TaxTMI Updates e-Newsletter
Jun 14,2018

Classification of carry bags as sacks and bags of a kind used for the packing of goods - classification under Chapter 63 (made-up textile articles) - application of entry 224 of Schedule 1 of Notification No. 01/2017 Central Tax (Rate) and corresponding State Notification - sale value threshold of Rs. 1,000 per piece determining Schedule 1 v. Schedule 2 applicability

Classification of carry bags as sacks and bags of a kind used for the packing of goods - application of entry 224 of Schedule 1 of Notification No. 01/2017 Central Tax (Rate) and corresponding State Notification - sale value threshold of Rs. 1,000 per piece determining Schedule 1 v. Schedule 2 applicability - Whether carry bags made of polypropylene non-woven fabrics are classifiable under Chapter 63 and attract tax under entry 224 of Schedule 1 of Notification No. 01/2017 Central Tax (Rate) and the corresponding State Notification. - HELD THAT: - The Authority examined the product composition and laboratory test report which established that the non-woven carry bags are made of polypropylene. Chapter 63 of the Customs Tariff (sacks and bags used for packing of goods of man-made textile materials) thus applies to the product. The HSN classification falls within the entries reflected in both Schedule 1 and Schedule 2 of Notification No. 01/2017 Central Tax (Rate) and the corresponding State Notification, the applicability being dependent on the sale value per piece. Where the sale value does not exceed Rs. 1,000 per piece, entry 224 of Schedule 1 applies. In the present case the sale value is less than Rs. 1,000 per piece; accordingly entry 224 of Schedule 1 is applicable and the tax rate specified thereunder governs. [Paras 8, 9, 10]

Carry bags made of polypropylene non-woven fabrics are classifiable under the relevant entries of Chapter 63 and, being priced below Rs. 1,000 per piece, are taxable under entry 224 of Schedule 1 at an aggregate rate of 5% (CGST 2.5% + SGST 2.5%).

Final Conclusion: The Authority ruled that carry bags made of polypropylene non-woven fabrics are classifiable under the relevant Chapter 63 entry and, having sale value below Rs. 1,000 per piece, attract tax at 5% (CGST 2.5% and SGST 2.5%) under entry 224 of Schedule 1 of the Notifications cited.

Works contract - supply of services (composite supply) - time of supply of services - transfer of property in goods in execution of contract - transitional input tax credit under Section 140(6)

Works contract - transfer of property in goods in execution of contract - supply of services (composite supply) - time of supply of services - Classification of the activity of providing and laying underground pipeline network and the liability to GST for the portion of supply the time of which falls on or after the appointed date. - HELD THAT: - The activity of excavation, laying, joining (by lamination or welding) and backfilling resulting in an underground pipeline network which cannot be dismantled without substantial damage involves transfer of property in goods in execution of a contract and thus constitutes a "works contract" as defined in Section 2(119). A works contract is a composite supply to be treated as a supply of services under the Schedule read with Section 7. The time of supply of services is governed by Section 13 and, accordingly, the part of the contract the time of supply for which falls on or after the appointed date is exigible to GST. Provisions under Section 142(11) ensure absence of double levy under the earlier laws and GST. [Paras 11, 12]

The laying of the underground pipeline network is a "works contract" and the portion of supply the time of which is on or after the appointed date is liable to Goods and Services Tax.

Transitional input tax credit under Section 140(6) - inputs contained in semi-finished or finished goods held in stock - use or intended to be used for making taxable supplies - Admissibility of transitional input tax credit under Section 140(6) in respect of pipes purchased and used for the pipeline project where only testing and commissioning remained to be done on the appointed date. - HELD THAT: - Section 140(6) permits credit for inputs or inputs in semi-finished or finished goods held on the appointed day provided, inter alia, such inputs or goods are used or intended to be used for making taxable supplies under the Act. Here, supply of pipes at location and laying of pipes had been completed before the appointed day and only testing and commissioning remained; no inputs or materials were required to be used on or after the appointed day for that pending milestone. Consequently the condition of clause (i) of Section 140(6) is not satisfied and transitional input tax credit is not allowable for the pending portion of the contract. [Paras 13]

The applicant is not entitled to transitional input tax credit under Section 140(6) for the pending testing and commissioning stage.

Final Conclusion: The Authority ruled that the activity of providing and laying the underground pipeline network is a "works contract" liable to GST for that part of supply with time of supply on or after the appointed date, and that the applicant cannot claim transitional input tax credit under Section 140(6) for the pending testing and commissioning stage.

Appealability of seizure orders - Non-appealable decisions and orders under Section 121 - Seizure of books of account, registers and other documents - Statutory alternative remedy by appeal under Section 107 - Electronic or alternative filing under Rule 109 of the West Bengal GST Rules, 2017

Appealability of seizure orders - Non-appealable decisions and orders under Section 121 - Seizure of books of account, registers and other documents - Whether an order of seizure of a vehicle under Section 129 (1)/(3) is non-appealable under Section 121(b) of the CGST Act, 2017 or is appealable under Section 107. - HELD THAT: - Section 107 generally renders decisions or orders under the Act appealable to the prescribed Appellate Authority. Section 121 is a narrow exception which specifies particular categories of non-appealable orders. Sub section (b) of Section 121 refers specifically to "the seizure or retention of books of account register and other documents." The court held that reading Sub section (b) to bar appeals against every form of seizure would do violence to its plain language. An order of seizure of a vehicle (or other items not being books, registers or documents) under Section 129 falls outside the limited non appealability carved out by Section 121(b) and therefore remains subject to appeal under Section 107.

An order of seizure of a vehicle under Section 129 is appealable under Section 107; Section 121(b) is limited to seizure/retention of books of account, registers and other documents and does not bar appeal against vehicle seizures.

Statutory alternative remedy by appeal under Section 107 - Electronic or alternative filing under Rule 109 of the West Bengal GST Rules, 2017 - Whether the petitioner should be permitted to pursue the statutory remedy of appeal and, if so, the manner and time limit for filing such appeal. - HELD THAT: - The State informed the court that the designated appellate authority has been prescribed and that Rule 109 of the West Bengal GST Rules, 2017 permits filing an appeal electronically or otherwise. The court directed that the petitioner be permitted to prefer an appeal to the designated Appellate Authority. Although the ordinary limitation under Section 107 applies, the court exercised its discretion to validate delayed initiation by directing that if the appeal is filed within ten days from the date of this order it shall be treated as within time. The appellate authority is to proceed to hear and dispose of the appeal in accordance with law.

Petitioner directed to prefer statutory appeal before the designated Appellate Authority (electronically or otherwise); if filed within ten days from the order it will be treated as within time and the Appellate Authority shall hear and dispose of the appeal in accordance with law.

Final Conclusion: Writ petition disposed by directing the petitioner to prefer a statutory appeal under Section 107 against the seizure order; Section 121(b) does not render vehicle seizures non appealable, and an appeal filed within ten days will be treated as timely for adjudication by the prescribed Appellate Authority in accordance with Rule 109.

Detention and release of goods under the statutory detention regime - interim release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - adjudication under Section 129 of the Central Goods and Services Tax Act and the Kerala Goods and Services Tax Act - expeditious completion of adjudication

Detention and release of goods under the statutory detention regime - interim release of detained goods on compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - adjudication under Section 129 of the Central Goods and Services Tax Act and the Kerala Goods and Services Tax Act - expeditious completion of adjudication - Release of goods detained under the GST detention provisions and direction for completion of adjudication under Section 129 - HELD THAT: - The petitioner sought release of goods detained by the respondent under the GST detention provisions. Having regard to the earlier Division Bench decision in W.A.No.1802 of 2017, the Court directed that the competent authority shall complete the adjudication mandated by Section 129 of the Central and Kerala GST Acts within one week from production of a copy of this judgment. The Court further directed that if the petitioner complies with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017, the detained goods shall be released forthwith pending completion of the adjudication. The order implements the principle of expeditious adjudication and conditional interim release where statutory requirements for release are met.

Writ petition disposed directing completion of adjudication under Section 129 within one week and immediate release of detained goods on compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Final Conclusion: Petition disposed; competent authority to complete Section 129 adjudication within one week from production of this judgment and detained goods to be released immediately if the petitioner complies with Rule 140(1) of the Kerala GST Rules, 2017.

Permanent Establishment - Fixed Place PE - Service PE - Agency PE - Preparatory and auxiliary activities - Place at the disposal - Arm's Length Price - Article 5 of India-Saudi Arabia DTAA - Advance Ruling on proposed transaction

Advance Ruling on proposed transaction - Maintainability of the application for an advance ruling on the Proposed Addendum and Services Agreement. - HELD THAT: - The Authority had admitted the application under section 245R(2) and, after hearing both sides, reaffirmed that an advance ruling can be sought in respect of proposed transactions. The Authority held that Chapter XIX B is intended to remove uncertainty in respect of contemplated or proposed transactions and that sections 245N and 245S permit rulings in relation to proposed transactions. The earlier admission order dated 16.08.2016 stood and the Revenue's objections on maintainability were rejected. The Authority also noted that lack of certain compliance documents was explainable given the nascent stage of the subsidiary and the proposed nature of some activities, and that any change in facts would remove the binding effect of the ruling under section 245S(2). [Paras 6, 23]

The application is maintainable and the Authority will proceed to rule on the substance of the questions posed.

Article 5 of India-Saudi Arabia DTAA - Fixed Place PE - Place at the disposal - Preparatory and auxiliary activities - Whether Aramco India constitutes a Fixed Place Permanent Establishment of the Applicant under Article 5(1) of the DTAA. - HELD THAT: - Applying the tests in Formula One and E Funds, the Authority required (i) a fixed place, (ii) that the place be at the disposal of the foreign enterprise, and (iii) that the enterprise's main business be carried on through that place. The Authority found that Saudi Aramco's main business (production and sale of oil) is carried on from Saudi Arabia and that Aramco India is an independent Indian company carrying on its own support business from premises it controls. No material showed that any part of Aramco India's premises had been placed at the disposal of Saudi Aramco or that Saudi Aramco would carry on its main business from those premises. Support services and procurement related activities provided by Aramco India were held insufficient to establish a Fixed Place PE; Article 5(4) exceptions (purchase/procurement, preparatory/auxiliary) would in any event remove such activities from PE if a PE were otherwise in issue. [Paras 15]

Aramco India does not constitute a Fixed Place PE of the Applicant.

