TaxTMI Updates e-Newsletter
Jun 28,2017

Penalty under Section 271(1)(c) - furnishing of inaccurate particulars - bona fide claims - reliance on precedent

Penalty under Section 271(1)(c) - furnishing of inaccurate particulars - bona fide claims - reliance on precedent - Validity of the Tribunal's deletion of the penalty imposed under Section 271(1)(c) for Assessment Year 1998-99. - HELD THAT: - The Court examined whether the Tribunal was justified in deleting the penalty levied under Section 271(1)(c). The authorities below and the Tribunal found that the principal loss relating to the Information Service Division was subsequently allowed by the Assessing Officer in consequential orders, removing the primary basis for penalty. The remaining three disputed claims were held to be bona fide by the CIT(A) and the Tribunal after considering the material on record. The Tribunal's reliance on the Apex Court decision in Commissioner of Income Tax v. Reliance Petro Products (P) Ltd. was held to be appropriate in the factual matrix of the case. Given these findings - that the major disallowance was ultimately sustained in favour of the assessee and the balance claims were bona fide - the Court concluded that no substantial question of law arises regarding the deletion of the penalty. [Paras 4, 5]

The Tribunal rightly deleted the penalty under Section 271(1)(c); no substantial question of law arises and the appeal is dismissed.

Final Conclusion: The appeal against deletion of penalty for Assessment Year 1998-99 is dismissed; the Tribunal's deletion of the penalty under Section 271(1)(c) is upheld as the major loss was subsequently allowed and the remaining claims were bona fide, with proper reliance on relevant precedent.

Addition under Section 69B of the Income-tax Act - valuation report under Section 55A - comparability of sale instances - burden of proof on the Revenue

Addition under Section 69B of the Income-tax Act - comparability of sale instances - valuation report under Section 55A - burden of proof on the Revenue - Deletion of the addition made by the Assessing Officer under Section 69B upheld by the Tribunal. - HELD THAT: - The Tribunal found that the comparable sales relied upon by the Assessing Officer related to commercial properties while the subject asset was a residential flat, and it considered the assessee's explanation that the property had been vacant since 1981, bore an adverse reputation including a Municipal Corporation notice under the MRTP Act, and that an agreement of sale was on record. Applying the principle that the initial burden lies on the Revenue, the Tribunal assessed the explanation as plausible and reached a reasonable conclusion that justified rejecting the addition. The Tribunal's appraisal of the evidence and comparability was therefore sustainable. [Paras 5, 6]

Tribunal's deletion of the addition sustained; no substantial question of law arises.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order deleting the addition under Section 69B is upheld and no substantial question of law is found.

Exemption under section 10(23C)(vi) - existence solely for educational purposes - trust objects and ancillary activities - approval by prescribed authority - registration under section 12AA - exemption under section 80G

Exemption under section 10(23C)(vi) - existence solely for educational purposes - trust objects and ancillary activities - approval by prescribed authority - Whether the Tribunal was justified in directing the CIT(E) to grant approval under section 10(23C)(vi) to the Trust despite the CCIT's finding that the Trust did not satisfy the condition of existing solely for educational purposes - HELD THAT: - The Court upheld the Tribunal's conclusion that the Trust, in existence since 1954, was engaged exclusively in educational activities and entitled to approval under section 10(23C)(vi). The Tribunal relied on the Trust's long history of running educational institutions, its registration under section 12AA and enjoyment of exemption under section 80G, and observed that the CCIT had not pointed to any specific non educational activity but had made only hypothetical observations about ancillary activities. The Court accepted the editorial reading of the trust deed: clause (a) establishes the primary object of spreading education; clause (b) empowers collection and application of funds for that object; and clause (c), which permits managing any public institution of the village, must be read in the context of the antecedent educational objects and not as a blanket licence to undertake non educational purposes. On that basis, the Tribunal was justified in directing the prescribed authority to grant approval under section 10(23C)(vi).

Tribunal's direction to grant approval under section 10(23C)(vi) upheld and the revenue appeal dismissed.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal was correct in directing the prescribed authority to grant approval under section 10(23C)(vi) for Asst. Year 2013-14, the Trust being held to exist for educational purposes and clause (c) of its trust deed not defeating that character.

Eligibility for deduction under Section 80IB(10) - minimum plot area requirement and single-project interpretation - commencement certificate and completion within stipulated period - effect of sale of transferable development rights (TDR) / commercial activity on 80IB(10) benefit - precedential effect of Vandana Properties and Sarkar Builders

Eligibility for deduction under Section 80IB(10) - minimum plot area requirement and single-project interpretation - commencement certificate and completion within stipulated period - Whether the assessee satisfied the conditions of Section 80IB(10) for the housing project in Assessment Year 2009-10 including the requirement as to plot area and completion within the stipulated period. - HELD THAT: - The Court recorded that the commencement certificate for the residential project was issued on 7th September, 2004 and that the project was completed in Financial Year 2007-08 with full occupancy certified on 2nd December, 2008. The Court observed that the conditions of Section 80IB(10) were complied with and noted that the commencement certificate was granted before 31st March, 2005 (prior to the amendment). Relying on the reasoning in Vandana Properties and the Apex Court's decision in Sarkar Builders, the Court upheld the finding of fact that the housing project met the statutory eligibility criteria and that the Tribunal was correct in deleting the addition made by the assessing authorities. [Paras 5]

The deduction claimed under Section 80IB(10) for the housing project in AY 2009-10 is allowable; the Tribunal's deletion of the addition is upheld.

Effect of sale of transferable development rights (TDR) / commercial activity on 80IB(10) benefit - precedential effect of Vandana Properties and Sarkar Builders - Whether the assessee's sale of TDR or existence of an outgoing commercial project on the same plot precludes the deduction under Section 80IB(10). - HELD THAT: - The Court noted the Revenue's contention that sale of TDR and the outgoing commercial project rendered the residential project an extension or otherwise disentitled the assessee from deduction. The Court found that the amount in question related to the completed housing project for which the commencement certificate existed and full occupancy was obtained within the stipulated period, and that earlier acceptance for AY 2008-09 supported this position. The Court accepted the precedents relied upon by the Tribunal and observed that Vandana Properties has been upheld by the Apex Court (Sarkar Builders), thereby diminishing the Revenue's objection based on those precedents being assailed. [Paras 5]

The sale of TDR / presence of a commercial project on the same land did not disentitle the assessee to the deduction under Section 80IB(10) in the facts of this case; Revenue's contention rejected.

Final Conclusion: The appeal is dismissed; no substantial question of law arises as the Court held that the statutory conditions for Section 80IB(10) were satisfied for AY 2009-10 and the Tribunal's deletion of the addition is affirmed.

Dependent agent - permanent establishment - principal to principal transaction - arm's length - common directorship not determinative of PE - Article 5 of the Double Taxation Avoidance Agreement - amended explanation to Section 9(2) of the Income Tax Act

Dependent agent - Article 5 of the Double Taxation Avoidance Agreement - Findings that the respondent is a dependent agent of the foreign principal were not sustained. - HELD THAT: - The Tribunal and the Commissioner of Income Tax (Appeals) examined the factual matrix and concluded that the respondent did not act as an agent of the foreign company. The authorities analysed the contractual and transactional flow and held that the commercial relationship was not that of principal-agent. The High Court found the concurrent factual conclusions to be plausible and not vitiated by error; mere common directorship did not compel treating the respondent as a dependent agent under Article 5.4 of the Treaty. [Paras 6, 7, 8]

The contention that the respondent is a dependent agent was rejected and the concurrent authorities' conclusion upheld.

Permanent establishment - dependent agent - Article 5 of the Double Taxation Avoidance Agreement - There is no creation of a Permanent Establishment in India by treating the respondent as a dependent agent. - HELD THAT: - On appreciation of evidence, the Commissioner (Appeals) and the Tribunal held that the respondent did not constitute a Permanent Establishment by virtue of agency. The transactional arrangement between the respondent and the foreign company was found to be on a principal-to-principal basis and at arm's length; therefore the tests for a dependent agent PE under the Treaty were not satisfied. The High Court declined to interfere with these concurrent findings of fact. [Paras 6, 7, 8]

The Tribunal's and Commissioner (Appeals)'s finding that no dependent agent Permanent Establishment arose in India was upheld.

Principal to principal transaction - arm's length - amended explanation to Section 9(2) of the Income Tax Act - common directorship not determinative of PE - The commercial dealings were correctly characterized as principal-to-principal transactions at arm's length; allegations of non-arm's-length pricing and that the relationship was principal-subsidiary were rejected. - HELD THAT: - The Commissioner (Appeals) described the chronological flow of transactions showing purchase and resale pricing (cost plus markup) between the parties and concluded transactions were on a principal-to-principal basis. The Tribunal agreed that the arrangement operated at arm's length. The High Court held that these factual conclusions are tenable and that the mere existence of common directors does not convert the relationship into principal-subsidiary or show non-arm's-length dealings. No error of law was shown in the authorities' treatment of the amended explanation to Section 9(2). [Paras 6, 7, 8]

The characterization of transactions as principal-to-principal and at arm's length was affirmed; allegations of principal-subsidiary relationship and non-arm's-length pricing were rejected.

Final Conclusion: The High Court dismissed the departmental appeal, upholding the concurrent factual findings of the Commissioner (Appeals) and the Tribunal that the respondent was not a dependent agent, did not constitute a Permanent Establishment in India, and that transactions were on a principal to principal, arm's length basis; no substantial question of law arises.

Addition as unaccounted cash credit under section 68 - supporting documentary evidence (agreement to sell and rock pavati) as proof of source of cash - treatment of undisclosed bank account vis-a -vis acceptability of explanation - family transactions and immediate transfer to vendor's account as corroboration

Addition as unaccounted cash credit under section 68 - supporting documentary evidence (agreement to sell and rock pavati) as proof of source of cash - family transactions and immediate transfer to vendor's account as corroboration - Deletion of the addition of Rs. 14,95,000/- made under section 68 as unexplained cash credit - HELD THAT: - The Assessing Officer added Rs. 14,95,000/- as unexplained cash credit after ITS data showed cash deposits in the assessee's bank account. The assessee explained that the amount represented part-payment under an agreement to sell agricultural land by his father to his brother and placed on record the agreement and dated cash receipts (rock pavati), and the deposits were shown to have been transferred shortly thereafter to the father's account. The Tribunal noted that Rs. 4,00,000/- of the total deposits was accepted by the AO as withdrawals from the proprietary concern and no addition was made in respect of that amount; consequently the differential treatment adopted by the authorities in relation to the undisclosed bank account (i.e., treating only part of the deposits as unexplained) was untenable. Having regard to the agreement, the cash receipts, the family connection between parties, and the immediate transfer of funds to the vendor, the Tribunal found the explanation to be corroborated and persuasive and concluded there was no merit in treating the sum as unaccounted cash credit under section 68. [Paras 10, 11]

The addition of Rs. 14,95,000/- under section 68 is deleted and the AO is directed to give effect accordingly.

Treatment of undisclosed bank account vis-a -vis acceptability of explanation - supporting documentary evidence (agreement to sell and rock pavati) as proof of source of cash - Rejection of the alternate contention relying on precedent (Bhaichand H. Gandhi) as unnecessary after allowance of main ground - HELD THAT: - The assessee alternatively relied on a decision of the Bombay High Court. The Tribunal, having accepted the assessee's primary explanation and deleted the addition on that basis, dismissed the alternate ground as redundant. No separate reliance on the precedent was required because the deletion was based on the documentary and transactional evidence on record. [Paras 11]

The alternate plea is dismissed as unnecessary in view of the allowance of the main ground.

Final Conclusion: The appeal is allowed: the addition of Rs. 14,95,000/- made under section 68 for Assessment Year 2008-09 is deleted; the alternate ground is dismissed as unnecessary and the AO is directed to give effect to the deletion.

