TaxTMI Updates e-Newsletter
Jul 21,2018

Summary order. Application dismissed as withdrawn.

Summary order. Application for advance ruling dismissed as withdrawn.

Proceedings under Section 129 of the Kerala State Goods and Service Tax Act, 2017 - setting aside of impugned writ court order

Proceedings under Section 129 of the Kerala State Goods and Service Tax Act, 2017 - The writ appeal succeeded and the impugned judgment was set aside to enable the Department to proceed under Section 129 of the Kerala State Goods and Service Tax Act, 2017. - HELD THAT: - The High Court, following the common judgment in W.A. Nos. 371/2018 and 699/2018 dated 13.07.2018, set aside the impugned writ court order. By setting aside that order the Court removed the restraint on the Department and authorised it to initiate or continue proceedings under Section 129 of the Kerala State Goods and Service Tax Act, 2017. The Court disposed of the writ appeal accordingly and declined to award costs.

Writ appeal allowed; impugned judgment set aside; Department permitted to proceed under Section 129 of the Kerala State Goods and Service Tax Act, 2017; no costs.

Final Conclusion: The High Court allowed the writ appeal, set aside the impugned order and enabled the State GST Department to proceed under Section 129 of the Kerala State Goods and Service Tax Act, 2017; the appeal is disposed of with no costs.

Depreciation on a building held on long-term lease - Deemed ownership of lessee on long-term lease - Disallowance under Section 14A of the Income Tax Act - Principles of natural justice / audi alteram partem

Depreciation on a building held on long-term lease - Deemed ownership of lessee on long-term lease - Lessee's entitlement to depreciation where business premises are held on a long-term lease and whether the lease is equivalent to ownership for claiming depreciation. - HELD THAT: - The Court recognised that under the Income Tax Act a lessee of business premises for a sufficiently long term may be treated as owner for the purpose of claiming depreciation. The Tribunal had accepted in principle that a lessee of over twelve years can be deemed owner and claim depreciation, but it failed to make a clear finding whether the subject lease in the present case was for the requisite duration. Because no definitive factual determination was recorded by the Tribunal on the lease term, the question cannot be finally decided on appeal before a factual finding is made.

Question remitted to the Tribunal for fresh determination in accordance with law within six weeks; parts of the Tribunal's order on this issue set aside.

Disallowance under Section 14A of the Income Tax Act - Validity of making an ad-hoc disallowance (1% of dividend income) under Section 14A where the assessee's investment in securities is integral to its mandated business and actual expenses were not determined. - HELD THAT: - The Tribunal applied a thumb-rule ad-hoc deduction (1% or 10% as a norm) without making any concrete finding as to the actual expenses attributable to exempt income. The Court observed that where deductible expenses must be quantified, the Tribunal should determine the amount on evidence and law rather than apply an undifferentiated ad-hoc percentage. In the absence of any finding or determination of deductible expenses by the Tribunal, the appellate court could not uphold the approach adopted below.

Question remitted to the Tribunal for fresh consideration and determination of deductible expenses in accordance with law within six weeks; the relevant parts of the Tribunal's order are set aside.

Principles of natural justice / audi alteram partem - Whether the assessment additions were made without giving the assessee an opportunity of hearing, thereby violating natural justice. - HELD THAT: - The Tribunal found that the assessee's representative had appeared on several occasions and made submissions before the Assessing Officer. Under Section 260A the High Court will interfere only where a substantial question of law arises; allowing a factual contention of lack of hearing in every appeal would open floodgates. The Court treated the question as one of fact and declined to disturb the Tribunal's factual finding that opportunity to be heard had been afforded.

Tribunal's finding that hearing was given is upheld; no interference on this ground.

Final Conclusion: Two substantive issues-entitlement to depreciation on the long-term lease and the correctness of an ad-hoc Section 14A disallowance-are remitted to the Tribunal for fresh determination in accordance with law within six weeks; the assessee's challenge on grounds of denial of hearing is rejected and the Tribunal's factual finding on opportunity to be heard is upheld; appeals disposed accordingly.