Service PE - Article 5 of India-Saudi Arabia DTAA - Whether Aramco India constitutes a Service Permanent Establishment of the Applicant under Article 5(3)(b) of the DTAA. - HELD THAT: - Article 5(3)(b) requires that the foreign enterprise furnish services in India to its customers through its employees or specially engaged personnel for the requisite period. The Authority observed that Aramco India is rendering support services to Saudi Aramco (i.e., Aramco India is the service provider and Saudi Aramco the recipient), not the reverse; Saudi Aramco is not rendering services to customers in India through its employees in India. The Revenue's reliance on the status or activities of certain directors was rejected: those directors act as directors of the independent Indian subsidiary, and internet material about prior roles did not establish that Saudi Aramco would furnish services in India through its employees. Consequently the conditions for a Service PE under the DTAA are not satisfied on the facts and clauses presented. [Paras 16]

Aramco India does not constitute a Service PE of the Applicant.

Agency PE - Article 5 of India-Saudi Arabia DTAA - Whether Aramco India constitutes an Agency Permanent Establishment of the Applicant under Article 5(5) of the DTAA. - HELD THAT: - Agency PE requires that a person acting in India habitually exercise authority to conclude contracts in the name of the enterprise or habitually obtain orders for the enterprise. The Authority examined the Services Agreement and the Proposed Addendum, noting express contractual prohibitions: Clause 5 of the Services Agreement and Clauses 3 and 4 of the Addendum expressly prevent Aramco India from representing itself as agent, negotiating or concluding contracts, or binding Saudi Aramco; Saudi Aramco retained final decision making authority on customers and contract terms. Aramco India was incorporated as an independent entity remunerated on a principal to principal basis to provide support services. On these contractual provisions and the facts before it, the Authority found no authority or habitual exercise of authority by Aramco India to conclude contracts or obtain orders on behalf of Saudi Aramco and therefore no Agency PE. [Paras 17]

Aramco India does not constitute an Agency PE of the Applicant.

Final Conclusion: The Authority rules that, on the facts and contractual terms presented (Services Agreement and Proposed Addendum) and assuming the activities are carried out as stated and Aramco India is remunerated on an Arm's Length basis, Aramco India would not create a Permanent Establishment of Saudi Arabian Oil Company in India under Article 5 of the India-Saudi Arabia DTAA. The application is maintainable and the ruling is binding subject to any change in law or material change in facts.

Principles of mutuality - taxability of foreman dividend in chit-fund business - deduction for bad debts in respect of running and terminated chits - time of recognition/accrual of commission on cancelled/removed chit subscribers - allowability of royalty paid to holding/related company as business expenditure - precedential value of Tribunal's earlier orders in assessee's own case

Principles of mutuality - taxability of foreman dividend in chit-fund business - precedential value of Tribunal's earlier orders in assessee's own case - Whether foreman dividend received by the assessee-company from compulsory chits is non-taxable on the principles of mutuality - HELD THAT: - The Tribunal examined the nature of the assessee as a commercial company carrying on chit-fund business and followed the coordinate-bench and earlier decisions in the assessee's own case. It reiterated that mutuality is inapplicable where the entity is a profit oriented commercial organisation and where there is not complete identity between contributors and receivers. The foreman's statutory role and rights under the Chit Funds Act distinguish the foreman from other participators; the foreman may not forgo discount or loss and can take the first instalment, thus negating the requisite complete identity for mutuality. In view of identical facts and the binding effect of earlier Tribunal rulings in the assessee's own case, the Tribunal upheld the taxability of the foreman dividend for the years under appeal. [Paras 7]

Grounds of the assessee regarding non taxability of foreman dividend on principles of mutuality are dismissed and the CIT(A)'s orders are upheld.

Deduction for bad debts in respect of running and terminated chits - precedential value of Tribunal's earlier orders in assessee's own case - Whether the assessee is entitled to deduction for bad debts written off in respect of running and terminated chits - HELD THAT: - The Tribunal found the issue to be covered in favour of the assessee by earlier Tribunal orders in the assessee's own case. Those precedents recognise that bad debts/written off amounts in respect of running and terminated chits are allowable to the extent instalments are irrecoverable or prized amounts have gone out of the assessee's hands, and where appropriate remitted earlier for computation and verification by the AO. Having regard to these consistent earlier decisions and the CIT(A)'s application of them, the Tribunal saw no infirmity in the CIT(A)'s allowance of the bad debts claim and upheld the CIT(A)'s order. [Paras 14]

Revenue's ground challenging allowance of bad debts is dismissed; the CIT(A)'s allowance is upheld.

Time of recognition/accrual of commission on cancelled/removed chit subscribers - allowability of royalty paid to holding/related company as business expenditure - precedential value of Tribunal's earlier orders in assessee's own case - Whether commission on cancelled chits is recognisable only on final settlement and whether royalty paid to the holding/related company is an allowable business expenditure - HELD THAT: - Relying on earlier Tribunal determinations in the assessee's own case, the Tribunal accepted that the 5% commission receivable from a defaulting subscriber upon replacement is a distinct item which accrues on finalisation/settlement of the defaulting subscriber's account and need not be recognised earlier. With respect to royalty payments, the Tribunal followed prior findings that where the holding company provides the right to use logo, managerial support, software, financial assistance and other legitimate business benefits, modest royalty stipulated by agreement is an expenditure for legitimate business benefit and therefore allowable. The CIT(A)'s application of these precedents to permit the commission and royalty claims was endorsed. [Paras 15]

Revenue's appeals contesting disallowance of commission on cancelled chits and disallowance of royalty are dismissed; the CIT(A)'s allowances are upheld.

Final Conclusion: All appeals are dismissed: the assessee's appeals on the taxability of foreman dividend are dismissed (mutuality held inapplicable), and the revenue's appeals challenging allowance of bad debts, commission on cancelled chits and royalty payments are dismissed, the CIT(A)'s orders being upheld in respect of AY 2013-14 and AY 2014-15.

Revisionary power under Section 263 of the Income Tax Act - Erroneous assessment and prejudice to revenue - Scope of inquiry required before exercising revisional jurisdiction - Standards for setting aside assessment in exercise of revisional power - Tribunal's appellate review of Commissioner's order under Section 263 - Reliance on Malabar Industries Company Limited Vs. CIT

Revisionary power under Section 263 of the Income Tax Act - Erroneous assessment and prejudice to revenue - Scope of inquiry required before exercising revisional jurisdiction - Validity of the Commissioner's invocation of power under Section 263 in regard to the assessment for AY 2004-05 - HELD THAT: - The Court examined whether the Commissioner properly concluded that the Assessing Officer's order was 'erroneous' and 'prejudicial to the revenue' so as to warrant exercise of revisional jurisdiction. The record shows that the Assessing Officer had considered and discussed the matters relied upon by the Commissioner - including export incentives/drawback variations, discrepancies in pairs manufactured versus sole/insole consumption, foreign currency travel expenditure, and office/health insurance expenses claimed - and had recorded reasons accepting the assessee's positions having regard to export nature of business and exchange fluctuations. The Tribunal reviewed the entire record, addressed each head relied upon by the Commissioner, and found no error in the Assessing Officer's conclusions nor any material prejudicial to revenue. In that factual and legal context the Commissioner's order under Section 263 was held not to satisfy the statutory standard of being both erroneous and prejudicial to the revenue, and thus not valid. The Tribunal's reliance on the precedent in Malabar Industries Company Limited Vs. CIT was noted as supporting the requirement that revisional power cannot be exercised where the Assessing Officer has considered the relevant facts and reached a reasoned conclusion.

Commissioner's invocation of Section 263 was invalid as the AO's order was not shown to be erroneous or prejudicial to the revenue; the revisional order is set aside.

Tribunal's appellate review of Commissioner's order under Section 263 - Standards for setting aside assessment in exercise of revisional power - Whether the Tribunal was justified in setting aside the Commissioner's order and restoring the assessment - HELD THAT: - The Tribunal conducted a detailed examination of the Assessing Officer's order and the materials on record, addressing each of the four grounds relied upon by the Commissioner. Finding that the Assessing Officer had made inquiries, taken into account the export nature of the business and exchange rate fluctuations, and had given reasons for acceptance of the claimed expenditures and adjustments, the Tribunal concluded there was no legal or factual basis to sustain the revisional order. The High Court concurred with the Tribunal's conclusion that, on the record, the Tribunal correctly applied the legal standard for interference under Section 263 and rightly restored the assessment.

Tribunal was justified in setting aside the Commissioner's order and restoring the assessment order dated 29.09.2006.

Final Conclusion: Appeal dismissed; questions of law answered in favour of the assessee and against the department - the CIT's revisional order under Section 263 was invalid and the Tribunal rightly restored the assessment.

Disallowance of business expenditure - ad hoc additions for absence of vouchers - treatment of VAT refund under mercantile system of accounting - contingent claims and accrual of income upon finalisation of tax proceedings

Disallowance of business expenditure - ad hoc additions for absence of vouchers - reconciliation with VAT audit report - Deletion of 5% ad hoc disallowance made in respect of labour expenses and piece work charges - HELD THAT: - The Assessing Officer made estimated disallowances in respect of labour and piece work payments on grounds of absence of vouchers and an alleged variance with the VAT audit report. The Commissioner (Appeals) found no material variance between the books and the VAT audit report, recorded that piece work payments were made by cheque with TDS and noted that net profit in the current year was not lower than the preceding accepted year, yet confirmed a 5% adhoc disallowance. The Tribunal observed that where payments are recorded in books, corroborated by the VAT audit report, and the profit ratios are not adverse, an adhoc disallowance unsupported by specific evidence is unsustainable. Considering the nature of operations (remote sites where cash labour payments are customary) and absence of any rejection of books or demonstrable underreporting of profits, the adhoc 5% disallowance was deleted. [Paras 4, 8]

The ad hoc disallowance of 5% of labour expenses and piece work charges is deleted.

Treatment of VAT refund under mercantile system of accounting - contingent claims and accrual of income upon finalisation of tax proceedings - Deletion of addition made on account of VAT refund claimed but not finally determined - HELD THAT: - The Assessing Officer treated the amount claimed as VAT refund as income in the year on grounds that the assessee follows mercantile accounting and the refund was shown in the VAT return. The Commissioner (Appeals) confirmed this view. The Tribunal held that mercantile accounting does not require recognition of contingent claims before their crystallisation; entitlement to a VAT refund depends on final determination by the VAT authority. Where a demand was raised in VAT proceedings and subsequently the appellate VAT order determined the refund, the accrual of income occurs on finalisation of the VAT assessment, not when the refund is merely claimed in the return. The Tribunal accordingly followed the principle that contingent claims are not to be accounted as income until the matter attains finality and set aside the addition, relying on the cited precedents applying the same proposition. [Paras 10, 13, 15]

The addition on account of VAT refund claim is deleted; the claim is to be recognised only upon finalisation of the VAT assessment.

Final Conclusion: The appeal is allowed: the Tribunal deletes the 5% adhoc disallowance in respect of labour and piece work payments and sets aside the addition made for the VAT refund claim, holding that the refund is crystallisable only upon finalisation of the VAT proceedings.