Comparable Uncontrolled Price (CUP) method - Resale Price Method (RPM) - Berry Ratio - Most Appropriate Method (MAM) - Arm's Length Price (ALP) - Provision for warranty - deductibility - Employees' contribution to PF/ESI - deductibility if paid before income tax return due date

Comparable Uncontrolled Price (CUP) method - Resale Price Method (RPM) - Berry Ratio - Most Appropriate Method (MAM) - Arm's Length Price (ALP) - Appropriateness of CUP as MAM for benchmarking imports from Associated Enterprise and validity of applying Berry Ratio instead of RPM to determine ALP - HELD THAT: - The Tribunal examined the transfer pricing determination for AY 2010-11 and AY 2011-12. The assessee, a trader of UPS systems that also provides after sales services, had adopted CUP as the MAM; the TPO rejected CUP and, after suggesting RPM, applied Berry Ratio to compute ALP. The Tribunal recorded that the assessee did not carry out substantial manufacturing or value addition to the imported goods sold as procured from the AE. The TPO's concern that the assessee purchased significant inputs from independent parties (and therefore the margin would reflect such purchases) supported application of a gross margin based comparison. The assessee's reliance on authorities where goods were resold without value addition was held inapplicable because, on the record, purchases from non AEs and the assessee's service activities differentiated the factual matrix. In view of these findings, the Tribunal upheld the DRP/TPO conclusion that Berry Ratio was the appropriate method in the facts of these appeals and confirmed the transfer pricing adjustment. [Paras 5, 6]

CUP rejected as MAM and the adoption of Berry Ratio by the TPO/DRP to determine ALP is upheld; the assessee's ground is rejected.

Provision for warranty - deductibility - Allowability of provision for warranty claimed by the assessee - HELD THAT: - The assessee claimed a provision for warranty for the year and tendered a computation. The Tribunal applied the governing principle that provisions for warranty are deductible if based on a scientific basis and supported by systematic historical data, and where excess provisions are reversed in subsequent years. As the assessee had not claimed such provisions in earlier years and the record did not establish consistency, the Tribunal did not decide the claim on merits but remitted the matter to the AO for verification. The AO is to examine whether the assessee follows a consistent method year to year, makes provisions on a sound basis, and reverses excess provisions in later years, and to decide accordingly in light of the Apex Court authority relied upon. [Paras 7, 8]

Issue remitted to the AO for verification and fresh decision on deductibility of the warranty provision.

Employees' contribution to PF/ESI - deductibility if paid before income tax return due date - Disallowance under transfer pricing assessment of employees' contribution to PF and ESI paid after statutory due date under PF/ESI Acts but before the due date for filing the income tax return - HELD THAT: - The assessee deposited employees' contributions after the statutory due date under the PF/ESI statutes but before the due date for filing the return under the Income Tax Act. The Tribunal noted binding precedent of the jurisdictional High Court and Supreme Court holdings that contributions so remitted are allowable as deduction where paid before the due date of filing the return, in view of retrospective operation of the proviso to the relevant provision. Applying that ratio, the Tribunal allowed the assessee's claim subject to verification by the AO. [Paras 10, 12, 13]

Disallowance reversed; employees' contribution to PF/ESI treated as allowable deduction provided payment was made before the due date for filing the return, subject to verification by the AO.

Final Conclusion: Appeals partly allowed: transfer pricing adjustment based on Berry Ratio upheld; warranty provision claim remanded to the AO for verification of consistency and reversal practice; disallowance of PF/ESI contribution reversed subject to verification.

Income deemed under section 69A (unexplained cash deposits) - explanation of source of cash deposits - agricultural income as a permissible source of deposits - co-relation of bank withdrawals and deposits - remand for verification and opportunity of hearing

Income deemed under section 69A (unexplained cash deposits) - agricultural income as a permissible source of deposits - Deletion of the addition of Rs. 4,51,000 treated as unexplained cash deposits. - HELD THAT: - The assessee produced income-and-expenditure statements of the rubber estate, returns showing declared net agricultural income for the relevant and subsequent year, and a confirmation from the purchaser M/s A.N. Rubbers detailing payments aggregating to Rs. 4,78,055 which correspond with bank deposits. The CIT(A)'s rejection of the confirmation on the ground that agricultural income was not disclosed in past and subsequent years was found to be incorrect because the assessee had disclosed net agricultural income of Rs. 3,85,000 in the relevant year and declared agricultural income in the subsequent year. Given the matching receipts and the undisputed disclosure of agricultural income for the year, the Tribunal accepted that the deposits specified (aggregate Rs. 4,51,000) were satisfactorily explained as agricultural receipts and deleted the addition under section 69A accordingly. [Paras 7]

The addition of Rs. 4,51,000 was deleted.

Co-relation of bank withdrawals and deposits - remand for verification and opportunity of hearing - explanation of source of cash deposits - Remand of the balance addition of Rs. 10,05,000 to the Assessing Officer for verification of claimed sources (OD withdrawals and margin money loan) and for affording the assessee an opportunity to produce evidence. - HELD THAT: - For the remaining cash deposits, the assessee asserted that the source comprised withdrawals from an overdraft account and receipt of margin money loan from the District Industries Centre. The Tribunal found that these asserted sources required further co-relation between specific cash withdrawals and subsequent deposits. In the interest of justice and equity, the Tribunal did not decide the matter on merits but directed that the issue be restored to the Assessing Officer to verify the claimed co-relation, afford a reasonable opportunity of hearing to the assessee, and allow production of supporting evidence before final disposal. [Paras 7]

The addition of Rs. 10,05,000 was remitted to the Assessing Officer for fresh verification after affording an opportunity to the assessee.

Final Conclusion: The appeal was partly allowed: the Tribunal deleted the addition of Rs. 4,51,000 as explained by agricultural receipts and remitted the balance addition of Rs. 10,05,000 to the Assessing Officer for verification and adjudication after affording the assessee an opportunity of hearing.

Penalty under section 271B for failure to get accounts audited - Penalty under section 271A for non-maintenance of books of account - Interplay between section 44AA and section 44AB and corresponding penalties - Strict construction of penal provisions

Penalty under section 271B for failure to get accounts audited - Penalty under section 271A for non-maintenance of books of account - Interplay between section 44AA and section 44AB and corresponding penalties - Strict construction of penal provisions - Whether penalty under section 271B can be sustained where the assessee has not maintained books of account and a penalty under section 271A has been levied for that failure - HELD THAT: - The Assessing Officer imposed penalties under both section 271A (for not maintaining books as required by section 44AA) and section 271B (for not getting books audited as required by section 44AB). The Tribunal examined authorities of the Gauhati and Allahabad High Courts which hold that where an assessee has not maintained books of account the obligation to get books audited cannot arise and therefore section 271B cannot be invoked; the offence under section 44AA/271A is complete and section 44AB/271B is inapplicable. The Tribunal distinguished the decision relied upon by the CIT(A) (S.J. Agarwal & Co.) on its facts, noting that in that case books were held to be maintained but not audited, whereas in the present case the Assessing Officer found no books maintained. Applying the principle of strict construction of penal provisions and the cited precedents, the Tribunal concluded that the penalty under section 271B was not sustainable when the penalty under section 271A for non-maintenance of books had been levied. [Paras 4, 5]

Penalty under section 271B deleted; appeal allowed.

Final Conclusion: The Tribunal deleted the penalty under section 271B, holding that where books of account are not maintained and penalty under section 271A is leviable, penalty under section 271B for failure to get books audited cannot be sustained; appeal allowed.

Credit for tax deducted at source - TDS certificate issued in the name of a person other than the assessee - Rule 37BA(2) - credit to person other than deductee subject to declaration by deductee and reporting by deductor - avoidance of double credit for tax deducted at source - remand for verification by assessing officer

Credit for tax deducted at source - TDS certificate issued in the name of a person other than the assessee - Rule 37BA(2) - credit to person other than deductee subject to declaration by deductee and reporting by deductor - avoidance of double credit for tax deducted at source - Entitlement of the assessee-company to claim credit for TDS where the TDS certificates were issued in the name of the proprietary concern which originally held the contract. - HELD THAT: - The Tribunal recognised that Rule 37BA(2) exists to prevent double credit by permitting credit in the hands of a person other than the deductee only where the deductee has filed the prescribed declaration and the deductor reports the deduction in the name of that other person. However, the Tribunal found on the material before it that the proprietor in whose name the TDS certificates were issued had neither claimed the credit nor had the credit been allowed to him by the Department. In those circumstances the Tribunal held that the Assessing Officer should verify whether the proprietor has been allowed or has claimed the TDS credit; if no credit has been given to the proprietor, the assessee-company's claim for credit may be allowed. The Tribunal therefore set aside the appellate order and remitted the matter to the Assessing Officer for fresh decision after the necessary verification to ensure that no double credit arises. [Paras 6, 7]

Impugned order set aside and matter restored to the Assessing Officer for fresh decision after verification whether the proprietor has claimed or been allowed the TDS; appeal treated as allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the claim for TDS credit to the Assessing Officer for verification as to whether the TDS was claimed or allowed to the proprietor; if not, the assessee-company's claim for credit may be permitted. The appeal is allowed for statistical purposes.

Rejection of books of account under section 145(3) - estimation of income by applying net profit rate - consideration of past history as comparable for estimation - procedure under section 144 for assessment on material gathered - treatment of liabilities shown in rejected books-accretion to trade creditors

Rejection of books of account under section 145(3) - estimation of income by applying net profit rate - consideration of past history as comparable for estimation - procedure under section 144 for assessment on material gathered - Validity of estimating income at 8% net profit on gross receipts after rejection of books, without taking into account the assessee's past history and comparable cases - HELD THAT: - The Tribunal found it undisputed that the assessing officer rejected the books under section 145(3). The AO neither identified specific defects in purchase or expense vouchers nor applied any comparable case to justify the 8% net profit rate. The assessee's past years' net profit rates before salary and interest to partners showed consistency (approximately 3.54%, 3.3% and 3.8%), and after interest/salary the net rates were below 1% in earlier years. In absence of material pointing to specific infirmities warranting an 8% estimation and having regard to the jurisprudence and an identical decision of the ITAT, Agra Bench (M/s Om Construction Company), the Tribunal held that 8% was excessive. Applying a just and reasonable estimate on the record, the Tribunal reduced the estimated net profit rate to 4% of gross receipts before salary and interest to partners for the year under appeal. The Tribunal therefore granted relief by lowering the rate of estimation while noting the procedure under section 144 should be followed where specific material is gathered, but the AO had not done so here. [Paras 8]

Assessee granted partial relief: net profit for estimation fixed at 4% of gross receipts before salary and interest to partners in place of 8%.

Rejection of books of account under section 145(3) - treatment of liabilities shown in rejected books-accretion to trade creditors - Sustainability of addition on account of accretion to trade creditors where the books of account have been rejected - HELD THAT: - The AO computed an addition by taking the increase in 'current liabilities & provisions' (trade creditors) between two years and the CIT(A) sustained that addition on the ground that the assessee failed to prove genuineness of liabilities. The Tribunal observed that once books are rejected under section 145(3), the revenue cannot selectively rely on entries from those rejected books to make additions; where estimation is made by applying profit rates it covers infirmities and there is no basis to further pick entries from rejected accounts. The Tribunal followed the view of the Karnataka High Court (CIT vs. Bahubali Neminath Muttin) and other authorities that rejected books cannot be used to support additional disallowances on such entries. Finding that the CIT(A)'s confirmation lacked proper factual and legal basis, the Tribunal held the addition was not justified and deleted it. [Paras 9]

Addition on account of accretion to trade creditors deleted; ground allowed.

Final Conclusion: Appeal partly allowed: estimation of income reduced to 4% of gross receipts before partner salary and interest for AY 2009-10; addition on account of accretion to trade creditors deleted.

Penalty for failure to comply with notice under section 142(1) - wilful defiance / deliberate non-compliance - effect of assessment completed under section 143(3) on penalty proceedings - validity and service of statutory notice - requirement of recording satisfaction before initiating penalty proceedings

Penalty for failure to comply with notice under section 142(1) - wilful defiance / deliberate non-compliance - effect of assessment completed under section 143(3) on penalty proceedings - requirement of recording satisfaction before initiating penalty proceedings - Levy of penalty under section 271(1)(b) for alleged non-compliance with notice under section 142(1) was unsustainable on the facts and was to be deleted. - HELD THAT: - The Tribunal found that the assessee's authorised representative attended proceedings and filed written submissions in response to the notice, and the assessment was ultimately completed under section 143(3). Those facts, as recorded in the assessment order, demonstrate that the supposed default was later treated as complied with in assessment proceedings. The authorities failed to show deliberate or wilful defiance by the assessee, and the CIT(A) relied on mere presumptions without supporting documentary evidence. Further, precedents relied upon establish that mere initiation of penalty without proper recording of satisfaction, and where subsequent assessment under section 143(3) treats compliance as adequate, negates the basis for penalty. Applying these principles, the Tribunal held that levy of penalty under section 271(1)(b) was patently wrong and directed deletion of the penalty. [Paras 6, 8, 9, 10, 11]

Penalty under section 271(1)(b) deleted and the impugned penalty order set aside.

