TaxTMI Updates e-Newsletter
Jul 19,2018

GST regime - One nation, One market, One tax - abolition of check posts - notification rescinding check post notifications under Section 57(1) of M.P. VAT Act, 2002 - interim relief - notice and returnable process

GST regime - abolition of check posts - notification rescinding check post notifications under Section 57(1) of M.P. VAT Act, 2002 - interim relief - Direction to respondents to implement notifications abolishing check posts and to file compliance affidavit within a specified time - HELD THAT: - The Court noted that the GST regime was introduced with the objective of creating a unified national market and that the State Government issued a notification dated 24/06/2017 (under the exercise of power referenced in the record) rescinding earlier notifications regarding the erection and operation of check posts with effect from 01/07/2017. In view of those notifications and the national policy underlying GST, the Court directed the State respondents to take appropriate steps pursuant to the notifications of 24/06/2017 and 01/07/2017 to remove the check posts and to file a detailed affidavit setting out compliance with those notifications within two weeks. The direction operates as an interim measure to secure compliance with the notifications pending further proceedings.

Respondents directed to remove check posts in accordance with the notifications and to file a detailed affidavit of compliance within two weeks.

Notice and returnable process - interim relief - Issuance and acceptance of notices and time-frames for filing replies and personal service - HELD THAT: - The Court ordered that notice be issued to respondents No.3 and 5 with process fee to be paid within three working days and the matter be made returnable in four weeks; Dasti service was also directed as per rules. Notice was accepted on behalf of respondents No.1 and 2 by the State's counsel, who was granted four weeks to file a reply. These procedural directions were given to ensure orderly adjudication and to secure the respondents' participation in the matter.

Notice issued to respondents No.3 and 5 (with payment of process fee) returnable in four weeks; respondents No.1 and 2 to file reply within four weeks; Dasti service directed.

Final Conclusion: Admission granted in part; interim directions issued for removal of check posts and filing of compliance affidavit within two weeks, notices ordered and time-frames fixed for respondents to file their replies; matter listed for the week commencing 6.08.2018.

Principles of natural justice - quashing of order passed without hearing - fresh adjudication after affording opportunity of hearing - decision on refund/payment of Goods and Services Tax (GST) - interim protection from coercive action - liberty to place additional material

Principles of natural justice - quashing of order passed without hearing - The impugned order dated 26.9.2017 passed by the Assistant Commissioner was quashed on the ground that it was passed without adhering to the principles of natural justice. - HELD THAT: - The Court found that the order under challenge had been passed without affording the petitioner an opportunity of hearing, thereby violating the principles of natural justice. In view of this procedural infirmity, the order could not stand and required setting aside so that the matter may be adjudicated afresh with full observance of fair hearing.

Impugned order quashed and set aside for breach of the principles of natural justice.

Fresh adjudication after affording opportunity of hearing - liberty to place additional material - decision on refund/payment of Goods and Services Tax (GST) - interim protection from coercive action - The matter was remitted to the appropriate authority to decide afresh after affording opportunity of hearing, with liberty to place additional material, and to decide the question of payment/refund of GST up to date; no coercive action to be taken until that decision. - HELD THAT: - The Court directed that on remand the appropriate authority shall conduct fresh adjudication permitting all concerned parties to be heard and to place any additional material they may wish. The authority is also to address the petitioner's claim for payment/refund of GST up to date and consider the factual averments (including the departmental averments regarding allocation and disbursal of funds). Pending the fresh decision, the Court granted interim protection by restraining coercive action against the petitioner. The Court refrained from expressing any opinion on the merits of the claim.

Matter remitted for fresh decision after hearing; parties may place additional material; authority to decide on GST refund/payment up to date; interim protection from coercive action until decision.

Final Conclusion: Petition disposed of by quashing the impugned order for violation of natural justice, remitting the matter to the appropriate authority for fresh adjudication after hearing and permitting additional material, with a direction to decide the GST refund/payment claim up to date and restraint on coercive action until such decision; no opinion expressed on merits.

Inspection of goods in movement - e-way bill Part-B update requirement - detention and assessment under Section 129 - penalty for transporting without prescribed documents - grievance mechanism on GST portal as remedy for technical errors

E-way bill Part-B update requirement - penalty for transporting without prescribed documents - grievance mechanism on GST portal as remedy for technical errors - Whether penalty and detention/assessment imposed for failure to update Part B of the e way bill could be sustained. - HELD THAT: - The Court found that the petitioner, a national transporter, failed to update Part B of the e way bill before movement of goods for a long inter state journey; Part B contains conveyance details and its updation is a mandatory pre condition under the rules. The adjudicating authority rejected the petitioner's plea of a technical error because the GST common portal provides a grievance option which was not availed, and because the petitioner's organisational capacity made the explanation implausible. Given that non updation rendered the e way bill incomplete and therefore not legally valid for the movement, the authorities were entitled to detain the vehicle, assess the goods under the statutory provision relating to detention, and impose penalty for transporting taxable goods without the prescribed documents. The Court distinguished earlier authority relied upon by the petitioner on facts, noting that in that case the journey was short and the obligation to fill Part B did not operate in the same manner. The petitioner's request for imposition of a lesser/'minor' penalty was declined on the basis that the tax liability exceeded the threshold for such treatment. The writ did not disclose any error of law or jurisdiction in upholding the detention, assessment and penalty.

Orders of detention, assessment and imposition of penalty for failure to update Part B of the e way bill are sustainable; writ petition dismissed.

Final Conclusion: The High Court upheld the orders of the GST Appellate Authority and the Assistant Commissioner sustaining detention, assessment and penalty for non updation of Part B of the e way bill, and dismissed the writ petition.

IT Grievance Redressal Mechanism - technical glitch on GST portal - nodel officer remedy for portal glitches - enable uploading of FORM GST TRAN-1 - credit of input tax on migration

Technical glitch on GST portal - enable uploading of FORM GST TRAN-1 - IT Grievance Redressal Mechanism - Direction to apply to the designated Nodal Officer for resolution of portal-related failure to upload FORM GST TRAN-1 and facilitation of uploading without reference to the statutory time-frame. - HELD THAT: - The Court relied on the Government of India circular (Ext.P4) establishing an IT Grievance Redressal Mechanism and the procedure for nodal officers to examine applications where taxpayers demonstrate a bona fide attempt to comply but were prevented by a portal glitch. Applying that scheme, the petitioner - who alleges inability to upload FORM GST TRAN-1 due to a system error - is permitted to make an application to the sixth respondent, the designated Nodal Officer. On such application, the Nodal Officer is to examine the matter and facilitate uploading of FORM GST TRAN-1 without regard to the prescribed time-limit where the failure is attributable to the portal. The Court implemented the remedy contemplated by the circular and directed the Nodal Officer to act on the petitioner's application. [Paras 3, 5]

Petitioner to apply to the Nodal Officer who shall consider and facilitate uploading of FORM GST TRAN-1 irrespective of the time-frame where failure was due to portal glitch.

Credit of input tax on migration - nodel officer remedy for portal glitches - Alternative relief where uploading is not possible: enabling the assessee to take credit of input tax available at migration. - HELD THAT: - The Court provided a fallback direction: if, after examination by the Nodal Officer, uploading of FORM GST TRAN-1 remains impossible for reasons not attributable to the petitioner, the competent authority shall enable the petitioner to take the credit of input tax available at the time of migration. That direction implements the remedial objective of the grievance mechanism to ensure taxpayers are not deprived of migrated credit due to technical failures on the portal. [Paras 5, 6]

If uploading cannot be effected for reasons not attributable to the petitioner, the authority shall enable the petitioner to avail the input tax credit existing at migration.

Nodel officer remedy for portal glitches - Timelines for administrative action on the petitioner's application to the Nodal Officer. - HELD THAT: - The Court prescribed a short procedural timetable to give effect to its directions: if the petitioner applies within two weeks of receipt of the judgment, the Nodal Officer shall consider and take steps within one week thereafter. These directions are administrative and intended to secure prompt resolution under the grievance mechanism. [Paras 6]

Petitioner to apply within two weeks; Nodal Officer to act within one week of such application.

Final Conclusion: Writ petition disposed by directing the petitioner to apply to the designated Nodal Officer under the IT Grievance Redressal Mechanism; the Nodal Officer to facilitate uploading of FORM GST TRAN-1 irrespective of time-limits or, if uploading remains impossible for reasons not attributable to the petitioner, to enable the petitioner to take the input tax credit, with the petitioner to apply within two weeks and the Nodal Officer to act within one week.

Summary order. Special Leave Petition dismissed on account of inordinate delay of 151 days without satisfactory explanation.

Summary order. Special Leave Petition dismissed; delay condoned; pending applications, if any, disposed of.

Summary order. Special Leave Petition dismissed in view of this Court's order dated 11.01.2018 in SLP(C) D. No. 24156 of 2017; delay condoned; pending applications, if any, disposed of.

Summary order. Special Leave Petition dismissed; delay in filing condoned.

Summary order. Delay condoned; Special Leave Petition dismissed; pending application disposed of.

Summary order. Special Leave Petition dismissed; pending applications, if any, stand disposed of.

Summary order. The special leave petition is dismissed on the ground of delay.