Deduction under section 37(1) - Corporate Social Responsibility expenditure - Explanation 2 to section 37(1) - prospective operation - Setting aside assessment under section 263 - Expenditure incurred pursuant to governmental directions by a public sector undertaking

Explanation 2 to section 37(1) - prospective operation - Deduction under section 37(1) - Explanation 2 to section 37(1) of the Income-tax Act is prospective and does not apply to the assessment year 2012-2013. - HELD THAT: - The Tribunal noted that Explanation 2 was introduced by the Finance Act, 2014 and the Notes on Clauses explicitly state that the amendment takes effect from 1st April, 2015 and applies to assessment year 2015-16 and subsequent years. The Tribunal relied on the reasoning in ITAT, Raipur Bench (Jindal Power Ltd.) that the disabling provision in Explanation 2 refers to CSR expenses under section 135 of the Companies Act, 2013 and cannot apply to periods before that statutory scheme. Consequently, CSR expenditure incurred up to assessment year 2014-15 remains capable of being allowed as business expenditure under section 37(1). [Paras 9]

Explanation 2 is prospective and therefore does not preclude allowance of CSR expenditure for AY 2012-2013 under section 37(1).

Expenditure incurred pursuant to governmental directions by a public sector undertaking - Setting aside assessment under section 263 - Deduction under section 37(1) - CSR expenditure incurred by the assessee, a Government of India undertaking, pursuant to Government guidelines is deductible under section 37(1) for AY 2012-2013 and the assessment cannot be said to be erroneous or prejudicial merely because the AO allowed that expenditure. - HELD THAT: - The Tribunal observed that the assessee, being a Central Government undertaking, incurred CSR expenditure in compliance with Government of India Guidelines dated 09.04.2010 which mandated PSUs to spend a percentage of net profit on CSR. Precedents of the Kerala High Court (Travancore Titanium Products Ltd.) and ITAT Mumbai (Hindustan Petroleum Corporation Ltd.) were held to support the principle that expenditures made by government-controlled companies pursuant to governmental directions are incidental to business and allowable under section 37(1). Given that the Assessing Officer had taken a possible view in allowing the deduction and the expenditure was made under specific governmental directions, the assessment could not be characterised as erroneous and prejudicial to revenue to warrant interference under section 263. [Paras 9]

The CIT's exercise of power under section 263 to set aside the assessment on the limited issue of CSR deduction is not justified; the AO's allowance was a tenable view and the deduction is permissible for AY 2012-2013.

Final Conclusion: The appeal is allowed: the order under section 263 setting aside the assessment in relation to CSR expenditure for AY 2012-2013 is set aside because Explanation 2 is prospective (applicable from AY 2015-16) and CSR expenditure incurred by the Government undertaking pursuant to Government guidelines was a tenable business deduction under section 37(1).

Estimation of income - Net profit on cost of goods sold - Rejection of books of account - Addition under section 68 - unexplained cash deposits - Telescoping of bank deposits with estimated business income - Precedential effect of coordinate bench decisions

Estimation of income - Net profit on cost of goods sold - Precedential effect of coordinate bench decisions - Income of the assessee engaged in retail trading of IMFL was to be estimated at 3% of the cost of goods sold (subject to not being less than the profit disclosed). - HELD THAT: - The Tribunal accepted the assessee's contention and followed the coordinate Bench decision in Shri Sridhar Ramagiri v. ITO (and earlier decisions referred therein) which held that 3% of the cost of goods put to sale is a reasonable estimation of net profit in similar liquor retail cases. Having regard to the totality of facts and precedents of the Tribunal, the AO was directed to adopt 3% of the cost of goods sold as the assessee's income, provided that this amount is not less than the profit already disclosed by the assessee; if the computed amount is less, the disclosed profit is to be accepted. [Paras 5]

Adopt 3% of cost of goods sold as the estimated income, subject to the floor of the profit already disclosed by the assessee.

Addition under section 68 - unexplained cash deposits - Telescoping of bank deposits with estimated business income - Rejection of books of account - Addition of Rs. 1,60,000 treated as unexplained cash deposits was deleted and not to be separately assessed. - HELD THAT: - The AO had treated certain deposits into the assessee's bank account as unexplained and assessed them separately. The Tribunal held that the deposits pertained to the assessee and, given that the books of account were rejected and the AO had not verified corresponding credits in the books, the small, regular deposits across the year could be telescoped into the income estimated from the business. Consequently, when the business income is being estimated (and in this case estimated at a rate higher than the disclosed profit floor), separate assessment of those deposits was unnecessary, and the addition was deleted. [Paras 6]

Delete the addition of the bank deposits and do not assess them separately.

Final Conclusion: Appeal partly allowed: income to be assessed at 3% of cost of goods sold (not less than the profit disclosed by the assessee) and the addition of Rs. 1,60,000 as unexplained bank deposits is deleted.

Registration under section 12AA - charitable purpose within the meaning of section 2(15) - genuineness of charitable activity - extraordinary powers of managing trustees and dominance by founder trustees - alternative remedies under section 12A and section 10(23C)

Registration under section 12AA - charitable purpose within the meaning of section 2(15) - genuineness of charitable activity - Application for registration under section 12AA was to be granted. - HELD THAT: - The Tribunal found that the trust's objects include educational activity which falls within the definition of charitable purposes under section 2(15) and that the trust deed contains explicit conditions (clause (9)) prohibiting distribution of income or property to trustees, barring salaries to trustees, requiring application of surplus for object promotion, and prescribing transfer of assets on dissolution to similarly recognised charitable bodies. The CIT(E) had not pointed to any clause or material showing distribution of profits, diversion of assets, or breach of these conditions. The trust had taken concrete steps towards carrying out its educational object (setting up a school, bank loan, construction, commencement of primary education and supporting documentary material), and there was no record that its activities were not genuine. Applying these findings, the Tribunal held that the criteria for registration under section 12AA were satisfied and that registration should be granted.

Registration under section 12AA granted; impugned rejection set aside.

Extraordinary powers of managing trustees and dominance by founder trustees - genuineness of charitable activity - alternative remedies under section 12A and section 10(23C) - Extraordinary powers of managing trustees and concentration of trusteeship in a family are not, by themselves, a ground to deny registration where activities remain genuine. - HELD THAT: - The Tribunal relied on the trust deed safeguards and the absence of material showing misuse of trustee powers. It noted the CBDT clarification (Circular No.14/2016) that extraordinary powers to appoint, remove or nominate trustees do not per se warrant denial of exemption unless such powers lead to change in nature of activities or cause the institution to cease to exist solely for educational purposes or become profit-oriented. The availability of an alternative route of claiming exemption under section 10(23C) did not preclude the assessee from opting for registration under section 12AA; the existence of multiple statutory options is for the applicant to choose and does not indicate non-charitable intent.

Concentration of trusteeship in husband and wife and their appointment powers do not justify denial of registration in the absence of material showing activities are not genuine or are profit-oriented.

Final Conclusion: The Tribunal set aside the CIT(E)'s order rejecting registration under section 12AA, held that the trust's educational activity falls within charitable purposes and that neither the familial composition of trustees nor their extraordinary appointment/removal powers, without material of misuse, justify denial of registration; appeal allowed and registration directed to be granted.

Disallowance under section 41(1) - Liability having ceased to exist - Sundry creditors and other liabilities - Submission to and scrutiny by BIFR / liquidator - Penalty under section 271(1)(c) for filing inaccurate particulars - Penalty proceedings independent of assessment

Disallowance under section 41(1) - Liability having ceased to exist - Sundry creditors and other liabilities - Submission to and scrutiny by BIFR / liquidator - Addition under section 41(1) in respect of sundry creditors and other liabilities for Assessment Year 2010-11 was unjustified and deleted. - HELD THAT: - The Tribunal found that the assessee, a company under BIFR and partial liquidation, had submitted details of sundry creditors and other liabilities to the liquidator and the Hon'ble High Court and that opening balances had already been examined in the scrutiny assessment for the immediately preceding year (AY 2009-10). The Assessing Officer made a summary disallowance treating the liabilities as having ceased to exist without verifying the assessment records for AY 2009-10 or carrying out any enquiry. The liabilities were held to be suspended pending BIFR proceedings and not extinguished; therefore they could not be taxed as income under section 41(1). On these bases the additions were held to be unjustified and deleted. [Paras 5, 6]

Addition under section 41(1) in respect of sundry creditors and other liabilities deleted; assessee's appeal allowed.

Penalty under section 271(1)(c) for filing inaccurate particulars - Penalty proceedings independent of assessment - Penalty levied under section 271(1)(c) for Assessment Year 2010-11 was not sustainable and was cancelled. - HELD THAT: - The Tribunal recorded and accepted the reasoning of the CIT(A): the Assessing Officer had not established concealment of income, the disputed additions (basis for penalty) were examined in the preceding year and were reflected in annual accounts, and no enquiry was made to establish that the particulars were inaccurate. The Tribunal also noted that penalty proceedings are independent of assessment proceedings but, on the facts, the AO had not discharged the burden of proving that inaccurate particulars were furnished. In view of the deletion of the underlying additions and the absence of evidence of concealment or inaccurate particulars, the penalty was rightly deleted. [Paras 9, 10]

Revenue's appeal against deletion of penalty dismissed; penalty cancelled.

Final Conclusion: The assessee's appeal against the additions under section 41(1) for Assessment Year 2010-11 is allowed and the additions deleted; the revenue's appeal against deletion of penalty under section 271(1)(c) is dismissed and the penalty is cancelled.

Disallowance under section 43B - payment before due date of filing of return under section 139(1) - power to enhance assessment under section 251(1)(a) and requirement of section 251(2) to issue show cause - valuation of closing stock - FIFO and LIFO principles - remand for fresh adjudication by Assessing Officer

Disallowance under section 43B - payment before due date of filing of return under section 139(1) - Deletion of disallowance of employee contributions to ESIC and Provident Fund under section 43B - HELD THAT: - The Assessing Officer disallowed amounts claimed as deduction for employees' contributions to ESIC and PF on the ground that payments were not made within the due date under the relevant Acts. The Tribunal noted, however, that the payments were made before the due date for filing the return of income under section 139(1). Applying the principle in the cited jurisdictional High Court decision, the Tribunal held that where such payments are made before the due date for filing the return, no disallowance under section 43B can be sustained. The Tribunal therefore set aside the disallowance made by the AO and confirmed by the first appellate authority. [Paras 4]

Disallowance under section 43B set aside; grounds no.1 and 2 allowed.

Power to enhance assessment under section 251(1)(a) and requirement of section 251(2) to issue show cause - Validity of exercise of power by Commissioner (Appeals) to enhance assessment under section 251 - HELD THAT: - Section 251(1)(a) empowers the Commissioner (Appeals) to enhance an assessment, and section 251(2) requires that the assessee be given a reasonable opportunity to show cause before enhancement. The Tribunal found that the Commissioner (Appeals) identified a prima facie discrepancy in stock valuation from assessment records, issued a show cause notice under section 251(2), considered the assessee's reply and then decided the matter. On these facts the exercise of power to enhance was in accordance with the statutory mandate and therefore not without jurisdiction. [Paras 10]

Contention that enhancement was without jurisdiction rejected; ground dismissed.