Validity and service of statutory notice - penalty for failure to comply with notice under section 142(1) - The penalty order was void or not maintainable in view of absence of established service of the statutory notice. - HELD THAT: - The Tribunal observed that the date of service of the notice issued under section 142(1) was not established from the record, and neither the assessing officer nor the CIT(A) had recorded the service particulars in their orders. Because service was not shown and the penalty order did not establish jurisdictional facts of service, the appeal was found not maintainable on grounds of bad service and the penalty order was treated as void ab initio. [Paras 6, 10, 12]

Appeal allowed on the additional ground of bad service of the statutory notice; penalty order held void ab initio.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside and deleted the penalty imposed under section 271(1)(b) for assessment year 2010-11, holding that there was no wilful defiance, the assessment under section 143(3) treated compliance as adequate, and service of the notice was not established rendering the penalty order unsustainable.

Deduction under section 80IB(11C) - Filing return within due date under section 139(1) - Belated return filed under section 139(4) treated as curable procedural defect - Beneficial construction of incentive provisions - Survey under section 133A and reconciliation of turnover

Deduction under section 80IB(11C) - Filing return within due date under section 139(1) - Belated return filed under section 139(4) treated as curable procedural defect - Beneficial construction of incentive provisions - Survey under section 133A and reconciliation of turnover - Whether deduction under section 80IB(11C) can be denied solely because return was not filed on or before the due date under section 139(1), where a belated return was filed under section 139(4) and reasonable cause for delay is shown - HELD THAT: - The assessee operated an eligible hospital and satisfied the substantive conditions for deduction under section 80IB(11C); the only ground for denial was non-filing of the return within the due date under section 139(1). While section 80IB read with the proviso in section 80AC mandates filing the return within the time prescribed by section 139(1), the Tribunal observed that incentive provisions should be construed beneficially and that procedural lapses which are shown to be due to reasonable cause should not automatically defeat substantive entitlement. The assessee explained delay as attributable to reconciliation of turnover arising out of materials impounded during a survey under section 133A, a reason found to be beyond its control; the return was filed belatedly under section 139(4). Relying on precedents treating such procedural defects as curable, and on the facts and explanations furnished, the Tribunal held that denial of the deduction on this technicality was not warranted and directed the Assessing Officer to allow the deduction under section 80IB(11C). [Paras 7, 9]

Deduction under section 80IB(11C) allowed as the assessee satisfied substantive conditions and had reasonable cause for belated filing of return; procedural delay under section 139(1) did not disentitle the assessee to the benefit.

Final Conclusion: The appeal is allowed and the assessing officer is directed to allow deduction under section 80IB(11C) for Asst. Year 2011-12, the denial being set aside on the ground that the assessee had reasonable cause for belated filing and was otherwise eligible for the benefit.

Jurisdiction under section 263 to revise assessment - applicability of section 40A(3) - disallowance for payments other than by account payee cheque/draft - banking transaction tax as evidence of cash/bearer cheque payments - requirement of specific defects and prima facie prejudice to revenue before invoking revisional jurisdiction

Jurisdiction under section 263 to revise assessment - applicability of section 40A(3) - disallowance for payments other than by account payee cheque/draft - banking transaction tax as evidence of cash/bearer cheque payments - requirement of specific defects and prima facie prejudice to revenue before invoking revisional jurisdiction - Validity of the CIT's exercise of revisional jurisdiction under section 263 to set aside the assessment and direct further disallowance under section 40A(3). - HELD THAT: - The Tribunal held that the Assessing Officer during scrutiny had examined bank statements and books and made disallowances under section 40A(3) where justified; the CIT failed to point to any specific defect in the AO's examination or to demonstrate a prima facie case of prejudice to the revenue. The CIT's conclusion was based on suspicion and on an assertion that banking transaction tax entries proved bearer/cash payments, but the Tribunal on perusal of the bank statements found no correspondence between the dates cited by the CIT and any cash/bearer payments. Absent specific defects or demonstrable prejudice, the revisional jurisdiction under section 263 could not be exercised merely on the basis of suspicion or on a superficial reading of banking transaction tax entries. Therefore the CIT's direction to modify the assessment and enhance disallowance was unwarranted and the assessment order passed by the AO was held to be neither erroneous nor prejudicial to the interest of the revenue. [Paras 8, 9]

The CIT's order under section 263 is set aside and the assessment order dated 8.11.2011 passed under section 143(3) is restored.

Final Conclusion: The appeal is allowed: the revisional order of the CIT under section 263 is quashed for lack of specific defects or prima facie prejudice, and the assessment order of the AO under section 143(3) for AY 2009-10 is restored.

Reopening of assessment and change of opinion doctrine - validity of notice under section 147 - assessment of peak bank credit - presumptive taxation under section 44AF and reconciliation with bank deposits

Validity of notice under section 147 - reopening of assessment and change of opinion doctrine - Objection to initiation of reassessment proceedings under section 147 was not adjudicated on merits and was dismissed for procedural non-compliance in raising the ground before the authorities. - HELD THAT: - The Tribunal observed that although there may be merit in the contention that reopening after four years required satisfaction of the proviso to section 147 and that reopening on the same facts could amount to a change of opinion, the assessee had not raised or agitated this contention before the Assessing Officer or the Commissioner (Appeals). The ground was pressed for the first time in appeal and required examination of factual materials including the satisfaction recorded by the AO, which were not placed on record. Accordingly, the Tribunal declined to entertain the contention and dismissed the ground without entering into the substantive legality of the reassessment notice. [Paras 6]

Ground challenging initiation of proceedings under section 147 dismissed for being not properly agitated before the revenue authorities; substantive validity of reopening not decided.

Assessment of peak bank credit - reopening of assessment and change of opinion doctrine - presumptive taxation under section 44AF and reconciliation with bank deposits - Addition of peak bank credit in the reassessment was deleted: reassessment amounted to impermissible change of opinion as the AO in the original assessment had examined and accepted the source of deposits and assessee's income under presumptive scheme. - HELD THAT: - The Tribunal found that the original assessment order (completed after notice under section 148) had recorded receipt of AIR data and had examined the cash deposits in the Union Bank account, accepting the assessee's explanation that deposits arose from sales and completing assessment after making only a nominal rounding addition. The subsequent reassessment by the same officer on the same material, resulting in taxing peak credits, was characterised as a review or change of opinion not permissible in reassessment proceedings. Further, the Tribunal noted that the deposits fell within the turnover declared by the assessee and that income had been declared under the presumptive provisions (section 44AF), accepting the assessee's income. In view of these factors, the addition of peak credit in the reassessment was unsustainable and was directed to be deleted. [Paras 6]

Addition of peak credit deleted; reassessment found to be impermissible change of opinion and deposits treated as accounted for within declared turnover and presumptive income.

Final Conclusion: The appeal is partly allowed: the ground challenging initiation of proceedings under section 147 is dismissed as not properly agitated before the revenue authorities, but the addition of peak bank credit made in the reassessment is deleted on the ground that it amounted to an impermissible change of opinion and the deposits were within the turnover declared and covered by presumptive income.

Pass a speaking order - protest registered at the time of self-assessment - verification and testing of imported goods - reassessment under Section 17 of the Customs Act, 1962 - self-assessment regime / trust-based customs control

Pass a speaking order - protest registered at the time of self-assessment - reassessment under Section 17 of the Customs Act, 1962 - Whether the proper officer is obliged to pass a speaking order where an importer has paid duty under protest at the time of self-assessment of a Bill of Entry. - HELD THAT: - The Court examined the amended scheme of Section 17 which permits self-assessment but preserves the proper officer's power to verify, examine or test goods and to reassess under sub section (4). The Court held that lodging a formal protest at the time of payment of duty converts the clearance into a clearance with a caveat and engages the obligation of the proper officer to verify the claim. Where reassessment under Section 17(4) is undertaken and the re assessment is contrary to the importer's self assessment (or where the importer records non acceptance in writing), sub section (5) requires the proper officer to pass a speaking order within the prescribed period. The division the respondents sought to draw between consignments processed through self assessment and those cleared after provisional conversion (or on bond) was rejected: in each case the respondents treated the goods as chargeable and there was no acquiescence by the importer. The Court therefore found that the scheme does not exclude passing of speaking orders in entries made by self assessment where a protest has been registered, and that without a speaking order an appeal would be ineffectual. [Paras 21, 23, 24, 29, 30]

The proper officer is directed to pass speaking orders under Section 17 in respect of the six specified Bills of Entry where protests were registered at the time of self assessment, and to do so with due expedition (not later than 15 days from receipt of the order).

Verification and testing of imported goods - self-assessment regime / trust-based customs control - Whether any additional direction was required in respect of the Bill of Entry (No.2968893 dated 19.10.2015) for which samples had been sent for testing and the respondents had undertaken to pass a speaking order after further clarification. - HELD THAT: - The record showed that for BE No.2968893 samples were drawn and sent to the Regional Telecom Engineering Centre and that the respondents had indicated their intention to seek further clarification from the Department of Telecommunications and to pass a speaking order after affording hearing. The Court noted that where test reports exist they must be supplied to the petitioner. Given the respondents' clear undertaking to pass a speaking order after giving opportunity of hearing, no separate coercive direction was necessary in respect of this BE; the broader obligation to supply any test reports and to proceed expeditiously was reiterated. [Paras 17, 28, 31, 32, 33]

No specific further direction as to BE No.2968893 is required; respondents to supply any available test reports to the petitioner and to pass a speaking order after hearing. The exercise to supply reports and pass orders shall be completed with due expedition, and in any event not later than 15 days from receipt of a copy of this order.

Final Conclusion: Writ petition disposed of by directing the proper officer to pass speaking orders under Section 17 of the Customs Act, 1962 in respect of the six Bills of Entry in which protests were registered at the time of self assessment; in respect of the seventh BE (No.2968893) the respondents shall supply any test reports and, after giving the petitioner an opportunity of hearing, pass a speaking order; the actions ordered are to be completed expeditiously and in any event within 15 days of receipt of this order. No order as to costs.

Exemption for aircraft parts imported for servicing, repair or maintenance of aircraft used in scheduled air transport service - confiscation under Section 111 (o) for breach of conditional exemption - penalty under Section 112 (a) predicated on confiscation - time bar for demand under Section 28 - detention for revenue recovery distinguished from seizure under the Customs Act

Exemption for aircraft parts imported for servicing, repair or maintenance of aircraft used in scheduled air transport service - Availability of exemption under Notification 12/2012 (customs and excise) for the imported aircraft engine - HELD THAT: - The engine was imported to be fitted to aircraft MSN 3089 with the admitted purpose of making the aircraft airworthy and taking it out of India after termination of the lease. The tribunal affirmed the Original Authority's finding that on the date of import the aircraft could not be regarded as being used for operating scheduled air transport service because (a) the aircraft operator permit was suspended and proceedings for de registration and re registration abroad had been initiated prior to import, and (b) the lease in respect of the aircraft had been terminated prior to import. The exemption is explicitly limited to parts imported for servicing, repair or maintenance of aircraft that are used in scheduled air transport/cargo service; those factual prerequisites were not met. For these reasons the denial of exemption by the Original Authority was upheld. [Paras 9, 10, 11, 12]

Denial of exemption under the notifications to the imported engine is upheld.

Confiscation under Section 111 (o) for breach of conditional exemption - Validity of the order of confiscation of the imported engine under Section 111 (o) - HELD THAT: - Section 111(o) applies where goods were imported under a conditional exemption and the condition was not observed. In this case the bill of entry claiming exemption was assessed and the exemption was denied at assessment; there was therefore no antecedent grant of a conditional exemption whose breach could attract Section 111(o). The engine remained in customs custody and was not cleared for home consumption under a conditional concession. Accordingly, the tribunal concluded that confiscation under Section 111(o) is not legally sustainable. [Paras 13, 14, 15]

Confiscation of the engine under Section 111(o) is set aside as unsustainable in law.

Penalty under Section 112 (a) predicated on confiscation - Sustainability of penalty imposed on the appellant under Section 112(a) - HELD THAT: - Section 112(a) penalises acts or omissions which would render goods liable to confiscation under Section 111. Since the tribunal held that confiscation was not sustainable, the foundational basis for imposition of penalty under Section 112(a) failed. The Original Authority's view that the appellant acted with knowledge or mala fides was examined in context; given that the bill of entry was filed by the airline and the appellant asserted ownership later to protect its commercial interest, the tribunal found no justifiable basis to sustain the penalty. [Paras 18, 19]

Penalty imposed on the appellant under Section 112(a) is set aside.