Section 127(2) of the Income Tax Act, 1961 - agreement between officers of equal rank - jurisdictional requirement for transfer of cases - centralisation of cases for coordinated investigation - absence of dissent not amounting to agreement

Section 127(2) of the Income Tax Act, 1961 - agreement between officers of equal rank - jurisdictional requirement for transfer of cases - Validity of transfer order dated 2nd January, 2018 passed under Section 127(2) in absence of an agreement between officers of equal rank - HELD THAT: - The Court found that the impugned transfer proceeded from a decision of a Centralised Committee and subsequent communications, but the record does not disclose a positive agreement between two officers of equal rank as a pre condition for invoking Section 127(2). The Revenue's reliance on the absence of a dissenting note was held insufficient to constitute the affirmative agreement contemplated by the statute. The Court applied the principle in Noorul Islam Educational Trust that mere absence of disagreement cannot be equated with the positive concurrence required under the provision. Because CCIT (Central), Mumbai and the Principal Commissioner at Kolhapur are not officers of equal rank and there is no material showing consent by the officer of equal rank (CCIT, Pune), the statutory requirement for transfer under Section 127(2) was not satisfied and the officer lacked jurisdiction to make the transfer order. [Paras 15, 16, 17]

Impugned transfer order dated 2nd January, 2018 is without jurisdiction and therefore invalid.

Centralisation of cases for coordinated investigation - absence of dissent not amounting to agreement - Validity of the show cause notice dated 14th February, 2017 and the process of centralisation relied upon to effect transfer - HELD THAT: - The Court held that the notice and the process described - arising from a Centralised Committee decision and subsequent inter office communications - do not substitute for the statutory agreement between officers of equal rank. The Centralised Committee is not the authority envisaged by Section 127(2), and communications from higher or subordinate officers do not demonstrate the requisite mutual agreement. Consequently, the show cause notice and the transfer process founded on it were vitiated for want of the statutory pre condition. [Paras 14, 16, 17]

The show cause notice dated 14th February, 2017 and the centralisation process relied upon are invalid for failing to show the agreement required by Section 127(2).

Final Conclusion: The impugned notice dated 14th February, 2017 and order dated 2nd January, 2018 are quashed and set aside for want of the statutory agreement between officers of equal rank required under Section 127(2); petition allowed with no order as to costs.

Comparability in transfer pricing - assesee-specific selection of comparables - application of consistent loss filter for comparables - appellate jurisdiction under Section 260-A of the Income Tax Act

Appellate jurisdiction under Section 260-A of the Income Tax Act - comparability in transfer pricing - Whether the challenge to the Tribunal's selection or rejection of comparables in transfer pricing proceedings raised a substantial question of law maintainable under Section 260-A. - HELD THAT: - The Court applied its earlier reasoning that disputes over selection of comparables, application of filters and factual comparability ordinarily do not give rise to substantial questions of law under Section 260-A. Unless the Tribunal's finding is ex facie perverse or involves a legal question of general importance (for example, treaty interpretation or overriding legal principles), mere dissatisfaction with factual findings on comparability does not sustain an appeal under Section 260-A. The Court relied on the precedent in Prl. Commissioner of Income Tax v. Softbrands India Pvt. Ltd. to hold that the Revenue's contentions about selection and rejection of comparables do not meet the statutory threshold for framing and answering a substantial question of law. [Paras 7, 8]

Appeal under Section 260-A dismissed as raising no substantial question of law on the selection/rejection of comparables.

Assesee-specific selection of comparables - comparability in transfer pricing - Whether the Tribunal was wrong in rejecting the comparables selected by the Assessing Officer without considering reasons assigned by the Transfer Pricing Officer and by following decisions of other benches. - HELD THAT: - The Tribunal examined the functional profiles and concluded that certain comparables (e.g., Mindtree) were not functionally comparable and therefore ought not to be considered. The High Court noted that such determinations are fact-intensive and based on the Tribunal's assessment of functional comparability; this falls within the Tribunal's domain. The Revenue did not establish that the Tribunal's conclusion was ex facie perverse or involved a legal error of principle warranting interference under Section 260-A. Accordingly, the Court declined to entertain the Revenue's challenge to the Tribunal's rejection of comparables that it found non-comparable. [Paras 6, 8]

Tribunal's factual conclusion rejecting certain comparables upheld; no interference under Section 260-A.

Application of consistent loss filter for comparables - comparability in transfer pricing - Whether Neeman Medical International (Asia) Limited should have been excluded as a comparable on the ground of being a loss-making company. - HELD THAT: - The Tribunal found that Neeman Medical International (Asia) Limited was functionally comparable to the assessee and that its losses were not consistent; the reported accounts showed income and expenditure for the relevant period indicating the absence of consistent losses. The Tribunal also noted that the assessee's application under Section 154 had not been rejected by the TPO. The High Court treated this as a factual determination by the Tribunal on which the Revenue could not raise a substantial question of law under Section 260-A. As the exclusion on the basis of 'consistent loss' was not justified in the Tribunal's view, the Tribunal directed inclusion of Neeman for comparability; the High Court found no legal infirmity warranting interference. [Paras 6, 8, 17]

Neeman Medical International (Asia) Limited to be considered as a comparable; Tribunal's finding not disturbed.

Final Conclusion: The Revenue's appeal is dismissed: the High Court found that the challenges to the Tribunal's factual determinations on selection and exclusion of comparables, including application of the consistent-loss filter and reliance on comparability assessments of other benches, did not raise substantial questions of law under Section 260-A and did not show any ex facie perversity warranting interference.

Exception under Rule 6DD(b) of the Income Tax Rules, 1962 - payment to country liquor vending centre - government notification identifying warehouse as supply source - cash payment covered by Rule exception

Exception under Rule 6DD(b) of the Income Tax Rules, 1962 - payment to country liquor vending centre - government notification identifying warehouse as supply source - cash payment covered by Rule exception - Payment made by the assessee to a country liquor vending centre falls within the exception contained in Rule 6DD(b) of the Income Tax Rules, 1962 where the payment is to a government identified warehouse for supply of country spirit. - HELD THAT: - The Appellate Tribunal examined the question in the appropriate perspective and relied on its earlier decision concerning country spirit. The Tribunal placed weight on the Government notification published in the Kolkata Gazette on September 20, 2005 which identified the warehouse from which the retail vendor obtained country spirit as the warehouse for supply of country spirit. In those circumstances the Tribunal concluded that a cash payment made to such a warehouse is encompassed by the exception recognised in Rule 6DD(b). The High Court found no reason to interfere with the Tribunal's conclusion which was founded on the Government notification and the Tribunal's considered view.

The Tribunal's finding that the payment is covered by the exception in Rule 6DD(b) is upheld.

Final Conclusion: The appeals are dismissed; there will be no order as to costs.

Unexplained cash deposit - availability of cash in hand - genuineness of cash and documentary evidence - re-deposit after withdrawal - consistency of earlier accepted return and estoppel against revenue

Unexplained cash deposit - availability of cash in hand - genuineness of cash and documentary evidence - consistency of earlier accepted return and estoppel against revenue - Deletion of addition made on account of alleged unexplained cash deposits in the bank account. - HELD THAT: - The Tribunal considered the assessee's consistent plea that cash of Rs. 11,49,879/- was shown as cash in hand as on 31.03.2004 in the earlier return and statement of affairs, and that this position had been accepted by the department while processing the return u/s 143(1). The earlier acceptance of availability of cash in hand in the preceding year was held to be a material circumstance which the revenue could not lightly overturn in the subsequent assessment year in the absence of substantive contradictory material. The Assessing Officer had not produced any evidence to rebut the contemporaneous documentary material filed by the assessee nor made adequate inquiry into the documents relied upon. The Tribunal accepted that the cash available on 01.04.2004 was legitimately available to the assessee for making bank deposits during the year under appeal and that the mere fact of making deposits on different dates did not render the explanation implausible. Applying these principles, the Tribunal concluded that the AO's rejection of the explanation was not sustainable and deleted the addition to the extent of Rs. 13,49,879/-.

Addition on account of unexplained cash deposits deleted to the extent of Rs. 13,49,879/- and appeal partly allowed.

Re-deposit after withdrawal - genuineness of cash and documentary evidence - Acceptability of explanation regarding withdrawal of Rs. 2,00,000/- and subsequent re-deposits of Rs. 1,00,000/- each. - HELD THAT: - The Tribunal examined bank statements and noted that the assessee withdrew Rs. 2,00,000/- on 5th March, 2005 and subsequently made deposits of Rs. 1,00,000/- each on 21st and 23rd March, 2005. The AO produced no evidence to show that the withdrawn amount was expended elsewhere. In absence of such evidence, the Tribunal found the assessee's explanation for availability of funds for re-deposit acceptable and held that the AO erred in rejecting it.

Explanation for the withdrawal and subsequent re-deposits accepted; no adverse inference to be drawn.

Final Conclusion: The Tribunal set aside the orders of the authorities below, accepted the assessee's documentary explanation regarding availability and genuineness of cash, allowed deletion of Rs. 13,49,879/- out of the disputed Rs. 14,00,000/-, and partly allowed the appeal for AY 2005-06.

Taxability of profit on sale as capital gains - Definition of "capital asset" - agricultural land exception under Sec. 2(14)(iii) - Characterisation of land as non agricultural/industrial land - Deduction of interest under Sec. 24(b) - applicability of second proviso - Penalty under Sec. 271(1)(c) - premature initiation

Taxability of profit on sale as capital gains - Definition of "capital asset" - agricultural land exception under Sec. 2(14)(iii) - Characterisation of land as non agricultural/industrial land - Profit arising on sale of the land was liable to be assessed as short term capital gain because the land was a non agricultural industrial land on the date of transfer. - HELD THAT: - The Tribunal accepted the factual material showing that (i) the Government of Maharashtra had earlier notified the land for establishment of an industrial estate (permission dated 05.08.2009); (ii) the assessee purchased the land and within a short span sold it to M/s Prakhyat Infra Projects Pvt. Ltd.; and (iii) the registered sale agreements dated 31.01.2011 and 04.02.2011 describe the land as industrial non agricultural land. Since an asset that is a capital asset on the date of transfer attracts tax under the head 'capital gains' as per Sec. 48, and the land was non agricultural at the time of sale, the exclusion in Sec. 2(14)(iii) for certain agricultural lands did not apply. The Tribunal therefore upheld the findings of the lower authorities that the profit was taxable as short term capital gain. [Paras 7]

Ground No.1 dismissed; profit on sale brought to tax as STCG.