Foreign exchange fluctuation gains as operating revenue - arm's length price and comparability under TNMM - proviso to section 92C(2) - 5% marginal relief - treatment of telecommunication expenses in computation of total turnover under section 10A

Foreign exchange fluctuation gains as operating revenue - Foreign exchange fluctuation gains form part of the operating revenue of an exporter for purposes of determining arm's length price under section 92C. - HELD THAT: - The Tribunal held that foreign exchange fluctuation gains are an integral part of the sales proceeds of an exporter and must be included in computing operating income and operating margin for transfer pricing purposes. The Tribunal relied on earlier authorities which treated such gains as contributing to operating margin and concluded they cannot be excluded from computation of operating margin of the exporter. The High Court adopted those findings and treated the question as resolved by the Tribunal's reasoning. [Paras 42]

The Tribunal's conclusion that foreign exchange fluctuation gains constitute part of operating revenue for ALP determination is accepted.

Arm's length price and comparability under TNMM - The Tribunal correctly excluded certain super profit comparables as not functionally similar and held that extreme super profit cases cannot be treated as comparables for the assessee operating in a risk mitigated, limited risk role. - HELD THAT: - The Tribunal found that the assessee functions largely as a risk mitigated R&D/back office centre remunerated on cost plus terms and therefore cannot be equated with market leaders generating commercial profits. Companies showing exceptionally high margins (described as 'super profits') were excluded because the TPO/AO did not demonstrate functional similarity or a common thread with the assessee; selection of such extremes was held to be inappropriate for TNMM comparability. The High Court treated these Tribunal findings on facts as not giving rise to a substantial question of law. [Paras 53, 54]

Exclusion of the super profit comparables by the Tribunal is sustained.

Proviso to section 92C(2) - 5% marginal relief - Under the old proviso to section 92C(2) the assessee was entitled to claim a 5% marginal relief as a standard deduction from the arithmetic mean; the Tribunal's interpretation granting the 5% benefit where circumstances warrant was upheld. - HELD THAT: - The Tribunal analysed the old and amended provisos and explained that the old proviso effectively permitted the assessee, at its option, to adopt a price differing from the arithmetic mean by up to 5%, functioning as a standard marginal relief. The Tribunal held that this benefit must be given if circumstances warrant. The High Court recorded and accepted the Tribunal's reasoning that the 5% marginal relief under the proviso is available to the assessee under the law as it stood for the relevant period. [Paras 63, 64]

The Tribunal's holding that the assessee is entitled to the 5% marginal relief under the old proviso is accepted.

Treatment of telecommunication expenses in computation of total turnover under section 10A - Telecommunication expenses attributable to delivery of software are to be excluded from total turnover in computing deduction under section 10A where they are excluded from export turnover. - HELD THAT: - Following the Division Bench decision in Tata Elxsi (affirmed by the Supreme Court in HCL Technologies), the Court observed that where deductions such as freight, telecommunication and insurance are excluded from 'export turnover', they must likewise be excluded from 'total turnover' because export turnover forms a component of total turnover. Excluding such expenses only from export turnover but not from total turnover would produce incongruous results and frustrate the legislative scheme for computing profits from export business. The High Court applied that principle to uphold the Tribunal's direction to exclude telecommunication expenses from total turnover for section 10A computation. [Paras 5, 6]

The Tribunal's direction to exclude telecommunication expenses from total turnover for the purpose of section 10A computation is sustained.

Final Conclusion: No substantial question of law survives for the High Court on the matters decided by the Tribunal; the appeals by the Revenue are dismissed and the Tribunal's orders are sustained. No costs.

Deduction under Section 80P(2) - exclusion under Section 80P(4) - characterisation of a co-operative society vis-a -vis a co-operative bank - definition of primary co-operative bank in Part V of the Banking Regulation Act, 1949 - deference to findings of fact by the Tribunal - legislative intent behind Section 80P(4) - exclusion confined to co-operative banks exclusively carrying on banking business

Deduction under Section 80P(2) - deference to findings of fact by the Tribunal - Whether the assessee societies are entitled to deduction of income under Section 80P(2) for income attributable to providing credit facilities to members - HELD THAT: - The Court accepted the concurrent factual findings of the Tribunal and lower authorities that the respondent societies are co-operative societies engaged in providing credit facilities to their members and have not obtained any licence to carry on banking. Applying the established precedent of this Court, the income attributable to the business of providing credit facilities to members falls within the scope of Section 80P(2) and is deductible. There was no material shown to this Court to demonstrate perversity or misreading of evidence in the findings of fact reached below, and the coordinate-bench decisions dealing with identical facts were followed. [Paras 5, 6]

Deduction under Section 80P(2) allowed in favour of the assessee societies; appeals dismissed on this ground.

