TaxTMI Updates e-Newsletter
Jun 13,2018

Supply of goods - Transfer of title as supply (Schedule II Sl.1(a)) - Movable property as goods - Classification under Chapter 4911 - Tariff heading interpretation using First Schedule to the Customs Tariff Act, 1975 - Applicability of GST rates under Notification No.1/2017

Supply of goods - Transfer of title as supply (Schedule II Sl.1(a)) - Movable property as goods - Printed advertisement materials manufactured and supplied by the applicant are classifiable as supply of goods. - HELD THAT: - The Authority examined the nature of the transaction and the statutory definitions. The applicant manufactures and sells printed trade advertising materials (banner flex), procures the inputs, and transfers title in the finished printed materials to customers. The definition of 'goods' (movable property) and the provision in Schedule II Sl.1(a) treating transfer of title in goods as supply lead to the conclusion that the activity is a supply of goods. The facts that the materials are movable and that title is transferred were determinative of the classification as goods rather than services. [Paras 6, 8]

Supply is 'goods'.

Classification under Chapter 4911 - Tariff heading interpretation using First Schedule to the Customs Tariff Act, 1975 - Applicability of GST rates under Notification No.1/2017 - The printed advertisement materials are classifiable under Chapter heading 4911 of the GST Tariff and attract CGST 6% + SGST 6%. - HELD THAT: - Applying the rules for interpretation of the First Schedule to the Customs Tariff Act, 1975 (including chapter and section notes), the Authority found that printed matter essentially devoted to advertising falls under heading 4911. Chapter Note 5 was noted to exclude advertising publications from heading 4901 and direct classification to 4911. Having classified the goods under heading 4911, the corresponding GST rate in Notification No.1/2017 was applied, resulting in CGST 6% and SGST 6%. [Paras 7, 8]

Classification is under Chapter 4911; rate CGST 6% + SGST 6%.

Final Conclusion: Advance Ruling: the applicant's printed advertisement materials are supplies of goods, classifiable under Chapter heading 4911 of the GST Tariff, and taxable at CGST 6% + SGST 6% as per Notification No.1/2017.

Job Work - Treatment or process - Goods - Value of taxable supply - transaction value - Inputs supplied by principal

Job Work - Treatment or process - Goods - Inputs supplied by principal - Whether the manufacturing of Oxygen, Nitrogen and Argon by the applicant for Essar amounts to 'job work' under Section 2(68) of the CGST Act, 2017. - HELD THAT: - The Authority held that the definition of 'job work' requires (i) a treatment or process, (ii) undertaken on goods, and (iii) such goods belonging to another registered person. Atmospheric air, industrial water and electricity qualify as 'goods' for the purposes of the Act. The separation of atmospheric air by the applicant's Air Separation Unit to produce industrial gases constitutes a 'treatment or process'. Clause 4.1 of the parties' agreement and the commercial arrangement establish that Essar supplies the main inputs (electricity and industrial water) free of charge and provides the designated land (with the attendant ownership of the vertical column of air). On the combined statutory principle and contractual allocation of inputs, the Authority found that the inputs used in the process belong to Essar. Applying these findings, the manufacturing activity by the applicant is a treatment/process performed on goods belonging to Essar and thus falls within the statutory meaning of 'job work'. [Paras 11, 12, 13, 14]

The manufacturing of industrial gases by the applicant for Essar amounts to 'Job Work' as defined under Section 2(68) of the CGST Act, 2017.

Value of taxable supply - transaction value - Related persons - The value on which the applicant is liable to pay GST. - HELD THAT: - Section 15(1) provides that where supplier and recipient are not related and the price is the sole consideration, the value is the transaction value. The Authority examined the relationship between the parties and concluded that the applicant and Essar are not 'related persons' within the Explanation to Section 15. The job work charges agreed in the contract constitute the sole consideration payable by Essar to the applicant for the processing activity. Consequently, the value of the taxable supply is the transaction value - the job work charges - and there is no need to apply alternative valuation provisions. [Paras 15]

GST is payable on the value determined under Section 15(1) of the CGST Act, 2017, namely the transaction value (the job work charges).

Final Conclusion: The Authority ruled that the applicant's manufacture of industrial gases for Essar qualifies as 'job work' under Section 2(68) of the CGST Act, 2017, and that GST is payable on the transaction value determined under Section 15(1) of the Act (i.e., the job work charges).

Classification under Heading 9208 - indigenous handmade musical instruments exemption (Sl. No. 143, Notification No. 2/2017 Central Tax (Rate)) - application of First Schedule to the Customs Tariff Act and HSN Explanatory Notes - exhaustive listing in Annexure II - non pari materia of prior VAT entry

Classification under Heading 9208 - application of First Schedule to the Customs Tariff Act and HSN Explanatory Notes - The appropriate tariff classification of the product 'Electrically operated Drum with Bell and Zalar'. - HELD THAT: - The product is marketed and known as an electrically operated assembly in which drum, bell and zalar are played in a rhythm by mechanical operation of an electric motor. Heading 9208 of the First Schedule to the Customs Tariff Act, 1975 covers musical boxes, mechanical organs, mechanical singing birds, musical saws and other musical instruments not falling within any other heading of Chapter 92. Applying the Chapter description and the HSN interpretative approach endorsed for tariff classification, the Authority finds that the described product falls within the scope of Heading 9208 as an 'other musical instrument' driven by mechanical/electrical operation and not covered by any more specific heading in Chapter 92. [Paras 13]

The product is classifiable under Heading 9208 of the First Schedule to the Customs Tariff Act, 1975.

Indigenous handmade musical instruments exemption (Sl. No. 143, Notification No. 2/2017 Central Tax (Rate)) - exhaustive listing in Annexure II - non pari materia of prior VAT entry - Whether the product is eligible for exemption as an 'Indigenous handmade musical instrument' listed in Annexure II to Sl. No. 143 of Notification No. 2/2017 Central Tax (Rate). - HELD THAT: - Sl. No. 143 originally exempted 'Indigenous handmade musical instruments' of Chapter 92, but was amended to make the exemption applicable only to instruments expressly listed in Annexure II. The Authority examined the product's construction and mode of operation and compared it with items listed in Annexure II (including Getchu Vadyam/Jhallari and Nagara). The electrically operated drum with bell and zalar does not correspond to those specific listed descriptions or to any other entry in the exhaustive Annexure II. Given the clear and limited scope of the amended exemption and the exhaustive nature of Annexure II, the product cannot avail the benefit. Further, the earlier Gujarat VAT entry is not pari materia with the amended GST notification, so the prior VAT determination is inapplicable to GST exemption entitlement. [Paras 14]

The product is not eligible for exemption under Sl. No. 143 of Notification No. 2/2017 Central Tax (Rate), as amended, because it is not one of the indigenous handmade musical instruments listed in Annexure II; the prior VAT entry is not pari materia and does not confer entitlement under the GST notification.

Final Conclusion: The Authority rules that the 'Electrically operated Drum with Bell and Zalar' is classifiable under Heading 9208 of the First Schedule to the Customs Tariff Act, 1975, and that it does not qualify for exemption under Sl. No. 143 of Notification No. 2/2017 Central Tax (Rate), as amended, since it is not included in the exhaustive Annexure II list; the earlier Gujarat VAT entry is not applicable for claiming the GST exemption.

Power driven pumps primarily designed for handling water - Common parlance test for interpretation of taxing statutes - Distinction between 'water' and 'sewage' in tariff entries - Classification under Notification No. 1/2017 - Schedule II Sl. No. 192 - Eligibility for GST rate of 12% (CGST 6% + SGST 6% / IGST 12%)

Power driven pumps primarily designed for handling water - Common parlance test for interpretation of taxing statutes - Distinction between 'water' and 'sewage' in tariff entries - Classification under Notification No. 1/2017 - Schedule II Sl. No. 192 - Eligibility for GST rate of 12% (CGST 6% + SGST 6% / IGST 12%) - Whether pumps for sewage or waste are covered by Sl. No. 192 of Schedule II of Notification No. 1/2017-Central Tax (Rate) and thereby eligible for the GST rate of 12% - HELD THAT: - The Authority applied the established principle that undefined terms in taxing statutes are to be construed in common parlance by those conversant with the subject (the common parlance test). It examined the statutory entries in the same Notification and noted that 'sewage' and 'water' are used separately (illustrated by Sl. No. 238 of Schedule III), which indicates the legislature intended distinct meanings. In common and commercial parlance, pumps described as designed for handling water are understood to mean clear or raw water and are distinct from pumps designed for sewage or waste. The decisions cited by the applicant under earlier regimes were found inapplicable as they dealt with different notifications and contextual issues. Applying this reasoning, pumps for sewage or waste do not fall within the description at Sl. No. 192 of Schedule II of Notification No. 1/2017 and therefore cannot claim the rate prescribed there (12%). [Paras 9, 10, 11, 12]

Pumps for sewage or waste are not covered by Sl. No. 192 of Schedule II of Notification No. 1/2017 and are not eligible for the GST rate of 12% (CGST 6% + SGST 6% / IGST 12%).

Final Conclusion: The Advance Ruling Authority held that products described as pumps for sewage or waste do not fall within the entry for "Power driven pumps primarily designed for handling water" in Sl. No. 192 of Schedule II to Notification No. 1/2017 and accordingly are not entitled to the 12% GST rate under the cited Notifications.

Classification of goods by HSN - interpretation of HSN Explanatory Notes - assemblies comprising motor and gearbox - classification under Chapter Heading 8501 - exclusion of combined gearboxes from heading 8483 - application of tariff-based GST rate - rules for interpretation of the First Schedule to the Customs Tariff Act, 1975

Classification of goods by HSN - assemblies comprising motor and gearbox - interpretation of HSN Explanatory Notes - classification under Chapter Heading 8501 - application of tariff-based GST rate - HSN classification and applicable GST rate of the product 'Geared Motor'. - HELD THAT: - The Authority applied the rules for interpreting the First Schedule to the Customs Tariff Act, 1975 and relied on the Harmonised System Explanatory Notes. The Explanatory Notes to heading 8483 expressly exclude "gear boxes or other variable speed changers combined with a motor", while the Explanatory Notes to heading 8501 state that motors remain classified there even when equipped with gears or gear boxes. Applying these notes, a Geared Motor-an assembly of an electric motor and a gear box-is not covered by heading 8483 but is classifiable as an electric motor under heading 8501. Consequently, the GST rate applicable to goods classifiable under Chapter Heading 8501 applies to Geared Motors. [Paras 7, 8, 9]

Geared Motor is classifiable under Chapter Heading 8501 and the GST rate applicable to Chapter Heading 8501 applies.

Final Conclusion: The Advance Ruling holds that 'Geared Motor' falls under Chapter Heading 8501 of the Customs Tariff Act, 1975, and the GST rate corresponding to Heading 8501 is applicable to the product.

Allowability of bad debts under section 36(1)(vii) - disallowance under section 14A and Rule 8D - valuation of investments as stock-in-trade at cost or market value whichever is less - unreconciled nostro/mirror credit entries not constituting taxable income - non-applicability of section 115JB (MAT) to banking companies

Allowability of bad debts under section 36(1)(vii) - Deductibility of bad debts written off by non rural branches under section 36(1)(vii). - HELD THAT: - The Tribunal followed its coordinate-bench decision in the assessee's own case and the reasoning in the Supreme Court decision referred to by that bench, holding that bad debts written off in respect of non rural branches are allowable as deduction under section 36(1)(vii). The AO's disallowance was therefore not sustained and the Assessing Officer was directed to allow the deduction. [Paras 6, 7, 16]

Additions on account of bad debts written off in respect of non rural branches deleted; deduction allowed.

Disallowance under section 14A and Rule 8D - Extent of disallowance under section 14A in respect of expenditure attributable to exempt income. - HELD THAT: - On the facts the Tribunal found that the assessee's interest free own funds exceeded investments yielding exempt income and that the AO had not recorded the requisite satisfaction after examining books as a precondition to invoke section 14A/Rule 8D. Applying the coordinate bench approach in the assessee's earlier years, the Tribunal held that a limited quantification is appropriate and directed that disallowance be restricted to 2% of the exempt income. [Paras 8, 9, 10, 19]

Disallowance under section 14A restricted to 2% of exempt income.

Valuation of investments as stock-in-trade at cost or market value whichever is less - Allowability of loss on diminution in value of investments treated as stock in trade. - HELD THAT: - The Tribunal agreed with the assessee that it consistently valued investments held as stock in trade at cost or market value, whichever was lower, treating the resulting reduction as a business loss. Relying on the Bombay High Court decision in Bank of Baroda and Supreme Court authority recognising stock valuation methods where actually followed, the Tribunal held that such diminution is allowable and sustained the deletion made by the CIT(A). The Revenue failed to produce contrary authority to displace that view. [Paras 11, 13, 14]

Addition for diminution in value of investments held as stock in trade deleted; loss allowed.

Unreconciled nostro/mirror credit entries not constituting taxable income - Taxability of unreconciled credit entries in nostro/mirror accounts routed through profit and loss account. - HELD THAT: - Following the High Court of Karnataka decision and ITAT Bangalore decisions interpreting section 35A of the Banking Regulation Act and RBI Master Circular guidance, the Tribunal observed that amounts remaining unclaimed or unencashed and placed in a general reserve by RBI direction do not acquire the character of the bank's income merely because routed through the profit and loss account. Such entries therefore cannot be treated as taxable income; the additions were to be deleted. [Paras 20, 21, 22]

Additions for unreconciled nostro/mirror credit entries routed through profit and loss account deleted.