Time bar for demand under Section 28 - Whether the demand for customs duty was barred by limitation - HELD THAT: - The bill of entry was assessed on 06/12/2012 with denial of exemption. Subsequent investigations and recognition of the appellant as importer led to issuance of the show cause notice on 28/11/2013, within one year of assessment. Given these intervening developments and that the show cause notice was issued within the statutory period following assessment, the tribunal found no infirmity in invoking Section 28 for confirmation of the demand. [Paras 16]

Demand for customs duty is not barred by limitation; invocation of Section 28 is valid.

Detention for revenue recovery distinguished from seizure under the Customs Act - Characterisation of the initial detention of the engine pursuant to a revenue recovery request - HELD THAT: - The engine was detained by Customs in pursuance of a detention notice issued by the Service Tax authority for recovery of confirmed tax arrears of the airline. The tribunal distinguished this action as a revenue recovery detention permitted under law and different in character from a seizure under Section 110 of the Customs Act, which is punitive and linked to enforcement action under the Act. The detention for revenue recovery therefore could not be equated to seizure under the Customs Act for purposes of invalidating subsequent proceedings. [Paras 17]

Detention pursuant to the Service Tax revenue recovery notice is a revenue recovery action and not a seizure under the Customs Act.

Final Conclusion: The appeal is partly allowed: the denial of exemption to the imported aircraft engine is upheld, but the order of confiscation and the penalty imposed on the appellant are set aside; the demand for customs duty is valid and the initial detention was a revenue recovery action, not a seizure under the Customs Act.

Re-test of samples - classification of imported goods - reliability of laboratory test reports - NABL accredited laboratory - reasoned order - stay of operation of appellate order

Re-test of samples - NABL accredited laboratory - reliability of laboratory test reports - Validity of Commissioner (Appeals)'s direction to get representative samples re-tested by Delhi Test House (NABL accredited laboratory) for distinguishing Natural Calcium Carbonate from Precipitated Calcium Carbonate. - HELD THAT: - The Commissioner (Appeals) considered documentary material including a letter from CSIR indicating that chemical methods cannot reliably distinguish Natural and Precipitated Calcium Carbonate and that X-ray diffraction is relevant for such distinction. The Commissioner (Appeals) also noted instances where CRCL reported lack of requisite testing facilities. On that basis the appellate authority set aside the original order and directed re-testing by Delhi Test House, a NABL accredited laboratory possessing facilities for X-ray diffraction and Atomic Absorption Spectrometry. The Tribunal found the appellate order to be a reasoned exercise of discretion in light of the material about testing capabilities and the need for appropriate tests to determine nature and composition of the goods.

Direction for re-test by Delhi Test House is upheld as a reasoned order amenable to implementation.

Stay of operation of appellate order - reasoned order - Whether the Revenue's applications for stay of the Commissioner (Appeals)'s order directing re-testing should be granted. - HELD THAT: - Revenue relied on CRCL's earlier test reports and sought a stay of the appellate direction. The Tribunal observed that the Commissioner (Appeals)'s order is reasoned and that implementation of the re-test direction would not cause injustice to Revenue. The Tribunal also noted precedential administrative practice where re-testing by laboratories other than CRCL had been directed in similar cases. Balancing these considerations, the Tribunal concluded that stay was not warranted.

Applications for stay are rejected and the appellate order shall not be stayed.

Final Conclusion: Both stay applications filed by Revenue are dismissed; the Commissioner (Appeals)'s reasoned direction for re-testing the samples by a NABL accredited laboratory (Delhi Test House) is to be implemented.

Conversion of free shipping bills into DEPB shipping bills - conversion of free shipping bills into drawback shipping bills (All Industry Rate) - existence of documentary evidence at the time of export - discretion to amend shipping bills under Section 149 of the Customs Act - CBEC Circular No.4/2004 permitting relaxation for conversion to drawback shipping bills - self-declaration scheme and responsibility of the exporter at the time of filing shipping bill

Conversion of free shipping bills into DEPB shipping bills - existence of documentary evidence at the time of export - discretion to amend shipping bills under Section 149 of the Customs Act - Request for conversion of free shipping bills into DEPB shipping bills was rejected for lack of documentary evidence existing at the time of export. - HELD THAT: - The Commissioner recorded that identity, description, value and admissibility for DEPB (except two shipping bills) were established on merits, but conversion was barred because no documentary evidence existed at the time of export indicating intention to avail DEPB. The proviso to Section 149 requires that amendments to a shipping bill after export be supported by documentary evidence in existence at the time of export. Board's Circular No.4/2004 recognises that under the self-declaration regime exporters must decide at the time of filing which incentive to claim and that post-facto conversions create difficulties. The Tribunal noted these principles and the Commissioner's application of them in para 8 of the impugned order, and did not direct conversion to DEPB in the absence of contemporaneous documentary evidence. [Paras 3]

The rejection of conversion of the free shipping bills into DEPB shipping bills on the ground of absence of documentary evidence at the time of export is recorded and not sustained for conversion to DEPB.

Conversion of free shipping bills into drawback shipping bills (All Industry Rate) - CBEC Circular No.4/2004 permitting relaxation for conversion to drawback shipping bills - self-declaration scheme and responsibility of the exporter at the time of filing shipping bill - Whether the Commissioner ought to have considered, on merits, the appellant's alternate request for conversion of free shipping bills into drawback shipping bills (All Industry Rate). - HELD THAT: - The Tribunal found that the goods were factory-stuffed under supervision of Central Excise authorities and relevant export documentation including foreign inward remittance certificate had been placed on record. In terms of CBEC Circular No.4/2004 the Commissioner has power to relax the condition and permit conversion into drawback shipping bills subject to conditions and merits. The Commissioner had not examined the alternate plea for conversion to drawback on merits nor exercised the discretion conferred by the Circular. Consequently the Tribunal set aside the impugned order and remanded the matter for fresh consideration, directing that the Commissioner afford personal hearing and decide the request afresh. [Paras 5, 6]

Impugned order set aside insofar as it failed to consider conversion to drawback shipping bills; matter remanded to Commissioner for fresh adjudication on that request with opportunity of personal hearing.

Final Conclusion: The appeal is allowed in part: the Commissioner's order refusing conversion to DEPB is recorded on established principles but, since the Commissioner did not exercise his power under Circular No.4/2004 to consider conversion into drawback shipping bills (All Industry Rate) on merits, the impugned order is set aside and the matter is remanded to the Commissioner of Customs for fresh adjudication (with personal hearing) to decide the alternate conversion request within three months.

Diversion of imported goods from advance licence obligation to domestic market - Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Connivance and custodial shelter by Customs House Agent (CHA) - Vicarious/partnership liability for acts of the firm - Liability of buyer in possession of offending imported goods - Proof by tracing origin and termination of goods and unrebutted evidence - Failure to fulfill export obligation under advance licence scheme

Diversion of imported goods from advance licence obligation to domestic market - Connivance and custodial shelter by Customs House Agent (CHA) - Proof by tracing origin and termination of goods and unrebutted evidence - Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Penalty imposed on Hansraj Pragji & Sons (CHA) confirmed for channelizing imported goods to the domestic market and sheltering them in its custody contrary to advance licence obligations. - HELD THAT: - The adjudicating authority and investigation established that the imported materials were diverted to the CHA's godown instead of being sent to the importer's factory, and that the CHA acted as financier and was aware that the goods related to the advance licence scheme. Evidence from buyers identified the seller and tracing of origin and termination of the goods, together with DGFT confirmation that export obligation was unfulfilled, remained unrebutted. Oral admissions recorded that goods were received into the CHA's warehouse and delivered therefrom. On the basis of these materials and the uncontradicted evidence, there was no scope for interference with the adjudication, and the penalty imposed was correctly sustained. [Paras 2]

Penalty of Rs. 10 lakhs imposed on Hansraj Pragji & Sons is confirmed and the appeal is dismissed.

Vicarious/partnership liability for acts of the firm - Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Penalty imposed on partner Shamlal Biharilal Bajaj confirmed on account of his association with the partnership firm that committed the offence. - HELD THAT: - The partner could not disassociate himself from the offence of the partnership firm which stored and channelized the offending goods. Given the firm's culpability established in the proceedings, granting relief to the partner would amount to rewarding evasion. The adjudicating authority's imposition of the penalty on the partner is therefore upheld. [Paras 3]

Penalty of Rs. 10 lakhs imposed on Shamlal Biharilal Bajaj is confirmed and the appeal is dismissed.

Liability of buyer in possession of offending imported goods - Proof by tracing origin and termination of goods and unrebutted evidence - Penalty under Section 112(a) and 112(b) of the Customs Act, 1962 - Penalty imposed on buyer Atul Shah confirmed for being in possession of offending imported goods purchased from the identified seller. - HELD THAT: - The adjudicating authority found possession of the offending goods by the appellant and imposed penalty under the relevant provisions. The appellant did not deny purchasing the imported goods; Customs discharged the burden of proof by establishing sale to him. He could not disentangle himself from the dealing in the offending goods and failed to rebut the case, warranting confirmation of the penalty. [Paras 4]

Penalty of Rs. 10 lakhs imposed on Atul Shah is confirmed and the appeal is dismissed.

Final Conclusion: All three appeals are dismissed and the penalties of Rs. 10 lakhs imposed on the CHA, the partner, and the buyer are confirmed.

Classification of imported cartridges - sampling and expert testing of imported goods - reliance on authorised armourer's technical opinion - remand for de novo adjudication

Classification of imported cartridges - sampling and expert testing of imported goods - reliance on authorised armourer's technical opinion - Whether the question of whether the imported .32 cartridges were rifle or revolver cartridges could be finally determined without drawing and testing samples and obtaining an expert opinion, or required remand for technical examination. - HELD THAT: - The Tribunal noted that the factual controversy in the present appeals is identical to that in the earlier M/s. Nanda Shastralaya matter, where the crucial question was whether .32 rifle cartridges permitted under licence covered the imported cartridges alleged to be .32 revolver cartridges. The Tribunal observed that physical characteristics differ and that the Commissioner (Appeals) had relied on a certificate of an Authorised Armourer who had tested samples; the Revenue disputed the reliability of such reliance where no sample from the consignment had been examined. Citing its reasoning in the Nanda Shastralaya judgment, the Tribunal held that the issue can be resolved only by drawing samples from the imported consignment and obtaining an expert opinion from the Authorised Armourer or another competent technical expert. In view of identical facts, the Tribunal followed the earlier decision and directed remand to the original adjudicating authority to have samples drawn, secured an expert opinion, afford effective opportunity of hearing, and thereafter pass a de novo adjudication. The Tribunal therefore did not decide the classification on merits but required technical verification before a final decision. [Paras 5, 6, 7]

Matter remanded to the original adjudicating authority to draw samples, obtain expert testing/opinion and thereafter pass a de novo order after affording effective opportunity of hearing.

Final Conclusion: Appeals disposed of by way of remand; Tribunal follows its earlier decision in M/s. Nanda Shastralaya and directs sampling, expert testing and de novo adjudication by the original authority.

Joint and several liability in Customs demand - Remand to adjudicating authority for fresh determination - Discharge of export obligation under EPCG scheme - EODC certificate and cancellation of bond and bank guarantee as evidence of discharge - Consideration of DGFT correspondence on acceptability of foreign exchange earnings

Joint and several liability in Customs demand - Confirmation of Customs duty demand jointly and severally against multiple persons is not sustainable. - HELD THAT: - The Tribunal applied its consistent precedent that a demand of duty cannot be confirmed jointly and severally against multiple persons. The adjudicating authority in the impugned order confirmed the demand jointly and severally against the hotel and two individuals. That approach is contrary to the Tribunal's established position, and therefore the impugned order is unsustainable on this ground. [Paras 4]

Impugned order set aside insofar as the demand was confirmed jointly and severally; matter remanded for fresh decision on against whom the demand should be made.

Remand to adjudicating authority for fresh determination - Discharge of export obligation under EPCG scheme - EODC certificate and cancellation of bond and bank guarantee as evidence of discharge - Consideration of DGFT correspondence on acceptability of foreign exchange earnings - Whether export obligation under EPCG was discharged and related material to be considered on remand. - HELD THAT: - The Tribunal did not decide on the merits of whether the export obligation was fulfilled. Instead it directed remand to the original adjudicating authority to determine, afresh, against whom any demand may be made and to consider all relevant material including the EODC issued by DGFT, cancellation of bond and bank guarantee by Customs, and correspondence from DGFT regarding the acceptability of hotel foreign exchange earnings as discharge of the obligation. All substantive issues were left open for the adjudicating authority to examine in the light of those documents. [Paras 4]

Matter remanded to the original adjudicating authority with directions to consider the DGFT correspondence, the EODC certificate and cancellation of bank guarantee, and to decide all issues afresh.