Exclusion under Section 80P(4) - characterisation of a co-operative society vis-a -vis a co-operative bank - definition of primary co-operative bank in Part V of the Banking Regulation Act, 1949 - legislative intent behind Section 80P(4) - exclusion confined to co-operative banks exclusively carrying on banking business - Whether the benefit of Section 80P(2) is excluded by Section 80P(4) because the societies are to be treated as co-operative banks - HELD THAT: - The Court held that Section 80P(4) excludes only co-operative banks as defined in Part V of the Banking Regulation Act, 1949, which requires cumulative satisfaction of the statutory conditions for a primary co-operative bank (principal object of banking business, minimum paid-up capital/reserves threshold, and bye-laws barring other co-operative societies as members). The respondent societies did not satisfy those criteria and had not obtained banking licence; merely providing credit facilities to members does not convert a co-operative society into a co-operative bank. The legislative purpose of Section 80P(4) is to deny the deduction only to entities that are co-operative banks exclusively carrying on banking business; that purpose does not extend to the present societies. [Paras 3, 4, 6]

Section 80P(4) held not attracted; societies are not co-operative banks and are entitled to Section 80P(2) deduction.

Final Conclusion: Following coordinate-bench precedents and accepting the factual findings that the respondent societies are not co-operative banks and have not obtained banking licences, the Court upheld the Tribunal's orders granting deduction under Section 80P(2) and dismissed the Revenue's appeals for AY 2013-14.

Mandatory compliance with the Section 144C scheme for eligible assessee - draft assessment order under Section 144C(1) and right to approach the DRP - direction by the Dispute Resolution Panel under Section 144C(5) - final assessment invoking Section 143(3) read with Section 144C(13) - jurisdictional error by passing final order without following statutory procedure - entertaining writ remedy where order is without jurisdiction despite alternative appeal remedy

Draft assessment order under Section 144C(1) and right to approach the DRP - final assessment invoking Section 143(3) read with Section 144C(13) - jurisdictional error by passing final order without following statutory procedure - Whether the assessment order dated 31st January, 2018 is without jurisdiction for not preceding it with a draft assessment order under Section 144C(1) before invoking Section 144C(13). - HELD THAT: - The court held that a Foreign Company is an eligible assessee under Section 144C(15) and is therefore entitled to the special procedure under Section 144C which mandates that where the Assessing Officer proposes a variation in returned income a draft assessment order under Section 144C(1) must be passed so the assessee may object before the DRP. The Assessing Officer cannot invoke Section 144C(13) and pass a final assessment under Section 143(3) without first complying with the draft-order and DRP direction mechanism; doing so is a jurisdictional defect. The Revenue's contention that compliance with Section 144C is unnecessary where the Tribunal's order restores matters to the Assessing Officer or that the requirement applies only to first-round proceedings was rejected. Even in remand or partial remand proceedings, if the Assessing Officer proposes a variation in returned income he must follow Section 144C(1) so that the DRP can consider objections and give directions under Section 144C(5); only thereafter can Section 144C(13) be invoked. Because the impugned order varied the returned income but was passed without the mandatory draft order and DRP process, it was held to be without jurisdiction. [Paras 7, 8, 9, 11, 12]

Impugned assessment order dated 31st January, 2018 is quashed and set aside as passed without complying with the mandatory requirements of Section 144C.

Final Conclusion: The petition under Article 226 is allowed; the assessment order dated 31st January, 2018 (Assessment Year 2011-12) is quashed for failure to comply with the mandatory Section 144C procedure applicable to a Foreign Company, without prejudice to rights of the Revenue and the petitioner to proceed in accordance with law.

Treatment of lease rentals as revenue receipts in finance lease transactions - inapplicability of Accounting Standard 19 as sole determinant of taxation character - primacy of contractual terms and substance over form in classifying lease vs finance arrangement - binding effect of prior Division Bench decision on identical question

Treatment of lease rentals as revenue receipts in finance lease transactions - inapplicability of Accounting Standard 19 as sole determinant of taxation character - primacy of contractual terms and substance over form in classifying lease vs finance arrangement - Whether the lease transactions in question must be treated as finance leases for tax purposes so that only the interest component is taxable, or whether the entire lease rentals must be offered to tax having regard to the terms of the agreement despite reliance on Accounting Standard 19. - HELD THAT: - The Court examined the terms of the lease agreements placed before the authorities and found them to be lease agreements on their face, with nothing in the documents to demonstrate that they were in substance only finance arrangements. Delivery of equipment by the supplier to the lessee or the lessee's prior purchase of equipment did not, by itself, convert the agreement into a finance contract. The Court held that reliance solely on Accounting Standard 19 to characterise the transactions as finance leases is not justified where the contractual terms indicate otherwise. The decision in earlier Tax Case Appeals between the same parties on identical questions of law was binding and the present appeal was squarely covered by that precedent. The pendency or admission of Special Leave Petitions in the Supreme Court did not amount to a stay of the Division Bench judgment relied upon. Applying these principles, the Tribunal's and lower appellate authorities' conclusions to treat the entire lease rental as taxable were upheld. [Paras 4, 6, 7]