Non-applicability of section 115JB (MAT) to banking companies - Whether the minimum alternate tax provisions under section 115JB apply to banking companies. - HELD THAT: - Relying on coordinate bench precedent considering the exemption under the proviso to section 211(2) of the Companies Act and the fact that banks prepare final accounts under the Banking Regulation Act rather than Schedule VI to the Companies Act, the Tribunal held that the computation basis envisaged by section 115JB (MAT) is inapplicable to banking companies. Consequently, book profit adjustments under section 115JB could not be made and related reassessment proceedings were unsustainable. [Paras 23, 24, 25]

Adjustments based on book profit under section 115JB deleted; provisions of section 115JB held not applicable to the banking company in the facts.

Final Conclusion: For AY 2004 05 the assessee's appeal is allowed (bad debts and diminution in value issues decided as above) and the Revenue's appeal and cross objection are dismissed. For AY 2010 11 the assessee's appeal is allowed and the Revenue's appeal is dismissed, with directions to the Assessing Officer to give effect to the deletions and quantified restriction of disallowance where directed.

Accrual on mercantile system of accounting - accrual of liability vs contingent liability - retrospective operation of arbitral/tribunal awards - enforceability of awards and publication under Industrial Disputes Act - application of Accounting Standard (AS) 4 to tax liability - construction of commercial agency agreements to determine point of accrual - maintenance of an agency outside India for weighted deduction under Section 35B(1)(b)(iv) - liability under insurance contracts contingent on payment of premium

Retrospective operation of arbitral/tribunal awards - enforceability of awards and publication under Industrial Disputes Act - accrual on mercantile system of accounting - Provision for increase in wages based on a Wage Board/Arbitrators' award was not an accrued liability in the previous year ended 30.06.1983 - HELD THAT: - The Court held that the liability to pay increased wages arose only under the arbitration award dated 11.07.1983 and upon its publication and enforceability as envisaged by the Industrial Disputes Act. A joint memo filed on 19.05.1983, agreeing a retrospective date in principle, could not itself create a legally enforceable liability prior to the award. The distinction between the date from which an award operates (retrospective operation specified in the award) and the date on which it becomes enforceable was emphasised; enforceability followed publication and the statutory period. Accounting on a mercantile basis does not convert an absence of a legally enforceable obligation into an accrued liability for income tax purposes. Reliance on AS 4 or later statutory provisions that made accounting standards mandatory was not available for the relevant period.

Answered in the negative for the assessee; provision for increased wages not deductible for the previous year 01.07.1982 to 30.06.1983.

Construction of commercial agency agreements to determine point of accrual - accrual on mercantile system of accounting - Provision for commission payable to Sri Lankan agents (Eastern Trading Co. Ltd. and Globe Commercial Agencies Ltd.) accrued when the agents secured the orders during the previous year - HELD THAT: - The Court read the agency agreements as a whole and found Clause (e)/(d) made the consideration arise on KCP securing the order, while other sub clauses dealt with computation and payment mechanics. Because the agents had secured the orders in the relevant previous year and the assessee maintained books on the mercantile system, the liability to pay commission accrued on the date the orders were secured even though payment might be staggered later.

Answered in the affirmative for the assessee; entire accrued commission allowed for the previous year 01.07.1982 to 30.06.1983.

Maintenance of an agency outside India for weighted deduction under Section 35B(1)(b)(iv) - accrual on mercantile system of accounting - Expenditure by way of commission paid to foreign agents did not qualify as expenditure on 'maintenance outside India of a branch, office or agency' under Section 35B(1)(b)(iv) for weighted deduction - HELD THAT: - The Court examined the statutory phrase and the agency agreements and concluded that 'maintenance' connotes expenditure to support or carry on an agency (e.g., establishment/operation), and the provision requires the expenditure to be wholly and exclusively for promoting sales outside India. The payments here were commission/advance commission to procure contracts; the contracts placed incidental expenses on the agents and did not show the assessee incurred expenditure to maintain an agency for promotion of sales. The assessee failed to discharge onus of establishing that the payments were for maintenance qualifying under Section 35B.

Answered in the negative for the assessee; weighted deduction under Section 35B(1)(b)(iv) disallowed.

Liability under insurance contracts contingent on payment of premium - accrual on mercantile system of accounting - Liability to pay insurance premium was not an accrued liability in the previous year when the policy terms made cover contingent on payment and the premium was not paid before 30.06.1983 - HELD THAT: - Although the policy was expressed to cover from a retrospective date and the insurer permitted installment payments, the policy conditions made applicability contingent upon payment of the premium. Because no installment or premium was paid within the relevant previous year, the basic contractual condition for the insurer's obligations and for the insured's liability was unfulfilled. On the proper construction of the contract, accrual of liability depended on payment (or fulfillment of policy conditions), and therefore the premium could not be treated as an accrued deduction in that previous year despite mercantile accounting.

Answered in the negative for the assessee; insurance premium not deductible as an accrued liability for the previous year 01.07.1982 to 30.06.1983.

Construction of commercial agency agreements to determine point of accrual - accrual on mercantile system of accounting - Liability to pay commission under the agreement dated 18.08.1981 with M/s. Annapurna Agencies accrued on procurement of the purchase orders during the previous year - HELD THAT: - Clause (1) of the Annapurna agreement entitled the agent to 5% commission on the total value of the order; Clause (5) dealt only with the mode of payment (pro rata as payments are received). The agent had procured the order in the relevant previous year, creating the obligation to pay commission. Under mercantile accounting the liability that has crystallised by virtue of performance (procurement of order) is deductible even if actual cash payment depends on subsequent receipts; the Tribunal's view that accrual occurred on procurement was a permissible and preferred view.

Answered in the affirmative for the assessee; provision for commission on the orders procured by Annapurna Agencies is an accrued liability in the relevant previous year.

Accrual on mercantile system of accounting - Right to receive extra price / liquidated damages accrues on delivery and is taxable in the year of delivery (question No.6) - HELD THAT: - The Tribunal had followed its earlier decision in the assessee's own case and the Division Bench precedent of this Court for the earlier assessment year, concluding that the right to receive the extra price arose on delivery and that the assessee had accounted for it on delivery. The High Court, following the earlier Division Bench order, answered the referred question in the affirmative in favour of the assessee.

Answered in the affirmative for the assessee; accrual of right to extra price/liquidated damages is on delivery.

Final Conclusion: Questions 1, 3 and 4 answered against the assessee (provision for increased wages, weighted deduction under Section 35B, and insurance premium not deductible for the previous year 01.07.1982-30.06.1983); Questions 2, 5 and 6 answered in favour of the assessee (commission to Sri Lankan agents accrues on securing orders, Annapurna Agencies' commission accrues on procurement of orders, and extra price/liquidated damages accrue on delivery).

Disallowance under section 40A(3) for cash payments - exception under Rule 6DD(b) and Rule 6DD(k) of the Income Tax Rules - payment to State-controlled warehouse to be treated as payment to Government - principal-agent relationship between State and wholesale licensee - followings of coordinate bench precedent

Disallowance under section 40A(3) for cash payments - exception under Rule 6DD(b) and Rule 6DD(k) of the Income Tax Rules - payment to State-controlled warehouse to be treated as payment to Government - principal-agent relationship between State and wholesale licensee - Deletion of the addition made by the Assessing Officer under section 40A(3) in respect of cash payments deposited in the bank account of M/s. Asansol Bottling & Packaging Co. Ltd. - HELD THAT: - The Tribunal found that M/s. Asansol Bottling & Packaging Co. Ltd. operates as a warehouse/wholesale licensee under the West Bengal Excise Rules established and controlled by the State Excise Commissioner for supply of country spirit to retail vendors. Payments by the retail vendor (assessee) mandated by the Excise Rules to be deposited directly into the bank account of that wholesale licensee must be construed as payments to the State authority. Further, where the wholesale licensee acts under the statutory scheme and at the instance of the State, the relationship is effectively that of principal (State) and agent (wholesale licensee). On these conclusions, such payments fall within the exceptions contained in Rule 6DD(b) (payment to Government) and Rule 6DD(k) (payment to agent) of the Income Tax Rules, 1962, and therefore are not liable to disallowance under section 40A(3). The Tribunal also followed the coordinate-bench decision in M/s. Amrai Pachwai & C.S. Shop where identical facts and reasoning led to deletion of the disallowance, and applied that precedent to allow the assessee's position. [Paras 4, 5]

The disallowance under section 40A(3) was deleted and the revenue's appeal was dismissed.

Final Conclusion: The Tribunal upheld the deletion of the addition made under section 40A(3), holding that cash payments deposited into the bank account of the wholesale licensee mandated by the State Excise Rules fall within the exceptions in Rule 6DD(b) and 6DD(k); the revenue's appeal is dismissed.

Deduction under section 10B - manufacture or production of an article or thing - EOU/100% export-oriented undertaking - first degree nexus - unit-wise computation of tax incentives - unbilled revenue - accrual and invoicing - weighted deduction under section 35(2AB) - disallowance under section 40A(2)(b) - premium on redemption of foreign currency convertible bonds treated as revenue expenditure - disallowance under section 14A restricted to exempt income - interest under sections 234B and 234D consequential - transfer pricing - imputed interest on advances (LIBOR plus 300 basis points)

Deduction under section 10B - manufacture or production of an article or thing - EOU/100% export-oriented undertaking - Claim of deduction under section 10B in respect of STAR (Research & Development) unit - HELD THAT: - Tribunal found STAR to be a registered and approved EOU engaged in R&D where the product development culminates in a dossier that documents manufacture of development and exhibit batches; the dossier has the attributes of an article or thing and its creation entails manufacture up to exhibit/commercial batch stage. Reliance placed on precedents recognising processed data/documentation and customization/compilation of technical know-how as producible articles. On the facts, the conditions of section 10B - production of an article or thing and export thereof with consideration brought into India within prescribed time - were satisfied. Accordingly the Tribunal allowed the assessee's claim for deduction under section 10B for the STAR unit. [Paras 12]

Deduction under section 10B allowed for STAR unit.

Unit-wise computation of tax incentives - deduction under section 10B - Computation of section 10B deduction undertaking-wise (error in consolidated claim) - HELD THAT: - Applying the principle in Yokogawa India Ltd., the Tribunal held that deduction under section 10B must be determined with reference to the eligible undertaking independently and not on a consolidated basis which results in inter-unit set-offs. The assessee had inadvertently claimed deduction on a consolidated basis; the Tribunal directed the AO to recompute the deduction undertaking-wise after verifying facts. [Paras 17]

Computation remitted to AO for undertaking-wise determination in terms of Yokogawa; AO to verify facts and allow claim accordingly.

Unbilled revenue - accrual and invoicing - deduction under section 10B - Claim of section 10B deduction in respect of unbilled revenue recorded by STAR unit - HELD THAT: - The Tribunal held that revenue recognised on internal progressive-billing (unbilled revenue) had not accrued for tax purposes as agreed by parties; therefore such amounts did not qualify for deduction under section 10B. Simultaneously, the Tribunal directed that where the AO had included such unaccrued amounts as income, those additions be deleted after factual verification. Further, where invoices were raised and consideration received in convertible foreign exchange within six months of invoicing, the AO may allow the deduction for the year of invoicing after verification. [Paras 22]

Unbilled revenue not eligible for deduction; additions based on non-accrual to be deleted; AO to verify receipts within six months of invoicing and allow deduction where conditions met.

Reworking of deduction - Reworking of section 10B deduction (issue not pressed) - HELD THAT: - Assessee informed Tribunal that this ground was not pressed. The Tribunal accordingly did not adjudicate on merits and dismissed the issue as not pressed. [Paras 24]

Issue dismissed as not pressed.

Weighted deduction under section 35(2AB) - recognition by DSIR - Claim for weighted deduction under section 35(2AB) for STAR unit R&D expenditure - HELD THAT: - On the facts the assessee had applied to DSIR, held in-house R&D recognition and furnished supporting certificates and auditor confirmations; delay in issuance of Forms 3CL/3CM was attributable to administrative process of DSIR. Following precedents (including coordinate bench and High Court decisions), the Tribunal treated approval as relating back to application and directed the AO to allow the weighted deduction. [Paras 29]

Weighted deduction under section 35(2AB) allowed; AO directed to give effect.

Section 40A(2)(b) - Disallowance of portion of rental expenditure paid to related parties under section 40A(2)(b) - HELD THAT: - Tribunal examined factual distinctions: differing dates of lease, disparity in who bore construction costs, superior quality and corporate-use nature of related-party premises, and prevailing market conditions when rents were fixed. On these facts the rent paid to related party was held reasonable and not within mischief of section 40A(2)(b). [Paras 34]

Disallowed rental disallowance deleted; rental expenditure allowed.

Premium on redemption of foreign currency convertible bonds treated as revenue expenditure - Allowability of premium on redemption and issue expenses of FCCBs as revenue deduction - HELD THAT: - The Tribunal found that issuance of FCCBs created an obligation to pay an enhanced amount on redemption which represents cost of borrowing (akin to interest) and was incurred wholly and exclusively for business; liability was accrued in books as per GAAP and audit certification; precedents support treating such premium as revenue in nature. On these grounds the Tribunal allowed the claim. [Paras 39]

FCCB premium and related issue expenses allowed as revenue deduction.