Valuation of closing stock - FIFO and LIFO principles - remand for fresh adjudication by Assessing Officer - Undervaluation of closing stock of diamond jewellery and enhancement of income - remand to Assessing Officer for fresh adjudication - HELD THAT: - The Commissioner (Appeals) concluded that closing stock was undervalued by comparing average purchase and closing stock rates and, relying on the presumption that jewellery businesses use FIFO, applied the higher average purchase rate to closing stock to enhance income. The assessee contended that purchases included items set in gold/platinum while opening and closing stock were loose diamonds and that it consistently followed LIFO; it produced some invoices. The Tribunal observed that the issue of undervaluation arose for the first time at first appeal, that the assessee's explanations and invoices were not accepted by the Commissioner (Appeals) for lack of supporting audit details, and that it would be impermissible to decide the matter on conjecture. Accordingly, the Tribunal restored the issue to the Assessing Officer for fresh adjudication after affording the assessee an opportunity to adduce supporting evidence and correlate purchases, sales and stock quantities. [Paras 15]

Addition for undervaluation of closing stock set aside for fresh adjudication by the Assessing Officer; ground allowed for statistical purposes (remanded).

Remand for fresh adjudication by Assessing Officer - Consequential adjustment in subsequent year's opening stock dependent on resolution of closing stock valuation - remand - HELD THAT: - The assessee sought consequential effect in the subsequent year's opening stock if the enhancement in the impugned year were upheld. Because the Tribunal has remitted the principal issue of closing stock valuation to the Assessing Officer for fresh adjudication, it directed that the consequential claim be considered afresh by the Assessing Officer depending on the outcome of that adjudication. [Paras 17]

Claim for consequential effect on subsequent year's opening stock restored to the Assessing Officer for consideration (allowed for statistical purposes).

Final Conclusion: The appeal is partly allowed: disallowance under section 43B deleted; validity of the Commissioner (Appeals)'s enhancement under section 251 upheld; the addition for undervaluation of closing stock and the consequential claim for the subsequent year's opening stock are remitted to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to produce supporting evidence.

Disallowance under section 14A in absence of exempt income - application of rule 8D for computation of section 14A disallowance - section 40(a)(ia) disallowance for failure or shortfall in tax deduction at source - short deduction of tax at source not attracting section 40(a)(ia) - nature of payment - commission v. cash discount - for TDS applicability under section 194H - up linking/transponder fees and characterization as process / royalty - retrospective amendment and impossibility to withhold tax for past payments - remand for verification or fresh adjudication on factual matters

Disallowance under section 14A in absence of exempt income - application of rule 8D for computation of section 14A disallowance - remand for verification or fresh adjudication on factual matters - Assessing Officer to verify assessee's claim of no exempt income and proceed accordingly on section 14A/ rule 8D disallowance. - HELD THAT: - The Tribunal observed that the assessee had, in response to the Assessing Officer's notice under section 142(1), stated that no tax free (exempt) income was received in the year, a reply which the AO did not appear to have considered and which is not contradicted by a finding in the assessment order. In the light of precedent holding that no disallowance under section 14A can be made in the absence of exempt income, the Tribunal directed verification of the assessee's claim and stated that if the claim is found correct no disallowance under section 14A read with rule 8D should be made. The ground was allowed for statistical purposes. [Paras 6]

AO directed to verify absence of exempt income; if verified, no disallowance under section 14A r/w rule 8D.

Nature of payment - commission v. cash discount - for TDS applicability under section 194H - remand for verification or fresh adjudication on factual matters - Issue as to whether payments to distributors are commission (attracting TDS under section 194H) or cash discount is restored to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal noted that identical factual controversy in the assessee's own earlier years required examination of the distributor agreement and subscription application forms to determine the true nature of the transaction. Following the coordinate Bench's reasoning, the Tribunal held that examination of the documents as a whole is essential to decide whether the amounts represent commission (and attract TDS) or are discounts not hit by section 194H, and therefore set aside the issue to the AO for fresh decision in accordance with law. [Paras 12, 13]

Issue remitted to the AO for fresh adjudication with directions to examine agreements and evidences to determine whether payments are commission or cash discount.

Section 40(a)(ia) disallowance for failure or shortfall in tax deduction at source - short deduction of tax at source not attracting section 40(a)(ia) - Deletion of disallowance under section 40(a)(ia) upheld in respect of channel subscription charges where tax was deducted at a lower rate. - HELD THAT: - The Tribunal analysed section 40(a)(ia) and found it operates where tax is not deducted or, after deduction, is not remitted by the prescribed date. In the present case tax had been deducted (albeit at 2%), so the matter is one of short deduction not non deduction. Relying on the Calcutta High Court decision in S.K. Tekriwal and consistent Tribunal and High Court authorities, and applying the principle of following a view favourable to the assessee in absence of a contrary decision of the jurisdictional High Court, the Tribunal held that section 40(a)(ia) does not apply to short deduction and accordingly upheld deletion of the disallowance. [Paras 20]

Deletion of section 40(a)(ia) disallowance upheld in respect of channel subscription charges (short deduction).

Section 40(a)(ia) disallowance for failure or shortfall in tax deduction at source - short deduction of tax at source not attracting section 40(a)(ia) - Deletion of disallowance under section 40(a)(ia) upheld in respect of up linking fees paid to Antrix where tax was deducted at a lower rate. - HELD THAT: - The facts show tax was deducted at 2% under section 194C though Revenue contended the rate should have been 10% under section 194J. As the tax was deducted, the Tribunal treated this as short deduction rather than non deduction and, following the reasoning applied to channel subscription charges, held that section 40(a)(ia) does not apply to short deduction. Accordingly deletion was sustained. [Paras 24]

Deletion of section 40(a)(ia) disallowance upheld for up linking fees paid to Antrix (short deduction).

Up linking/transponder fees and characterization as process / royalty - retrospective amendment and impossibility to withhold tax for past payments - Deletion of disallowance under section 40(a)(i) upheld in respect of up linking fees paid to a non resident (B.T. Worldwide) because the retrospective amendment could not be invoked to require withholding at the time of payment. - HELD THAT: - Revenue relied on Explanation 6 to section 9(1)(vi) (defining 'process' to include transmission by satellite/up linking) introduced by Finance Act, 2012 with retrospective effect. The Tribunal accepted the assessee's contention that at the time of payment Explanation 6 was not in the statute and that it would be impossible to require withholding under section 195 for a provision not then in force. The Tribunal also noted an order of the TDS authority holding no liability to deduct TDS on such payments. Applying the jurisdictional High Court's reasoning that one cannot be called upon to perform an impossible act by anticipation of a later retrospective amendment, the Tribunal upheld deletion of the disallowance. [Paras 30]

Deletion of disallowance under section 40(a)(i) upheld for payments to B.T. Worldwide; no liability to withhold at the time of payment.

Section 40(a)(ia) disallowance for failure or shortfall in tax deduction at source - short deduction of tax at source not attracting section 40(a)(ia) - Deletion of disallowance under section 40(a)(ia) upheld in respect of transponder fees where tax was deducted at a lower rate. - HELD THAT: - Record shows tax was deducted at 2% under section 194C though Revenue contended 10% under section 194J applied. Since tax was in fact deducted, the Tribunal treated the matter as short deduction and applied its earlier reasoning that section 40(a)(ia) does not apply to shortfall in deduction. Consequently the Commissioner (Appeals)'s deletion was sustained despite limited discussion in that order. [Paras 36]

Deletion of section 40(a)(ia) disallowance upheld for transponder fees (short deduction).

Final Conclusion: For assessment year 2010-11 the Tribunal directed verification on the section 14A claim and remitted the commission v discount TDS issue to the AO for fresh adjudication, and upheld deletion of the disallowances under section 40(a)(ia)/40(a)(i) in respect of channel subscription, Antrix up linking fees, payments to B.T. Worldwide and transponder fees; assessee's appeal allowed for statistical purposes and Revenue's appeal dismissed.

Evidentiary value of statements recorded during survey under Section 133A - reliance on books of account and reconciliation statement as proof of source of investment - administrative guidance to search for material evidence rather than extract statements - disallowance of addition where no independent material contradicts claimed sources

Evidentiary value of statements recorded during survey under Section 133A - reliance on books of account and reconciliation statement as proof of source of investment - Whether addition of the unexplained sum of Rs. 5 Crores to each assessee on account of construction of hotel could be sustained solely on the basis of a statement recorded during survey. - HELD THAT: - During survey the Revenue identified an investment of Rs. 9 Crores in construction of a hotel; the assessees explained Rs.4 Crores was by loan and the balance Rs.5 Crores by withdrawals by partners reflected in their books. The Assessing Officer accepted the loan but, relying on a statement recorded from a partner during survey, rejected the books entries and made an addition of Rs.5 Crores. The Tribunal upheld the CIT(A)'s finding that Section 133A does not empower administering oath and that a statement recorded during survey has no independent evidentiary value to displace contemporaneous books and the reconciliation produced by the assessees. The Tribunal noted CBDT instructions advising officers to search for material evidence rather than extract statements during survey and observed that no independent material was found to contradict the claimed sources. In these circumstances the Assessing Officer was not justified in ignoring the books/reconciliation and making the addition solely on the basis of the survey statement; the deletion by the CIT(A) was accordingly confirmed. [Paras 6, 7]

Addition of Rs.5 Crores in the hands of each assessee cannot be sustained solely on the basis of the statement recorded during survey; the deletions by the CIT(A) are confirmed.

Final Conclusion: The appeals by the Revenue are dismissed and the orders of the CIT(A) deleting the additions are confirmed; the assessees' cross objections in support of the CIT(A) orders are rendered infructuous.

Estimation of income in best judgment assessment - treatment of incidental receipts (sale of scrap) as part of business income - distinction between contractor and sub contractor for profit rate estimation - best judgment assessment under section 144 - application of precedents of ITAT, Hyderabad in estimation of profits

Estimation of income in best judgment assessment - distinction between contractor and sub contractor for profit rate estimation - application of precedents of ITAT, Hyderabad in estimation of profits - Assessee's net profit in a best judgment assessment was to be estimated at 6% (as returned) for works executed as subcontractor, rather than 8% adopted by the AO. - HELD THAT: - The AO, having completed assessment under best judgment, estimated profits at 8% of gross receipts. On appeal the CIT(A) examined the remand report and materials and concluded that the assessee executed the contracts in the capacity of sub contractor/sub sub contractor. Established practice of the ITAT, Hyderabad distinguishes profit rate estimates for main contractors and subcontractors and accepts lower percentages for subcontractors. The assessee had declared net profit at 5.99% (rounded to 6%), and the CIT(A) reduced the AO's estimate to 6% as reasonable in the factual matrix. The Tribunal found that the AO himself accepted, in the remand report, that the assessee acted as subcontractor for the major works and that the work order in respect of UAN Max Infra Ltd. likewise indicated subcontracting; in the absence of any contrary comparable precedents placed on record by Revenue, the CIT(A)'s conclusion to adopt 6% was held to be in consonance with ITAT, Hyderabad principles and therefore sustainable. [Paras 5, 7]

Reduction of estimated profit to 6% for the works held to be executed as subcontracting was upheld and the AO's estimate of 8% was disallowed.

