause (a) or (b) of Section 11AC(1). Section 11AC(1)(b) expressly provides that where duty and interest are paid within thirty days of communication of the adjudication order, the amount of penalty shall be twenty-five per cent. of the penalty imposed, provided that the reduced penalty is also paid within the period specified. A plain reading shows that an adjudicating authority imposing penalty under Rule 15(1) after 14.05.2015 does not fall outside the scheme of Section 11AC; consequently an assessee has the statutory option to avail the reduced twenty-five per cent. payment under Section 11AC(1)(b) by complying with the temporal condition set therein. The First Appellate Authority's conclusion that the reduced penalty under Section 11AC would not apply to penalties under Rule 15(1) is therefore erroneous. [Paras 7]

Section 11AC(1)(b) applies to penalties imposed under Rule 15(1) post 14.05.2015 and permits reduction to twenty-five per cent. if conditions of timely payment are met.

Payment within thirty days of communication of adjudication order - application of Section 11AC(1)(b) for reduction of penalty to 25% - Whether the appellant paid twenty-five per cent. of the penalty within thirty days of receipt of the Order-in-Original and is therefore entitled to the benefit of Section 11AC(1)(b). - HELD THAT: - The Tribunal reviewed the record showing that the Order-in-Original was passed on 30.06.2016 and was received by the appellant on 12.07.2016 as evidenced by the acknowledgment produced. The appellant paid twenty-five per cent. of the penalty by challan dated 09.08.2016, which falls within thirty days from the date of communication of the order. Having satisfied the temporal and payment condition prescribed by Section 11AC(1)(b), the appellant is entitled to the reduced penalty and the case stands closed insofar as any further penalty is concerned. [Paras 8]

Appellant paid twenty-five per cent. of the penalty within thirty days of receipt of the adjudication order and is entitled to the benefit under Section 11AC(1)(b); no further penalty is payable.

Final Conclusion: The appellate order is modified: penalties under Rule 15(1) imposed after 14.05.2015 are amenable to reduction under Section 11AC(1)(b), and since the appellant paid twenty-five per cent. of the penalty within thirty days of communication of the Order-in-Original, the matter is closed and no further penalty is payable.

Denial of Cenvat Credit on account of fake invoices - Burden of proof on Revenue to demonstrate non receipt or diversion of inputs - Use of manufacture and clearance of final product as evidence of receipt of inputs - Non specification of raw material under contract does not ipso facto prove non receipt

Denial of Cenvat Credit on account of fake invoices - Burden of proof on Revenue to demonstrate non receipt or diversion of inputs - Use of manufacture and clearance of final product as evidence of receipt of inputs - Non specification of raw material under contract does not ipso facto prove non receipt - Whether the denial of Cenvat credit to the appellant on the ground that inputs were not received and invoices were fake was justified. - HELD THAT: - The Revenue's case rested on investigations into two dealers who allegedly did not procure the specified grade of raw material from the authorised manufacturer and on recorded statements suggesting that the appellant received only invoices without physical supply. The adjudicating authority and Commissioner (Appeals) treated these findings as establishing non receipt and fraud and confirmed the demand and penalties. The Tribunal found this reasoning inadequate. Even if the dealers did not procure the contractually specified raw material, that fact alone does not inevitably establish that the appellant never received any raw material from those dealers. The Revenue failed to produce evidence showing diversion or the physical whereabouts of the purportedly missing inputs, or that the finished goods manufactured by the appellant were not in fact produced or accepted. The appellant had manufactured and cleared the final product on payment of duty, which in the absence of contrary evidence from the Revenue, supports the inference that inputs were used in manufacture. The Tribunal therefore held that the Revenue did not discharge the burden of proving non receipt or fraudulent passing of credit and that non compliance with the contractual specification, without proof of non receipt or diversion, could not justify denial of Cenvat credit. [Paras 6, 7]

The denial of Cenvat credit and the consequential demand and penalties were set aside; the appeal was allowed.

Final Conclusion: The impugned order confirming denial of Cenvat credit and imposing penalties was quashed and the appeal allowed, the Tribunal holding that Revenue failed to prove non receipt or diversion of inputs and that mere non use of specified grade without evidence of fraud did not justify denial of credit.

Assessable value - place of removal / factory gate - process of manufacture versus process adding to value - precedent and consistency of Tribunal decisions - prohibition against double taxation - res judicata in revenue matters (precedential application)

Assessable value - place of removal / factory gate - process of manufacture versus process adding to value - prohibition against double taxation - Clearances of paper in reels from the factory gate to independent buyers and to cutting centres (where cutting into sheets occurs subsequently) do not attract inclusion of subsequent conversion/processing costs in the assessable value at the factory gate. - HELD THAT: - The Tribunal found the question squarely covered by earlier decisions in the appellant's own cases after considering the Apex Court's decision in Union of India v. J.G. Glass Industries Ltd., which warns against levying duty twice on the same tariff item where subsequent processes add value and are carried out after removal. The Revenue's reliance on the distinction between manufacture and valuation (as in Sidhartha Tubes Ltd.) was considered, but on the facts of that case galvanisation occurred within the factory and before removal, increasing value at the place of removal; those facts differ from the present case where reels are cleared from the factory gate and subsequent cutting into sheets takes place outside the scope of removal that attracted duty. Applying the established precedents of the Tribunal in the appellant's own cases and the principle against double taxation, the Tribunal held there was no reason to depart from the earlier favourable rulings and followed them. [Paras 4, 5, 6]

Appeal allowed; earlier Tribunal decisions in appellant's favour followed and subsequent cutting/processing costs were not includable in assessable value at the factory gate.

Final Conclusion: Following consistent Tribunal precedents and the principle against double taxation articulated by the Supreme Court, the appeal was allowed and the clearances of paper in reels from the factory gate were held not to require inclusion of subsequent cutting/processing costs in the assessable value.

Stay of recovery pending appeal - interim abeyance of recovery until appellate order is communicated - direction to appellate authority to decide stay application within a specified time-frame - power to grant stay on terms where amount involved is substantial

Stay of recovery pending appeal - interim abeyance of recovery until appellate order is communicated - direction to appellate authority to decide stay application within a specified time-frame - Petition for interim restraint of recovery of assessed tax was entertained and directions issued for expeditious consideration of pending stay applications by the Appellate Authority, with recovery kept in abeyance until the appellate order is communicated to the petitioner. - HELD THAT: - The petitioner had preferred appeals and separate stay applications before the Deputy Commissioner (Appeals). Although the respondents submitted that stay, if any, ought to be granted only on terms because the amount involved is substantial, the High Court found it appropriate to afford the petitioner interim relief. The Court directed the 2nd respondent to take up and decide the stay petitions within one month from receipt of a certified copy of this judgment and the writ petition placed before the 2nd respondent by the petitioner. Pending the appellate authority's decision and its communication to the petitioner, all steps for recovery under the impugned assessment orders were ordered to be kept in abeyance. The time-frame for disposal was made contingent on the petitioner placing the certified copy before the appellate authority, thereby fixing an objective commencement for the prescribed period.

The appellate authority is directed to consider and decide the stay petitions within one month from receipt of the certified copy of this judgment and the writ petition; until its order is communicated to the petitioner, recovery under the assessment orders shall remain in abeyance.

Final Conclusion: Writ petition allowed to the limited extent of granting interim relief: the Deputy Commissioner (Appeals) is directed to decide the pending stay applications within one month of receipt of the certified copy of this judgment and the writ petition, and recovery of amounts under the assessment orders is stayed until the appellate order is communicated to the petitioner.