Deduction of interest under Sec. 24(b) - applicability of second proviso - Assessee entitled to deduction of interest under Sec. 24(b) for the housing loan to the extent of interest actually relatable to the property; the second proviso to Sec. 24(b) did not apply because the property was let out. - HELD THAT: - The A.O computed proportionate interest attributable to the assessee's share in the purchased flat and arrived at an interest amount. The CIT(A) had allowed the claim in principle but restricted it to Rs.1,50,000 relying on the second proviso to Sec. 24(b). The Tribunal held that the proviso (which limits deduction in certain cases of self occupied property) is not applicable where the property is let out; the flat was admittedly let out and earned rental income during the year. Consequently the restriction under the second proviso falls away and the assessee is entitled to the interest deduction as computed-the Tribunal directed allowance to the extent of the interest shown as relatable to the property. [Paras 9]

Ground No.2 allowed; interest deduction under Sec. 24(b) to be allowed to the extent of Rs. 2,93,656/ (as computed by the Tribunal).

Penalty under Sec. 271(1)(c) - premature initiation - Challenge to initiation of penalty proceedings under Sec. 271(1)(c) is premature and therefore dismissed. - HELD THAT: - The Tribunal observed that the ground assailing initiation of penalty proceedings was premature at the stage of the present appeal. No adjudication on the merits of any penalty was undertaken; the plea was dismissed as not ripe for decision in these appeals. [Paras 10]

Ground No.3 dismissed as premature.

Procedural - grounds not pressed - General or omnibus ground framed by the assessee (Ground No.4) was not pressed and dismissed. - HELD THAT: - The Tribunal recorded that the general ground of appeal was not pressed by the assessee and accordingly dismissed it. [Paras 11]

Ground No.4 dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: the assessment of profit on sale as short term capital gain is upheld, the claim of interest deduction under Sec. 24(b) is restored (subject to the interest attributable to the property), the challenge to initiation of penalty proceedings is dismissed as premature, and the omnibus ground is dismissed as not pressed.

Reimbursement treated as operating income/expenditure for Transfer Pricing - transfer pricing adjustment on interest on outstanding receivables / characterization of receivables as international transaction - selection and exclusion of comparables under TNMM - working capital adjustment in comparables' margins - disallowance under section 14A read with Rule 8D

Reimbursement treated as operating income/expenditure for Transfer Pricing - treatment of reimbursements received from associated enterprises for expenses incurred on their behalf in computing OP/TC margin - HELD THAT: - The Tribunal accepted the assessee's case that amounts reimbursed by the AE for travel, marketing and similar expenses, when supported by bills/vouchers, are reimbursements of actual expenditure and should be included in operating income and operating cost for transfer pricing computation. The DRP's direction to include such reimbursements in operating income/expenditure was held to be proper. The Tribunal directed the TPO to verify the documentary proof (invoices/vouchers) and, if found to be actual reimbursements, to refrain from making any TP adjustment in respect thereof and allow the claim accordingly. [Paras 5]

Reimbursements found to be actual reimbursements shall be treated as part of operating income/expenditure; TPO to verify supporting bills and allow claim if actual.

Transfer pricing adjustment on interest on outstanding receivables / characterization of receivables as international transaction - whether delay in realization of trade receivables from AEs beyond agreed credit period constitutes an international transaction warranting imputation of interest and ALP adjustment - HELD THAT: - The Tribunal observed conflicting authorities and factual intricacies (credit terms, impact on working capital, pattern of delays) that require detailed inquiry. Noting that most receipts were beyond 90 days but it was not clear whether extended credit was admitted, and having regard to precedent requiring investigation of working capital impact and factual matrix, the Tribunal found it appropriate to remit the issue to the AO/TPO for fresh decision after examining the commercial arrangement, working capital impact and relevant data. The assessee will be given opportunity of hearing in the remand proceedings. [Paras 6]

Issue set aside and remanded to AO/TPO for fresh adjudication on merits and working capital impact; assessee to be heard.

Selection and exclusion of comparables under TNMM - inclusion/exclusion of specific comparable companies in the final comparable set used to determine arm's length margin under TNMM - HELD THAT: - The Tribunal examined the functional profile, assets and risks of the assessee and of the disputing comparables. It directed exclusion of certain companies (Acropetal Technologies Ltd, Eclerx Services Ltd, ICRA Techno Analytics Ltd, Microland Ltd) as per DRP directions, found Accentia Technologies Ltd and TCS E-Serve Ltd not appropriate comparables and directed their removal from the final list, directed inclusion of R Systems International Ltd. (requiring production of quarterly reports to extrapolate financials), and upheld the TPO's rejection of Informed Technologies India Ltd. on functional dissimilarity. The Tribunal thus allowed the assessee's challenge to selected inclusions/exclusions in part and remitted computation aspects to the TPO/AO as directed. [Paras 10, 11]

Comparable set revised: specified companies to be excluded; R Systems to be included (with extrapolated financials); Informed Technologies rightly excluded; matter partly allowed and finalised by TPO/AO in accordance with directions.

Working capital adjustment in comparables' margins - whether and how working capital adjustment directed by DRP should be applied to comparables' margins - HELD THAT: - The Tribunal held that the DRP has the power under section 144C(8) to direct such adjustments and noted that the TPO had applied a negative working capital adjustment increasing the mean margin. Given the procedural and computational character of the issue and the DRP's direction, the Tribunal remitted the matter to the TPO to carry out the working capital adjustment in accordance with the DRP's directions. [Paras 12]

Issue remitted to TPO to implement working capital adjustment as per DRP directions.

Disallowance under section 14A read with Rule 8D - applicability of section 14A/Rule 8D where assessee had no exempt income during the year - HELD THAT: - Having regard to the audited accounts showing investments (equity in foreign subsidiary) and absence of exempt income in the relevant year, and following the precedent that section 14A requires actual receipt of exempt income in the year for disallowance to apply, the Tribunal held that section 14A could not be invoked. The ad hoc disallowance under Rule 8D made by the AO/DRP was therefore deleted. [Paras 13]

Disallowance under section 14A/Rule 8D deleted as no exempt income arose in the relevant year.

Final Conclusion: The appeal is partly allowed: reimbursements must be treated as operating income/expenditure if supported by bills and will be allowed after verification; the interest-on-receivables issue and working-capital adjustment are remitted to AO/TPO for fresh consideration in accordance with the Tribunal's directions and relevant precedents; specific comparables are to be included/excluded as directed; and the section 14A disallowance is deleted.

Treatment of gifts under section 68 - genuineness of gift - burden and onus in unexplained credits - appellate obligation to consider documentary evidence and to furnish reasons - remand for fresh consideration

Treatment of gifts under section 68 - genuineness of gift - appellate obligation to consider documentary evidence and to furnish reasons - remand for fresh consideration - Addition of Rs. 8,00,000 treated as unexplained credit on account of a gift and the correctness of confirmation by the CIT(A). - HELD THAT: - The Tribunal found that the Assessing Officer treated the Rs. 8,00,000 received by the assessee as a gift from a relative as unexplained and added it under the relevant law after recording the donor's statement and noting circumstances casting doubt on genuineness (absence of any social occasion, donor's modest means, timing of affidavit, and other facts). On appeal the CIT(A) affirmed the addition but did not address or analyse the documentary evidence placed before the authorities in any detail; rather he observed that affidavit, receipt and cheque explained only form and not substance. The Tribunal concluded that the CIT(A) had brushed aside and failed to consider or discuss the documentary evidence and the donor's statement on oath, resulting in non reading and misreading of material evidence. For these reasons the Tribunal did not decide the merits of the genuineness question on appeal but directed that the matter be remitted to the CIT(A) for fresh adjudication. The CIT(A) is required to consider all evidence filed by the assessee, discuss it on merits, provide adequate opportunity of hearing, and determine the issue in accordance with law, with all pleas available to the assessee preserved. [Paras 10, 11]

Matter remitted to the ld. CIT(A) to decide afresh after discussing, on merits, all evidence relied upon by the assessee and after affording adequate opportunity of hearing; all legal pleas preserved.

Final Conclusion: Appeal is partly allowed insofar as the addition of Rs. 8,00,000 is concerned: the matter is remitted to the CIT(A) for fresh consideration in accordance with law after proper evaluation of the documentary evidence and after affording due opportunity of hearing.

Section 158BD - satisfaction requirement - seized material belonging to other person - jurisdictional fact - search and seizure - null and void ab initio

Section 158BD - satisfaction requirement - seized material belonging to other person - jurisdictional fact - null and void ab initio - Validity of initiation of proceedings and completion of assessment under section 158BD against the assessee-company. - HELD THAT: - Section 158BD can be invoked against a person other than the searched person only if the Assessing Officer is satisfied, on the basis of material found during the search, that undisclosed income belongs to that other person, and the seized books/documents/assets relied upon are handed over to the AO having jurisdiction over that person. The satisfaction is a prerequisite and must be founded on material belonging to the person against whom proceedings are proposed. In the present case the seized scrips at the UIC premises did not belong to the assessee on the date of search: the assessee had sold the shares prior to the search, received the sale consideration by account-payee cheques which were deposited and recorded in its books and returns. Therefore the essential jurisdictional fact - existence of material belonging to the assessee found during the search - was absent. In consequence the AO lacked jurisdiction to invoke section 158BD and to frame the block assessment; the proceedings and the order passed thereunder are null and void ab initio. As the decision rests on the absence of jurisdictional fact, the Tribunal did not adjudicate the merits of the additions. [Paras 12, 13, 14, 15, 16]

Invocation of section 158BD and the consequent block assessments are quashed as the jurisdictional satisfaction based on seized material belonging to the assessee was absent.