Disallowance under section 14A restricted to exempt income - Quantum of disallowance under section 14A in relation to dividend income - HELD THAT: - Assessee's exempt income (dividend) in the year was nominal. Following the decision in Cheminvest and as agreed by revenue, the Tribunal restricted the section 14A disallowance to the extent of exempt income actually received. [Paras 42]

Disallowance under section 14A restricted to amount of exempt dividend (Rs. 600 as in record); AO directed accordingly.

Interest under sections 234B and 234D consequential - Levy of interest under sections 234B and 234D - HELD THAT: - The Tribunal treated interest levies as consequential to the assessment outcome and directed that interest be charged by the AO as per law while giving effect to the Tribunal's order. [Paras 44]

Interest under sections 234B and 234D to be charged by AO in accordance with law at the time of compliance.

Transfer pricing - imputed interest on advances (LIBOR plus 300 basis points) - Upheld TPO adjustment for imputed interest on outstanding inter-company advances and method of quantification - HELD THAT: - Following prior decisions in assessee's own case and consistent Tribunal practice, the Tribunal directed recomputation of the transfer pricing adjustment by applying LIBOR plus 300 basis points as the appropriate benchmark for imputed interest on foreign-currency advances/receivables to associated enterprises. AO/TPO directed to compute disallowance accordingly. [Paras 48]

Transfer pricing adjustment sustained but to be recomputed using LIBOR + 300 bps; AO/TPO to give effect.

Final Conclusion: The Tribunal partly allowed the assessee's appeal: deduction under section 10B was allowed for the STAR unit; computation of 10B deduction was remitted to the AO for unit wise determination; unbilled revenue was held not to have accrued (additions to be deleted where applicable and receipts within six months of invoicing may be considered); weighted deduction under section 35(2AB), rental claims, and FCCB premium were allowed; section 14A disallowance restricted to the exempt dividend; interest under sections 234B/234D to be dealt with consequentially by the AO; and the transfer pricing adjustment was to be recomputed applying LIBOR plus 300 basis points.

Eligibility for deduction under section 80IA(4) - infrastructure facility - agreement with Central/State Government or statutory body by virtue of concessionaire/sub licence - operation and maintenance of leased infrastructure by a transferee enterprise (proviso to section 80IA(4)) - claim of deduction by lessee/operator of facility

Infrastructure facility - cargo facility as integral part of airport - The cargo facility operated and maintained by the assessee qualifies as an "infrastructure facility" within the meaning of section 80IA(4). - HELD THAT: - The Tribunal held that the Explanation to section 80IA(4) expressly includes airports within the scope of "infrastructure facility" and that cargo facilities are an integral part of an airport. The assessment of the factual matrix - GHIAL having developed the airport and cargo building, Menzies providing facilities, and the assessee operating and maintaining the cargo terminal under lease and operation agreements - led the Tribunal to conclude that the assessee's activity of operating and maintaining the cargo terminal falls within the activity contemplated by clause (i) of section 80IA(4). The Tribunal relied on coordinate decisions treating cargo/CFS functions as analogous to inland ports and on prior Tribunal precedent holding a cargo facility to be an eligible infrastructure facility, and observed that each entity is entitled to claim deduction only in relation to the activity it carries on, avoiding duplication of benefit. [Paras 7]

Cargo facility operated and maintained by the assessee is an "infrastructure facility" eligible for deduction under section 80IA(4).

Agreement with Central/State Government or statutory body by virtue of concessionaire/sub licence - proviso to section 80IA(4) - A direct, independent agreement between the assessee and the Central/State Government or statutory authority is not a prerequisite where the concessionaire (GHIAL) has been authorised by the Government to grant service provider rights and has, under the concession framework, granted the assessee rights to operate and maintain the facility. - HELD THAT: - Applying the proviso to section 80IA(4)(i) and following Tribunal and High Court precedents, the Tribunal accepted that where an enterprise authorised by the Government (the transferor/concessionaire) has the right to grant service provider rights and has entered into agreements enabling operation and maintenance by another enterprise, the transferee enterprise may be eligible for deduction as if it were the enterprise covered under the clause. The Tribunal rejected the Revenue's contention that approvals from government departments alone suffice only for operational compliance and not as substitute for the requisite agreement, but accepted the assessee's position that recognition as a service provider/right holder under the concession and registration as a regulated agent by the Ministry, together with the concession/lease and tripartite arrangements, satisfy the proviso's object so that a separate direct agreement with the Government is not necessary for claiming benefits under section 80IA(4). The Tribunal noted the absence of a conflicting decision of the jurisdictional High Court on GHIAL's statutory status but did not find it necessary to decide that question because the proviso reasoning sufficed. [Paras 7]

The assessee need not have executed a separate agreement directly with the Government or specified authority where the concessionaire authorised by the Government has granted the assessee rights under the concession/lease framework; such arrangement satisfies the proviso to section 80IA(4).

Claim of deduction by lessee/operator of facility - operation and maintenance of leased infrastructure by a transferee enterprise (proviso to section 80IA(4)) - An enterprise that operates and maintains a leased infrastructure facility under rights granted by the concessionaire is entitled to claim deduction under section 80IA(4) for profits attributable to the activity it carries on; the fact that the assessee did not own the facility but operated it under lease/operation agreements does not defeat the claim. - HELD THAT: - The Tribunal observed that section 80IA(4) contemplates not only developers but also enterprises carrying on operation and maintenance of infrastructure facilities. Relying on earlier coordinate bench decisions, the Tribunal held that where the concessionaire or transferor has development obligations and operational rights which are performed by another enterprise pursuant to agreements permitted by the concession, the performing enterprise (transferee/operator) is eligible for deduction for the activity it carries out. The Tribunal rejected the Assessing Officer's objection that only one entity can claim the benefit and that transfer must involve the entire enterprise; instead, it treated the assessee's claim as limited to its operational role and the profits arising therefrom, in line with precedent. [Paras 7]

The assessee, though not owner, as lessee/operator of the cargo facility under the granted rights, is entitled to claim deduction under section 80IA(4) in respect of the activity it carries on.

Final Conclusion: Having found the assessee's cargo operations to constitute an "infrastructure facility", and that the proviso to section 80IA(4) permits a transferee/operator to claim the deduction where the concessionaire authorised by the Government has granted requisite rights, the Tribunal upheld the CIT(A)'s allowance of the deduction and dismissed the Revenue's appeals for AY 2013-14 and AY 2014-15.

Penalty under section 271(1)(c) - Validity of show cause notice - Requirement to specify charge as concealment or furnishing inaccurate particulars - Ambiguity in notice vitiating penalty proceedings - Precedent favouring assessee where conflicting authorities exist

Penalty under section 271(1)(c) - Validity of show cause notice - Requirement to specify charge as concealment or furnishing inaccurate particulars - Ambiguity in notice vitiating penalty proceedings - Whether the penalty imposed under section 271(1)(c) is sustainable where the show-cause notice did not clearly indicate whether the charge was concealment of income or furnishing of inaccurate particulars and the irrelevant portions of the notice were not struck off. - HELD THAT: - The Tribunal accepted the assessee's preliminary contention that the notice initiating penalty proceedings was defective because it did not clearly indicate the exact charge against the assessee - i.e., whether the penalty was proposed for concealment of particulars of income or for furnishing inaccurate particulars - and the irrelevant portion of the notice had not been struck off. Relying on the coordinate-bench decision in Jeetmal Choraria vs ACIT, the Tribunal observed that where the language of the show-cause notice leaves ambiguity as to the charge and the inappropriate words are not struck out, the notice fails in its fundamental administrative function of informing the assessee of the proposal so as to enable an explanation. Given the conflicting views in earlier decisions and the principle that, where two views exist, the one favourable to the assessee should be followed, the Tribunal followed the said coordinate-bench decision and held that imposition of penalty could not be sustained. The Tribunal therefore upheld the cancellation of the penalty by the first appellate authority. [Paras 5, 6]

Penalty under section 271(1)(c) cancelled because the show-cause notice was defective and ambiguous; revenue appeal dismissed.

Final Conclusion: The Tribunal upheld the cancellation of the penalty under section 271(1)(c) on the ground that the show-cause notice was defective and ambiguous for failing to specify whether the charge was concealment or furnishing inaccurate particulars; the revenue's appeal is dismissed.

Deduction under section 10B - computation of export turnover and total turnover - Exclusion of freight and insurance from turnover for deduction purposes - Revenue v. capital characterization of product development expenditure - Allowability of donation under section 37(1) - business expediency and enduring benefit test - Classification of assets - functional test to distinguish plant & machinery and furniture & fixtures for depreciation - Disallowance under section 14A and application of Rule 8D - requirement of AO's recorded satisfaction - Capitalisation v. revenue treatment of foreign travel expenditure - remand for verification - Allowability of demat/portfolio management fees in computation of capital gains - Revenue v. capital nature of expenditure on laying water pipeline - business necessity and enduring benefit test - Allowability of rent/repairs paid to related party - business expenditure and consistency rule - Allowability of wealth-tax for computing book profit under section 115JB

Deduction under section 10B - computation of export turnover and total turnover - Exclusion of freight and insurance from turnover for deduction purposes - Exclusion of freight and insurance from total turnover for the purpose of quantifying deduction under section 10B - HELD THAT: - The Tribunal followed its coordinate-bench precedent in the assessee's own case and earlier Special Bench / jurisdictional High Court authority to hold that freight and insurance charges are to be excluded both from export turnover and total turnover while computing deduction under section 10B. The Revenue's challenge to CIT(A)'s allowance of this exclusion was dismissed as settled by earlier decisions relied upon by the Tribunal.

Grounds Nos.1 & 2 of Revenue appeal dismissed; freight and insurance excluded from total turnover for section 10B computation.

Revenue v. capital characterization of product development expenditure - Whether the product development expenditure capitalised in books is revenue in nature and allowable under section 35(1)(i) - HELD THAT: - The Tribunal, applying its coordinate-bench precedent in the assessee's own case and authoritative principles that book entries are not conclusive, upheld CIT(A)'s finding that the product development expenditure is revenue in nature. The assessing officer's addition was deleted as the true nature of the expenditure warranted revenue treatment.

Ground No.3 of Revenue appeal dismissed; product development expenditure treated as revenue and deletion of addition upheld.

Allowability of donation under section 37(1) - business expediency and enduring benefit test - Allowability of donation to Aslaji Agiary Trust as business expenditure under section 37(1) - HELD THAT: - The Tribunal upheld CIT(A)'s conclusion that the Rs. 14 lakh contribution to a religious trust did not satisfy the requirement of being wholly and exclusively for the assessee's business; the asserted benefit (enhanced social status/word-of-mouth publicity) was either unsupported or of an enduring/ capital nature and therefore not allowable as revenue expenditure under section 37(1).

Ground No.4 of Revenue appeal dismissed (i.e., CIT(A)'s partial disallowance sustained); donation to Aslaji Agiary Trust disallowed.

Classification of assets - functional test to distinguish plant & machinery and furniture & fixtures for depreciation - Appropriate classification of certain items as plant & machinery or furniture & fixtures for depreciation rates - HELD THAT: - Applying the functional test as adopted by coordinate benches and jurisdictional authority, items used in laboratory/production (even if denominated as stools, tables, racks, trolleys etc.) were held to be plant & machinery if they are necessary for production; the Tribunal followed its earlier rulings in the assessee's own case and directed segregation and appropriate depreciation rates.

Ground No.5 of Revenue appeal dismissed; CIT(A)'s direction to classify items by functional test and allow higher depreciation sustained.

Disallowance under section 14A and application of Rule 8D - requirement of AO's recorded satisfaction - Validity of disallowance made under section 14A read with Rule 8D where AO did not record requisite satisfaction - HELD THAT: - The Tribunal held that the assessing officer failed to record the requisite satisfaction, in the manner required by law and explained by the Supreme Court in Godrej & Boyce, before invoking Rule 8D; the satisfaction recorded was generic and based on surmise. Consequently the section 14A disallowance was technically unsustainable. The Tribunal treated the merits as academic once the technical defect was established.

Assessee's Ground No.1(a) allowed - section 14A disallowance deleted for want of legally sustainable satisfaction; merits not adjudicated as academic.

Capitalisation v. revenue treatment of foreign travel expenditure - remand for verification - Characterisation of foreign travel expenses claimed as revenue - remitted to AO for verification - HELD THAT: - While prior coordinate-bench precedent had gone against the assessee where travel was shown to be for finalising purchase of machinery, the Tribunal observed factual disputes as to purpose of various foreign trips. Rather than finally decide on merits, the Tribunal remitted the matter to the assessing officer for fresh verification of facts after giving the assessee opportunity and requiring production of supporting documents.

Ground No.2 of assessee appeal allowed for statistical purposes and remitted to AO for verification of factual nexus between foreign travel and capital acquisition.

Allowability of demat/portfolio management fees in computation of capital gains - Whether demat/portfolio management charges are allowable in computing income under the head capital gains - HELD THAT: - Relying on coordinate-bench precedent in the assessee's own case and related decisions, the Tribunal held that the demat/portfolio management fees were allowable in computing capital gains; the CIT(A)'s disallowance was reversed.

Ground No.6 of assessee appeal allowed; demat charges held allowable under section 48.