Final Conclusion: Appeal allowed by way of remand: impugned order set aside to the extent it confirmed a joint and several demand; the file is remitted to the original adjudicating authority to determine against whom any demand should be made and to consider the EODC, cancellation of bond/bank guarantee and DGFT correspondence; all other issues left open for fresh adjudication.

Value for additional duty under Section 4A - retail sale price (RSP) as basis for valuation - genuineness of printed MRP - linked or non-linear transactions affecting RSP determination - remand for fresh consideration of RSP determination

Retail sale price (RSP) as basis for valuation - genuineness of printed MRP - linked or non-linear transactions affecting RSP determination - Whether the sale by the importer to M/s. Dish T.V. can be treated as the RSP for determining value for additional duty and whether the declared printed MRP is genuine - HELD THAT: - The Tribunal found wide and non-linear variations in prices along the chain from import to ultimate retail sale, with the importer's bulk sale to M/s. Dish T.V. at a price materially higher than the printed MRP and subsequent sales at substantially lower levels, indicating that other considerations were operating in the transactions. The Tribunal held that the prima facie rejection of the declared printed MRP is supported by evidence on record, but that the legal provisions governing Section 4A, the statutory scope of RSP and the application of relevant rules were not examined in sufficient detail by the original authority with respect to the unique facts. In particular, because the first buyer (M/s. Dish T.V.) was not the retail consumer and the transaction was in bulk, the question whether that sale can be equated to an RSP requires careful evaluation against the definition and purposes of RSP and consideration of linked incomes and commercial arrangements. The Tribunal therefore directed that the original authority must reassess the correct assessable value under Section 4A with clear reasons and supporting evidence, and afford the importer an opportunity to place relevant material and defence before arriving at any final RSP determination. [Paras 5, 6]

Issue remanded to the original authority for fresh consideration of RSP and valuation under Section 4A, with opportunity to the appellant to present evidence and defence.

Value for additional duty under Section 4A - remand for fresh consideration of RSP determination - Whether the impugned adjudication order fixing value at the importer's sale price and demanding differential duty can be sustained - HELD THAT: - The Tribunal concluded that the impugned order could not be sustained in its present form because the original authority had not recorded adequate reasoning or undertaken a detailed statutory examination to fix the correct assessable value after rejecting the declared MRP. Although the original authority adopted the importer's sale price as RSP, the Tribunal noted that this approach required further examination given that the first sale was a bulk transaction to an entity that is not the retail consumer and that other commercial considerations appeared to influence pricing. Consequently, rather than deciding the valuation on merits, the Tribunal set aside the impugned order and remitted the matter for reconsideration so that the authority may determine the correct value with reasoned findings and evidence. [Paras 6, 7]

Impugned order set aside; matter remanded to the original authority for fresh adjudication of assessable value and differential duty, after giving the appellant adequate opportunity to be heard.

Final Conclusion: Appeal allowed in part; impugned order cannot be sustained and is set aside. Matter remitted to the original adjudicating authority for fresh consideration and determination of the correct assessable value for additional duty under Section 4A after examining relevant statutory criteria and evidences and after affording the appellant a full opportunity of hearing.

Appeals to Appellate Tribunal under Section 129A - No jurisdiction of Appellate Tribunal over orders relating to payment of drawback - Mixed issues of drawback and classification not maintainable before the Appellate Tribunal

No jurisdiction of Appellate Tribunal over orders relating to payment of drawback - Appeals to Appellate Tribunal under Section 129A - Tribunal has no power to entertain an appeal against an order of the Commissioner (Appeals) insofar as it relates to payment of drawback. - HELD THAT: - The statutory scheme under Section 129A confines appeals to the Appellate Tribunal and contains a proviso expressly excluding jurisdiction in respect of payment of drawback. The impugned order of the Commissioner (Appeals) set aside the adjudication confirming demand of drawback; however, as the subject-matter of the Commissioner (Appeals) order pertains to payment of drawback, such an order is outside the jurisdiction of the Appellate Tribunal and cannot be entertained by it. Applying the statutory exclusion, the Tribunal is not empowered to decide issues decided by the Commissioner (Appeals) that relate to drawback claims. [Paras 6, 8]

Appeal dismissed insofar as it challenges the Commissioner (Appeals) order relating to payment of drawback for lack of jurisdiction.

Mixed issues of drawback and classification not maintainable before the Appellate Tribunal - Appeals to Appellate Tribunal under Section 129A - Where the Commissioner (Appeals) decides both drawback and classification together such that the main dispute is the drawback claim, the appeal is not maintainable before the Appellate Tribunal even if classification is also addressed. - HELD THAT: - Past Tribunal precedent was applied to hold that when the principal issue in the Commissioner (Appeals) order concerns admissibility of drawback and determination of that issue necessarily involves consideration of classification, the first proviso to the relevant appellate provision bars the Appellate Tribunal's jurisdiction. Only in cases where the Commissioner (Appeals) clearly records separable and independent decisions-one solely on drawback and another solely on classification-could different portions be challenged before different fora. In the present case the order under challenge is essentially a drawback decision which incidentally involves classification; therefore the appeal to the Tribunal is not maintainable. [Paras 7, 8]

Appeal not maintainable before the Tribunal where drawback is the main issue even if classification is also decided; accordingly the appeal fails on this ground.

Final Conclusion: Revenue's appeal is dismissed: the Appellate Tribunal lacks jurisdiction to entertain appeals against Commissioner (Appeals) orders relating to payment of drawback, and where drawback is the principal issue (even if classification is considered), such orders cannot be challenged before the Tribunal.

Fraud on revenue - deliberate misdeclaration - deception by false representation - confiscation as smuggled goods - vitiation of proceedings by fraud

Fraud on revenue - deception by false representation - Whether the appellant committed fraud by claiming concessional exemption without evidence. - HELD THAT: - The Tribunal found that the appellant declared entitlement to concessional duty under the notification in the bill of entry without having any evidence to satisfy the conditions of the notification. Making Customs believe an untrue claim was treated as deception irrespective of any subsequent examination; fraud is established where a false representation is made knowingly, without belief in its truth, or recklessly. The bench relied on precedents recognising that fraud involves deceit and injury and that suppression or false representation vitiates legal proceedings (references as cited in the judgment: Commissioner of Customs, Kandla v. Essar Oil Ltd. ; S.P. Chengalvaraya Naidu v. Jagannath ; Roshan Deen v. PreetiLal ; Ram Preeti Yadav v. U.P. Board of High School and Intermediate Education ; Ashok Leyland Ltd. v. State of T.N. ; Gowrishankar v. Joshi Amha Shankar Family Trust ). On facts, Customs proved deliberate misdeclaration and deceptive conduct by the appellant, amounting to fraud on the revenue.

Fraud by the appellant was held proved and the claim of exemption was rejected.

Deliberate misdeclaration - confiscation as smuggled goods - Whether the goods were liable to confiscation as smuggled goods due to the appellant's conduct. - HELD THAT: - The Tribunal concluded that the deliberate misdeclaration of entitlement to exemption rendered the imported goods liable to confiscation as smuggled goods under the Customs Act, as the appellant sought undue enrichment at the cost of the Revenue. The finding was grounded on the established principle that wrongful declaration and deceptive import conduct attract confiscation consequences and sanctioning under the statute.

The goods were held liable to confiscation on account of deliberate misdeclaration.

Vitiation of proceedings by fraud - fraud unravels all - Whether fraud vitiates the appellant's entitlement and justifies dismissal of the appeal. - HELD THAT: - Applying authorities that fraud nullifies advantages obtained and vitiates proceedings, the Tribunal observed that where fraud is established no court will permit retention of benefit obtained thereby. The Tribunal referred to decisions holding that fraud unravels everything and fortifies Revenue's stand (references in the judgment: UOI v. Jain Shudh Vanaspati Ltd. ; CC v. Candid Enterprises ; Delhi Development Authority v. Skipper Construction Company (P) Ltd ; S P Chengalavaraya Naidu v. Jagannath ; Ram Preeti Yadav v. UP Board ). On that basis the appeal was dismissed.

Fraud vitiated the claimed entitlement and warranted dismissal of the appeal.

Final Conclusion: The Tribunal dismissed the appeal, holding that the appellant's unsupported claim of concessional exemption constituted deliberate misdeclaration and fraud, rendering the goods liable to confiscation and depriving the appellant of the claimed benefit.

Alteration of Articles - Conversion of a public company into a private company requiring Tribunal approval - Validity of registered alteration as if originally in the articles - Supremacy of statute over rules - Applicability of transitional MCA notification preserving Companies Act, 1956 provisions - Compliance with NCLT Rules, 2016 - Rule 68 conditions for conversion

Conversion of a public company into a private company requiring Tribunal approval - Compliance with NCLT Rules, 2016 - Rule 68 conditions for conversion - Conversion of the petitioner company from a public company to a private company sanctioned and the requisite alteration in its articles ordered to be filed with the Registrar. - HELD THAT: - The Tribunal examined the petition filed under Section 14 read with Rule 68 of the NCLT Rules, 2016 and found that the petitioner satisfied the statutory and procedural prerequisites: board resolution approving conversion, members passing a special resolution, publication of statutory notice, explanation of reasons for conversion, and disclosure as to creditors with no prejudice to members or creditors. Having regard to Section 14(1) second proviso (requiring Tribunal approval for conversion) and subsection (2) (filing of altered articles and Tribunal order with the Registrar), and the conditions prescribed in Rule 68 for implementation, the Tribunal concluded that conversion is in the interest of the company and causes no prejudice to members or creditors. The Tribunal therefore allowed the petition and directed the petitioner to effect the alteration and file the altered articles with the Registrar within fifteen days. [Paras 6, 7, 8]

Petition for conversion allowed; petitioner directed to effect alteration of articles and file them with the Registrar within fifteen days; no order as to costs.

Applicability of transitional MCA notification preserving Companies Act, 1956 provisions - Supremacy of statute over rules - Effect of Ministry of Corporate Affairs notifications and interaction between transitional arrangements under Companies Act, 1956 and the notified provisions of Companies Act, 2013; Rule 33 of the Companies (Incorporation) Rules, 2014 treated as redundant to the extent indicated. - HELD THAT: - The Tribunal referred to the MCA clarification of 11.06.2014 which preserved corresponding provisions of the Companies Act, 1956 until the relevant provisions of the Companies Act, 2013 were notified. On 1.6.2016 the Central Government notified the second proviso to sub section (1) and sub section (2) of Section 14 of the Companies Act, 2013, thereby vesting the power to approve conversions in the Tribunal. Consequently, statutory provisions under the Act prevail over inconsistent rules; Rule 33 of the Companies (Incorporation) Rules, 2014 (which had made conversion subject to approval by the Central Government) became redundant insofar as the Tribunal now has the power to pass orders under Section 14, and the role of the Registrar is confined to giving effect to the Tribunal's order by registration within the period prescribed. [Paras 2, 3, 4, 5]

MCA transitional notification acknowledged; following the notification of Section 14(2) on 1.6.2016 the Tribunal's power to approve conversions under Section 14 supersedes earlier rule-based requirement, rendering Rule 33 redundant to the extent stated.

Final Conclusion: The petition for conversion of M/s. Amir Chicken and Eggs Limited from a public company to a private company is allowed after finding compliance with Section 14 and Rule 68; the Tribunal's supervisory role under the notified provisions of the Companies Act, 2013 supersedes earlier rule-based arrangements, and the petitioner is directed to file the altered articles with the Registrar within fifteen days.

Refund of service tax under notification no.41/2007-ST - exemption by way of refund for services received for export of goods - Port services - classification of service by provider not determinative for refund claim - proof of payment by service provider to Government not requisite for refund sanction - validity of debit notes as supporting documents - GTA service-invoice as evidence of service tax charged - technical testing and analysis services where testing is statutorily required - remand for fresh decision by Original Authority

Port services - classification of service by provider not determinative for refund claim - Services such as documentation charges, terminal handling charges, bill of lading charges and similar services availed in the port in relation to export of goods are eligible for consideration under the port services category for refund purposes irrespective of the classification adopted by the service provider. - HELD THAT: - The Tribunal held that where services were received by the exporter in connection with export of goods and within port premises and service tax was suffered, the refund claim under notification no.41/2007-ST must be entertained. The mere classification adopted by the service provider (i.e., the label under which the provider paid service tax) is not a valid basis to reject a refund claim. The Tribunal relied on its prior decisions and observations that services provided directly or indirectly by a port bring such services within the ambit of port services for taxation and refund purposes, and that nomenclature of services is not material to charging provisions. [Paras 5, 6]

Refund claims for services availed at the port in connection with export cannot be rejected solely because the provider classified the service differently; such claims must be considered on their merits.