Final Conclusion: All appeals are allowed on the sole legal ground that jurisdiction under section 158BD was not established; the impugned orders are quashed and merits were left unadjudicated.

Summary order. Matter listed for final disposal on 28th August, 2018; proceedings before the Customs, Excise and Service Tax Appellate Tribunal, Allahabad pursuant to the High Court's order are stayed in the meantime.

Provisional release of seized goods - seizure under Section 110 of the Customs Act, 1962 - appeal under Section 128 of the Customs Act, 1962 - alternative statutory remedy and exhaustion of remedies - rejection of provisional release based on quarantine/test reports

Alternative statutory remedy and exhaustion of remedies - appeal under Section 128 of the Customs Act, 1962 - Maintainability of the writ petition challenging seizure and seeking provisional release when an appeal remedy exists under the Customs Act. - HELD THAT: - The Court held that Section 128 of the Customs Act constitutes an effective statutory remedy against orders passed under the Act and that ordinarily a writ under Article 226 should not be entertained where such an alternative remedy is available. Citing settled precedents on the principle of exhaustion of statutory remedies and the restrained exercise of writ jurisdiction in matters involving public dues and statutory schemes, the Court found that the petitioner had an adequate remedy under the Customs Act to challenge the rejection of his application for provisional release. Consequently, the writ petition was held not maintainable and the substantive prayer for provisional release could not be considered in the writ proceedings. [Paras 15, 21, 22]

Writ petition dismissed as not maintainable for failure to avail the statutory remedy under the Customs Act.

Provisional release of seized goods - rejection of provisional release based on quarantine/test reports - Obligation of the adjudicating authority to furnish the petitioner with the order rejecting provisional release and the basis for that rejection. - HELD THAT: - Although the writ was rejected on maintainability grounds, the Court directed that on the petitioner approaching the appropriate authority, the authority shall, in accordance with law, provide the petitioner or his authorised representative with a copy of the order passed by the Additional Commissioner rejecting the provisional release application. The direction ensures access to the adjudicating authority's order (which was based on quarantine/test reports) so that the petitioner may pursue the statutory remedy available under the Act. [Paras 23]

Petitioner to be supplied with a copy of the rejection order by the concerned authority if not already provided.

Final Conclusion: Writ petition dismissed as not maintainable because an efficacious statutory remedy under the Customs Act exists; however, the adjudicating authority is directed to provide the petitioner or his authorised representative with a copy of the order rejecting provisional release so that the petitioner may pursue the available statutory remedy.

Binding precedent - clarificatory amendment - cenvat credit - disposal without finality - waiting for higher forum decision - principle of judicial precedence

Disposal without finality - waiting for higher forum decision - binding precedent - Validity of the Tribunal's order disposing numerous appeals by staying final adjudication pending the outcome of a higher court appeal. - HELD THAT: - The Tribunal disposed of a batch of appeals by recording that it would be inappropriate to decide the issue in view of a pending appeal before the High Court and by granting liberty to re approach the Tribunal after the higher forum's verdict. The High Court is prima facie of the view that such disposal leaves the appeals without finality and creates uncertainty as to how the eventual higher court outcome will be applied to those disposed appeals. The Court observed that the Tribunal ought not to have adopted that course when deciding the appeals, since the mode of disposal did not culminate in a final determination and thereby undermined clarity of outcome and implementation of precedent. [Paras 3]

The Tribunal's manner of disposing the appeals pending the higher forum's decision is prima facie inappropriate and lacks finality.

Clarificatory amendment - cenvat credit - principle of judicial precedence - Treatment of appeals which were disposed with liberty to approach the Tribunal after the Higher Court's verdict and the need for final adjudication. - HELD THAT: - The Tribunal's order arose in the factual context of competing decisions and an amendment said to be clarificatory regarding eligibility of cenvat credit for service tax on sales commission. The Tribunal followed precedent of a co ordinate Bench and reserved final determination pending the High Court's decision in an appeal by the Revenue. The High Court noted that, given such background, the proper course is not to effect a non final disposal but to ensure that the appeals are finally determined so that the applicability of the higher court's decision can be implemented consistently. Consequently the High Court issued notice for final disposal and directed the matter be placed for final adjudication on the returnable date. [Paras 2, 4]

The appeals disposed of with liberty are to be finally adjudicated; notice issued for final disposal and the matter listed for hearing.

Final Conclusion: The High Court has recorded a prima facie view that the Tribunal erred in disposing numerous appeals without finality by awaiting a higher court decision; the appeals are directed to be finally disposed and notice is issued for the returnable hearing.

Time limit for availing CENVAT credit - retrospective application of amendment - effect of amendment on accrued rights under Section 38A - substitution of statutory time period (six months to one year)

Retrospective application of amendment - effect of amendment on accrued rights under Section 38A - substitution of statutory time period (six months to one year) - The amendment substituting 'one year' in place of 'six months' is to be applied retrospectively for the purpose of validating CENVAT credit availed prior to the substitution. - HELD THAT: - The Tribunal observed that the time-limit for taking CENVAT credit was first introduced from 01/09/2014 prescribing six months and that vide Notification No.6/2015-CE dated 01/03/2015 the period was increased by substitution to one year. Relying on the reasoning in Fosroc Chemicals (India) Pvt. Ltd. and the decision in Indian Tobacco Association, and having regard to the effect of amendments under Section 38A, the Tribunal held that the substitution effected by the March 2015 notification is applicable retrospectively so as to validate credits which would fall within one year from the substitution. The Tribunal rejected the Revenue's contention that the March 2015 substitution must be treated as prospective only, distinguishing the authority invoked by the Revenue (Ruby Confectionery).

Substitution increasing six months to one year is to be applied retrospectively and validates previously availed credit falling within one year of the amendment.

Time limit for availing CENVAT credit - entitlement to CENVAT credit subject to limitation period - The appellant is entitled to CENVAT credit for invoices produced that fall within one year from the amendment dated 01/03/2015, but not for invoices beyond that one-year period. - HELD THAT: - Applying the retrospective substitution, the Tribunal examined the invoices produced and found that all except one invoice fell within one year from the amendment dated 01/03/2015. The Tribunal therefore allowed the refund claim to the extent of the credit which fell within that one-year period and disallowed the single invoice which lay beyond one year of the amendment.

Refund claim allowed in part for credits within one year of 01/03/2015; credit corresponding to the invoice beyond one year is disallowed.

Final Conclusion: Appeal partly allowed: the substitution increasing the time-limit from six months to one year is applied retrospectively and the appellant's refund is allowed to the extent of credits within one year of the 01/03/2015 amendment, while the invoice beyond that one-year limit is excluded.

Refund of service tax - requirement of supporting documents for refund claims - burden of proof for refund applicants - applicability of Section 11B of the Central Excise Act - applicability of Section 83 of the Finance Act, 1994 - CBEC supplementary instructions on refund (Para 2.4)

Refund of service tax - requirement of supporting documents for refund claims - CBEC supplementary instructions on refund (Para 2.4) - Whether refund claims filed without supporting documentary evidence showing that the service tax incidence was credited to the exchequer can be rejected - HELD THAT: - The Tribunal found that the appellant's refund applications did not include documents to establish that the service tax claimed had been actually credited to the exchequer and that the flow of tax from the executor of the works contract up to the exchequer was not demonstrated. The Board's supplementary instructions (Chapter IX, Para 2.4) require that refund claims filed without requisite supporting documents may be rejected or returned with a Query Memo and that a claim is to be treated as filed only when all relevant documents are available. The Original and Appellate Authorities followed those instructions in rejecting the applications; the appellant conceded before the Bench that the requisite documents were not submitted and only stated that they could be produced if given a chance. On these facts the Tribunal held there was no infirmity in the rejection of the refund claims for want of supporting documents and that no inference in favour of the appellant could be drawn in the absence of documentary proof. [Paras 3, 5]

The appeals are dismissed as the refund claims, unsupported by the requisite documents showing tax credited to the exchequer, were correctly rejected in accordance with CBEC instructions.

Applicability of Section 11B of the Central Excise Act - applicability of Section 83 of the Finance Act, 1994 - burden of proof for refund applicants - Whether invocation of Section 11B (as made applicable to service tax by Section 83 of the Finance Act, 1994) entitled the appellant to refund in the absence of supporting documents - HELD THAT: - Although the appellant relied on the principle that a person who has borne the incidence of service tax can claim refund and invoked Section 11B (made applicable to service tax by Section 83), the Tribunal emphasized that statutory entitlement is subject to proof of the factual predicate - namely that the tax was borne and credited to the exchequer. The appellant did not file the necessary documentary evidence with the refund applications to establish the payment and credit to the exchequer. Given the absence of such proof, the mere invocation of Section 11B/Section 83 could not sustain the refund claims. The Tribunal therefore did not accept the appellant's contention and affirmed the rejection of the claims. [Paras 3, 5]

Invocation of Section 11B (as applied by Section 83) does not relieve the claimant of the obligation to discharge the burden of proof; absent supporting documents, the appellant was not entitled to the claimed refunds.

Final Conclusion: Both appeals are dismissed for failure to produce requisite supporting documents showing that the service tax incidence was credited to the exchequer; the rejection of the refund claims by the Original and Appellate Authorities, in accordance with CBEC supplementary instructions (Para 2.4), is upheld.