Revenue v. capital nature of expenditure on laying water pipeline - business necessity and enduring benefit test - Nature (revenue or capital) of expenditure incurred in laying water pipeline to factory premises - HELD THAT: - Considering factual matrix - government control over land, lease/permission conditions, essentiality of supply for vaccine production and binding obligations to provide water to villages - and applying the practical business-purpose approach in jurisprudence (including Chowgule and Tata Engineering principles), the Tribunal concluded the outlay was revenue in nature as it was an integral part of the profit making process and not acquisition of a right/assets of a permanent character.

Ground No.7 of assessee appeal allowed; expenditure on laying water pipeline treated as revenue expenditure.

Allowability of rent/repairs paid to related party - business expenditure and consistency rule - Allowability of rent paid for bungalow occupied by director and related repairs/renovation as business expenditure; depreciation on capitalised items remanded - HELD THAT: - Following earlier Tribunal decisions in the assessee's own case, the Tribunal allowed the rent and repairs/renovation as business expenditure. However, because details on capitalised items, applicable depreciation rates and use were unclear, the Tribunal remitted the depreciation/ capitalisation aspect to the assessing officer for fresh adjudication after giving the assessee an opportunity.

Ground No.8 partly allowed: rent/repairs allowed; the capitalisation/depreciation component remanded to AO for fresh consideration.

Allowability of wealth-tax for computing book profit under section 115JB - Whether wealth-tax paid is an allowable deduction in computing book profit under section 115JB - HELD THAT: - Referencing Tribunal precedent in the assessee's own case and reasoning that wealth-tax constitutes an ascertained liability distinct from income-tax, the Tribunal held wealth-tax paid is an allowable deduction in computing book profits under section 115JB.

Ground No.9 of assessee appeal allowed; wealth-tax payment allowable for computation of book profits under section 115JB.

Provision for leave encashment - allowance dependent on applicable precedents - Allowability of provision for leave encashment (actuarial valuation) for employees of DTA unit - HELD THAT: - The Tribunal followed its coordinate-bench precedents and relevant High Court authority which had decided the issue against the assessee in earlier years; the assessee did not press differently, so the earlier adverse view was applied.

Ground No.4 of assessee appeal dismissed; provision for leave encashment disallowance upheld.

Allowability of donation under section 37(1) - business expediency and enduring benefit test - Allowability of donation to Aslaji Agiary Trust (assessed also in assessee's grounds) - HELD THAT: - As part of the assessee's appeal the Tribunal considered the same facts and concluded that the donation did not meet the wholly and exclusively business test and was essentially for status enhancement/enduring benefit, so the addition was sustained.

Assessee's challenge to disallowance of Rs.14 lakh donation dismissed.

Final Conclusion: The Revenue's appeal is dismissed. The assessee's cross appeal is partly allowed: the section 14A disallowance was deleted for want of the AO's legally sustainable satisfaction; demat charges and expenditure on water pipeline were held allowable; certain issues (foreign travel capitalisation; depreciation/capitalisation for bungalow assets) were remitted to the assessing officer for verification/ fresh adjudication; other contested additions including the donation to Aslaji Agiary Trust and provision for leave encashment were sustained.

Notional interest on outstanding receivables - International transaction - scope of the Explanation to section 92B - Working capital adjustment - Transfer pricing adjustment - Chargeability of hypothetical interest under transfer pricing

Notional interest on outstanding receivables - International transaction - scope of the Explanation to section 92B - Chargeability of hypothetical interest under transfer pricing - Notional interest on outstanding receivables from associated enterprises is not chargeable as a transfer pricing adjustment in the facts of these cases. - HELD THAT: - The Tribunal followed the Coordinate Bench reasoning in Pegasystems Worldwide India Pvt Ltd. and the earlier decision in Evonik Degussa India P. Ltd. to the effect that a notional or hypothetical interest cannot be levied unless there is material demonstrating under charging of real income. On the facts, the assessee had service receivables and no real interest liability (being a zero debt company), and there was no material of under charging to justify a notional interest addition. The Tribunal also noted that DRP's attempt to treat outstanding service receivables as capital financing under the Explanation to section 92B did not warrant bringing notional interest to tax in the present circumstances. Respectfully following those precedents, the Tribunal held that the notional interest on outstanding receivables cannot be made the subject of TP adjustment. [Paras 9, 10]

Deletion of the notional interest addition; no TP adjustment on outstanding receivables.

Working capital adjustment - Transfer pricing adjustment - Working capital adjustment already accounts for the impact of receivables and therefore a separate adjustment for interest on receivables is unwarranted. - HELD THAT: - The Tribunal relied on the decision in Kusum Healthcare Pvt. Ltd. as affirmed by the Delhi High Court, and on subsequent Coordinate Bench decisions, to hold that differential impact of working capital between the assessee and comparables is factored into pricing and profitability, and consequently any further adjustment on the pretext of outstanding receivables would be unjustified. Where the A.O. has applied a working capital adjustment, that adjustment subsumes the interest impact of receivables and precludes a separate notional interest addition. [Paras 11, 12]

No separate transfer pricing adjustment is required in respect of receivables where working capital adjustment has been considered.

Final Conclusion: Assessee appeals for A.Y. 2011 12 and A.Y. 2012 13 are allowed by deleting the additions made for notional interest on outstanding receivables; Revenue's cross appeal for A.Y. 2011 12 is dismissed.

Tax deduction at source - Reimbursement of expenses - Deduction under section 194C - Disallowance under section 40(a)(ia) - Principal agent relationship - Remand for fresh adjudication

Tax deduction at source - Reimbursement of expenses - Deduction under section 194C - Disallowance under section 40(a)(ia) - Principal agent relationship - Remand for fresh adjudication - Whether the assessee was liable to deduct TDS under section 194C and attract disallowance under section 40(a)(ia) on amounts claimed as reimbursement of expenses paid to the clearing and forwarding agent, or whether the matter required fresh verification. - HELD THAT: - The Tribunal noted that the Assessing Officer treated amounts shown as reimbursement of expenses to the clearing and forwarding agent as liable to TDS and made an addition. The learned CIT(A) had deleted the addition relying on judicial precedents holding that amounts reimbursing expenses incurred by an agent on behalf of the principal are not subject to TDS. The Bench queried production of the agreement between the assessee and M/s. S.K. Agency to determine whether the agent had in fact incurred costs on behalf of the assessee; the agreement was not produced. In view of absence of such specific documentary evidence to establish the principal agent relationship and the nature of payments, and since both parties did not object to restoration, the Tribunal considered it necessary that the Assessing Officer verify the agreement and other relevant documents and adjudicate the issue afresh in accordance with law. Accordingly the Tribunal restored the matter to the file of the AO for fresh adjudication after verification of the agreement and supporting evidence. [Paras 6, 9]

Issue remanded to the Assessing Officer for fresh adjudication after verification of the agreement and supporting documents; appeals allowed for statistical purposes.

Final Conclusion: The Tribunal remanded the question of liability to deduct TDS on alleged reimbursements to the Assessing Officer for fresh adjudication after verification of the agreement between the assessee and the clearing and forwarding agent; both the Revenue's appeal and the assessee's cross objection were allowed for statistical purposes.

Treatment of lease premium as revenue or capital expenditure - characterisation of lease premium based on factual matrix and intention - transfer pricing adjustment on reimbursements and application of mark up - whether reimbursements routed through books of account for TP purposes - remand for verification of factual matrix by assessing officer

Treatment of lease premium as revenue or capital expenditure - characterisation of lease premium based on factual matrix and intention - Deletion of disallowance of lease premium paid and treatment of the lease premium as allowable revenue expenditure. - HELD THAT: - The Tribunal examined facts and precedents relied upon by the revenue but found the present case materially similar to the coordinate bench decisions in the assessee's own earlier years. The Tribunal accepted that the lease was for the purpose of the assessee's business, that the capital structure of the assessee did not change by obtaining lease rights, and that the payment operated as consideration to obtain facilities to carry on business rather than acquisition of an asset of enduring nature. The Apex Court decisions cited by the revenue were held distinguishable on their facts. Following the coordinate bench rulings in the assessee's own cases for earlier years, the Tribunal upheld the CIT(A)'s deletion of the disallowance and dismissed the revenue's grounds on this point. [Paras 6, 7]

The disallowance of the lease premium was deleted and the revenue's appeal on this point was dismissed.

Transfer pricing adjustment on reimbursements and application of mark up - whether reimbursements routed through books of account for TP purposes - remand for verification of factual matrix by assessing officer - Whether the TPO's addition of a 10% mark up on reimbursements should be sustained or the matter remitted for verification whether reimbursements were routed through the assessee's books. - HELD THAT: - The Tribunal noted the factual position that certain employee cost (Dr. Srini) was apportioned and recharged to related affiliates on a cost to cost basis. The TPO applied a 10% mark up treating reimbursements as operational receipts and added an adjustment. The CIT(A) sustained the TPO after finding reimbursements were not routed through the books and observing that independent parties would not render such services without a mark up. The coordinate bench in the assessee's own earlier year considered the same factual matrix and, because of the factual question whether the transactions were routed through the books, remitted the matter to the AO for verification: if not routed through books the TPO's action may be sustained; if routed through books, deletion of the mark up may be appropriate given common multi company practices and lack of comparables. Applying that decision, the Tribunal remitted the present issue to the AO to verify routing through books and decide in accordance with the earlier direction. [Paras 11, 12]

The transfer pricing adjustment was not finally upheld; the issue was remitted to the assessing officer for factual verification and fresh decision in line with the Tribunal's earlier directions.

Final Conclusion: The revenue appeal is dismissed. The disallowance of lease premium for AY 2012-13 is deleted. The transfer pricing addition of Rs. 7,00,457 on reimbursements is remitted to the assessing officer for verification whether the transactions were routed through the assessee's books and for fresh adjudication in accordance with the Tribunal's directions; the assessee's cross objection is allowed for statistical purposes.

Transfer pricing adjustment - Arm's Length Price - comparability and selection of comparables - treatment of provision for bad and doubtful debts as operating expense - entity-level versus transaction-level adjustment - remand for fresh consideration

Comparability and selection of comparables - transfer pricing adjustment - Acceptability of specific comparable companies selected by the TPO and DRP for determination of arm's length margin. - HELD THAT: - The Tribunal examined the four challenged comparables in the light of functional profile, prior coordinate-bench decisions in the assessee's own cases and the material on record. Eclerx Services Ltd. was excluded as a comparable following the coordinate-bench precedent that the acquisition/winding up events did not render it comparable for the year under consideration. Infosys BPO Ltd. was directed to be excluded on grounds of functional dissimilarity, large turnover and brand/intangible considerations as recognised in earlier coordinate-bench orders. TCS eServe Ltd. was directed to be excluded by applying the turnover and functional dissimilarity filters relied upon in prior decisions. By contrast, Crossdomain Solutions Pvt. Ltd. was retained as a comparable because the Tribunal found no reason to interfere with the DRP's conclusion that, on the available annual-report information, the company could be regarded as functionally akin to the assessee; however the Tribunal directed verification of margin computation for that company by the AO/TPO after giving the assessee opportunity to make submissions. [Paras 6]

Eclerx Services Ltd., Infosys BPO Ltd. and TCS eServe Ltd. directed to be excluded as comparables; Crossdomain Solutions Pvt. Ltd. retained as a comparable subject to verification of margin computation.

Treatment of provision for bad and doubtful debts as operating expense - Arm's Length Price - Whether provision for bad and doubtful debts and bad debts written off are to be treated as operating expenses for computing margins of comparables. - HELD THAT: - The Tribunal followed the coordinate-bench decision in Kenexa Technologies Pvt. Ltd. and held that bad debts and provision for bad and doubtful debts are part of operating expenses for the purpose of computing profit of comparable companies. The Tribunal observed that the view taken by the DRP and TPO treating such provisions as non-operating was inconsistent with the cited coordinate-bench precedent and directed the AO/TPO to recompute comparable margins by including such items as operating expenses. [Paras 7]

Directs recomputation of margins of comparables by including bad debts and provision for bad and doubtful debts as operating expenses.

Remand for fresh consideration - comparability and selection of comparables - Status of inclusion of Crystal Voxx Ltd. as an additional comparable. - HELD THAT: - The TPO rejected Crystal Voxx Ltd. on the ground that it failed the service-income filter and showed persistent segmental losses. The DRP reviewed the annual report and upheld the TPO's action but the assessee contended it was not given an opportunity to represent. In the interest of justice, the Tribunal found it appropriate to remit the issue to the TPO for fresh consideration after affording the assessee a reasonable opportunity of being heard. [Paras 8]

Issue remitted to the TPO for fresh consideration and decision after giving the assessee an opportunity to be heard.

Entity-level versus transaction-level adjustment - remand for fresh consideration - Whether the transfer-pricing adjustment should be restricted to the value of international transactions with the associated enterprises or applied at entity (total revenue) level. - HELD THAT: - The assessee contended that the adjustment under section 92CA(3) must be confined to the international transactions with AEs. The DRP rejected the contention because the assessee failed to furnish the evidentiary support showing the cost structure for the invoices forming part of the international transaction revenue. The Tribunal directed that the issue be remitted to the TPO to afford the assessee one more opportunity to submit the required information to substantiate its claim and stated that the matter be considered in accordance with law. [Paras 9]

Remitted to the TPO to allow the assessee one more opportunity to produce supporting evidence; statistical allowance recorded.