Treatment of incidental receipts (sale of scrap) as part of business income - estimation of income in best judgment assessment - Income from sale of scrap generated during execution of civil works is to be treated as part of business income and not added separately where net profit is estimated. - HELD THAT: - The AO separately assessed sale of scrap as income from other sources. The CIT(A) observed that scrap arose from the civil contract operations and, having estimated net profit, no separate addition for scrap was warranted. The Tribunal agreed, noting that the assessee's accepted 6% estimate encompassed normal business incidents such as scrap; since scrap is generated in the ordinary course of the contract activity, it forms part of business receipts and need not be taxed separately over and above the estimated business income. [Paras 5, 7]

Sale of scrap treated as part of business income included within the estimated profit; no separate addition directed.

Final Conclusion: The appeal is dismissed; the CIT(A)'s order for AY 2012-13 reducing the best judgment estimation of profit to 6% for works held to be subcontracting and treating scrap receipts as part of business income is upheld.

Failure to consider material filed by the assessee - remand for de novo adjudication - opportunity of hearing - assessment under section 144 - reopening of assessment under section 148 - principles of natural justice

Failure to consider material filed by the assessee - assessment under section 144 - principles of natural justice - opportunity of hearing - remand for de novo adjudication - Whether the assessment and first appellate orders proceeded without considering the information filed by the assessee explaining bank deposits, and whether the matter requires remand for fresh adjudication after affording opportunity of hearing. - HELD THAT: - The Tribunal records that the assessee had filed information before the Assessing Officer explaining the sources of cash deposits in bank accounts. The assessment orders passed under section 144 and the order of the first appellate authority do not indicate that these materials were considered. In view of the absence of any indication that the Assessing Officer or the CIT(A) applied their minds to the material placed on record, the Tribunal found it appropriate to remit the matter for fresh consideration. The remand is limited to de novo adjudication by the ld. CIT(A) with direction to consider the information/material filed by the assessee on 30/03/2015 and to pass an order after giving due opportunity of hearing to the assessee, thereby safeguarding the principles of natural justice. [Paras 4]

Appeals remitted to the file of the ld. CIT(A) for de novo adjudication considering the information filed on 30/03/2015 and after affording opportunity of hearing to the assessee.

Final Conclusion: The appeals are allowed for statistical purposes and remitted to the ld. CIT(A) for fresh adjudication as directed; consequent stay petitions are disposed of as infructuous.

Fee under section 234E - processing of statements under section 200A - machinery provision versus charging provision - rectification and appealability of intimation under section 200A - binding effect of jurisdictional High Court precedent

Fee under section 234E - processing of statements under section 200A - machinery provision versus charging provision - Validity of levy of fees under section 234E for delay in furnishing TDS statements for the assessment years 2013-14 to 2015-16. - HELD THAT: - The Tribunal held that the appeals are governed by the decision of the jurisdictional High Court in Rajesh Kourani, which held that section 234E is a charging provision capable of levying a fee for late filing of statements and that section 200A is a machinery provision for processing statements. The High Court reasoned that absence of specific reference to section 234E in section 200A prior to its recast did not preclude levy of the fee under section 234E; section 200A merely regulated computation and adjustment (and by recast rendered such intimations rectifiable and appealable). Relying on that binding precedent, the Tribunal found no merit in the assessee's contention that fees under section 234E could not be levied before the amended section 200A and affirmed the levy. [Paras 4]

Levy of fees under section 234E for the stated assessment years upheld and sustained against the assessee.

Binding effect of jurisdictional High Court precedent - leave to appeal to higher forum - Whether the Tribunal should keep the appeals pending awaiting possible reversal of the High Court decision by a larger bench or Supreme Court. - HELD THAT: - The Tribunal rejected the assessee's request to keep the matters pending merely because the assessee hoped for a future favourable outcome in higher fora. Observing that the issue was squarely covered against the assessee by the jurisdictional High Court decision and that the assessee remains free to pursue remedy before higher courts, the Tribunal found no justification to defer adjudication and proceeded to dismiss the appeals. [Paras 6]

Request to keep appeals pending declined; appeals dismissed.

Final Conclusion: Appeals against confirmation of fees under section 234E for AYs 2013-14 to 2015-16 dismissed, the Tribunal applying and following the jurisdictional High Court's reasoning that section 234E creates the charge and section 200A is a machinery provision regulating computation and adjustment.

Reopening of assessment under section 147/148 - change of opinion - reason to believe - tangible material / live link between reasons and belief - power to reopen assessment - disallowance under section 40(a)(ia) - deduction of tax at source (Chapter XVIIB)

Reopening of assessment under section 147/148 - change of opinion - tangible material / live link between reasons and belief - Validity of reassessment proceedings initiated by issuance of notice under section 148 for A.Y. 2009-10 - HELD THAT: - The Tribunal held that the AO had called for and received details of the expenditure during the original assessment proceedings under section 143(3) and completed the assessment thereafter. In such circumstances the reopening on the same ground amounted to a change of opinion for which reassessment cannot be sustained absent fresh tangible material. Relying on the principle that reasons recorded for reopening must have a live link with formation of a belief that income has escaped assessment, and on precedents treating mere change of view as impermissible, the reassessment initiated by the AO was quashed. The Tribunal found the facts analogous to earlier coordinate decisions and concluded the initiation of reassessment was invalid. [Paras 7, 8, 9]

Reopening / reassessment proceedings held invalid and grounds 3 and 4 of the appeal allowed.

Disallowance under section 40(a)(ia) - deduction of tax at source (Chapter XVIIB) - Challenge to disallowance of Rs. 20,00,000 under section 40(a)(ia) and applicability of TDS provisions to the returned advance - HELD THAT: - The Tribunal observed that, on merits, an advance received towards professional fees which was returned would not fall under the categories attracting TDS under Chapter XVIIB. However, because the reassessment itself was quashed as invalid, the Tribunal did not adjudicate the substantive grounds against the disallowance under section 40(a)(ia). Consequently the contentions on merits were left undetermined by the order. [Paras 10]

Merits of the disallowance under section 40(a)(ia) not adjudicated as reassessment was quashed; grounds 5 and 6 left unaddressed.

Final Conclusion: The reassessment proceedings for A.Y. 2009-10 initiated by notice under section 148 were quashed as constituting impermissible change of opinion in the absence of fresh tangible material; consequentially the challenge to the disallowance under section 40(a)(ia) was not decided and remains unadjudicated.

State's tortious liability - duty of care in custody of seized goods - compensation for negligence of public authorities - redemption of confiscated goods on payment of fine - approbate and reprobate - return of seized goods where notice not given within six months

Approbate and reprobate - redemption of confiscated goods on payment of fine - Whether the appellant can claim a higher value for the seized diamonds after having accepted the valuation fixed by CEGAT and paid the redemption fine. - HELD THAT: - The appellant had accepted the valuation of the diamonds fixed by CEGAT at Rs. 4,27,000/- and paid the redemption fine on that basis; that CEGAT decision was not challenged. Having chosen that course to redeem the goods, the appellant cannot thereafter repudiate that acceptance by claiming a higher valuation in proceedings for compensation. The principle of approbation and reprobation applies to preclude the appellant from retracting the earlier acceptance of value when seeking enhanced compensation. [Paras 5]

Appellant's plea that the diamonds were worth Rs. 40,00,000/- is rejected; having accepted CEGAT's valuation and paid the fine, appellant cannot claim a higher value.

State's tortious liability - duty of care in custody of seized goods - compensation for negligence of public authorities - return of seized goods where notice not given within six months - Whether the writ Court was right in holding the respondents liable for compensation for loss of the seized diamonds and in fixing compensation and rate of compensation. - HELD THAT: - The writ Court found that authorities owe a duty to secure seized goods with due care until they are returned or lawfully disposed of, and that negligence or failure to discharge that duty attracts tortious liability of the State. Applying the principles reflected in the cited authorities, the writ Court concluded that compensation was due for the loss and, in the absence of a better parameter, fixed compensation and an 18% per annum sum on the CEGAT valuation for the period specified. The High Court found no manifest illegality in that conclusion and in the quantum fixed by the writ Court, and therefore declined to interfere with the exercise of judicial discretion by the writ Court. [Paras 4, 6]

Writ Court's finding of liability and its award of compensation (including the 18% per annum component on the CEGAT valuation for the stated period) are upheld; no interference is warranted.

Final Conclusion: Writ appeal dismissed. The High Court affirms the writ Court's conclusion that the respondents are liable for compensation for loss of the seized diamonds and upholds the compensation fixed; the appellant cannot claim a higher valuation after accepting CEGAT's valuation and paying the redemption fine.

Alternative and efficacious remedy - exhaustion of statutory remedies - writ jurisdiction under Article 226 - principles of judicial restraint in revenue matters - exceptions to rule of alternative remedy (violation of principles of natural justice, lack of jurisdiction, challenge to vires) - statutory appellate remedy

Alternative and efficacious remedy - exhaustion of statutory remedies - writ jurisdiction under Article 226 - principles of judicial restraint in revenue matters - statutory appellate remedy - Whether the writ petition challenging revocation of Customs House Agent licence should be entertained or the petitioner must first avail the statutory appellate remedy under the Customs Act, 1962. - HELD THAT: - The High Court upheld the principle that, ordinarily, when an effective and alternative statutory remedy exists, the High Court should not exercise its discretionary writ jurisdiction under Article 226 to entertain challenges to administrative or revenue actions. The Court applied the established rule of self-imposed restraint in revenue matters and relied on a consistent line of authority holding that a party must ordinarily exhaust the hierarchy of statutory remedies before invoking writ jurisdiction. The Court noted recognised exceptions to this rule (for example, where there is a violation of the principles of natural justice, action wholly without jurisdiction, or a direct challenge to the vires of the statute), but found no manifest illegality that would justify bypassing the statutory forum in the present case. In consequence, the Court declined to decide the merits of the challenge to revocation and instead sustained the writ court's exercise of discretion in directing the petitioner to pursue the remedy provided by statute. The Court granted the petitioner liberty to prefer the statutory appeal and specified a time-limit for filing, with the direction that time spent in litigation be excluded from limitation.

Writ appeal dismissed; petitioner permitted to file the statutory appeal against revocation of the Customs House Agent licence within one month from receipt of this order, with time spent in litigation excluded.