Small scale exemption - aggregate value for threshold after abatement - exclusion of consideration exempt from whole of service tax - abatement of 60% under Notification No. 1/2006-ST

Small scale exemption - aggregate value for threshold after abatement - abatement of 60% under Notification No. 1/2006-ST - exclusion of consideration exempt from whole of service tax - Eligibility for small scale exemption is to be determined after excluding the portion of consideration covered by the abatement of 60%, i.e., the threshold aggregate value must be calculated on the value after abatement. - HELD THAT: - The Tribunal applied Explanation B to Notification No.6/2005-ST which permits exclusion of consideration received for services that are exempt from whole of service tax leviable thereon. Notifications No.9/2004 and No.1/2006-ST effect a 60% abatement of consideration for the relevant service. Accordingly, for computing the aggregate value to test eligibility under the small scale exemption, 60% of the consideration (the abated portion) need not be included. Relying on the precedent Final Order No. 71841/2017 dated 01.12.2017, the Tribunal observed that after excluding the 60% abatement the aggregate value for the years in question falls within the permissible limit for exemption under Notification No.6/2005-ST, and therefore the demand confirmed by the authorities could not be sustained. The Tribunal examined the taxable amounts after abatement as shown in the show-cause notice and found that consideration received in each year was within the threshold limit after abatement; on that basis the impugned order was set aside and consequential reliefs were directed. [Paras 5, 6]

Impugned Order-in-Appeal set aside; appellant entitled to small scale exemption after computing aggregate value post-abatement and consequential relief as per law.

Final Conclusion: Appeal allowed: the aggregate value for testing entitlement to Notification No.6/2005-ST must be computed after excluding the 60% abatement under Notification No.1/2006-ST; on that basis the appellant is covered by the small scale exemption for the period in dispute and entitled to consequential relief.

Exemption under Notification Entry No.19A (canteen maintained in a factory) - interpretation of 'canteen maintained in a factory' - scope of 'outdoor catering' vis-a -vis canteen services - application of Section 66F(1) - main service versus service used for providing main service - statutory interpretation - prohibition on adding words to a notification

Exemption under Notification Entry No.19A (canteen maintained in a factory) - interpretation of 'canteen maintained in a factory' - statutory interpretation - prohibition on adding words to a notification - Services of preparing and serving food and beverages by a third-party caterer in a canteen maintained in a factory are eligible for exemption under Entry No.19A of the exemption Notification. - HELD THAT: - Entry No.19A exempts services provided "by a canteen maintained in a factory covered under the Factories Act, 1948"; the phrase identifies the place and nature of the canteen, not the identity of the person who operates it. A narrow construction that would restrict the exemption to canteens "maintained by and run by the factory" is not supported by the language of the Notification and would amount to impermissibly adding words to the entry. The provisions and context (read with preceding Entry No.19) show the exemption is confined to canteens (not restaurants generally) in factories but do not require that the factory itself prepare or serve food. Where the factory is statutorily required to maintain a canteen and, as on the record, provides the canteen premises and facilities while engaging a separate agency to prepare and serve food for employees, treating the service as non-exempt would distort the Notification and tax services effectively received by employees. Accordingly, such services fall within Entry No.19A and are exempted.

Allowed the appeal and held that services provided by a third-party caterer in a canteen maintained in a factory are covered by Entry No.19A and exempt from service tax.

Scope of 'outdoor catering' vis-a -vis canteen services - application of Section 66F(1) - main service versus service used for providing main service - Services rendered by the appellant, though characterised as "outdoor catering", are used to provide the exempted canteen service and thus fall within the exemption under Entry No.19A; Section 66F(1) does not exclude such used services from the reference to the main exempt service. - HELD THAT: - The appellant entered into agreements with factories to supply and serve food and beverages in factory canteens; the factories provided the canteen space and facilities and paid the caterer. Under earlier definitions in the Finance Act, 'caterer' and 'outdoor caterer' encompass a person supplying food at a place other than his own, including a place provided by the person receiving the service. Even if described as outdoor catering, such services are used for providing the main service of serving food in a factory canteen. Section 66F(1) provides that reference to a main service does not include services used for providing the main service only "unless otherwise specified", but the Notification exempts the canteen service itself; the functional reality and definitions show that outdoor catering employed to furnish the canteen service is encompassed by Entry No.19A. Therefore the claim that only the canteen service is exempt and not the outdoor catering used to provide it is unsustainable.

Held that outdoor catering services used to provide the canteen service are covered by the exemption and not liable to service tax separately.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and held that services of preparing and serving food and beverages by a third-party caterer in a canteen maintained in a factory are covered by Entry No.19A of the exemption Notification (as amended) and are exempt from service tax; services characterised as outdoor catering used to provide the canteen service are likewise covered.

Cut-off date for refund claims under Section 11B - relevant date for refund of Cenvat credit on export of goods - interpretation of Notification 27/2012 read with Rule 5 of the Cenvat Credit Rules - distinction between export of goods and export of services for computation of relevant date

Relevant date for refund of Cenvat credit on export of goods - cut-off date for refund claims under Section 11B - Whether the cut-off date for filing refund claims under Section 11B (as made applicable by Notification 27/2012 read with Rule 5) for goods exported is the last date of the quarter to which the claim pertains or the date on which the goods were exported. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) erred in construing the one-year limitation in Section 11B as running from the end of the quarter to which the claim pertains. Applying the reasoning of the Madras High Court in GTN Engineering and the decision in Celebrity Designs India Pvt. Ltd., the Tribunal concluded that in cases of refund of Cenvat credit claimed on account of export of goods under Rule 5, the relevant date must be the date on which the export of the goods was made. The Commissioner (Appeals) decision to treat the quarter-end as the relevant date was held to be inconsistent with the statutory scheme and the cited precedents dealing with export of goods.

The relevant date for computing the one-year period under Section 11B for refund claims in respect of export of goods is the date on which the goods were exported; the impugned interpretation adopting quarter-end is not sustainable.

Distinction between export of goods and export of services for computation of relevant date - interpretation of Notification 27/2012 read with Rule 5 of the Cenvat Credit Rules - Whether the decision in Affinity Express (pertaining to export of services) is applicable to refund claims in respect of export of goods. - HELD THAT: - The Tribunal observed that the authority relied upon by the Commissioner (Appeals), namely Affinity Express India Pvt. Ltd., dealt with export of services and therefore is distinguishable. The Tribunal held that reliance on a decision concerning export of services cannot be extended to cases of export of goods where the statutory 'relevant date' for refund under Rule 5 must be linked to the date of export of goods as held by the Madras High Court.

The decision in Affinity Express (export of services) is not applicable to refund claims in respect of export of goods; the Commissioner (Appeals) wrongly relied upon it.

Final Conclusion: The appeal is allowed; the impugned order of the Commissioner (Appeals) is set aside. For refund claims of Cenvat credit in respect of exported goods under Notification 27/2012 read with Rule 5, the one year limitation under Section 11B is to be computed from the date of export of the goods and not from the end of the quarter.

Applicability of limitation under Section 11B to refund of accumulated CENVAT credit under Rule 5/Notification - computation of 'relevant date' for limitation in refund claims relating to export/clearance - refund of unutilised CENVAT credit v. refund of duty paid on output

Applicability of limitation under Section 11B to refund of accumulated CENVAT credit under Rule 5/Notification - computation of 'relevant date' for limitation in refund claims relating to export/clearance - refund of unutilised CENVAT credit v. refund of duty paid on output - Whether the refund claims filed under Rule 5 of the Cenvat Credit Rules read with Notification 5/2006 are barred by the one year limitation prescribed by Section 11B of the Central Excise Act - HELD THAT: - The Tribunal found the refunds filed on 30.03.2015 for the periods 01.04.2011-31.03.2012 and 01.04.2012-31.03.2013 to be time barred. It held that refund claims based on CENVAT/Modvat credit fall within the scope of Section 11B because Clause (c) of the proviso to sub section (2) of Section 11B refers expressly to refund of credit of duty paid on inputs in accordance with Rules or Notifications, indicating legislative intent to include such refunds within Section 11B's regime. The Tribunal relied on precedent, notably decisions of the Madras High Court (GTN Engineering and Celebrity Designs India Pvt. Ltd.), holding that the one year limitation and the 'relevant date' concept under Section 11B apply to refund claims under Rule 5/Notification. It rejected the appellant's contention that accumulated Cenvat credit is fundamentally different from refund of duty on outputs and thus outside Section 11B. Applying the binding ratio, the Tribunal concluded that the appellant's refund applications, filed on the dates stated, were filed beyond the prescribed period and therefore rightly rejected by the original authority and Commissioner (Appeals). [Paras 5]

Refund claims under Rule 5/Notification 5/2006 are governed by the limitation in Section 11B; the appellant's refund applications for the stated periods are time barred and the impugned order upholding rejection is affirmed.

Final Conclusion: Appeal dismissed; the order of the Commissioner (Appeals) rejecting the refund claims as time barred under Section 11B is upheld.

Refund of unutilised cenvat credit - time barred refund claim - Rule 5 of the Cenvat Credit Rules - export of services - relevant date for limitation is end of the quarter in which FIRC is received - FIRC as the triggering event for computing limitation for quarterly refund claims

Export of services - relevant date for limitation is end of the quarter in which FIRC is received - time barred refund claim - Rule 5 of the Cenvat Credit Rules - Whether the refund claims filed by the assessee for the listed periods are time barred, having regard to the appropriate date for computing limitation in export of services cases. - HELD THAT: - The Tribunal applied the binding Larger Bench interim decision in CCE & CST, Bangalore v. Span Infotech (India) Pvt. Ltd., holding that for quarterly refund claims in respect of export of services the relevant date for computing limitation under Rule 5 of the Cenvat Credit Rules is the end of the quarter in which the Foreign Inward Remittance Certificate (FIRC) is received. Applying that principle to the present case, the Commissioner (Appeals)'s conclusion that refund claims for the periods April 2004 to March 2005, April 2006 to March 2007, April 2007 to September 2007 and October 2008 to March 2009 are barred by limitation is sustained, while the Commissioner (Appeals)'s finding that the claims for April 2009 to March 2010 and April 2010 to June 2010 are within time is left undisturbed. The Tribunal noted the issue is settled by the Larger Bench ratio and, having followed that precedent, found no infirmity in the impugned order.