Proof of payment by service provider to Government not requisite for refund sanction - Non-production of proof that the service provider has deposited service tax with the Government is not a ground for rejecting the refund claim where the appellant produces evidence that service tax was charged by the provider. - HELD THAT: - The Tribunal noted Board clarification that producing the invoice or evidence that service tax was charged by the service provider is sufficient and that rejection on the basis that the provider has not been shown to have deposited tax with Government is not sustainable. Where appellants produced evidence of payment of service tax to the provider or invoices showing service tax charged, the sanctioning authority should not deny refund for lack of proof of deposit by the provider. [Paras 7]

Claims cannot be denied for want of proof of deposit of service tax by the service provider where invoices or similar evidence show that service tax was charged.

Validity of debit notes as supporting documents - Debit notes containing essential particulars including nature of service and service tax paid are admissible and cannot be the sole basis for rejecting refund claims. - HELD THAT: - The Tribunal observed that lower authorities erred in denying refund merely because supporting documents were in the form of debit notes. If debit notes contain the required particulars - nature of service, service tax charged, and other essential details - they should be accepted as evidence in support of the refund claim. [Paras 8]

Debit notes with requisite particulars are admissible and cannot be used as a ground for rejection of refund claims.

GTA service-invoice as evidence of service tax charged - Where the transporter (GTA) has charged service tax and issued an invoice evidencing such charge for transportation of goods by road (e.g., from ICD to port), the invoice should be considered by the sanctioning authority for refund. - HELD THAT: - The Tribunal found that denial of refund for GTA services on the ground of non-submission of proper invoice or proof of deposit was incorrect when the provider had issued an invoice charging service tax. Such invoices constitute evidence for consideration of refund claims under the notification. [Paras 9]

Invoices issued by GTA providers showing service tax charged must be considered and are sufficient for sanctioning refund claims subject to other conditions being met.

Technical testing and analysis services where testing is statutorily required - Whether refund for technical testing and analysis services is allowable where no written agreement with the foreign buyer is produced requires fresh consideration by the Original Authority when testing is statutorily mandated. - HELD THAT: - The Tribunal noted Board clarification that refund for testing and analysis services may be allowed without a copy of an agreement with the buyer if such testing and analysis is statutorily stipulated by domestic rules and regulations. Given that appellants exported edible products requiring mandatory hygienic testing, the question of entitlement to refund on testing services necessitates re-examination by the Original Authority in light of statutory requirements and the Board's circular. [Paras 10]

Issue remanded to the Original Authority for fresh consideration of claims for testing and analysis services where such testing is statutorily required; no final adjudication on merits by the Tribunal.

Remand for fresh decision by Original Authority - The impugned orders rejecting refund claims are set aside and the matters are remanded for fresh decision where supporting evidence and conditions under the notification were not duly considered. - HELD THAT: - The Tribunal found that lower authorities often failed to duly consider the clarifications and supporting evidence submitted by appellants and in many cases applied incorrect grounds for rejection. Consequently, the Tribunal set aside the rejections and remanded the matters to the Original Authority for reconsideration in accordance with the Tribunal's observations, directing that appellants be given adequate opportunity to furnish clarifications and evidence. [Paras 11, 12]

Impugned rejection orders set aside; appeals allowed by way of remand to the Original Authority for fresh decision in line with the Tribunal's observations.

Final Conclusion: The Tribunal set aside the orders rejecting the refund claims and allowed the appeals by remanding the matters to the Original Authority for fresh decisions in accordance with the observations on admissibility of port-related services, invoices, debit notes, GTA invoices and the need to re-examine testing services where statutorily required; appellants to be afforded adequate opportunity to furnish clarifications and supporting evidence.

Entitlement to refund under exemption notification for services to SEZ developer - developer includes co-developer - sufficiency of contracts and invoices for classification of taxable services - proof of payment of service tax to service provider - limitation and amendment of refund claim - remand for verification and sanction

Developer includes co-developer - entitlement to refund under exemption notification for services to SEZ developer - The appellants, being approved co-developers, fall within the category of developers entitled to claim refund under the exemption notification. - HELD THAT: - The Tribunal accepted the appellants' undisputed approval as co-developers and held that the SEZ Act's definition of developer includes a co-developer. The lower authorities' finding that the appellants did not qualify as a developer or unit under SEZ was therefore without merit and set aside. The entitlement to claim refund under the notification arises once the party is an approved developer/co-developer. [Paras 5]

Appellants qualify as co-developers and are within the class entitled to claim the refund under the notification.

Sufficiency of contracts and invoices for classification of taxable services - entitlement to refund under exemption notification for services to SEZ developer - The description in invoices need not replicate statutory classification; agreements and invoices together may establish the nature of taxable services for refund purposes. - HELD THAT: - The Tribunal observed that invoice descriptions are often generic and that correct classification of taxable services can be ascertained from the terms of the contracts and related documents. The Original Authority's summary conclusion-that invoice descriptions did not match approved services and therefore the refund was unsustainable-was held to be incorrect. If it is satisfied from agreements and supporting documents that the services received fall within the overall categories of approved services and service tax has been discharged, the refund claim must be considered for sanction. [Paras 5]

Refund claims cannot be rejected merely because invoice descriptions are generic; agreements and accompanying documents must be examined to determine classification.

Proof of payment of service tax to service provider - The Original Authority's finding that the appellants did not pay service tax to the providers was based on a wrong appreciation of facts and inapplicable contractual provisions; adequate documentary evidence shows that service tax was discharged. - HELD THAT: - The Tribunal noted that the Original Authority relied on a contractual clause concerning adjustment of PL service which is relevant only where the appellant pays tax on reverse charge basis. In the present factual matrix the domestic contractors had been paid service tax along with the contract consideration, and documentary proof was placed before the Tribunal to that effect. The conclusion of non-payment was therefore unsustainable. [Paras 6]

The finding of non-payment of service tax to contractors is set aside; documentary evidence establishes payment for consideration and tax.

Limitation and amendment of refund claim - remand for verification and sanction - The original refund claim was filed within time and the subsequent amendment correcting omitted items should not displace the claim; the matter is remanded for verification and sanction. - HELD THAT: - The Tribunal accepted the appellants' contention that the original claim was timely filed and that the later amendment only rectified an omission (non-inclusion of service tax discharged using cenvat credit). The Tribunal found the Original Authority's view-that amounts paid after a cut-off date could not be added-factually incorrect in light of the appellants' assertion that the full service tax liability (cash and credit) was discharged before the original claim date. Consequently, the Tribunal set aside the impugned orders and remanded the claims for fresh examination, directing the Original Authority to verify the documentary evidence and sanction the refund where appropriate, providing the appellants an opportunity to respond. [Paras 7, 8]

Original claim treated as timely; amendment rectifying omission acceptable; refund claims remanded for verification and sanction with opportunity to the appellants.

Final Conclusion: Impugned orders are set aside and the appeals are allowed by way of remand; the Original Authority is directed to examine and decide the refund claims afresh in the light of these observations, providing the appellants adequate opportunity and preferably concluding the process within three months.

Manpower recruitment and supply service - reverse charge liability for recipient of service - permanent establishment / branch treated as business establishment - debit entries as gross amount charged for taxable service - associated enterprise

Permanent establishment / branch treated as business establishment - reverse charge liability for recipient of service - Whether the appellant (Indian branch/project office) is covered by the reverse charge liability as a business establishment under Section 66A. - HELD THAT: - The appellants are an Indian branch/project office of a foreign head office undertaking project work in India. Section 66A(2) Explanation 1 treats a person carrying on business through a branch or agency in a country as having a business establishment in that country. On the admitted facts that the appellant is a branch of the Japanese company carrying on business in India, the Tribunal held that the appellant is covered by Section 66A and therefore can be liable as the recipient on reverse charge basis when taxable services are received from outside India.

The appellant is a business establishment in India for purposes of reverse charge liability and is covered by Section 66A.

Manpower recruitment and supply service - debit entries as gross amount charged for taxable service - associated enterprise - Whether deputation of employees from the foreign head office to the Indian branch and the debit entries in the branch accounts amount to taxable manpower recruitment and supply service and whether the debit entries qualify as gross amount charged under Explanation (c) to Section 67(2). - HELD THAT: - The admitted position is that employees of the foreign head office were deputed to the Indian branch, remained on payroll of the head office, and salary costs were shown as debit entries in the branch accounts; no consideration was paid by the branch to the head office for manpower supply. The Tribunal found that deputation within the same corporate entity does not amount to supply of manpower by a manpower recruitment and supply agency, particularly where the foreign entity is not shown to be engaged in such business and there is no consideration paid for a supply of manpower. Further, Explanation (c) to Section 67(2) which treats debit entries as gross amount charged applies where the transaction is with an associated enterprise; there is nothing on record to show that the branch office is an associated enterprise of the head office. The Tribunal therefore concluded that the debit entries cannot be treated as consideration for taxable manpower supply under the facts of this case.

The deputation and the debit entries do not constitute taxable manpower recruitment and supply service, and Explanation (c) to Section 67(2) is not attracted because the transaction is not between associated enterprises; the demand is unsustainable.

Final Conclusion: The appeals are allowed: the appellant is correctly regarded as a business establishment in India under Section 66A, but on the facts the deputation and debit entries do not constitute taxable manpower supply nor attract the deeming of debit entries as gross amount charged, and the impugned orders are set aside.

Interest on delayed payment of service tax - penalty for delayed payment of service tax - Cenvat credit set-off and liability to pay interest/penalty - remand for fresh consideration

Interest on delayed payment of service tax - penalty for delayed payment of service tax - Cenvat credit set-off and liability to pay interest/penalty - Whether interest and penalty should have been imposed in respect of the portion of service tax discharged by availment of Cenvat credit (amounting to Rs. 99,00,373/-) despite delay in payment. - HELD THAT: - The adjudicating authority did not record reasons for dropping interest and penalty in respect of the disputed amount and failed to address the fact of delay in payment. The Tribunal observed prima facie that service tax of Rs. 1,18,59,571/- was paid after the due date and that the decision to not impose interest and penalty on the portion said to be covered by Cenvat credit lacked proper findings. In view of these omissions, the Tribunal held that the issue requires fresh consideration by the adjudicating authority limited to whether interest and penalty are exigible on the sum of Rs. 99,00,373/-, and directed remand for passing a reasoned order on that point. [Paras 4]

Appeal allowed by way of remand to the adjudicating authority to reconsider and pass a fresh reasoned order only in relation to interest and penalty pertaining to the demand of Service Tax of Rs. 99,00,373/-.

Final Conclusion: The appeal is allowed in part by remanding the specific issue of non imposition of interest and penalty on Rs. 99,00,373/- to the adjudicating authority for fresh, reasoned consideration limited to that amount.

Interest for delayed payment of service tax under Section 75 of the Finance Act, 1994 - liability to pay interest only where the underlying tax demand survives - exclusion of tax amounts set aside by a tribunal for purposes of interest computation - remand for verification and quantification of delayed tax - admission of additional evidence on remand

Interest for delayed payment of service tax under Section 75 of the Finance Act, 1994 - liability to pay interest only where the underlying tax demand survives - Whether interest under Section 75 is payable on the amount of service tax paid on 30.03.2005 for the period September 2004 to February 2005 - HELD THAT: - The Tribunal held that interest under Section 75 becomes payable for delayed payment where service tax was due to be paid by the 25th of the subsequent month and the payment on 30.03.2005 was delayed. However, where any portion of the tax paid on that date corresponds to demands which have been set aside by the Tribunal in Final Order dated 10.03.2017 (holding that no service tax was payable under business auxiliary service up to 16.06.2005), no interest can be demanded on that excluded portion because the underlying tax demand does not survive. For the remaining portion of the amount paid that is not covered by the Tribunal's order setting aside tax, interest liability in terms of Section 75 is to be upheld. The matter was therefore remanded for the adjudicating authority to verify and determine the quantum of service tax paid with delay after excluding the portion set aside by the Tribunal; admission of additional evidence on remand was permitted as per law. [Paras 5, 6, 7]

Interest under Section 75 is payable only on the portion of the tax payment that survives the Tribunal's order; the matter is remanded for verification and quantification excluding the portion set aside, and additional evidence may be admitted on remand.