Final Conclusion: The High Court sustained the writ court's refusal to entertain the challenge on merits and dismissed the writ appeal, directing the petitioner to avail the statutory appellate remedy within one month; no costs.

Provisional release of seized imported goods pending adjudication - remand for adjudication within a specified time-frame - redemption fine and release subject to conditions - confiscation for prohibited or IPR-violative goods - re-export as alternate remedy for IPR-violative imports - ownership/beneficial ownership dispute in customs seizure

Provisional release of seized imported goods pending adjudication - remand for adjudication within a specified time-frame - redemption fine and release subject to conditions - Remand for expeditious adjudication and directions on consideration of provisional release or release on payment of fine - HELD THAT: - The Tribunal found that show cause notices have been issued and the adjudication has not been finalised though the goods have been detained for an extended period. The Tribunal directed that the adjudicating authority should endeavour to complete adjudication within one month. If adjudication cannot be finalised within that period, the adjudicating authority is to consider, within fifteen days thereafter, liberal consideration of provisional release of declared goods and of goods redeemable on payment of redemption fine, subject to such conditions as the adjudicating authority may impose, and taking into account undertakings given by the appellants.

Appeals disposed by remand with direction to adjudicate within one month and, failing that, to consider release/redeemable release within fifteen days subject to conditions.

Confiscation for prohibited or IPR-violative goods - re-export as alternate remedy for IPR-violative imports - ownership/beneficial ownership dispute in customs seizure - Questions of ownership, allegation of prohibited/IPR-violative goods and absolute confiscation remanded for determination - HELD THAT: - The Commissioner had refused provisional release inter alia on the ground that the appellants were not the owners and that certain goods required BIS certification or implicated IPR and thus might be liable to absolute confiscation. The Tribunal observed that ownership/beneficial ownership requires investigation and verification and that certain goods may be absolutely confiscable under law. The Tribunal therefore did not decide these matters on merits but remanded them to the adjudicating authority for determination. The Tribunal also recorded that re-export could be considered by the adjudicating authority where appropriate and subject to conditions, and that appellants undertook not to seek provisional release of goods which are prohibited or IPR-violative.

Ownership and confiscation/IPR issues left open for adjudication; matters remitted to adjudicating authority for determination and appropriate orders (including possible re-export) subject to conditions.

Final Conclusion: The appeals are disposed of by remand: the adjudicating authority is directed to finalise adjudication within one month, and if not possible to consider release or redemption of non-prohibited/IPR-compliant goods within fifteen days thereafter; ownership and confiscation/IPR issues are left to be determined afresh by the adjudicating authority with liberty to consider re-export and impose conditions.

Condonation of delay - Right to obtain relied upon documents - Delay attributable to non-supply of documents

Condonation of delay - Delay attributable to non-supply of documents - Right to obtain relied upon documents - Application for condonation of delay in filing appeals was allowed on account of the appellants' pending requests for relied upon documents which were not supplied. - HELD THAT: - The applicants contended that from the time of issuance of the show cause notice they had repeatedly requested the department to furnish the relied upon documents by written letters, but those documents were not provided. After the impugned order they awaited receipt of the relied upon documents before filing the appeals. The Tribunal accepted that the delay in filing the appeals was attributable to the non-supply of the relied upon documents and, on that basis, allowed the applications for condonation of delay.

Applications for condonation of delay are allowed and the appeals are admitted despite the delay.

Final Conclusion: The Tribunal allowed the condonation applications, holding that delay caused by the department's failure to supply relied upon documents justified admitting the delayed appeals.

Misdeclaration - classification - confiscation - redetermination of assessable value - reliance on contemporaneous import data - natural justice - nondisclosure of valuation data - penalty for misdeclaration

Misdeclaration - classification - confiscation - Validity of findings of misdeclaration, classification of the goods and consequent confiscation - HELD THAT: - The Tribunal's earlier conclusion that the consignment was misdeclared (goods declared as semi refined paraffin wax with 3-5% oil when testing showed 0.7% oil) stands and was not reopened. The Chemical Examiner's report was accepted previously and classification under the tariff for fully refined paraffin wax was upheld. In view of the established misdeclaration, confiscation is justified and the imposition of penalty provisions is legally permissible. [Paras 5, 7]

Findings of misdeclaration and the classification upheld; confiscation of the goods warranted and penalty provisions are attracted.

Redetermination of assessable value - reliance on contemporaneous import data - natural justice - nondisclosure of valuation data - Whether the enhancement of assessable value based on NIDB data was justified in de novo proceedings - HELD THAT: - The matter was remanded earlier for fresh determination of assessable value. In the de novo proceedings the adjudicating authority relied on NIDB data to enhance value, while the importer produced bills of entry and supplier invoices showing lower prices and contended the purchase was made earlier when prices were lower. The Bench found that apart from the NIDB data there was no material on record showing the importer had paid a higher consideration; the NIDB reliance did not suffice to justify enhancement in the face of supporting documents from the importer. Accordingly, there is no justifiable basis to enhance the assessable value. [Paras 5]

Enhancement of value was not sustained; no higher assessable value is justified on the record.

Penalty for misdeclaration - redemption fine - Appropriate quantification of redemption fine and penalty in light of established misdeclaration and absence of short levy - HELD THAT: - While misdeclaration having been established permits confiscation and penalty, the adjudicating authority must calibrate monetary sanctions with reference to consequences of the misdeclaration. The Bench recognised that the differing chapter headings would not produce a duty short levy in the present case and, accordingly, exercised discretion to reduce monetary sanctions to amounts commensurate with the facts. [Paras 7]

Redemption fine reduced to Rs. 35,000 and penalty on Shri Sahul Hameed reduced to Rs. 15,000; his appeal disposed of accordingly.

Penalty for misdeclaration - natural justice - reasons for penalty - Sustainability of penalty imposed on Shri R.K. Aggarwal - HELD THAT: - The impugned order did not articulate any reasons or discuss the role of Shri R.K. Aggarwal in support of imposing penalty upon him. In absence of recorded reasons linking him to the misdeclaration or explaining liability, there is no justification to uphold the penalty imposed on him. [Paras 8]

Penalty imposed on Shri R.K. Aggarwal set aside and his appeal allowed in full.

Final Conclusion: The findings of misdeclaration and classification are upheld and confiscation is sustained; enhancement of assessable value is not sustained and no higher duty is demanded; redemption fine reduced to Rs. 35,000 and penalty on Shri Sahul Hameed reduced to Rs. 15,000; penalty on Shri R.K. Aggarwal is set aside and his appeal allowed.

CVD assessment on MRP under Section 4A of the Central Excise Act - institutional consumer exclusion under the Standards of Weights and Measures (Packaged Commodities) Rules, 1997 (as amended w.e.f. 17.07.2006) - precedential applicability of Jayanthi Foods Processing Pvt. Ltd. in light of statutory amendment

CVD assessment on MRP under Section 4A of the Central Excise Act - institutional consumer exclusion under the Standards of Weights and Measures (Packaged Commodities) Rules, 1997 (as amended w.e.f. 17.07.2006) - Whether modems imported for bulk supply to BSNL constitute supply to an institutional consumer and thereby fall outside the scope of MRP-based CVD assessment under Section 4A. - HELD THAT: - The amended definition of "institutional consumers" in Rule 2(b) of the Standards of Weights and Measurements (Packaged Commodities) Rules, 1997 (effective 17.07.2006) excludes such consumers from the application of the packaged-commodities provisions. BSNL procures the modems in bulk from the appellant for onward supply to subscribers on a rental basis. Applying the post-amendment definition, BSNL falls within the class of purchasers who buy packaged commodities directly from manufacturers/packers for use in a service industry. Consequently, the proviso for MRP-based assessment under Section 4A is not attracted to supplies made to such institutional buyers. The tribunal therefore concluded that Revenue was not justified in imposing CVD on the basis of MRP in the facts of this case. [Paras 5, 6, 7]

Supply of modems to BSNL is to an institutional consumer and CVD cannot be charged on the basis of MRP under Section 4A.

Precedential applicability of Jayanthi Foods Processing Pvt. Ltd. in light of statutory amendment - Whether the Supreme Court decision in Jayanthi Foods Processing Pvt. Ltd. governs the present case despite the amendment of the Standards of Weights and Measurements Rules effective 17.07.2006. - HELD THAT: - The authorities below relied on Jayanthi Foods Processing Pvt. Ltd. The tribunal noted that the Supreme Court's decision was rendered with reference to the law as it stood prior to the 17.07.2006 amendment. Because the statutory definition and scope were altered by that amendment, the earlier decision does not govern the present facts. The tribunal therefore rejected the lower authorities' reliance on that precedent for the post-amendment situation. [Paras 6]

Jayanthi Foods (supra) is not applicable to the present case in view of the amendment effected w.e.f. 17.07.2006.

Final Conclusion: The impugned order directing CVD on MRP is set aside; the appeal is allowed and the modems supplied to BSNL are to be treated as sold to an institutional consumer for whom Section 4A MRP assessment is not applicable, with consequential relief as per law.

Refund of SAD - endorsement on commercial invoice regarding Cenvat credit - procedural lapse - ineligibility of commercial invoice under Rule 9(2) of Cenvat Credit Rules, 2004 - non-declaration not a ground for denial of credit - precedential effect of Larger Bench decision in Chowgule & Company Pvt. Ltd. v. CCE

Refund of SAD - endorsement on commercial invoice regarding Cenvat credit - procedural lapse - ineligibility of commercial invoice under Rule 9(2) of Cenvat Credit Rules, 2004 - non-declaration not a ground for denial of credit - Validity of rejecting appellant's refund claim of SAD on ground that commercial invoices lacked endorsement that no Cenvat credit would be admissible to the buyer. - HELD THAT: - The Tribunal applied the Larger Bench ruling in Chowgule & Company Pvt. Ltd. v. CCE, which holds that omission of the specified endorsement on a commercial invoice is a procedural lapse because such commercial invoices are, in any event, ineligible under Rule 9(2) of the Cenvat Credit Rules, 2004 to be used for availing Cenvat credit. Consequently, non-declaration on the invoice cannot serve as a substantive basis to deny credit or related refund claims. On that precedent, the impugned order rejecting the refund claim for lack of the endorsement was unsustainable.

Impugned order set aside; all three appeals allowed with consequential relief to the appellants.

Final Conclusion: The Tribunal allowed the appeals, holding that absence of the endorsement on commercial invoices is only a procedural lapse and cannot justify denial of Cenvat credit or the related refund of SAD, in view of the Larger Bench decision referred to; the impugned rejection of the refund claim was set aside and consequential relief granted.