The impugned order is upheld; the refund claims for the first four listed periods are time barred and the claims for April 2009 to March 2010 and April 2010 to June 2010 are not time barred.

Final Conclusion: Following the Larger Bench ratio that for quarterly export of service refund claims the limitation is computed with reference to the end of the quarter in which the FIRC is received, the Tribunal dismissed both the assessee's and Revenue's appeals and upheld the Commissioner (Appeals)'s order.

Summary order. Special Leave Petition dismissed; delay condoned.

Extended period of limitation - proviso to Section 11 of the Central Excise Act - fraud or collusion or any wilful representation or suppression of facts - taking advantage of fraudulent documents - concurrent findings of fact

Extended period of limitation - fraud or collusion or any wilful representation or suppression of facts - taking advantage of fraudulent documents - Invocation of the extended period of limitation was justified despite assessee's plea of being a victim of fraud and absence of a specific finding that the assessee actively perpetrated the fraud. - HELD THAT: - The Court examined whether the proviso to Section 11 permitting invocation of the extended period on grounds of fraud, collusion or wilful misrepresentation could be applied where the assessee maintained it was an innocent victim and that criminal proceedings were pending. The Court relied on the principle in Aafloat Textiles that a person who takes advantage of circumstances founded on fraud must suffer the consequences; that principle prevailed over contrary views in Vallabh Design Products. Given that the appellants availed benefits by relying on documents later found to be fraudulent, the invocation of the extended period was held to be permissible. The Court rejected the contention that a positive finding of active participation in the fraud was an indispensable prerequisite for applying the extended period where the assessee had taken advantage of the fraudulent documents. [Paras 5]

Invocation of the extended period was legally justified and the appeals on this ground failed.

Concurrent findings of fact - standard of proof to invoke extended period - Sustainability of concurrent findings of fact by adjudicating and appellate authorities confirming duty and penalty where assessees alleged they were victims of fraud but did not produce corroborative evidence. - HELD THAT: - The Court upheld the concurrent factual findings of the lower authorities. The assessees had admitted entrusting individuals to deposit amounts with the bank but failed to produce bank records or call the concerned persons as witnesses to substantiate their innocence. Merely asserting victimhood and lodging an FIR was not sufficient; the assessees were expected to produce credible material to support their defence. In those circumstances the adjudicatory and appellate findings rejecting the defence and confirming extended-period demand and penalties were reasonable and sustainable. [Paras 4]

Concurrent findings of fact confirming duty and penalty were upheld and not vitiated by error.

Final Conclusion: The High Court dismissed the appeals, holding that the invocation of the extended period and the concurrent findings of the authorities upholding duty and penalty were justified.

Exemption for goods intended for use by the Indian Railways - exemption notification 64/95-CE - conditional exemption subject to intended use - suppression of material facts and evasion of central excise duty - extension of limitation for demand and penalty in cases detected by Anti-Evasion/ fraud - principal-to-principal contract with the Union Government and its bearing on exemption claim

Exemption for goods intended for use by the Indian Railways - exemption notification 64/95-CE - conditional exemption subject to intended use - principal-to-principal contract with the Union Government and its bearing on exemption claim - suppression of material facts and evasion of central excise duty - Claimed exemption under notification dated 16th March, 1995 was not available to the appellant for the wagons removed between August, 1996 and August, 1997. - HELD THAT: - The notification conferred exemption only where goods were intended for use by the Indian Railways and subject to specified conditions. Examination of the contract (the letter dated 4th August, 1995) and its notes, particularly clauses 2 and 3, showed that the wagons were procured against demand of the Oil Industry under an 'Own Your Wagon Scheme' with funds deposited by the oil industry, indicating that the wagons were intended for oil companies and not for exclusive use by the Indian Railways. The Railway Board communication of 24th July, 1997, which suggested excisability at that time, did not alter the clear contractual indication that exemption was not applicable. The adjudicating authority found that the appellant had illegally availed the exemption and suppressed material facts to evade duty; the Tribunal and this Court upheld that conclusion on the material before them.

Exemption under notification 64/95-CE was not attracted and the demand for excise duty was justified.

Extension of limitation for demand and penalty in cases detected by Anti-Evasion/ fraud - suppression of material facts and evasion of central excise duty - Extended period for demanding duty and imposing penalties was justified in the present case. - HELD THAT: - The Tribunal recorded that the case was detected by the Anti-Evasion Unit on the basis of specific information showing that the department was not aware that the wagons were meant for oil companies. Under those circumstances, the Tribunal held that invocation of the extended period for demand and penalties was justified. This finding, based on detection by anti-evasion machinery and factual conclusion of concealment, was not shown to be perverse and was upheld by the Court.

Invocation of the extended period for demand and penalty was proper and justified.

Absence of substantial question of law - The appeal did not raise a substantial question of law warranting interference. - HELD THAT: - The Court observed that the matters before it involved factual determinations by the adjudicating authority and the Tribunal-namely the applicability of the conditional exemption and the justification for invoking extended limitation-rather than novel legal questions. Consequently, there was no substantial question of law for the High Court to entertain beyond review of the impugned findings, which were not vitiated.

No substantial question of law arose; appeal dismissed.

Final Conclusion: The Tribunal's confirmation of demand, penalty and interest was upheld: the conditional exemption was inapplicable, the extended period for demand and penalty was rightly invoked, no substantial question of law arose, and the appeal is dismissed.

Cenvat credit on debit notes - Validity of document for availment of cenvat credit - Reversal of common input services credit relating to trading activity - Availment of cenvat credit under Rule 16 for goods returned by EOU - Extended period of limitation and suppression

Cenvat credit on debit notes - Validity of document for availment of cenvat credit - Debit Notes relied upon by the appellant satisfy the documentary requirements for availment of cenvat credit and the demand based on denial of credit on that ground is not sustainable. - HELD THAT: - The Tribunal examined the Debit Notes placed on record and found they contained the invoice numbers and necessary details to identify the original supplies, permitting easy verification that the returned goods corresponded to the original outward supplies. The original authority and Commissioner (Appeals) went beyond the scope of the show-cause notice by treating the Debit Notes as invalid without confronting the documentary particulars actually furnished. On this basis the Tribunal held that credit availed on the basis of the Debit Notes could not be denied and the corresponding demand was liable to be dropped.

Demand based on denial of cenvat credit on the ground that Debit Notes were not valid documents is dropped.

Reversal of common input services credit relating to trading activity - Extended period of limitation and suppression - Cenvat credit availed on common input services attributable to trading activity must be proportionately reversed; invocation of extended period was justified and the demand on this ground is upheld. - HELD THAT: - Applying the precedents of the High Court of Madras and the Tribunal cited in the order, the Tribunal accepted that trading constituted an exempted activity for the purpose of Rule 6 and therefore the appellant was not entitled to avail common input services credit for the trading operation. Consequential reversal of credit proportionate to the trading activity was directed. The Tribunal further held that the Department was entitled to invoke the extended period because non-disclosure of availment of credit on common input services for trading amounted to suppression, thereby precluding a limitation bar to the demand.

Demand for reversal of cenvat credit on common input services relating to trading activity is upheld and must be reversed proportionately; invocation of extended period is sustained.

Availment of cenvat credit under Rule 16 for goods returned by EOU - Validity of document for availment of cenvat credit - Credit availed under Rule 16 in respect of goods returned by an EOU cannot be denied where the supplier charged duty and the recipient complied with Rule 16 requirements; demand in respect of such returned goods is not sustainable. - HELD THAT: - The Tribunal noted that the goods were initially cleared to the EOU under CT-3 procedure and the EOU, on rejection, charged duty which the appellant credited under Rule 16. The appellant retained the goods and would pay duty when they are repaired or cleared; mere accounting as scrap by the lower authorities was not tenable. It is a settled principle that charging of duty by the supplier cannot be questioned at the recipient's end. Consequently, the demand relating to credit on goods returned from the EOU was dropped.

Demand relating to cenvat credit on goods returned from the EOU is dropped.

Final Conclusion: Appeal allowed in part: demands based on Debit Notes and on goods returned from EOU under Rule 16 are dropped; demand for reversal of common input services credit attributable to trading activity is upheld and sustained (extended period invocation held justified).

SSI exemption and price inclusive of duty - non-applicability of Section 11D where no excise duty collected during SSI exemption - effect of invoicing practice on demand for excise duty - followability of coordinate bench precedents / application of ratio

SSI exemption and price inclusive of duty - effect of invoicing practice on demand for excise duty - non-applicability of Section 11D where no excise duty collected during SSI exemption - Whether demand for excise duty and interest under Section 11D can be sustained where the assessee, while availing SSI exemption, did not charge or collect excise duty from customers and invoiced a price stated to be inclusive of duty for the period 11.05.2008 to 17.02.2009. - HELD THAT: - The Tribunal found as a fact that the appellant was an SSI unit during the stated period and availed the SSI exemption. The appellant did not indicate or collect any excise duty in the invoices issued while enjoying the exemption; the agreed price was shown as inclusive of duty with a contractual understanding between buyer and seller that no excise would be payable during the exemption period. In these circumstances the Tribunal held that there was no collection of duty from customers and, accordingly, the statutory mechanism under Section 11D (as relied upon by the Department) for demanding collected duty could not be invoked. The Tribunal further noted that the coordinate decisions relied upon by the appellant on identical factual matrices supported this conclusion and were squarely applicable; on that basis the impugned findings were held unsustainable in law.