Final Conclusion: The appeal is partly allowed: three disputed comparables (Eclerx, Infosys BPO and TCS eServe) are excluded, Crossdomain Solutions is retained subject to margin verification, comparable margins are to be recomputed including bad-debt provisions as operating expenses, and two matters (inclusion of Crystal Voxx Ltd. and restriction of adjustment to international-transaction value) are remitted to the TPO for fresh consideration after affording opportunities to the assessee; overall result: appeal partly allowed for statistical purposes.

Bogus purchases - beneficiary of accommodation entries/hawala entries - statement recorded during survey under section 133A - onus on assessee to substantiate purchases - right to cross examine adverse material and limits of natural justice in assessment proceedings - capital purchases versus revenue treatment - capitalization and claim of depreciation - restricted disallowance by applying a profit/markup percentage where sales are accepted

Bogus purchases - statement recorded during survey under section 133A - onus on assessee to substantiate purchases - right to cross examine adverse material and limits of natural justice in assessment proceedings - restricted disallowance by applying a profit/markup percentage where sales are accepted - capital purchases versus revenue treatment - capitalization and claim of depreciation - Validity and quantum of disallowance of purchases treated as non genuine by AO/CIT(A) where suppliers admitted issuing accommodation/hawala bills and assessee had made payments by account payee cheques and recorded goods in stock; whether entire purchases could be disallowed and whether AO/CIT(A) erred in relying on survey statements and suppliers' declarations without granting cross examination. - HELD THAT: - Tribunal noted that AO and CIT(A) recorded that suppliers declared non supply and that survey statements and suppliers' admissions supported disallowance of purchases as non genuine. The Tribunal also observed that the assessee had made payments through banking channels and had recorded the goods in stock, and that the assessee's sales were not doubted. Given acceptance of sales, the Tribunal treated it as plausible that purchases might have been from the grey market with acquisition of accommodation bills to avoid VAT, and that such purchases are typically sourced at lower rates. Relying on a coordinate bench decision in respect of the assessee's sister concern, which had restricted disallowance to a percentage of the claimed purchases, and noting precedent applying an approach based on a profit/markup rate in similar circumstances, the Tribunal concluded that a restricted disallowance would meet the ends of justice. The Tribunal directed that, insofar as certain purchases were capitalised and depreciation claimed, those aspects should be verified and adjusted in the relevant years rather than disallowing the entire capital purchase amount for the assessment year in question. Applying these considerations, the Tribunal reduced the disallowance to 30% of the unverifiable purchases instead of a 100% disallowance upheld by lower authorities, holding that the facts justify a proportionate addition where sales are accepted but purchases are not fully verifiable. The Tribunal therefore partly allowed the appeals. [Paras 8]

Appeals partly allowed; disallowance of unverifiable purchases restricted to 30% for the assessment years, with direction to verify capitalization/depreciation treatment where applicable.

Final Conclusion: Tribunal held that while purchases from suppliers who admitted issuing accommodation entries could not be treated as fully genuine, complete disallowance was not warranted where the assessee's sales were accepted and payments and stock records existed; accordingly, the disallowance confirmed by AO/CIT(A) was reduced and restricted to 30% of the unverifiable purchases for the relevant assessment years, with verification directed for capitalised purchases and depreciation treatment.

Validity of reassessment under section 147/148 - Scope of revisionary power under section 263 - Effect of limited set-aside on maintainability of appeal - Remand for adjudication of jurisdictional/legal objections

Validity of reassessment under section 147/148 - Scope of revisionary power under section 263 - Effect of limited set-aside on maintainability of appeal - Remand for adjudication of jurisdictional/legal objections - Ld. CIT(A) erred in dismissing the appeal as infructuous; the question of validity of reassessment proceedings required adjudication and the matter is to be restored to the file of the ld. CIT(A) for that purpose. - HELD THAT: - The Tribunal found that the ld. CIT, in exercise of powers under section 263, set aside the reassessment order only to the limited extent of re-examining deduction under sections 80IA/80IB and did not efface the entire reassessment or express a finding on the validity of the reassessment proceedings initiated under sections 147/148. Because the ld. CIT(A) simply dismissed the appeal as infructuous in view of the section 263 order without deciding the jurisdictional/legal objections to the assumption of jurisdiction under section 147/148 raised by the assessee, he failed to address a determinative legal issue. The Tribunal held that if the ld. CIT(A) were to sustain the assessee's challenge to the validity of the reassessment, the consequential revisionary action under section 263 would collapse. For these reasons the Tribunal restored the matter to the ld. CIT(A) with a direction to adjudicate the legal grounds challenging the validity of the reassessment, afford the assessee an opportunity of hearing, and decide in accordance with law. The Tribunal declined to decide the other grounds raised by the assessee since the primary legal issue was being remitted for consideration. [Paras 31, 33, 34]

Issue restored to the file of the ld. CIT(A) with direction to decide the legal objections to the reassessment proceedings; other grounds left open.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the impugned dismissal as infructuous, and remitted the matter to the ld. CIT(A) to adjudicate the legality of the reassessment proceedings under sections 147/148 after giving the assessee an opportunity of hearing; other grounds were not decided.

Rejection of books of account - Estimation of income by applying presumptive net profit rate - Requirement to consider past profit history before fixing an estimated profit rate - Penalty for concealment or furnishing inaccurate particulars of income - Requirement to specify charge for levy of penalty - Condonation of delay for filing appeal on reasonable cause

Rejection of books of account - Estimation of income by applying presumptive net profit rate - Requirement to consider past profit history before fixing an estimated profit rate - Validity of AO's rejection of books and estimation of net profit at 3% and the appropriate remedial measure - HELD THAT: - The Tribunal found that the Assessing Officer rejected the assessee's books without recording reasons and without considering the assessee's past profit history. The AO applied a net profit rate of 3% by way of estimate without stating or supporting the basis for that rate. Having regard to the material on record and the need to take past performance into account before fixing an estimated profit rate, the Tribunal held the AO's approach to be unsatisfactory and directed a revision of the estimate. In exercise of its appellate power the Tribunal substituted the AO's rate of 3% with a net profit rate of 1.75% and directed recomputation of the addition accordingly. [Paras 8]

Appeal partly allowed by directing AO to compute income applying net profit rate at 1.75% in place of 3% and recompute the addition.

Penalty for concealment or furnishing inaccurate particulars of income - Requirement to specify charge for levy of penalty - Sustainability of penalty under the penalty provision for concealment or furnishing inaccurate particulars where assessment was by estimate - HELD THAT: - The Tribunal observed that the penalty was levied after the AO made an estimated addition and that the AO did not specify the precise charge constituting concealment or furnishing of inaccurate particulars. Relying on the settled principle that mere estimation of income without a specified charge or culpable finding cannot sustain a penalty, the Tribunal concluded that the levy was not properly founded. Accordingly, the penalty was cancelled. [Paras 16]

Penalty of Rs. 15,81,940/- under the penalty provision is cancelled.

Final Conclusion: The appeal against assessment is partly allowed by directing recomputation of income using a net profit rate of 1.75%; the appeal against penalty is allowed by cancelling the penalty. Delays in filing both appeals were condoned.

Disallowance of expenditure attributable to exempt income under Section 14A read with Rule 8D - Computation of book profit under Section 115JB and treatment of expenditure relatable to exempt income - Allowability and apportionment of foreign business travel expenses with incidental personal benefit

Disallowance of expenditure attributable to exempt income under Section 14A read with Rule 8D - Use of interest free funds versus borrowed funds for investments - Deletion of disallowance computed under Rule 8D where assessee demonstrated availability and use of interest free own funds for investments. - HELD THAT: - The Tribunal examined the assessee's working and comparative balance sheet movements and accepted the assessee's case that incremental investments were made from interest free own funds and that major borrowings were for a specific business purpose (payment to ONGC) rather than to fund the investments. The assessee relied on earlier ITAT orders for earlier assessment years which were upheld by the Gujarat High Court. In view of the factual finding that borrowings were not linked to the investments and that sufficient interest free funds existed to cover the cost of investments, the presumption underlying the Rule 8D computation did not apply and the disallowance was deleted. [Paras 6]

Ground allowed; disallowance under Section 14A read with Rule 8D deleted.

Computation of book profit under Section 115JB and treatment of expenditure relatable to exempt income - Applicability of disallowance under Section 14A/Rule 8D to book profit computation - Assessee entitled to exclusion of Section 14A disallowance from book profit under Section 115JB where facts are identical to earlier years decided in assessee's favour. - HELD THAT: - Following a coordinate bench decision and applying the Explanation to Section 115JB, the Tribunal accepted that where the disallowance under Section 14A read with Rule 8D is deleted on merits (or the assessee has shown that expenditure is not attributable to exempt income), the same should not be imported into the computation of book profit. There being no factual disparity with the earlier year in which the Tribunal had directed that no disallowance be made while computing book profits, the Assessing Officer was directed not to make any addition under Section 115JB on account of Section 14A disallowance. [Paras 7]

Ground allowed; Assessing Officer directed not to make disallowance under Section 14A while computing book profit under Section 115JB.

Allowability and apportionment of foreign business travel expenses with incidental personal benefit - Standard of proof for treating visit as wholly personal versus partly business - Deletion of 75% disallowance of foreign travel expenditure where visit was found to be at least partly for business and there was no material to justify apportionment. - HELD THAT: - The Tribunal reviewed the facts and accepted the CIT(A)'s finding that the foreign visit, although it may have conferred some personal benefit on the director, was undertaken at least partly for business purposes. There was no material to show that the trip was wholly personal or that a 75% disallowance was warranted. Applying precedent, the Tribunal held that expenses incurred in the course of business which incidentally benefit a director remain allowable and deleted the disallowance. [Paras 8]

Ground allowed; disallowance of foreign travel expenditure deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2011-12: the Rule 8D/Section 14A disallowance was deleted on merits; no addition under Section 115JB was to be made on account of Section 14A; and the foreign travel disallowance was deleted.

Transfer of DEEC/Advance licences and liability of transferee importer - fraud and fabrication vitiating documentary title - requirement of a speaking order and reasoned adjudication - penalty for forgery and fabrication as basis for confiscation/penalty - penalty under section 112 and 114 of the Customs Act

Transfer of DEEC/Advance licences and liability of transferee importer - fraud and fabrication vitiating documentary title - requirement of a speaking order and reasoned adjudication - Impugned adjudicating order absolving transferee importers set aside and matter remanded for fresh determination. - HELD THAT: - The Tribunal found that the adjudicating authority had absolved the transferee importers without examining or recording reasons on the competing case-law cited by parties. Although numerous authorities bearing on whether transferees can be made liable where licences were obtained by forged documents were placed before the Adjudicating Authority, the order did not engage with those precedents and thus is not a speaking order. Given the existence of conflicting judicial pronouncements and the need to address them with cogent reasons, the appeals filed by the revenue against the transferee importers are allowed by way of remand to the original adjudicating authority to determine the issue afresh with a reasoned and speaking order. [Paras 23, 24]

Impugned order insofar as it absolves transferee importers is set aside; matter remanded to the original adjudicating authority for fresh decision with cogent reasons.

Forgery and fabrication as basis for penalty - penalty under section 112 and 114 of the Customs Act - Penalty imposed on Balchander V. Jadhav under the Customs Act upheld and his appeal dismissed. - HELD THAT: - The record contains admissions recorded under section 108 by the appellant that he forged signatures on test reports, shipping documents and other papers at the direction of his employer; the proprietor and other witnesses also admitted fabrication and the appellant's role was corroborated. In these circumstances the Tribunal held that the imposition of penalty under the Customs Act for forgery and fabrication was justified and the appeal against such penalty cannot succeed. [Paras 25]

Appeal of Balchander V. Jadhav dismissed; penalty under the Customs Act upheld.

Final Conclusion: Appeals by the revenue against transferee importers are allowed only to the extent that the adjudicating order is set aside and the matters are remanded for fresh, reasoned consideration; the appeal of Balchander V. Jadhav against the penalty is dismissed and the penalty is sustained.

Transaction value - evidence of real transaction value - customs valuation - Rule 10A of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - assessable value - confessional statement - voluntariness and admissibility - confiscation and redemption fine

Confessional statement - voluntariness and admissibility - The statement of the Director admitting off record payments and acknowledging invoices as reflecting the real price was voluntary and admissible. - HELD THAT: - The Tribunal found that the Director had in his recorded statement accepted that documents/invoices received by DRI disclosed the real price and that differential amounts were paid in cash to the supplier's local representative. The statement was not retracted and the appellants' claim of coercion was unsubstantiated. On this basis the statement was held to be reliable and admissible evidence supporting the department's case. [Paras 5]

Statement upheld as voluntary and admissible; appellant's coercion plea rejected.

Transaction value - evidence of real transaction value - Rule 10A of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - assessable value - Where invoices and admissions establish the price actually paid, that price constitutes the transaction value and may be adopted as the assessable value without proceeding through other valuation rules. - HELD THAT: - The Tribunal accepted the Revenue's position that documentary evidence recovered during investigation together with the Director's admissions established the real transaction value. In such circumstances there was no need to sequentially apply other valuation rules (such as Rules 5-8); the amount evidenced by the invoices and admissions could be taken as the transaction value under the Valuation Rules and used for demand of duty, interest and penalty. [Paras 6]

Assessable value re-determined on basis of proved real transaction value; demand sustained.

Confiscation and redemption fine - Confiscation could not be ordered and redemption fine could not be imposed because the goods were not available for confiscation. - HELD THAT: - Although the goods were held liable to confiscation in the order under challenge, the Tribunal recorded that the goods were not available for confiscation. In view of that factual circumstance, an order of confiscation could not be executed and the consequential imposition of redemption fine under the Customs Act could not stand. Accordingly the redemption fine was set aside. [Paras 7, 8]

Redemption fine set aside; appeal partly allowed to this extent.