Unjust enrichment - refund of customs duty / credit into Cenvat account - final product price determined by London Metal Exchange (LME) - effect on passing on of duty

Unjust enrichment - final product price determined by London Metal Exchange (LME) - effect on passing on of duty - refund of customs duty / credit into Cenvat account - Grant of refund/credit to importer-manufacturer would result in unjust enrichment where final product prices are determined on the basis of LME prices - HELD THAT: - The Tribunal found no dispute about the factual position that the appellant imported copper concentrates, paid duty provisionally and adjusted upon final invoices. The sole contested legal question was whether allowing refund (or credit) of duty would amount to unjust enrichment. Applying the Supreme Court's reasoning in State of Rajasthan v. Hindustan Copper Ltd. and consistent Tribunal decisions, the court held that where the price of the final product is fixed on the basis of prevailing LME prices and cannot reflect or pass on the duty element, the element of unjust enrichment does not arise. The Tribunal observed that prior authorities establish that in such circumstances the duty cannot be added to the final product price and therefore the refund/credit sanctioned by the original authority was not vitiated by unjust enrichment. On that basis the Revenue's objections were rejected and the appellant's refund claims were allowed. [Paras 11]

Refunds/credits allowed; no unjust enrichment where final product prices are LME based

Final Conclusion: Appeals by the assessee allowed and Revenue appeal rejected: refunds/credits granted as unjust enrichment does not arise where final product prices are determined on the basis of LME prices.

Admissibility of an application under Section 7 of the I&B Code despite parallel proceedings under the DRT Act or SARFAESI Act - effect of moratorium under the I&B Code on proceedings under other statutes - requirement of completeness of application under Section 7 and Rule 4 of the Insolvency Rules - authority of adjudicating authority to determine claim amounts vis-a -vis Resolution Professional and Committee of Creditors - authentication/authorization of insolvency application filings

Admissibility of an application under Section 7 of the I&B Code despite parallel proceedings under the DRT Act or SARFAESI Act - effect of moratorium under the I&B Code on proceedings under other statutes - Section 7 application by a financial creditor is maintainable even where actions under Section 13(4) of the SARFAESI Act or proceedings under Section 19 of the DRT Act have been initiated; the I&B Code overrides inconsistent provisions of other laws and moratorium prevents continuation of such proceedings. - HELD THAT: - The Tribunal relied on its earlier decision in M/s. Unigreen Global Private Limited to hold that initiation of proceedings under the SARFAESI Act or DRT Act cannot be a ground to reject a complete Section 7 application. Proceedings under those laws cannot continue once moratorium is in place. Section 238 of the I&B Code gives the Code overriding effect over inconsistent provisions of other statutes, including the DRT Act and SARFAESI Act, and the scheme of Section 7 requires the adjudicating authority to ascertain default and admit a complete application notwithstanding parallel proceedings under other enactments. [Paras 4, 5]

The Section 7 application was rightly admitted despite earlier steps under SARFAESI/DRT, and the I&B Code and moratorium operate to override and stay such proceedings.

Requirement of completeness of application under Section 7 and Rule 4 of the Insolvency Rules - showing of incorrect claim amount and consequences - Mismatch between amounts stated in demand notices and the application does not per se render a Section 7 application liable to be rejected where the adjudicating authority is satisfied that default exists and the application is complete; setting aside on such ground requires demonstrable mala fides or ex parte misleading conduct. - HELD THAT: - Reliance was placed on this Appellate Tribunal's prior observations in Starlog Enterprises but the Tribunal distinguished the present case because there was no contention that the financial creditor misled the adjudicating authority or that the order was passed ex parte on misleading material. The Supreme Court's exposition in Innoventive Industries about the limited scope at admission stage (ascertainment of default from records or furnished evidence) was applied. Since the adjudicating authority was satisfied that a default had occurred and the application was complete, the mismatch alone did not justify setting aside the admission. [Paras 5, 6, 9, 10]

The challenge based on mismatch of claim amount was rejected and does not vitiate admission in the absence of misleading/ex parte conduct.

Authentication/authorization of insolvency application filings - The application under Section 7 filed by authorised employees of the financial creditor is valid even if the Form was not signed by a specific authorised person named by the appellant. - HELD THAT: - The Tribunal declined to set aside the impugned order on the ground that Form-7 was not signed by the authorised person because the Section 7 application (Form-1) had been filed by authorised employees of the financial creditor. There was no ground to infer want of authority sufficient to vitiate the admission. [Paras 11]

The objection regarding signature/authority was rejected; admission stands.

Authority of adjudicating authority to determine claim amounts vis-a -vis Resolution Professional and Committee of Creditors - Adjudicating Authority should not record conclusive observations on the amount of claim owed by the corporate debtor when such claims are to be determined by the Resolution Professional and the Committee of Creditors; paragraph recording such a finding is to be set aside. - HELD THAT: - The Tribunal accepted submissions that determination of specific claim amounts is the domain of the Resolution Professional and thereafter the Committee of Creditors, and that the Adjudicating Authority was not required to make observations on the exact claim amount owed to a particular creditor. Although the Resolution Professional and Committee may determine claims independently, the Adjudicating Authority may decide disputes on claims where necessary. On this basis Paragraph 84 of the impugned order, which recorded a definitive finding as to the amount owed to Allahabad Bank, was set aside while the remainder of the admission order was affirmed. [Paras 15, 84]

Paragraph 84 of the impugned order is set aside; Adjudicating Authority should not have recorded the claim amount determination which is for the Resolution Professional/Committee of Creditors to consider.

Final Conclusion: Company Appeals (AT) (Insolvency) Nos. 292 & 293 of 2017 are dismissed; Company Appeal (AT) No. 324 of 2017 is allowed to the extent that Paragraph 84 of the impugned order is set aside; the admission of the Section 7 application otherwise stands and there shall be no order as to costs.

Liquidation under Section 33(1) of the I&B Code - rejection of resolution plan by Committee of Creditors - compliance with Sections 25, 27 and 29 of the I&B Code - appointment and vacancy of Resolution Professional - extension of corporate insolvency resolution process under Section 12(2) of the I&B Code - right to raise procedural defects after rejection by the Committee of Creditors

Liquidation under Section 33(1) of the I&B Code - rejection of resolution plan by Committee of Creditors - Validity of the Adjudicating Authority's orders initiating liquidation after the Committee of Creditors rejected the appellant's resolution plans. - HELD THAT: - The adjudicating authority initiated liquidation under Section 33(1) after the respective Committees of Creditors, by majority, rejected the resolution plan(s) submitted by the promoter-appellant. The Tribunal examined the record of meetings, progress reports and minutes and concluded that the Committee of Creditors had considered the matter and rejected the only plan on the table. Once the resolution process reached that finality under Sections 30 and 31, the Adjudicating Authority was left with no option but to pass orders initiating liquidation. The court therefore upheld the orders for commencement of liquidation. [Paras 4, 14, 16]

The initiation of liquidation under Section 33(1) was lawful and is upheld.

Compliance with Sections 25, 27 and 29 of the I&B Code - appointment and vacancy of Resolution Professional - right to raise procedural defects after rejection by the Committee of Creditors - Whether alleged procedural lapses (including non-invitation of other resolution plans, purported non-compliance with information memorandum requirements, and periods of vacancy in the post of Resolution Professional) vitiated the resolution process and entitled the appellant to relief. - HELD THAT: - The appellant contended that mandatory procedures from Sections 22 to 29 were not followed, that the post of Resolution Professional remained vacant for a period, and that invitation for resolution plans was not properly made. The Tribunal considered the record - progress reports, minutes of meetings, newspaper publication and subsequent meetings convened by the confirmed Resolution Professional - and observed that the appellant, who participated in the Committee meetings and submitted a plan, did not at the relevant time press the contention that other plans ought to have been called for. The court expressly held that the appellant cannot sit on its rights and, after the Committee rejected its plan, challenge the process on that ground. The adjudicating authority had taken into account the available reports and minutes before passing the liquidation orders. [Paras 5, 6, 15]

Alleged procedural lapses do not invalidate the resolution process or the liquidation orders; the appellant is not entitled to relief on these grounds.

Extension of corporate insolvency resolution process under Section 12(2) of the I&B Code - Whether failure to seek or grant an extension under Section 12(2) before the expiry of the 180-day period rendered the initiation of liquidation premature or illegal. - HELD THAT: - The appellant argued that no application for extension was made and that the Resolution Professional was not afforded the full 180 days (plus permissible 90 days). The Tribunal noted that where the Committee of Creditors has reached a decision rejecting the resolution plan and the process has attained finality under Sections 30 and 31, there is no occasion to grant further extension of time. The adjudicating authority, having regard to the Committee's decision and the record, legitimately proceeded under Section 33(1). [Paras 6, 16]

Absence of an extension application does not render the liquidation orders invalid once the resolution process has concluded with rejection by the Committee of Creditors.

Final Conclusion: Appeals dismissed; the Adjudicating Authority correctly initiated liquidation after the Committee of Creditors rejected the resolution plans, and the alleged procedural defects and absence of an extension application do not afford the appellant relief. No order as to costs.

Rectification of mistake - interest on refund - interpretation of precedent - explanation to Section 11BB - remedy by appeal under Section 35G

Rectification of mistake - interpretation of precedent - interest on refund - explanation to Section 11BB - remedy by appeal under Section 35G - Whether the Review (ROM) application could be entertained on the ground that the Tribunal misinterpreted the Supreme Court decision in Ranbaxy Laboratories Ltd and thereby ought to have directed payment of interest on the refund. - HELD THAT: - The Bench held that the Tribunal had considered and reproduced the relevant paragraph of the Supreme Court judgment and had given its interpretation. A mere contention that the Tribunal's interpretation is wrong does not amount to an apparent error warranting rectification under the remedy of rectification of mistake. Entertaining ROMs on such a ground would invite repeated applications seeking to unsettle reasoned interpretations of law, which is not the scope of the rectification remedy. The correct recourse for the applicant, if dissatisfied with the Tribunal's interpretation on the point of interest and the applicability of the explanation to Section 11BB, is to pursue an appeal to the High Court under Section 35G of the Central Excise Act; the Tribunal's order showed no apparent error requiring correction.

ROM application dismissed; no apparent error in the Tribunal's interpretation and liberty granted to aggrieved party to approach the High Court under Section 35G.

Final Conclusion: The Review application was dismissed for lack of any apparent error in the Tribunal's order; disputes over the correctness of the Tribunal's interpretation of the Supreme Court judgment or applicability of the explanation to Section 11BB are not remediable by rectification and should be challenged by appeal under Section 35G.