Appeal allowed; impugned order set aside and demand quashed for the period 11.05.2008 to 17.02.2009, with consequential relief, if any.

Final Conclusion: The appeal is allowed: the demand and penalty confirmed by the lower authorities are set aside because no excise duty was charged or collected by the appellant while availing SSI exemption for the specified period, and the Tribunal followed relevant coordinate-bench precedents in so holding.

Refund of unutilized input service credit under Rule 5 of the CENVAT Credit Rules - recrediting / reversal of CENVAT credit and recovery of irregular credit - requirement of issuance of a show-cause notice for recovery of CENVAT credit - availing CENVAT credit on invoices issued by an Input Service Distributor (ISD) and compliance with Rule 9 - jurisdictional competence of the tax authority having registration of the ISD to question eligibility of distributed credit

Requirement of issuance of a show-cause notice for recovery of CENVAT credit - recrediting / reversal of CENVAT credit and recovery of irregular credit - Whether the adjudicating authority could examine admissibility and order recovery of CENVAT credit in the refund proceedings without issuing a separate show-cause notice for recovery. - HELD THAT: - The Tribunal held that the Department went beyond the scope of the show-cause notices which challenged refund claims and proceeded to examine admissibility and order recovery of credit. Reliance on Grasim Industries and related authorities establishes that recovery of irregularly availed credit requires initiation of separate proceedings by issuing a show-cause notice under the recovery provisions; such a step is distinct from adjudication of a refund claim under Rule 5. Because the Department sought to deny or recover credit without issuing appropriate recovery notice, the Commissioner(A)'s order directing reversal/recovery was not sustainable. [Paras 6]

The impugned adjudication on admissibility/recovery in refund proceedings was beyond the scope of the show-cause notices and unsustainable.

Availing CENVAT credit on invoices issued by an Input Service Distributor (ISD) and compliance with Rule 9 - jurisdictional competence of the tax authority having registration of the ISD to question eligibility of distributed credit - Whether the appellants validly availed CENVAT credit on the basis of invoices issued by their Head Office registered as an ISD and whether eligibility of such credit could be challenged by the local tax authority. - HELD THAT: - The Tribunal found that the appellants had availed credit on the basis of ISD invoices which meet the requirement of Rule 9 (invoice/bill issued by an ISD under Rule 4A of the Service Tax Rules). The admissibility of credit availed and distributed by an ISD can be questioned only by the tax authority having jurisdiction over the ISD's registration. The Range Officer had verified the documents and recommended sanction of refund; notwithstanding partial sanction and recredit by the original authority, the Tribunal accepted that eligibility could not be permissibly reopened in the present proceedings by the authority lacking competence over the ISD. [Paras 7]

Credit availed on ISD invoices satisfied the requirements and eligibility could only be contested by the authority where the ISD is registered; local reopening of eligibility was improper.

Refund of unutilized input service credit under Rule 5 of the CENVAT Credit Rules - Whether the appellants' refund claims should be allowed in view of the unlawful recredit/recovery directed by the Commissioner (Appeals). - HELD THAT: - Having concluded that the Department exceeded the remit of the show-cause notices and that the ISD invoices met Rule 9 requirements, the Tribunal held that the Commissioner (Appeals) order directing reversal and recovery was not sustainable. The proper course for recovery had not been followed and the refund-adjudication should not have been converted into recovery proceedings without issuing requisite notices; consequently the appeals are allowed. [Paras 6, 7]

The appeals are allowed; the impugned order setting aside partial sanction of refunds and directing recovery is set aside with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, set aside the Commissioner (Appeals) order which directed reversal/recovery of CENVAT credit in the refund proceedings, held that recovery required separate show-cause proceedings and that credit availed on ISD invoices met Rule 9 requirements and could be contested only by the authority having jurisdiction over the ISD; consequential relief to the appellant was directed.

Confiscation under Rule 25 of the Central Excise Rules, 2002 - redemption fine and penalty for clandestine removal - recovery of Cenvat credit under the Cenvat Credit Rules, 2004 - penalty under Section 11AC of the Central Excise Act, 1944 and Rule 15 of the Cenvat Credit Rules, 2004 - point of payment of duty and liability on removal from factory - non-maintenance of statutory records and entry in RG-1

Confiscation under Rule 25 of the Central Excise Rules, 2002 - redemption fine and penalty for clandestine removal - point of payment of duty and liability on removal from factory - non-maintenance of statutory records and entry in RG-1 - Validity of confiscation of finished goods lying in the factory and imposition of redemption fine/penalty for alleged clandestine removal - HELD THAT: - The Tribunal held that confiscation under Rule 25 could not be sustained because the goods were lying in the factory and there was no evidence that they had been removed without payment of duty. The duty liability arises on removal from the factory; therefore finished goods not removed do not become contraband merely because they were not recorded in RG-1. The proper course where goods manufactured in excess are found is to require their entry in RG-1 and to deal with any improper maintenance of records, rather than to treat them as liable for confiscation. The Tribunal also accepted the appellants' challenge to the stock verification procedure, noting that the show cause notice itself indicated that weighment was not properly carried out and that the recorded verification over a short period was improbable, thereby undermining the basis for inferring clandestine removal or intent to remove.

Confiscation of finished goods and the attendant redemption fine/penalty were set aside; the goods could not be confiscated (and fines sustained) in the absence of evidence of removal without payment of duty.

Recovery of Cenvat credit under the Cenvat Credit Rules, 2004 - penalty under Rule 15 of the Cenvat Credit Rules, 2004 and Section 11AC of the Central Excise Act, 1944 - Sustenance of demand for recovery of Cenvat credit and imposition of consequential penalties based on alleged shortage of inputs - HELD THAT: - The Tribunal held that recovery of Cenvat credit cannot be sustained unless the Department proves that inputs on which credit was availed were not received by the manufacturer or that received inputs were cleared without reversal of credit. In the present record there was no evidence to establish non-receipt of the inputs or that they were removed as such without reversal. The alleged shortage recorded during the contested stock verification was not supported by reliable weighment or proof of unauthorised clearance. Accordingly, the demand of Cenvat reversal and the related penalties were not established.

Demand for recovery of Cenvat credit and penalties confirmed by the original authority were set aside for lack of evidence that inputs were not received or were cleared without reversal.

Final Conclusion: Both appeals allowed: the order-in-original was set aside insofar as it confiscated finished goods, demanded recovery of Cenvat credit, and imposed penalties; appellants are entitled to consequential relief as per law.

Cenvat credit - assessment at the receiver's end - reversal of credit - interest under Rule 14 read with Section 11AB - penalty under Rule 26(2)(ii) - reduction of assessable value under sub rule (5) of Rule 3

Cenvat credit - assessment at the receiver's end - reversal of credit - interest under Rule 14 read with Section 11AB - penalty under Rule 26(2)(ii) - Admissibility of Cenvat credit taken by the receiver where duty was paid by the supplier and consequent liability for interest and penalty. - HELD THAT: - The Tribunal found that the duty paid by the supplier and availed as Cenvat credit by the receiver is permissible under the Cenvat Credit Rules which allow credit of the entire duty paid on inputs and capital goods. It held that reassessment or denial of credit at the receiver's end is not permissible; assessment cannot be undertaken against the receiver merely because the supplier paid duty, and Board instructions and judicial precedent support this position. The Tribunal noted that the receiver had reversed the total Cenvat credit amount on record, and relying on the decision of the Hon'ble High Court of Punjab & Haryana in Commissioner of Central Excise, Ludhiana v. Perfect Synthetics and CBEC instructions, found no infirmity in the transactions of either party. Consequently, there was no basis to demand the alleged higher Cenvat credit, to recover interest under Rule 14 read with Section 11AB, or to impose penalty under Rule 26(2)(ii). [Paras 5]

Impugned Order in Appeal set aside; both appeals allowed and demands, interest and penalties deleted.

Final Conclusion: The Tribunal allowed the appeals, holding the Cenvat credit availed by the receiver valid, and set aside the orders confirming demand, interest and penalty.

CENVAT credit reversal - Job-worker non-receipt within 180 days - Absence of recovery mechanism under Rule 4 prior to 01/03/2011 - Exemption for job-work under Notification No.214/86-CE - Availability of CENVAT credit on capital goods - Limitation and extended period - suppression with intent to evade

CENVAT credit reversal - Job-worker non-receipt within 180 days - Absence of recovery mechanism under Rule 4 prior to 01/03/2011 - Demand of CENVAT credit attributable to inputs sent for job work and not received back within 180 days. - HELD THAT: - The Tribunal observed that for the tax period 2002-03 there was no mechanism in Rule 4 of the CENVAT Credit Rules to recover CENVAT credit where inputs sent for job work were not received back within 180 days. Following the precedents relied upon by the appellant, the Tribunal held that in absence of any recovery machinery prior to the amendment by Notification No.3/2011-CE(NT) (01/03/2011) the demand for recovery of CENVAT credit on such inputs is not sustainable in law. The Tribunal therefore allowed the appeal qua this demand. [Paras 7]

Demand of CENVAT credit on inputs sent for job work and not received within 180 days is not sustainable and is set aside.

Availability of CENVAT credit on capital goods - Job-worker non-receipt within 180 days - Demand in respect of captively manufactured moulds, dies and tools sent for job work and alleged not received back within 180 days. - HELD THAT: - The Tribunal held that the demand relating to captively manufactured moulds, dies and tools sent out for job work and allegedly not returned within 180 days is likewise unsustainable. The Tribunal noted that even if duty had been paid on such capital goods, CENVAT credit would be available to the manufacturer and, in the factual and legal matrix of the relevant period, the revenue's demand could not be sustained. [Paras 7]

Demand in respect of captively manufactured moulds, dies and tools is not sustainable and is set aside.