Final Conclusion: The Tribunal upheld the department's re-determination of assessable value on the basis of invoices and the Director's admission, rejected the appellant's coercion plea, and accordingly sustained the duty demand; however, because the goods were not available for confiscation the redemption fine was set aside and the appeal was partly allowed on that limited ground.

Rectification of mistake in order - application for rectification - recording of submissions in open court - representation by authorised representative - finality of pronounced order

Rectification of mistake in order - recording of submissions in open court - representation by authorised representative - Application for rectification of the Tribunal's order dismissed for lack of justification where the order was dictated and pronounced in open court in the presence of the authorised representative and the applicant's counsel was not privy to the proceedings. - HELD THAT: - The applicant contended that submissions were wrongly recorded in the Tribunal's order and sought rectification. On being asked, the applicant's counsel admitted that at the hearing before the Tribunal the appellant was represented by a Chartered Accountant, Shri Yash Dev Arya. The Tribunal's order had been dictated and pronounced in open court in the presence of that authorised representative. Given that the order was pronounced publicly in the presence of the authorised representative, the subsequent assertion by a different counsel that submissions were wrongly recorded could not be entertained. There was no justification shown for altering the record of proceedings or rectifying the order.

Application for rectification dismissed.

Final Conclusion: The application for rectification of the Tribunal's order is dismissed on the ground that the order was dictated and pronounced in open court in the presence of the authorised representative, and no justification was shown to disturb the record.

Refund under Notification No.102/2007 - unjust enrichment - Chartered Accountant's certificate and self-declaration as admissible evidence - requirement to show receivables in the same financial year

Refund under Notification No.102/2007 - unjust enrichment - Chartered Accountant's certificate and self-declaration as admissible evidence - requirement to show receivables in the same financial year - Whether the refund claims of SAD under Notification No.102/2007 were rightly allowed by Commissioner (Appeals) where the respondent produced Chartered Accountant's certificates and self-declarations but did not show the amounts as receivables in the balance sheet for the financial year 2007-08. - HELD THAT: - The refund claims were governed by the conditions of Notification No.102/2007 which permit refund of SAD on production of evidence that VAT has been discharged on sale of the imported goods. The departmental objection rested on an insistence that the CVD/SAD amount must appear as receivable in the books in the financial year of import (2007-08). The Tribunal observed that Notification No.102/2007 requires production of a Chartered Accountant's/statutory auditor's certificate and a self-declaration to establish that the burden was not passed on; those documents were produced. The circular relied upon by the department (Circular No.7/2008-Cus.) relates to refunds under section 27 of the Customs Act and the Tribunal found it inapplicable to refunds under Notification No.102/2007. Since the imports took place at the fag end of 2007-08 and sales (and VAT discharge) occurred in 2008-09, it was not necessary that the amount be shown as receivable immediately upon import. The Chartered Accountant's certificates and the self-declaration satisfied the evidentiary requirement under the Notification and the Commissioner (Appeals) correctly directed sanction of the refund.

The Commissioner (Appeals) order sanctioning refund was upheld and the departmental appeal was dismissed.

Final Conclusion: The appeal by the department is dismissed; the Tribunal affirms that for refund under Notification No.102/2007 a Chartered Accountant's/statutory auditor's certificate and self-declaration are acceptable evidence and there is no requirement to show the duty as receivable in the balance sheet of the year of import where VAT is discharged later.

Classification of goods - classification under Customs Tariff Heading 84716050 - classification under residual heading 85437099 - residual entry for electrical machines having individual functions - evidentiary value of catalogues and technical write ups in tariff classification - reliance on precedent decision of the Tribunal

Classification of goods - classification under Customs Tariff Heading 84716050 - classification under residual heading 85437099 - evidentiary value of catalogues and technical write ups in tariff classification - reliance on precedent decision of the Tribunal - Classification of imported Cogent Lifescan fingerprint scanners and validity of assessment under residual CTH 85437099 as opposed to CTH 84716050. - HELD THAT: - Appellants imported fingerprint scanners which they contended were designed to operate with Automatic Data Processing (ADP) machines and therefore classifiable under CTH 84716050. The lower authority assessed the goods under the residual heading CTH 85437099 after conducting internet searches in the absence of catalogue or technical write up from the importer and concluded the devices were standalone with independent memory. The Tribunal found that the Commissioner (Appeals) had searched generically for 'Life Scan Finger Print Devices' rather than the specific 'Cogent Lifescan Finger print Scanner' and reached a conclusion on that basis. The importer produced the manufacturer's catalogue and technical write ups (placed on record during appeal) showing the nature of the impugned items. The Tribunal also noted that the decision in STJ Electronics Pvt. Ltd. (CESTAT New Delhi) on identical scanners supported classification under CTH 8471 and held that its ratio applied to the present appeals. The Tribunal further observed that the department could have sought expert opinion or requested technical literature before assessment but did not do so. Applying the precedent and the material produced by the appellants, the Tribunal held that the impugned assessment under the residual entry could not be sustained. [Paras 6]

Impugned orders upholding assessment under CTH 85437099 set aside; appeals allowed and classification under CTH 84716050 accepted as per ratio of the cited Tribunal decision, with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeals, set aside the Commissioner (Appeals) orders sustaining classification under the residual heading, accepted classification of the imported Cogent Lifescan fingerprint scanners in line with the manufacturer's catalogue and the Tribunal precedent, and directed consequential relief as per law.

Liquidation under I&B Code - resolution process and extension of insolvency period - committee of creditors' voting and commercial decision-making - role and neutrality of the resolution professional - absence of resolution applicants - financial viability and erosion of reserves

Liquidation under I&B Code - resolution process and extension of insolvency period - committee of creditors' voting and commercial decision-making - absence of resolution applicants - financial viability and erosion of reserves - Validity of the Adjudicating Authority's order directing liquidation of the corporate debtor on completion of the 270-day insolvency period. - HELD THAT: - The Appellate Tribunal examined whether the order of liquidation, passed after completion of 270 days from admission of the Section 10 application, was justified in view of the conduct of the Committee of Creditors, the actions of the Resolution Professional and the possibility of revival. The record shows that the interim moratorium was declared and a Resolution Professional appointed; no Resolution Plan was submitted despite publication of the Information Memorandum prepared by the Resolution Professional. Although the State Bank of India voted against extension of the resolution period and there were submissions that the COC's voting blocked revival, there was no effective Resolution Applicant or filed Resolution Plan. The corporate debtor's audited accounts disclosed recurring and substantial operating losses that had eroded reserves, and material irregularities and waiver/appearance of bad debts were noted. In these circumstances, and given absence of any viable resolution proposal within the statutory period, the Adjudicating Authority had no option but to order liquidation upon expiry of 270 days. The Tribunal found no merit in the challenge to the liquidation order and did not find reversible error in the conduct relied upon by the appellant. [Paras 3, 10, 11, 12]

Appeal dismissed; order of liquidation upheld and earlier stay vacated, no order as to costs.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's order of liquidation after the 270-day insolvency period, concluding that absence of any Resolution Applicant or Resolution Plan and the corporate debtor's deteriorated financial position justified liquidation; the appeal is dismissed and the interim stay is vacated.

Maintainability of an application under Section 7 of the I&B Code where winding up proceedings have been initiated - Corporate Insolvency Resolution Process (CIRP) as distinct from winding up/liquidation - equivalence of 'winding up' under the Companies Act and 'liquidation' under the I&B Code - ineligibility to initiate CIRP where a liquidation order has been made (Section 11(d) in context)

Maintainability of an application under Section 7 of the I&B Code where winding up proceedings have been initiated - Corporate Insolvency Resolution Process (CIRP) as distinct from winding up/liquidation - equivalence of 'winding up' under the Companies Act and 'liquidation' under the I&B Code - Application under Section 7 for initiation of CIRP is not maintainable where winding up proceedings have already been initiated by the High Court against the corporate debtor. - HELD THAT: - The Tribunal examined prior decisions holding that where winding up or liquidation proceedings have been initiated or a liquidation order has been made, the stage of CIRP (which precedes liquidation) cannot be embarked upon in respect of the same corporate debtor. The judgment notes the statutory harmonisation treating 'winding up' under the Companies Act as synonymous with 'liquidation' under the I&B Code and relies on the reasoning in earlier decisions which preclude initiating CIRP once winding up/liquidation has been ordered. Applying these principles to the present facts, where the High Court has already ordered winding up of the corporate debtor (the second stage), initiation of CIRP (the first stage) is held not to arise and thus the Section 7 application was rightly dismissed as not maintainable. [Paras 4, 5]

Section 7 application dismissed as not maintainable since winding up proceedings had already been initiated by the High Court; appeal dismissed.

Final Conclusion: The appeal is dismissed for lack of merit: where winding up/liquidation has been initiated by the High Court, an application under Section 7 for initiation of CIRP against the same corporate debtor is not maintainable; no order as to costs.

Maintainability of appeal under Section 61(1) of the I&B Code - limitation prescribed by Section 61(2) of the I&B Code - validity of Notification S.O. 1683(E) dated 24th May, 2017 under Section 242 - compliance of a scheme treated as resolution plan with Section 30(2)(e) of the I&B Code - requirement of notice to unsecured creditors - compliance with Insolvency and Bankruptcy Board of India guidelines - conflict of a resolution plan with the Income-tax Act

Maintainability of appeal under Section 61(1) of the I&B Code - limitation prescribed by Section 61(2) of the I&B Code - validity of Notification S.O. 1683(E) dated 24th May, 2017 under Section 242 - Appeal under Section 61(1) is not maintainable and is barred by limitation. - HELD THAT: - The Tribunal considered the notification extending the period to prefer appeals and the earlier analysis in Principal Director General of Income Tax (Admn. & TPS) v. Spartek Ceramics India Ltd. & Anr., where it was held that the statutory limitation scheme under Section 61(2) allows thirty days to file an appeal and a discretionary condonation of delay of up to fifteen days only. The Central Government's Notification S.O. 1683(E) dated 24th May, 2017 purporting to permit a ninety-day period conflicted with the statutory maximum forty-five day period discernible from Section 61 and could not validly expand the appellate limitation. In consequence, appeals brought beyond the period permissible under Section 61(2) (and its fifteen-day condonation) are barred and not maintainable before the Appellate Tribunal. [Paras 3, 4]

Appeal is not maintainable and barred by limitation; the Tribunal declines to entertain the appeal under Section 61(1).

Compliance of a scheme treated as resolution plan with Section 30(2)(e) of the I&B Code - requirement of notice to unsecured creditors - compliance with Insolvency and Bankruptcy Board of India guidelines - conflict of a resolution plan with the Income-tax Act - The impugned schemes, if treated as resolution plans, are illegal for specified non-compliances; however, the Tribunal refrains from setting them aside due to want of jurisdiction and limitation. - HELD THAT: - On the merits, and without exercising appellate powers under Section 61, the Tribunal identified multiple infirmities in the schemes: they were framed without giving notice to the appellant as an unsecured creditor; they did not conform to the requirements of Section 30(2)(e) of the I&B Code and related IBBI guidelines (for example, provisions concerning treatment of operational creditor debts and the roles of resolution applicants and the committee of creditors were not adhered to); and the schemes purportedly contravened provisions of the Income-tax Act. These defects rendered the schemes illegal in substance. Nonetheless, because the appeals were held to be time-barred and the Tribunal lacked jurisdiction to entertain them under Section 61, the Tribunal recorded the illegality but did not set aside or annul the schemes. [Paras 7, 8]

Schemes are illegal on stated grounds, but the Tribunal, being without jurisdiction to hear the time barred appeals, does not interfere with them.

Final Conclusion: The appeals are dismissed as not maintainable and barred by limitation; while the Tribunal records that the impugned schemes are illegal for specified non-compliances with the I&B Code, IBBI guidelines and the Income tax Act, it refrains from altering the schemes because it has no jurisdiction to entertain the time barred appeals.

Corporate insolvency resolution process under I&B Code - operational creditor - pre-existing dispute under Section 5(6) of the I&B Code - demand notice under Section 8(1) of the I&B Code - novation of contract - separate corporate entity and privity of contract - unilateral transfer of liability not constituting a dispute

Pre-existing dispute under Section 5(6) of the I&B Code - demand notice under Section 8(1) of the I&B Code - unilateral transfer of liability not constituting a dispute - Existence of a pre existing dispute between the Corporate Debtor and the Operational Creditors preventing admission of the Section 9 applications - HELD THAT: - The Tribunal held there was no pre-existing dispute between the Corporate Debtor and the Operational Creditors. A unilateral transfer or internal agreement among the Corporate Debtor and its shareholder/ex director cannot create a dispute with Operational Creditors under Section 5(6) of the I&B Code. The alleged Memorandum of Understanding, being not executed by the Operational Creditors and being an inter-se arrangement among shareholders and the ex director, has no binding effect on the Operational Creditors. The creditor remains the owner of the debt and the borrower cannot unilaterally transfer its liability to a third party to defeat the creditor's claim. Further, the demand notice under Section 8(1) was issued and there was no reply within the statutory period; contemporaneous records such as balance confirmation and commercial tax returns were relied on to show acknowledgement of debt by the Corporate Debtor. On these bases the Tribunal concluded absence of a pre-existing dispute between the parties. [Paras 16, 17, 18, 21, 22]

No pre-existing dispute existed between the Corporate Debtor and the Operational Creditors; the Section 9 application(s) were rightly admitted.