Final Conclusion: The impugned order is set aside and the matter is remanded to the adjudicating authority to determine, after excluding the portion of tax set aside by the Tribunal, the quantum of delayed service tax on which interest under Section 75 is payable; admission of additional evidence on remand is permitted.

Business Support Service - Interconnection Usage Charges (IUC) - Infrastructural support service - Exclusion of IUC from telephone service by CBEC Circular

Interconnection Usage Charges (IUC) - Business Support Service - Infrastructural support service - Exclusion of IUC from telephone service by CBEC Circular - Whether amounts recovered as IUC, infrastructure, port charges and rent for space from other basic telephone service providers are taxable as Business Support Service. - HELD THAT: - The Tribunal examined the nature of the charges recovered by the appellant and the scope of Business Support Service (which includes, by explanation, certain infrastructural support service such as providing office with utilities, reception, secretarial services, internet and telecom facilities, pantry and security). The charges in question were collected from other basic telephone service providers for interconnection link facilities and for space to house equipment, and were not charges recovered from telephone subscribers for provision of telecommunication service. The Board had earlier clarified by Circular dated 12.3.2007 that IUC is not liable to service tax under the category of telephone service because it is not a charge for providing telecommunication services to a subscriber. On the facts, the Tribunal found that the appellant did not provide services of the character described in the Explanation to Business Support Service; the amounts were for mandatory interconnection facilitation and related infrastructure/space and not for office-like support services set out under the definition. Consequently, the impugned demand framed under Business Support Service could not be sustained. [Paras 6, 7, 8, 9]

Demand of service tax under Business Support Service on the IUC, infrastructure, port charges and rent for space is unsustainable; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the interconnection usage and related infrastructure/space charges recovered from other basic telephone service providers do not fall within the statutory definition of Business Support Service and the service-tax demand is set aside.

Exemption under area-based notification - exercise of option before first clearance - mandatory nature of pre-condition for exemption - submission of written intimation to jurisdictional officer - doctrine of substantial compliance

Exercise of option before first clearance - mandatory nature of pre-condition for exemption - exemption under area-based notification - Failure to exercise the option in writing before effecting first clearance disentitles the manufacturer to exemption under Notification No.50/2003-CE as amended. - HELD THAT: - The notification as amended inserted specific conditions requiring the manufacturer to exercise the option in writing before the first clearance and to inform the jurisdictional Deputy/Assistant Commissioner with prescribed particulars. These conditions, introduced by amendment, are intended to prevent misuse of an area-based exemption and to make the jurisdictional officer aware of the exemption being availed. Such conditions have legal significance and are not merely procedural; they go to the substance of the entitlement to the exemption. The Court applied the principle that the doctrine of substantial compliance cannot be invoked where a clear statutory prerequisite, essential to effectuate the object of the statute, has not been met. Consequently, failure to fulfil the pre-condition (exercise of option and intimation) cannot be condoned and disentitles the appellant to claim the exemption for the period in question. [Paras 5, 6]

The appellants, having failed to exercise the option and give the required intimation before first clearance, are not entitled to the exemption; the appeal is dismissed.

Final Conclusion: The appeal is dismissed on the ground that the conditions inserted in Notification No.50/2003-CE (exercise of option before first clearance and intimation to the jurisdictional officer) are mandatory and non-compliance disentitles the manufacturer to the exemption.

Deemed closure of proceedings under Section 11A(1A) of the Central Excise Act, 1944 - Payment of duty with interest and 25% penalty to avail amended Section 11A(1A) - Remand for verification of payments and applicability of statutory benefit - Disposition of Revenue appeal as academic consequential on remand

Deemed closure of proceedings under Section 11A(1A) of the Central Excise Act, 1944 - Payment of duty with interest and 25% penalty to avail amended Section 11A(1A) - Remand for verification of payments and applicability of statutory benefit - Applicability of amended Section 11A(1A) to M/s Shree Raj Pan Masala Pvt. Ltd. and other co-noticees and consequent requirement for verification of payments - HELD THAT: - The appellants admitted payment of duty before adjudication and did not contest merits; they did not, however, press the specific claim under the provision inserted as sub-section (1A) of Section 11A by the Taxation Laws (Amendment) Act, 2006. Given the availability of that statutory remedy for closure of proceedings where duty, interest and penalty (25% of duty) are paid as prescribed, and the absence of any finding by the original authority on this fresh ground, the Tribunal found it appropriate to set aside the impugned order and remand the matter. The original authority is directed to verify the facts of payments, examine applicability of the amended provision to M/s Shree Raj Pan Masala Pvt. Ltd. and other co-noticees, allow the appellants an opportunity to be heard, order closure of proceedings where conditions are satisfied, and where the provision is inapplicable record reasoned orders to that effect. The remand is for fresh consideration of the statutory issue and factual verification, not for rehearing of unrelated merits. [Paras 4, 5]

Impugned order set aside and matter remanded to the original authority for verification and fresh consideration of applicability of Section 11A(1A) and for passing consequential orders.

Disposition of Revenue appeal as academic consequential on remand - Effect of remand on the Revenue's appeal challenging the lesser redemption fine imposed by the original authority - HELD THAT: - The Revenue's appeal against the redemption fine becomes academic in consequence of the Tribunal setting aside and remanding the impugned order. Since the original order has been set aside for fresh consideration, the challenge to the quantum of redemption fine cannot be adjudicated at this stage and stands disposed of accordingly. [Paras 6]

Revenue appeal disposed of as consequential to the setting aside and remand of the impugned order.

Final Conclusion: The Tribunal set aside the adjudication order and remanded the matter to the original authority to verify payments and to determine, in accordance with the amended Section 11A(1A), whether proceedings should be closed or reasoned orders to the contrary should be passed; the Revenue's appeal is disposed of as consequential on the remand.

Clandestine manufacture and clearance - SSI exemption / small scale industry exemption - burden of proof on Revenue to prove unaccounted manufacture - requirement of corroborative evidence for retracted statements - production capacity and electricity consumption as corroborative material - reliability of seizure, punchanama and recovered documents

Production capacity and electricity consumption as corroborative material - clandestine manufacture and clearance - Whether specific findings were recorded on production capacity and power consumption to support an allegation of clandestine manufacture and clearance. - HELD THAT: - The Tribunal had earlier remanded the case for specific findings on production capacity and power consumption. The adjudicating authority failed to record specific findings on these points and relied on general observations that organised clandestine activities could subvert electricity-consumption based inferences. The Court held that such generalized statements do not amount to an analysis of the evidence and that, where the assessee asserts lack of capacity and produces records, the onus lies on the Revenue to support the allegation of production in excess of accounted quantity by cogent material such as verifiable power-consumption correlation or other tangible proof.

No specific findings were recorded; Revenue failed to discharge its onus by acceptable corroborative material on production capacity and electricity consumption.

Reliability of seizure, punchanama and recovered documents - requirement of corroborative evidence for retracted statements - Whether the two recovered notebooks and the punchanama furnished reliable corroboration of clandestine manufacture. - HELD THAT: - The notebooks were central to the Revenue's case but the author of the entries was not identified and the recovery itself was disputed: witnesses said they signed the punchanama at a location away from the assessee's premises. Further, the proprietor's statement accepting ownership was retracted before the Magistrate the next day. In these circumstances the adjudicating authority could not treat the notebooks and the disputed punchanama as reliable, standalone corroborative proof of clandestine manufacture without independent verification.

The notebooks and punchanama were not reliable corroborative evidence; the retracted statement did not suffice to establish clandestine manufacture.

Burden of proof on Revenue to prove unaccounted manufacture - clandestine manufacture and clearance - Whether the overall demand for duty and penalties was supported by cogent, tangible and credible evidence of unaccounted clearance. - HELD THAT: - The adjudicating authority did not furnish a clear method of correlation between accounted clearances and the alleged clandestine removals; no computation chart or calculation demonstrating how the duty liability was arrived at was placed on record. Photocopies of notebook entries were not meaningfully correlated to specific clandestine clearances. On review, the Tribunal concluded that the Revenue's case lacked cogent, tangible and credible evidence to sustain the demand for unaccounted clearance and attendant penalties.

The duty demand and penalties were unsupported by cogent evidence and therefore unsustainable.

SSI exemption / small scale industry exemption - clandestine manufacture and clearance - Whether denial of SSI exemption on the ground of manufacture of branded goods was justified on the record. - HELD THAT: - The denial was premised on alleged manufacture of wire bearing others' brand names, but there was no verification to establish exclusive rights, reputation, or recognition of the brand names relied upon. The Tribunal referred to the principle that absence of exclusive right or reputation linked to a brand undermines the bar to SSI exemption. In the facts before it, the adjudicating authority did not carry out the requisite verification before denying SSI exemption.

Denial of SSI exemption was unjustified in the absence of verification of exclusive brand rights or reputation; SSI exemption could not be denied on the record before the authority.

Final Conclusion: The impugned order confirming duty and imposing penalties was set aside as the Revenue failed to produce cogent, tangible and credible evidence of clandestine manufacture and unaccounted clearance; specific remand-directed issues were not addressed and the demand and penalties are unsustainable, accordingly the appeal is allowed.

Clandestine manufacture and unaccounted clearance - admissibility of statements recorded during investigation under Section 9D - requirement of cogent documentary and oral evidence for quantification of duty demand - reliance on railway receipts for quantification - denial of cross-examination in adjudication proceedings

Clandestine manufacture and unaccounted clearance - requirement of cogent documentary and oral evidence for quantification of duty demand - reliance on railway receipts for quantification - The demand of excise duty and imposition of penalty could not be sustained for want of credible and cogent evidence linking the seized goods to the appellant's factory. - HELD THAT: - The Tribunal found that the adjudicating authority relied on seizures at various locations and on railway receipts (RRs) to quantify duty, but failed to establish a link between those seizures/RRs and the appellant's manufacturing unit. Mere seizure of gutkha at other premises does not, by itself, prove unaccounted clearance by the appellant. The origin/consignor shown in the RRs was not verified, there was no investigation to connect the consignor or consignee to the appellant, and no explanation was recorded as to how goods would have moved from the appellant's Jodhpur unit to the booking point in Delhi. In these circumstances, and having regard to earlier tribunal findings in a parallel case involving similar evidence, the Tribunal concluded that the Revenue's case lacked the documentary and oral foundation necessary to sustain the demand and penalty. [Paras 8, 10, 11]

The impugned demand and penalty were set aside and the appeals allowed for want of cogent evidence establishing clandestine manufacture and unaccounted clearance by the appellant.

Admissibility of statements recorded during investigation under Section 9D - denial of cross-examination in adjudication proceedings - The adjudicating authority erred in admitting and relying upon statements recorded during investigation without following the procedure under Section 9D and by refusing cross-examination. - HELD THAT: - The Tribunal held that when statements recorded during inquiry/investigation are relied upon, the adjudicating authority must comply with the procedure prescribed by Section 9D(1)(b): the maker of the statement must be examined as a witness before the authority and the authority must form the opinion that the statement should be admitted in the interests of justice. The original authority rejected the appellant's request for cross-examination and treated preponderance of probability as sufficient, which the Tribunal found to be erroneous. Consequently, reliance on such statements without affording the statutory procedure and opportunity for cross-examination was unsustainable. [Paras 9]

Statements recorded during investigation could not be legitimately relied upon in the absence of compliance with Section 9D and denial of cross-examination was held to be an error.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned order dated 31.03.2011 and quashed the demands and penalties imposed, concluding that the Revenue failed to prove clandestine manufacture and unaccounted clearance by cogent documentary and oral evidence and that investigative statements were improperly relied upon without compliance with statutory safeguards.

Cenvat credit on debit notes - documents for claiming Cenvat credit (invoice, bill or challan) - substance over form - suppression of facts and extended period for assessment

Cenvat credit on debit notes - documents for claiming Cenvat credit (invoice, bill or challan) - substance over form - Admissibility of Cenvat credit claimed on debit notes amounting to the demand of Rs. 11,08,694/- - HELD THAT: - The Tribunal examined the debit notes and found that, notwithstanding their title, they contained all information required of a service tax invoice/challan under Rule 4A of the Service Tax Rules and the documents contemplated by Rule 9 of the Cenvat Credit Rules. Applying the principle that substance prevails over form, and following earlier decisions relied upon by the appellant, the Tribunal held that debit notes containing requisite particulars cannot be rejected merely because they are not titled 'invoice'. Accordingly, the demand based on denial of credit on such debit notes was set aside.

Demand of Rs. 11,08,694/- (with interest and penalties) set aside and Cenvat credit on the debit notes allowed.