Exemption for job-work under Notification No.214/86-CE - Availability of CENVAT credit on capital goods - Applicability of Notification No.214/86-CE exemption for items manufactured as job-work and its bearing on the demand. - HELD THAT: - The Tribunal examined the erstwhile Notification No.214/86-CE (25/03/1986) and recorded that it provided exemption for items manufactured in a factory as job-work and used in manufacture of final product or cleared as such from the supplier's factory. The Tribunal further observed that payment of duty on capital goods would not deprive the manufacturer of the corresponding CENVAT credit. On this basis the Tribunal found that the notification and the availability of CENVAT credit undermined the revenue's demand. [Paras 7]

Notification No.214/86-CE and availability of CENVAT credit on capital goods negate the impugned demand in respect of such job-work items.

Limitation and extended period - suppression with intent to evade - Sustainability of the demand on limitation grounds where extended period was invoked by the Department. - HELD THAT: - The Tribunal found that the show-cause notice (14/11/2006) sought recovery for the period 2002-03 by invoking the extended period of limitation on the ground of suppression with intent to evade duty. The revenue did not produce material to demonstrate suppression with requisite intent. In absence of such proof the Tribunal concluded that the demand was time-barred and could not be sustained on limitation grounds. [Paras 7]

The demand is time-barred for want of proof of suppression with intent and therefore unsustainable.

Final Conclusion: The appeal is allowed on merits and on limitation; the impugned order is set aside and the demands confirmed by lower authorities are annulled with consequential reliefs, if any.

Classification of goods as medicaments/medicaments versus textile articles - common parlance / commercial usage test for tariff classification - functional utility and predominant/primary use test - effect of changed tariff nomenclature (introduction of eight digit tariff) on classification - demand under Section 11A of the Central Excise Act, 1944

Classification of goods as medicaments/medicaments versus textile articles - common parlance / commercial usage test for tariff classification - functional utility and predominant/primary use test - Whether the products manufactured and sold by the respondent (absorbent cotton wool, carded cotton, gauze, bandages etc.) are classifiable as medicaments under Chapter 30 rather than as textile articles under Chapter 56 (or Chapter 52/56), and hence not liable to the Central Excise treatment asserted by Revenue. - HELD THAT: - The Tribunal accepted the reasoning of the Commissioner (Appeals) that the products in question are regarded in the pharmaceutical trade as "Absorbent Cotton Wool" and are used by hospitals and similar end users for wound dressing and prophylactic/therapeutic purposes. Reliance on the tests laid down by higher judicial precedents was applied: classification depends on how the article is understood in common parlance/commercial usage and on its functional utility and predominant use, not merely on the nomenclature in pharmacopoeias or on the mere fact of a new tariff entry. The Tribunal noted there was no change in the manufacturing process after the introduction of the eight digit tariff and held that the mere appearance of a new entry in Chapter 56 did not warrant reclassification where the broad description and trade understanding fit Chapter 30. The Tribunal further recorded that similar findings in an earlier Commissioner (Appeals) order dated 25/03/2009 were sustained by this Tribunal in its Final Order dated 15/05/2017, and that the present impugned order adopts the same reasoning and is therefore sustainable. [Paras 3, 4, 6]

Findings of the Commissioner (Appeals) that the products are classifiable under Chapter 30 (medicaments) and not under the textile chapters are sustainable; the Tribunal dismisses Revenue's appeal on this classification issue.

Final Conclusion: The Revenue appeal is dismissed; the Commissioner (Appeals) order holding the products to be classifiable under Chapter 30 is sustained by the Tribunal.

Small Scale Exemption - aggregate value of clearance for home consumption - treatment of returned goods under Rule 16 of Central Excise Rules, 2002 - demand under the proviso to Sub section (1) of Section 11A of the Central Excise Act, 1944 - precedent on exclusion of first clearance when goods are returned for re making

Treatment of returned goods under Rule 16 of Central Excise Rules, 2002 - aggregate value of clearance for home consumption - Small Scale Exemption - precedent on exclusion of first clearance when goods are returned for re making - Whether the clearance value of goods returned under Rule 16 in March 2007 should be excluded from the computation of aggregate value of clearance for Financial Year 2006-07 for determining eligibility for Small Scale Exemption for Financial Year 2007-08. - HELD THAT: - The Tribunal examined the fact that goods cleared during Financial Year 2006-07 with a clearance value of Rs. 6,69,600/- were returned in March 2007 under Rule 16 of the Central Excise Rules, 2002 for re making and subsequently cleared again in the next financial year. Relying on the Tribunal's precedent in M/s Kusum Kemicals Pvt. Ltd. which holds that where goods are returned for re making the value of the first clearance ought not to be counted, the Tribunal found no justification for including that clearance value in the aggregate for Financial Year 2006-07. Excluding that amount reduced the aggregate below the Rs. 4 crore threshold, thereby preserving the appellants' entitlement to the Small Scale Exemption for Financial Year 2007-08 and rendering the demand raised under the proviso to Sub section (1) of Section 11A unsustainable.

The value of clearance returned under Rule 16 in March 2007 is to be excluded from the Financial Year 2006-07 computation; the appellants remained within the threshold and were eligible for the Small Scale Exemption, making the demand unsustainable.

Final Conclusion: The impugned Order in Appeal is set aside, the appeal is allowed, the demand and penalty are held unsustainable and the appellant is entitled to consequential relief according to law.

Validity of panchnama - substantiation of alleged stock shortage - requirement of stock-taking methodology and calculation sheet - reliance on defective evidence for demand and credit disallowance - entitlement to consequential relief on quashing

Validity of panchnama - requirement of stock-taking methodology and calculation sheet - substantiation of alleged stock shortage - Whether the panchnama recorded during the departmental visit validly established the alleged shortage of finished goods and pet coke and supported the demand, disallowance of Cenvat credit and penalties. - HELD THAT: - The Tribunal examined the panchnama and found it did not record the method by which stock-taking was conducted and did not contain any calculation sheet or working to substantiate the alleged shortages. There was also no admission of clandestine removal by any person. Since the entire adjudication and the consequent demand, Cenvat credit disallowance and penalties were founded on that panchnama, the defect in the panchnama rendered the foundational evidence unsustainable. Reliance on a panchnama that does not demonstrate how stock was taken or show computations was held insufficient to establish the shortages or justify the impugned Order-in-Original and the Order-in-Appeal which upheld it. [Paras 5]

The panchnama is defective and does not substantiate the alleged shortages; the demand, disallowance and penalties based on it cannot be sustained.

Final Conclusion: Both appeals are allowed; the impugned Order-in-Appeal and underlying adjudication are set aside for being founded on a defective panchnama, and the appellants are entitled to consequential relief as per law.

Installation versus uninstallation of packing machines - operation of PMPM Rules in relation to installed machines - deemed operation proviso to Rule 8 of PMPM Rules, 2008 - seizure and confiscation of plant and machinery - admissibility of statements recorded under Section 14 - duty demand under PMPM Rules for May'10

Installation versus uninstallation of packing machines - operation of PMPM Rules in relation to installed machines - deemed operation proviso to Rule 8 of PMPM Rules, 2008 - Whether the three pouch packing machines were installed and therefore liable to be treated as operating machines for demand of duty under the PMPM Rules - HELD THAT: - The adjudicating authority and the Tribunal analysed the panchnama, photographs, the installation/sealing/unsealing report and the on the spot observations. The Commissioner (Appeals) found, and the Tribunal accepted, that the three machines were uninstalled at the relevant time, not connected to hoppers, motors or heaters, and no manufacturing activity was taking place on them. Under the PMPM Rules only an installed packing machine can be treated as an operating machine and proviso 2 to Rule 8 applies only where a machine is installed. Because the department neither alleged nor proved installation or any manufacturing on those three machines for the period 01.05.2010-02.05.2010, the demand of duty for May'10 based on treating those machines as operating did not survive. [Paras 5, 10]

The three machines were uninstalled and not liable to be treated as operating machines; the demand of duty for May'10 insofar as it related to those machines does not survive.

Seizure and confiscation of plant and machinery - duty demand under PMPM Rules for May'10 - Whether seizure and confiscation of the three machines and consequential revenue measures were justified - HELD THAT: - The Commissioner (Appeals) held that seizure of the machines was unwarranted where no manufacture was shown to have taken place and where the machines were uninstalled and confined in isolation; the Tribunal endorsed this conclusion. The appellate forum observed that seizure of plant and machinery in such circumstances produced adverse revenue consequences and contradicted the statutory scheme (Section 3/3A and PMPM Rules) because the department's possession of the machines undermined the proof of manufacture. On that basis the Commissioner (Appeals) vacated the seizure/confiscation and the Tribunal upheld that view. [Paras 5, 10]

Seizure and confiscation of the three machines was not justified and the order of confiscation/seizure was set aside.

Admissibility of statements recorded under Section 14 - Whether the statement recorded from the authorised signatory on 02.05.2010 was admissible evidence - HELD THAT: - The Commissioner (Appeals) found that the on the spot statement relied upon by the department was not recorded by an officer empowered under Section 14 (not before a Superintendent) and therefore lacked the legal sanctity required for admissibility; authorities were cited to the same effect. The Tribunal accepted this reasoning and noted that the impugned statement could not support the department's case where other contemporaneous material (panchnama, photographs, installation report) did not establish manufacture or installation. [Paras 5, 10]

The statement recorded on 02.05.2010 was not admissible as evidence for sustaining the department's case.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) findings: the three machines were uninstalled and not operating, the duty demand and confiscation were unsustainable, and the impugned statement lacked admissibility; the revenue appeals are dismissed and the Order in Appeal is affirmed with consequential benefits to the respondents.