Final Conclusion: Appeals dismissed; the Adjudicating Authority rightly admitted one Section 9 application, ordered moratorium and appointment of an interim resolution professional, and there shall be no order as to costs.

Provisional attachment - confirmation of provisional attachment - schedule offence - acquittal - release of attached properties - PMLA proceedings as a judicial proceeding

Provisional attachment - confirmation of provisional attachment - schedule offence - acquittal - release of attached properties - Validity of the Adjudicating Authority's confirmation of the provisional attachment in view of the Special Court's acquittal of the accused for the schedule offence and entitlement to release of attached properties. - HELD THAT: - The Tribunal examined the Impugned Order which confirmed the Provisional Attachment Order and noted that the Adjudicating Authority had confirmed the attachment mainly on the basis of the FIR and charge sheet filed by the Karnataka Lokayukta. The Special Court, after full trial and on consideration of evidence and documents, set aside the charge sheet and acquitted the accused of the Schedule offence; no appeal against that acquittal was filed. Given that the Schedule offence (basis for the ECIR and attachment) was decided against the prosecution on merits by the Special Court, the Tribunal held that the confirmation of provisional attachment lacks legal support and is void. The Tribunal therefore concluded that, in these circumstances, the attached immovable properties are liable to be released to the appellants. [Paras 7, 8, 9, 25, 28]

The confirmation of the provisional attachment is set aside and the attached properties are to be released to the appellants.

PMLA proceedings as a judicial proceeding - provisional attachment - Whether the Adjudicating Authority complied with judicial standards in adjudicating the provisional attachment and considered the appellants' material on sources of funds. - HELD THAT: - The Tribunal recorded that the Adjudicating Authority did not adequately consider the documentary material and statements produced by the appellants showing salary, rental, agricultural, tailoring and other incomes, loans and brought-forward savings. The Provisional Attachment Order and its confirmation did not discuss sources of funds or scrutinise the evidence relied upon by the appellants, and the order appeared to be based on assumptions rather than a judicial appraisal of the material. The Tribunal emphasised that proceedings under PMLA are judicial proceedings and must be decided on cogent findings based on evidence. For these reasons the Tribunal found procedural infirmity in the impugned order which supported its conclusion to set aside the attachment. [Paras 17, 18, 19, 20]

Adjudicating Authority failed to conduct a proper judicial consideration of appellants' evidence; that procedural defect contributes to setting aside the attachment.

Final Conclusion: The appeal is allowed; the provisional attachment order and its confirmation are set aside for want of legal basis and proper judicial consideration in light of the Special Court's acquittal, and the attached immovable properties are directed to be released to the appellants; no costs.

Technical Inspection and Certification Service - technical inspection and certification agency - certificate of degassing/purging - degassing and purging as safety and maintenance activity

Technical Inspection and Certification Service - technical inspection and certification agency - degassing and purging as safety and maintenance activity - certificate of degassing/purging - Whether the activity of degassing and purging LPG tank trucks carried out by the appellant falls within the scope of "Technical Inspection and Certification Service" - HELD THAT: - The appellants perform degassing and purging of LPG tank trucks to render the tanks fit for mandatory testing, repairs and subsequent filling and transportation of LPG, and issue certificates to that effect. The Tribunal held that the taxability under "Technical Inspection and Certification Service" requires an agency to perform inspection or examination and, on completion, to certify that goods or processes meet specified standards such as quality, functionality, safety or other parameters. The appellants are not an agency engaged in inspection and testing as contemplated by that service description; rather, they perform operational activities related to safety and maintenance to make tank trucks fit for use. Issuance of a certificate recording that purging/degassing was performed does not convert these operational safety/maintenance activities into a technical inspection and certification service within the statutory meaning. Applying these considerations, the Tribunal concluded that the appellants have not satisfied the conditions necessary to classify purging and degassing of tank trucks as "Technical Inspection and Certification Service".

The activity of degassing and purging LPG tank trucks by the appellant does not constitute "Technical Inspection and Certification Service" and is not taxable as such.

Certificate of degassing/purging - degassing and purging as safety and maintenance activity - Consequences for demand of service tax, and for interest and penalty, arising from classification - HELD THAT: - The Tribunal noted that because the activity was held not to fall within the taxable category of technical inspection and certification services, the substantive demand of service tax cannot be sustained. Consequentially, the attendant claims for interest and penalty premised on that demand also fail. The Tribunal therefore allowed the appeal and directed consequential relief consistent with the finding that the underlying service tax demand was unsustainable.

The demand of service tax is unsustainable; accordingly, interest and penalty claimed thereon do not survive. Appeal allowed with consequential relief, if any.

Final Conclusion: The appeal is allowed: degassing and purging of LPG tank trucks performed by the appellant is a safety/maintenance activity and not a "Technical Inspection and Certification Service"; the service tax demand (and consequential interest and penalty) is therefore unsustainable and the appellant is entitled to consequential relief.

Provision and transfer of information and data processing - Credit card services - Banking and Other Financial Services - Service tax liability of non-resident service provider through Indian recipient - Application of Rule 2(1)(d)(iv) of Service Tax Rules, 1994 - Substantive legislative inclusion of services in Finance Act, 2006 - Precedential effect of a Larger Bench decision

Provision and transfer of information and data processing - Credit card services - Banking and Other Financial Services - Precedential effect of a Larger Bench decision - Whether the appellants were liable to pay service tax on Member Support and connectivity services provided to non-resident VISA for the period 6.8.2002 to 30.9.2006 classified as "provision and transfer of information and data processing" under BOFS. - HELD THAT: - The Tribunal accepted the appellants' submission that the question is governed by the Larger Bench decision in Standard Chartered Bank & Ors. v. CST and this Bench's subsequent decision in CCE v. M/s. Vijaya Bank & M/s. Canara Bank, which held that with effect from 1.5.2006 credit/debit card services were specifically and substantively included as separate services in the Finance Act, 2006 and that the other services enumerated are not impliedly subsumed within the credit card services or within the broader BOFS definition. The Revenue's representative conceded that the Larger Bench decision settles the issue in favour of the appellants. Applying that precedent, the Tribunal concluded that the classification and consequent service tax demand confirmed by the lower authorities could not be sustained for the period in question.

The appeal is allowed and the service tax demand confirmed by lower authorities is set aside in accordance with the controlling Larger Bench and this Bench's precedent.

Final Conclusion: The Tribunal allowed the appeal, setting aside the service tax demand for the period 6.8.2002 to 30.9.2006, applying the Larger Bench precedent and this Bench's earlier decision that credit card services were separately and substantively included by the Finance Act, 2006 and that the impugned services are not correctly taxable under the BOFS classification as applied by the lower authorities.

Exemption to taxable services relating to transmission and distribution of electricity - services "in relation to" transmission and distribution of electricity - nexus between the service rendered and transmission and distribution of electricity

Exemption to taxable services relating to transmission and distribution of electricity - services "in relation to" transmission and distribution of electricity - nexus between the service rendered and transmission and distribution of electricity - Repair and reconditioning of distribution transformers undertaken by the appellants fall within the exemption under Notification No.45/2010 ST as taxable services relating to transmission and distribution of electricity. - HELD THAT: - The Tribunal examined Notification No.45/2010 ST dated 20.7.2010 which directs that service tax payable on taxable services relating to transmission and distribution of electricity, which was not being levied in accordance with the prevailing practice, shall not be required to be paid for the specified periods. Applying the established authorities which have held that activities such as erection, commissioning, installation and analogous services come within the expression "in relation to" transmission and distribution of electricity, the Tribunal found a clear nexus between the appellants' repair and reconditioning work on distribution transformers and transmission/distribution of electricity. On that basis the activity falls within the scope of the Notification and is covered by the retrospective exemption.

The exemption in Notification No.45/2010 ST applies to the appellants' services and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the appellants' work on distribution transformers is covered by the retrospective exemption under Notification No.45/2010 ST as services relating to transmission and distribution of electricity for the periods specified in the Notification.

Technical inspection and certification - statutory or mandatory function - exclusion from "Club or Association" under clause (i) of the definition - doctrine of mutuality - pure agent reimbursement under Service Tax Determination of Value Rules, 2006 - penalties under the service tax regime

Doctrine of mutuality - exclusion from "Club or Association" under clause (i) of the definition - Whether the services provided by the appellant to its members can be treated as taxable 'Club or Association' services having regard to the doctrine of mutuality and the exclusion for bodies established or constituted by or under law - HELD THAT: - The Tribunal observed that the continued viability of the doctrine of mutuality as a defense to taxation is in doubt because the Supreme Court has referred the Young Men's Indian Association decision to a Larger Bench in State of West Bengal v. Calcutta Club Ltd., raising substantial questions about the applicability of mutuality-based exemptions. Consequently, the Tribunal refrained from finally deciding the mutuality question. Separately, relying on the Tribunal's decision in Federation of Indian Chambers of Commerce & Industries (ECSEPC), the Tribunal held that an Export Promotion Council created and recognised under the Foreign Trade Policy and functioning pursuant to statutory/administrative schemes is a body "established or constituted by or under" a law for the time being in force and thus falls outside the definition of "Club or Association" under clause (i). Applying that ratio to the facts, the Tribunal concluded that no demand can be sustained under the "Club or Association" service head and allowed the appeal on this count.

The appeal is allowed as regards classification under "Club or Association" service; the broader mutuality question has not been finally decided by the Tribunal in view of the reference to the Larger Bench of the Supreme Court.

Technical inspection and certification - statutory or mandatory function - Whether issuance of Kimberley Process (KP) certificates by the appellant is taxable as "technical inspection and certification" service - HELD THAT: - The Tribunal found on the material before it that KP certificates are issued by the appellant pursuant to a statutory/mandatory scheme and that the certification is effected on the basis of documents and information furnished by applicants without any physical inspection or examination of goods or processes. The Board's Circular No. 89/7/2006 clarifies that activities performed by sovereign/public authorities under a statute are statutory obligations and not taxable services. Although another circular (No. 145/14/2011) treats chambers/EPC issuance of certificates as classifiable under technical inspection and certification, that circular relates to classification and does not override the statutory/mandatory character identified by Circular No. 89. Applying those principles, the Tribunal held that issuance of KP certificates in the present facts is a mandatory/statutory function and not leviable to service tax.

The demand under "technical inspection and certification" for issuance of KP certificates is set aside; appeal allowed on this count.

Pure agent reimbursement under Service Tax Determination of Value Rules, 2006 - penalties under the service tax regime - Whether amounts collected and paid by the appellant (for Safe Deposit Vaults for foreign exhibitors and for booking stalls in foreign exhibitions) qualify as excludible reimbursable expenses as a "pure agent", and whether penalties are leviable - HELD THAT: - The Tribunal applied the tests in sub-rule (2) of the Service Tax Determination of Value Rules, 2006 and the reasoning in the Larger Bench decision in Bhagvathy Traders. The appellant failed to produce evidence satisfying the statutory conditions for treatment as a pure agent: there was no proof that the appellant acted solely as agent of the recipient, that the recipient was liable to make payment to the third party, that payments were separately indicated, or that the appellant neither held title nor used the procured goods/services. Given the absence of requisite documentary or contractual evidence, the Tribunal rejected the claim that the disputed receipts were excludible reimbursable expenses and held them to be includible in taxable value. On penalty, the Tribunal found no basis to relieve the appellant: because the assessable value was correctly determined against the appellant and statutory tests were not met, penalties under the service tax provisions were sustained.

The appeal is dismissed on the reimbursement/exclusion point and penalties under the service tax regime (confirmed demand) are upheld.

Final Conclusion: The appeal is partly allowed: demands under "Club or Association" service (on the basis of clause (i) exclusion) and for issuance of KP certificates as taxable technical inspection and certification are set aside; demands and additions relating to alleged non-excludible reimbursements for exhibition-related expenses are sustained and penalties confirmed; the broader mutuality issue was not finally adjudicated by the Tribunal in view of the pending reference to the Larger Bench of the Supreme Court.

Security agency service - agency of the State Government - statutory function of the State Government - deployment of Police personnel on payment basis - charge prescribed by statutory notification

Security agency service - agency of the State Government - deployment of Police personnel on payment basis - statutory function of the State Government - Whether deployment of Police personnel by the Police Department, against payment, falls within the definition of security agency service. - HELD THAT: - The Tribunal applied its earlier Final Order No. ST/A/55321-55348/2016-CU (DB) dated 25.11.2016 and held that the Police Department, being an agency of the State Government, cannot be treated as a 'person' engaged in the business of providing security services. The Tribunal further found that the charge for deployment of additional force is prescribed by a statutory notification issued by the State Government and that such deployment, even when against payment, forms part of the statutory function of the State Government. On that basis, the activity of deploying police personnel on payment basis does not fall within the definition of security agency service. [Paras 2, 3]

Impugned confirmation of demand under security agency service set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the adjudged demand on the ground that deployment of police personnel by the Police Department-being a State agency and acting pursuant to statutory notification-is not covered by the definition of security agency service.