Refund claim under Rule 5 of CENVAT Credit Rules - relevant date for limitation in export of services - receipt of foreign exchange as triggering event for computing one-year limitation - procedural requirement of FIRC vis-a -vis substantive entitlement to refund - remand for verification of remittances with invoices

Relevant date for limitation in export of services - receipt of foreign exchange as triggering event for computing one-year limitation - refund claim under Rule 5 of CENVAT Credit Rules - Reckoning of the relevant date for computing the one-year limitation for filing refund claims in respect of export of services. - HELD THAT: - The Tribunal considered whether the date of invoice or the date of receipt of foreign remittance is the 'relevant date' for computing the one-year limitation for refund claims under Rule 5. Reliance was placed on the Tribunal's earlier decision and a Chief Commissioner's circular which treat receipt of foreign exchange as the relevant event in export of services. Applying that principle, the Bench held that limitation must be computed from the date of receipt of foreign remittance rather than the invoice date, and therefore rejections on the ground of limitation were unjustified and set aside. [Paras 6]

Rejection of refund claim on limitation grounds is set aside; the relevant date is the date of receipt of foreign exchange.

Procedural requirement of FIRC vis-a -vis substantive entitlement to refund - remand for verification of remittances with invoices - refund claim under Rule 5 of CENVAT Credit Rules - Whether refund can be denied where FIRCs were not produced but receipt of foreign exchange can be correlated with invoices for remittances received through PayPal, cheques and RTGS. - HELD THAT: - The Tribunal observed that production of FIRCs is a procedural requirement and where the appellant can establish receipt of foreign exchange by correlating remittances with the underlying invoices, substantive entitlement to refund should not be defeated for mere procedural lapse. Given the appellant's representation that such correlation can be established, the matter was remanded to the adjudicating authority for limited verification of the remittances against invoices so that substantive benefit may be examined and granted if proved. [Paras 7]

Issues relating to remittances through PayPal, cheques and RTGS are remanded to the adjudicating authority for verification with invoices.

Procedural requirement of FIRC vis-a -vis substantive entitlement to refund - remand for verification - refund claim under Rule 5 of CENVAT Credit Rules - Treatment of refund claims rejected for non-production of FIRCs where the FIRCs can be subsequently furnished. - HELD THAT: - The appellant sought another opportunity to produce FIRCs for certain transactions. The Tribunal accepted that FIRCs are a procedural requirement and, in view of the appellant's assertion that FIRCs have since been or can be obtained, directed remand to the adjudicating authority to allow the appellant to furnish FIRCs and to process the refund claim accordingly. [Paras 8]

Refund claims rejected for non-production of FIRCs are remanded to the adjudicating authority to permit production of FIRCs and to process the claims.

Final Conclusion: Appeals disposed: limitation-based rejections set aside as the date of receipt of foreign exchange is the relevant date; other rejections for absence of FIRCs or for remittances received through PayPal/cheque/RTGS remitted to the adjudicating authority for verification and opportunity to furnish FIRCs, with consequential benefits, if any.

Renting of immovable property services - penalty under proviso to section 78 - interpretational issue - bona fide belief - service tax demand and interest

Penalty under proviso to section 78 - interpretational issue - bona fide belief - service tax demand and interest - Validity of the penalty imposed on the appellant arising from non-payment of service tax on services held to be "renting of immovable property services". - HELD THAT: - The appellant did not contest the service tax demand or the interest thereon and conceded liability. The Tribunal accepted the appellant's submission that the question whether tank storage charges amounted to "renting of immovable property services" was an interpretational issue and that the appellant acted under a bona fide belief that such charges were not taxable as renting of immovable property. The Tribunal also noted that a substantial part of the service tax had been discharged prior to issuance of the show cause notice. In view of these circumstances, the Tribunal found that imposition of penalty was unwarranted and exercised its discretion to set aside the penalty while leaving the confirmed service tax demand and interest intact.

Penalty set aside; service tax demand and interest upheld; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: the penalty imposed under the proviso to section 78 is set aside on account of a bona fide, interpretational dispute and prior payment of substantial tax, while the confirmed service tax demand and interest remain undisturbed.

Business Auxiliary Service - service tax liability on trading of airline cargo space - commission and incentives from airlines - principal-to-principal transaction (absence of third party client) - taxability of freight rebate/incentive as consideration for service

Business Auxiliary Service - service tax liability on trading of airline cargo space - commission and incentives from airlines - principal-to-principal transaction (absence of third party client) - Whether the commission and volume based incentives received by the IATA agent from airlines on booking and resale of cargo space are liable to service tax as Business Auxiliary Service. - HELD THAT: - The Tribunal examined earlier decisions which held that income arising from purchase and resale of airline cargo space by an agent on its own account is a trading activity between principals and does not involve provision of a Business Auxiliary Service to a third party client. Where the appellant purchases space in bulk and thereafter sells it on its own account, incentive or commission received from the airline flows from that trading activity and not from rendering BAS to a service recipient. The Tribunal reasoned that for BAS to be attracted there must effectively be a service rendered involving a distinct service provider, service recipient and a client; absent a third party client and where the activity is a principal to principal sale of space, the components of BAS are not satisfied. Applying that ratio to the respondent's case, the additional amounts received as incentives based on volume and the commission were held to be linked to the respondent's trading in cargo space and not consideration for BAS. [Paras 5, 6]

The commission and volume based incentives received by the respondent on booking and resale of airline cargo space are not taxable as Business Auxiliary Service; the departmental appeal is dismissed.

Final Conclusion: The departmental appeal is dismissed; the Tribunal affirms that commission and volume based incentives earned by the respondent from airlines in the course of buying and selling cargo space on its own account do not attract service tax under Business Auxiliary Service.

Service tax on TDS portion - actual consideration for taxable service received from outside India - Service Tax Valuation Rules - Rule 7 - valuation by actual consideration - reverse charge mechanism

Service tax on TDS portion - actual consideration for taxable service received from outside India - Service Tax Valuation Rules - Rule 7 - valuation by actual consideration - Liability to pay service tax on the portion of royalty said to have been deducted as TDS - HELD THAT: - The Tribunal examined whether the appellant had to discharge service tax on the portion alleged to have been deducted as TDS from royalty payable to a foreign service provider. The appellants produced the agreement showing that the royalty of record was paid in full to the foreign company and that the Indian income tax (TDS) was separately borne and discharged to the Government of India. Applying the valuation principle in Rule 7 of the Service Tax Valuation Rules (pre-amendment), the value of taxable service provided from outside India is the actual consideration charged for the services. On the facts, the invoice/bill disclosed the consideration actually charged and there was no material to show that the TDS amount constituted consideration paid to the foreign provider or was recovered by the appellant from the provider. The Tribunal followed the reasoning in the Tribunal's decision in Magarpatta Township Dev. & Constructions Co. Ltd. and noted earlier reliance on Indian National Shipowner's Association in the lower forum. Consequently, the demand for service tax on the alleged TDS portion was held unsustainable and the impugned demand set aside.

Demand of service tax on the alleged TDS portion of the royalty is without basis and is set aside; appeal allowed with consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that service tax is chargeable only on the actual consideration invoiced by the foreign service provider and that no service tax could be demanded on the TDS amount which was separately borne and paid to the Government; the impugned demand was set aside.

Rectification of order for error apparent on the face of the record - litigation policy exclusion for refund claims - refund arising from payment under wrong assessee code not constituting recurring/legal issue - amendment/withdrawal of instruction clause affecting litigation policy

Rectification of order for error apparent on the face of the record - litigation policy exclusion for refund claims - refund arising from payment under wrong assessee code not constituting recurring/legal issue - Maintainability of the ROM application seeking rectification of the Tribunal's order on the ground that the matter involved a refund excluded from litigation policy under clause (c) of para 3 of the instruction dated 17/08/2011. - HELD THAT: - The Tribunal held that the refund claim arose because the respondent had paid service tax under an incorrect assessee code; consequently the dispute did not involve a recurring legal issue or a pure question of classification/refund that would attract the litigation-policy exclusion in clause (c). The exclusion in clause (c) applies only where the issue is of a recurring nature or involves a legal point of classification/refund generally excluded from litigation. As the present case stemmed from payment under a wrong assessee code, it falls outside that exclusion. For these reasons the alleged error on the face of the record, relied upon in the ROM application, did not exist and rectification was not justified. [Paras 4, 5]

ROM application is not maintainable and is dismissed.

Amendment/withdrawal of instruction clause affecting litigation policy - Effect of subsequent amendment withdrawing clause (3) of the earlier instruction on the maintainability of the ROM. - HELD THAT: - The Tribunal noted the Government's amendment by F. No. 390/Misc./116/2017-JC dated 04/04/2018, which withdrew the earlier clause and broadened coverage to cases where the amount involved is less than Rs. 10 lakhs. This amendment further undermined the Revenue's contention that the matter fell within the excluded category under the earlier instruction. The amendment therefore reinforced the conclusion that the ROM could not be sustained on the ground invoked. [Paras 3, 4]

The amendment/withdrawal of the earlier clause supports dismissal of the ROM application.

Final Conclusion: ROM application by Revenue for rectification on the ground of litigation-policy exclusion was dismissed: the refund issue arose from payment under a wrong assessee code and did not fall within the exclusion, and the subsequent amendment/withdrawal of the relevant clause further precluded the relief sought.

Restoration of appeal - dismissal for non-appearance / non-prosecution - sufficient cause for non-appearance - condonation of delay - connected appeals arising out of a common Order-in-Original - denial of SSI exemption by clubbing of clearances

Restoration of appeal - dismissal for non-appearance / non-prosecution - sufficient cause for non-appearance - Application for restoration of an appeal dismissed for non-appearance - HELD THAT: - The Tribunal examined the appellant's plea for restoration after the appeal was dismissed on 10.03.2017 for non-appearance of the counsel. The bench noted that the appeal was filed in 2003 and had been adjourned several times; on the date of dismissal there was neither representation nor any request for adjournment. The appellant did not advance sufficient reason or cause for the failure to appear. In these circumstances the Tribunal found no merit in the restoration application and declined to exercise its discretion to restore the appeal. [Paras 4]

Application for restoration is dismissed for lack of sufficient cause for non-appearance.

Connected appeals arising out of a common Order-in-Original - condonation of delay - denial of SSI exemption by clubbing of clearances - Whether pendency of a connected writ/appeal in respect of another unit arising from the same Order-in-Original warrants restoration - HELD THAT: - The appellant relied on pendency of a writ in the High Court filed in relation to Unit-I (also arising from the same Order-in-Original) and contended that the present appeal (Unit-II) should be restored because the connected matter remains pending. The Tribunal recorded that the appeal concerning Unit-I had earlier been dismissed as time-barred and that the writ has been pending since 2005. Noting that both appeals arise from a common original order did not supply the required justification for non-appearance or for restoring an appeal which was dismissed for non-prosecution. The pendency of the writ in respect of Unit-I was therefore held insufficient to warrant restoration of the dismissed appeal. [Paras 4]

Pendency of the connected writ/appeal did not justify restoration; restoration refused.

Final Conclusion: The application to restore the appeal dismissed for non-appearance is refused: the appellant failed to show sufficient cause for non-appearance, and the pendency of a connected writ/appeal does not warrant restoration.