Acceptance of undisputed liability - Liability in respect of Cenvat credit of Rs. 36,937/- which the appellant did not contest - HELD THAT: - The appellant conceded non-contestation of the claim relating to this amount. The Tribunal therefore affirmed the demand and attendant consequences in respect of that portion.

Demand of Rs. 36,937/- (with penalty and interest) affirmed.

Suppression of facts and extended period for assessment - Cenvat credit on employee-recovered bus service charges - Whether the demand of Rs. 1,26,385/- for Cenvat credit on bus service (recovered from employees) is time-barred or sustainable for extended period assessment - HELD THAT: - The Tribunal found that the appellant had not disclosed to the department the availment of Cenvat credit on bus service and the recovery of service charges from employees. This nondisclosure amounted to suppression of material facts justifying invocation of the extended period of limitation. Consequently the claim that the demand was time-barred was rejected and the extended-period demand was sustained.

Demand of Rs. 1,26,385/- (with penalty and interest) upheld as within extended period due to suppression of facts.

Final Conclusion: The appeal is partly allowed: the challenge to denial of Cenvat credit on debit notes is allowed and the corresponding demand set aside; the conceded demand is affirmed; and the demand relating to bus-service credit is sustained on account of suppression of facts permitting extended-period assessment.

Penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation of goods - liability to confiscation as precondition for imposition of penalty

Penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation of goods - Whether penalty under Rule 26 of the Central Excise Rules, 2002 could be imposed on the appellant when there was no proposal for confiscation and no goods liable for confiscation. - HELD THAT: - The Tribunal examined the show cause notice and the Order in Original and found that Rule 26 permits imposition of penalty only on a person who deals with excisable goods that are liable for confiscation. The show cause notice contained no proposal for confiscation and there were therefore no goods which could be regarded as liable for confiscation. In the absence of goods liable for confiscation, the appellant could not be said to have dealt with such goods and consequently could not be subjected to penalty under Rule 26. Applying this principle, the Tribunal held that the penalty imposed on the appellant under Rule 26 was without jurisdiction and unsustainable. [Paras 5, 6]

Penalty imposed on the appellant under Rule 26 is set aside.

Final Conclusion: The appeal is allowed and the penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002 is quashed.

Non-conventional energy devices/systems - parts versus device - parts consumed within the factory of production - captively used for manufacture of the device - eligibility for exemption at the time of removal versus post-clearance end-use - duty liability on the manufacturer/clearer - Cenvat credit adjustment under Rule 6(3)(b) of Cenvat Credit Rules

Non-conventional energy devices/systems - parts versus device - parts consumed within the factory of production - captively used for manufacture of the device - Scope of exemption under Notification No.6/2002-C.E. (Sl. No. 237 read with List 9) in respect of parts of Biomass Energy Producing Systems manufactured by the respondent. - HELD THAT: - List 9 of the notification enumerates non-conventional energy devices/systems and, separately, parts which are consumed within the factory for manufacture of such devices. The entry for devices (e.g., Sl. No. 16) cannot by construction be stretched to cover mere parts; parts are covered only by Sl. No. 21 and that coverage is expressly limited to parts captively used within the factory of manufacture for making the complete energy device. Applying the Supreme Court's decision in Binny Ltd., a supplier of parts which removes those parts from its factory for use by another manufacturer does not satisfy the requirement of parts being consumed within the factory of production and therefore cannot claim the exemption. The respondent neither manufactured the complete Biomass Energy Producing System nor used the parts within their factory for manufacture of such systems; accordingly the exemption does not apply to their clearances. [Paras 6, 7, 8, 9, 10]

Exemption under Notification No.6/2002-C.E. (Sl. No. 237/List 9) is not available to the respondent for the parts removed from their factory as they are not devices and are not captively consumed within the factory of production.

Eligibility for exemption at the time of removal versus post-clearance end-use - duty liability on the manufacturer/clearer - Whether duty could be demanded from the buyer/end-user instead of the respondent in view of Annexure 1/bond and end-use arrangements. - HELD THAT: - The entitlement to notification benefit must be determined at the point of removal from the factory. End-use by the buyer is a post-clearance matter and does not validate an ineligible claim of exemption at removal. The respondent cleared goods from its factory without fulfilling the conditions of the exemption notification; therefore the duty rightly attaches to the respondent as the clearer. Authorities relied upon by the respondent pertain to Chapter X procedures, supplies to EOUs, or remission contexts and are not factually comparable or applicable to determine liability here. [Paras 11]

Duty liability is correctly fastened on the respondent (manufacturer/clearer); buyer's Annexure 1 or post-clearance end-use does not absolve the respondent of duty at the time of removal.

Cenvat credit adjustment under Rule 6(3)(b) of Cenvat Credit Rules - Consequential treatment of Cenvat credit reversed by the respondent where exemption is not allowable. - HELD THAT: - Since the goods are held not to qualify as exempted clearances, they fall outside the scope permitting reversal under Rule 6(3)(b). The cenvat credit which the respondent had reversed earlier at the rate of 8% is no longer required to be reversed and must be adjusted against the total duty liability determined on account of the disallowed exemption. This follows from the restoration of the adjudicating authority's finding that duty is payable on the clearances. [Paras 12, 13]

The cenvat credit reversed by the respondent @ 8% shall be adjusted against the assessed duty liability.

Final Conclusion: The Commissioner (Appeals) order allowing exemption is set aside; the adjudicating authority's demand for duty (for the period January, 2002 to February, 2003) is restored as the respondent's clearances do not qualify under Notification No.6/2002-C.E., duty rightly attaches to the respondent at removal, and the cenvat credit reversed earlier shall be adjusted against the total duty liability.

Restoration of appeal - Costs condition for restoration - Cenvat credit - Eligibility for exemption under Notification No.8/2002 - Requirement of specific finding linking Cenvat availed to goods claimed to be exempt

Restoration of appeal - Costs condition for restoration - Miscellaneous application for restoration of appeal allowed subject to payment of cost and appeal restored. - HELD THAT: - Although no reason was stated for non-appearance or non-prosecution when the appeal was dismissed, the Tribunal, in the interest of justice, allowed the restoration application. Restoration was made conditional upon payment of Rs. 2,000 into the Prime Minister's National Relief Fund within six weeks from receipt of the order. The miscellaneous application for restoration was accordingly allowed and the appeal was restored to its original number. The order further provided that the restoration would not be operative if the appellant failed to make the specified payment by the stated date.

Restoration allowed subject to the appellant paying Rs. 2,000 to the Prime Minister's National Relief Fund within the stipulated time; appeal restored.

Cenvat credit - Eligibility for exemption under Notification No.8/2002 - Requirement of specific finding linking Cenvat availed to goods claimed to be exempt - Appeal against confirmation of duty, penalty and interest for alleged ineligibility to avail Notification No.8/2002 in respect of Black and White TV sets was allowed. - HELD THAT: - Revenue's case was that because the appellant availed Cenvat credit on colour television sets, they could not claim exemption under Notification No.8/2002 for Black and White television sets. The original authority and Commissioner (Appeals) confirmed the demand, penalty and interest. On review of records, the Tribunal found absence of any clear finding by the original authority that Cenvat credit was availed in respect of inputs used in the manufacture of Black and White TV sets. In respect of assessment of Black and White TV sets, the Tribunal found no violation of the conditions of Notification No.8/2002 and set aside the impugned Order-in-Original and Order-in-Appeal, allowing the appellant's appeal. The miscellaneous application stands disposed of subject to compliance with the cost condition.

Orders under challenge set aside; appeal allowed insofar as Black and White TV sets are concerned for benefit under Notification No.8/2002, subject to compliance with the cost payment direction.

Final Conclusion: The Tribunal allowed the restoration application on payment of Rs. 2,000 to the Prime Minister's National Relief Fund and restored the appeal; on merits it set aside the orders below and allowed the appellant's appeal in respect of Black and White television sets, holding there was no clear finding that Cenvat credit related to inputs for those goods and no breach of the conditions of Notification No.8/2002.

Validity of executive notification note - rule making power vested in State Government - ultravires challenge to subordinate legislation - mandatoriness versus directory nature of statutory rules - submission of Form F to the assessing authority in accordance with rules - availability of statutory appellate remedy

Validity of executive notification note - rule making power vested in State Government - ultravires challenge to subordinate legislation - Whether the note appearing on the Form F issued by Central Government is ultravires the Central Government's rule making power and thus invalid. - HELD THAT: - The Court held that the Note on Form F merely states that the form is to be furnished to the assessing authority "in accordance with the Rules framed under Section 13(4)(e)". The Rules under Section 13(4)(e) are framed by State Governments and that fact is undisputed. The Note therefore reiterates and clarifies that production of Form F is subject to the State framed rules and does not usurp the State's rule making power. Consequently, the Note is not an act beyond the Central Government's rule making competence and is not ultravires for that reason. [Paras 5]

The challenge that the Note is ultravires the Central Government's rule making power is rejected; the Note is a clarification referring to State framed rules and is not invalid on that ground.

Mandatoriness versus directory nature of statutory rules - submission of Form F to the assessing authority in accordance with rules - Whether, under the Rules framed under Section 13(4)(e), submission of Form F is mandatory or directory. - HELD THAT: - The Court did not decide the substantive question whether the State framed rules make submission of Form F mandatory or merely directory. It observed that the Note expressly refers to compliance with the State Rules and that the determination of whether the rules render Form F mandatory or directory is a matter for the assessing authority (or competent appellate forum) to consider on the merits of the case. [Paras 5, 6]

Left for the competent authority to decide; remanded for consideration whether submission of Form F is mandatory or directory under the State Rules.

Availability of statutory appellate remedy - Whether the petitioner's challenge to the impugned assessment orders should be entertained in writ jurisdiction despite statutory appellate remedy. - HELD THAT: - The Court accepted the preliminary objection that remedies in respect of the impugned assessment orders lie by way of appeal under the statute. The writ petition was disposed of with liberty to the petitioner to assail the assessment order by filing the statutory appeal. The Court granted that if the appeal is filed within four weeks from the date of the order it shall be treated as within limitation, while keeping all contentions open for consideration by the appellate authority. [Paras 2, 7, 8]

Writ petition disposed; petitioner directed to pursue statutory appeal, which if filed within four weeks will be considered within limitation; substantive contentions left open.

Final Conclusion: The note on Form F is not ultravires as it merely refers to compliance with State framed rules under Section 13(4)(e); whether submission of Form F is mandatory or directory is left to the appropriate authority to decide; the writ petition is disposed and the petitioner is granted liberty to file the statutory appeal within four weeks, to be considered within limitation.

Sale of goods - taxability of premium - Exim scrips / replenishment licences as goods - transfer for consideration - agency - actions of State Bank of India as agent of Reserve Bank of India - cancellation/extinction of marketable instrument

Exim scrips / replenishment licences as goods - sale of goods - agency - actions of State Bank of India as agent of Reserve Bank of India - taxability of premium - cancellation/extinction of marketable instrument - Whether tendering Exim scrips/REP licences to designated branches of the State Bank of India for forwarding to the granting authority at a premium after discontinuance of the Import Export Policy constitutes a sale of goods within the meaning of the Bombay Sales Tax and whether the premium is exigible to sales tax. - HELD THAT: - The High Court held that the question is no longer res integra and is governed by the decision of the Apex Court in Commercial Tax Officer v. State Bank of India and Another. The Supreme Court analysed the character of replenishment licences/Exim scrips and observed that while such instruments are "goods" when they are transferred or assigned by the holder to a third person for consideration and thereby become marketable, the position differs where the instruments are returned to the grantor (sovereign authority) for cancellation. In the cancellation process the scrips are extinguished and cease to be marketable; they become valueless paper. Where SBI acted pursuant to directions of the Reserve Bank of India as its agent to receive and forward the scrips for cancellation with the object of nullifying and removing them from the market, SBI did not hold or purchase any goods and there was no transfer of ownership to it. The intent and purpose of the transaction was extinction of the right conferred by the scrips rather than acquisition of marketable goods. Consequently, such receipt and forwarding by the bank as agent did not constitute a purchase or sale attracting sales tax, and the premium in that context was not exigible to sales tax.

Reference answered in accordance with the Apex Court's decision: tendering Exim scrips to SBI branches acting as agent for cancellation is not a sale of goods and the premium is not exigible to sales tax.

Final Conclusion: The reference is disposed of by applying the Supreme Court's ruling in Commercial Tax Officer v. State Bank of India and Another: where Exim scrips are returned for cancellation through SBI acting as agent of RBI to extinguish them, there is no sale and the premium is not subject to Bombay Sales Tax.