Change of cause title and respondent jurisdiction - taxability of incentive payments from Computer Reservation Systems (CRS) to Air Travel Agents as Business Auxiliary Services - extended period of limitation - suppression not established / absence of malafide - limitation barred demand - remand for re-quantification of demand - penalty under Sections 76 & 78 of the Finance Act, 1994

Change of cause title and respondent jurisdiction - Change of cause title allowed and respondent's jurisdiction and address amended. - HELD THAT: - The Revenue's miscellaneous application for change of cause title was allowed to reflect the changed jurisdiction and address of the respondent, and the respondent is recorded as The Commissioner of GST & Central Excise, Chennai South Commissionerate at the stated address. [Paras 1]

Miscellaneous application allowed and respondent's jurisdiction/address changed.

Extended period of limitation - suppression not established / absence of malafide - limitation barred demand - Invocation of extended period of limitation was not justified; the major part of the demand is barred by limitation. - HELD THAT: - The Tribunal disagreed with the lower authorities' conclusion that mere non-payment equated to suppression attracting the extended period. Relying on the principle that mere non-disclosure or inaction does not establish a guilty mind, and observing that the taxability question was subject to ongoing litigation, the Tribunal found no evidence of deliberate suppression or malafide on the part of the appellant. Consequently, demands outside the normal limitation period cannot be sustained and the bulk of the demand is time-barred. [Paras 5]

Extended period not invocable; majority of the demand barred by limitation.

Remand for re-quantification of demand - Part of the demand falling within the limitation period is remanded for re-quantification. - HELD THAT: - While most of the demand was held time-barred, the Tribunal observed that a portion falls within the normal limitation period. The matter is therefore remitted to the original adjudicating authority for re-quantification of the demand limited to the period within limitation, consistent with the Tribunal's finding on absence of suppression. [Paras 5, 6]

Matter remanded to original authority for re-quantification of the demand within limitation.

Penalty under Sections 76 & 78 of the Finance Act, 1994 - penalty set aside due to absence of malafide - Penalty set aside in view of absence of malafide or suppression. - HELD THAT: - Having concluded there was no malafide suppression by the appellant and that the issue of taxability was the subject of litigation, the Tribunal found no justification for imposing penalty and accordingly set aside the penalty imposed by the lower authorities. [Paras 5]

Penalty set aside.

Final Conclusion: Appeal allowed in part: change of cause title permitted; extended limitation period not attracted and major part of the demand barred by limitation; matter remanded to the original authority for re-quantification of the portion within limitation; penalty set aside.

Special leave petition - permission to file SLP without certified copy - stay of operation of demand notice

Permission to file SLP without certified copy - Permission granted to file the special leave petition without production of the certified/plain copy of the impugned order. - HELD THAT: - The Court exercised its discretion to permit filing of the SLP notwithstanding the absence of the certified/plain copy of the impugned order, thereby relaxing the usual requirement for initiating the special leave petition in this case. No reasons for refusal of permission are recorded; permission is simply granted by the Court's order.

Permission to file the SLP without the certified/plain copy of the impugned order is granted.

Special leave petition - Leave under Article 136 granted. - HELD THAT: - The Court granted leave to entertain the special leave petition filed by the petitioner, thereby admitting the petition for consideration at this stage. The order records leave granted without elaboration of substantive grounds.

Leave is granted and the special leave petition is admitted.

Stay of operation of demand notice - Interim stay of operation of the impugned Demand Notice dated 11.05.2017 was directed. - HELD THAT: - Having admitted the SLP, the Court ordered an interim stay on the operation of the demand notice issued by the Office of the Superintendent of Customs, Central Excise and Service Tax, Osmanabad Range dated 11.05.2017. The stay preserves the status quo insofar as the demand notice's operation is concerned pending further orders in the petition.

The operation of the Demand Notice dated 11.05.2017 is stayed.

Final Conclusion: The Supreme Court granted permission to file the SLP without the certified/plain copy of the impugned order, allowed the petition by granting leave, and directed an interim stay of the operation of the Demand Notice dated 11.05.2017.

Duty demand based solely on electricity consumption - corroborative evidence requirement for clandestine production - technical expert report as sole basis for assessment - upholding appellate authority's discretion to drop demand in absence of corroboration

Duty demand based solely on electricity consumption - corroborative evidence requirement for clandestine production - technical expert report as sole basis for assessment - Whether a demand for excise duty can be sustained solely on the basis of electricity consumption as worked out by a technical expert, absent other corroborative evidence of receipt of raw material, production or clandestine clearance. - HELD THAT: - The Tribunal held that a demand founded only on a comparison between actual electricity consumption and theoretical consumption as per a technical expert's report cannot, without more, sustain an allegation of extra production and clandestine removal. The adjudicating authority's reliance on Dr. Batra's report of IIT, Kanpur, in the absence of independent evidence of receipt of raw material, production quantities, clandestine removals or sale consideration, was insufficient to uphold the duty demand. The Commissioner (Appeals) applied this principle and, consistently with earlier decisions of superior and coordinate authorities, dropped the demand that was based solely on electricity consumption. The shortage found in physical stock (a separate demand) was paid by the appellant and not contested on appeal, and therefore did not justify sustaining the additional demand premised only on electrical consumption variance.

Demand of duty based only on electricity consumption was not sustainable and the Commissioner (Appeals) rightly dropped that portion of the demand.

Final Conclusion: The impugned order insofar as it dropped the demand based solely on electricity-consumption calculations is upheld; Revenue's appeal is dismissed.

Collection of excise duty from buyer to be deposited with the Central Government under Section 11D - requirement of explicit identification of excise duty in invoice - treatment of sale price during SSI exemption - distinction between price of goods and amount collected as excise duty

Collection of excise duty from buyer to be deposited with the Central Government under Section 11D - requirement of explicit identification of excise duty in invoice - distinction between price of goods and amount collected as excise duty - Whether demand under Section 11D could be sustained where the assessee charged the same price during the SSI exemption period and thereafter but did not show or collect any amount in the invoices as excise duty. - HELD THAT: - The Tribunal found as an undisputed fact that the assessee charged the same price before and after crossing the SSI exemption limit, but during the exemption period no amount was indicated in either the commercial invoice or the excise invoice as having been collected in the name of excise duty. Section 11D applies where a person has collected any amount from the buyer 'in any manner as representing duty of excise' and such amount must be deposited with the Central Government. Mere parity of price before and after the exemption period does not, by itself, demonstrate collection of an amount representing excise duty. Absent any explicit identification or collection of excise duty in the invoices, the element required to invoke Section 11D is missing. The Revenue's assumption that the price during exemption was 'inclusive of excise duty' is insufficient to fasten liability under Section 11D; the statutory provision requires that an amount be actually collected as duty from the buyer, which was not established on the material on record. On this basis the demand under Section 11D was held to be without foundation and unsustainable. [Paras 5, 6]

Demand under Section 11D set aside and appeal allowed.

Final Conclusion: The Tribunal held that Section 11D could not be invoked where no amount was shown or collected in the invoices as excise duty despite identical pricing during the SSI exemption period; the demand under Section 11D was therefore unsustainable and the appeal was allowed.

Assessment on basis of Maximum Retail Price (MRP) - change of case by adjudicating authority - obligation to disclose basis of valuation in show-cause notice - arbitrariness in determination of assessable value - consequent unsustainability of penalty imposed

Assessment on basis of Maximum Retail Price (MRP) - obligation to disclose basis of valuation in show-cause notice - change of case by adjudicating authority - Whether the adjudicating authority could abandon the method of valuation set out in the show-cause notice and adopt a different, not previously pleaded method to determine MRP and assessable value. - HELD THAT: - The show-cause notice proposed assessment on the basis of MRP ascertained from the statement of the company's director. The original adjudicating authority rejected that basis but then adopted an alternative method of arriving at MRP based on a series of assumptions (presumed intermediary margins and notional retail selling price) which were neither part of the show-cause notice nor supported by cogent data. Having discarded the specific basis pleaded in the notice, the authority could not legitimately substitute a new method without setting out cogent reasons and data for the revised approach. The order's fresh method was based on assumptions and presumptions and thus amounted to a change of case that was arbitrary and unsustainable.

The adoption of a different, not-pleaded method to determine MRP and assessable value is impermissible and the revised assessment cannot be sustained.

Arbitrariness in determination of assessable value - consequent unsustainability of penalty imposed - Whether the demand and equal penalty confirmed by the Commissioner (Appeals) could be upheld in view of the arbitrariness in the valuation adopted by the original adjudicating authority. - HELD THAT: - The Tribunal found that the alternative valuation adopted by the original adjudicating authority involved considerable assumption and presumption and lacked cogent supporting material. Because the demand was founded on that arbitrary valuation, the confirmation of the demand and the imposition of equal penalty could not stand. The lack of a proper, pleaded, and supported basis for the revised assessable value undermines the sustaining of corresponding penalties.

The confirmation of the demand and the equal penalty is not sustainable and must be set aside.

Final Conclusion: The appeals are allowed: the reassessment by reference to a new, not-pleaded method of arriving at MRP and the consequent confirmation of demand and penalty are quashed insofar as they rest on the arbitrary valuation adopted by the adjudicating authority.

Service tax credit - input service - outdoor catering services - canteen facility for employees - integrally connected with manufacture - employees' contribution exclusion - remand for re-quantification

Service tax credit - input service - outdoor catering services - canteen facility for employees - integrally connected with manufacture - Appellants are entitled to avail service tax credit on outdoor catering services used to provide canteen facilities to factory employees for the period prior to 1.4.2011. - HELD THAT: - The period in question falls before 1.4.2011 when the definition of input service had a wide ambit covering services related to business activities. The tribunal followed the ratio in the authorities relied upon by the appellants and held that outdoor catering services, when used to provide the mandatory canteen facility within the factory premises under the Factories Act, are integrally connected with manufacture and therefore eligible for service tax credit.

Allowed the appeal insofar as entitlement to credit on outdoor catering services is affirmed.

Employees' contribution exclusion - remand for re-quantification - Portion of service tax credit attributable to contributions received from employees is not eligible and requires re-quantification. - HELD THAT: - It was noted and conceded that part of the catering cost was recovered from employees. The tribunal held that credit corresponding to the portion received from employees cannot be admitted. Consequently, the matter is remanded to the adjudicating authority for a limited purpose - to determine and quantify the exact portion of credit admissible after excluding the employees' contribution.

Matter remanded for limited re-quantification of eligible credit excluding amounts recovered from employees.

Final Conclusion: The impugned order is set aside; appellants are held entitled to service tax credit on outdoor catering services for the period prior to 1.4.2011, but the quantum of admissible credit must be re-quantified by the adjudicating authority after excluding the portion received from employees.

Remission of duty - Removal for export under bond/ARE-I - Place of removal extended to load port - Destruction of goods before export treated as destroyed before removal for remission - Evidence by survey report for quantification of loss - Delay in intimation not a bar to remission - Procedural compliance under Central Excise Manual not a ground for non-speaking rejection

Remission of duty - Removal for export under bond/ARE-I - Place of removal extended to load port - Destruction of goods before export treated as destroyed before removal for remission - Remission of duty is allowable where goods cleared for export under ARE I/bond are destroyed before export. - HELD THAT: - The Tribunal found the destruction of goods in the flood to be undisputed and relied on the Larger Bench decision in Honest Vio Bet Pvt. Ltd., which holds that where goods are cleared under ARE I for export under bond the place of removal extends to the load port and duty liability remains with the manufacturer until export. Accordingly, if such goods are destroyed before export they may be considered destroyed "before removal" for the limited purpose of claiming remission under Rule 21. The impugned rejection on the ground that destruction occurred after clearance from the factory was therefore not tenable in the circumstances of goods cleared for export. The matter was set aside and remanded to the original adjudicating authority for fresh decision consistent with these principles. [Paras 4]

Appeal allowed in part; remitted to the original adjudicating authority for fresh decision on the remission claim.

Evidence by survey report for quantification of loss - Delay in intimation not a bar to remission - Procedural compliance under Central Excise Manual not a ground for non-speaking rejection - Delay in intimation and procedural lapses in the Central Excise Manual, and reliance on a survey report, do not ipso facto justify rejection; survey report may be accepted subject to revenue scrutiny and the adjudicating order must be speaking on procedural non compliance. - HELD THAT: - The Tribunal observed that delay in intimating the department cannot be a sole ground for rejecting remission, citing precedent. Where warehouse records and goods were destroyed, the Tribunal accepted that a survey report can constitute evidence of destruction and quantification, subject to proper scrutiny by the Revenue. The impugned order was found not to specify how the Central Excise Manual procedure was breached and was therefore not a speaking order on that point; accordingly, the matter requires fresh examination by the authority with opportunity for verification. [Paras 4]

Findings on delay, procedural compliance and evidentiary sufficiency set aside for fresh consideration by the original authority.

Remand of consequential refund claim - Refund claim appeal dependent on remission decision is remanded for fresh adjudication after the remission issue is decided. - HELD THAT: - The appeal challenging rejection of a refund claim is contingent upon the outcome of the remission adjudication. Since the remission issue has been remitted to the Commissioner (Appeals) for fresh decision, the Tribunal remanded the refund appeal to the original adjudicating authority for decision in accordance with the remission outcome. [Paras 4, 5]

Refund appeal remanded to the original adjudicating authority for fresh decision after remission is determined.

Final Conclusion: Both appeals allowed by way of remand: the remission claim set aside for fresh adjudication in light of the principle that goods cleared for export under ARE I and destroyed before export may qualify for remission; related procedural, delay and evidentiary issues to be examined afresh; the refund appeal remanded for decision consequent to the remission outcome.