Appeal dismissed; the lease transactions are to be treated on the basis of the contractual terms and the entire lease rentals were rightly offered to tax; reliance on Accounting Standard 19 alone is insufficient.

Final Conclusion: The High Court dismissed the appeal challenging the Tribunal's treatment of the lease rentals for Assessment Year 2011-2012, holding that the contractual terms establish the transactions as leases for tax purposes, Accounting Standard 19 alone cannot dictate tax character, and the matter is governed by the Court's prior Division Bench decision which was not stayed.

Defective show cause notice - penalty under Section 271(1)(c) of the Income-tax Act, 1961 - concealment of income - furnishing inaccurate particulars of income - natural justice and notice requirement - assessment order cannot cure notice defect - benefit of precedent favouring the assessee where two views exist

Defective show cause notice - penalty under Section 271(1)(c) of the Income-tax Act, 1961 - concealment of income - furnishing inaccurate particulars of income - assessment order cannot cure notice defect - Validity of penalty imposed under Section 271(1)(c) where the show cause notice did not specify whether proceedings were for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the notice issued under the penalty provisions did not specify the charge against the assessee - whether it was for concealing particulars of income or for furnishing inaccurate particulars - and that the inappropriate portions of the printed pro forma notice were not struck out. The Court held that the content of the show cause notice issued under Section 274 (in proceedings under Section 271(1)(c)) is of prime significance and that a defect in that notice is not cured merely because the assessment order contains a finding. Reliance was placed on coordinate decisions and the principle that where two views exist on the validity of a form notice the view favourable to the assessee is to be followed. The Revenue's contention that the assessment order clarified the charge was rejected because the statute requires the assessee be put on notice of the specific charge before imposition of penalty. For these reasons the Tribunal concluded that imposition of penalty could not be sustained. [Paras 5, 6]

Penalty imposed under Section 271(1)(c) quashed on account of defective show cause notice.

Final Conclusion: Delay in filing the appeal was condoned; the penalty of Rs.2,04,180 imposed under Section 271(1)(c) was set aside because the show cause notice failed to specify whether the proceedings were for concealment of income or for furnishing inaccurate particulars, and the assessment order could not cure that defect; appeal allowed.

Allowability of business expenditure - deductibility under section 37(1) of the Income tax Act, 1961 - director's report as evidence - remand for fresh consideration

Allowability of business expenditure - deductibility under section 37(1) of the Income tax Act, 1961 - director's report as evidence - remand for fresh consideration - Whether the expenditure of Rs. 2,03,93,529 claimed under 'power and fuel' is allowable or requires further adjudication. - HELD THAT: - The Assessing Officer disallowed the excess power and fuel expenditure by treating the Director's Report (Form A) as conclusive that only the electricity amounts shown therein were incurred for business, and added the difference to income. The CIT(A) directed deletion of the disallowance relying on the assessee's explanations and documentary assertions about husk purchases, boiler installation and past practice. The Tribunal found that neither the Assessing Officer nor the CIT(A) examined the details filed by the assessee; the Director's Report was not placed before the Tribunal; and the material warranted proper scrutiny. In these circumstances the Tribunal concluded that the claim must be examined afresh with proper evidential appraisal and after affording the assessee a reasonable opportunity of hearing. The matter was therefore remitted to the file of the Assessing Officer for de novo consideration on the basis of the details to be filed by the assessee and in accordance with law. [Paras 11]

Remitted to the Assessing Officer for fresh adjudication after considering the assessee's details and after affording a hearing; the CIT(A) order deleting the disallowance set aside.

Procedural concession - non pressing of cross objection - Disposition of the assessee's cross objection. - HELD THAT: - At hearing the authorised representative for the assessee stated that the cross objection was not pressed. The Tribunal recorded that concession and dismissed the cross objection accordingly. [Paras 12, 13]

Cross objection dismissed as not pressed by the assessee.

Final Conclusion: The Revenue appeal is allowed for statistical purposes by setting aside the CIT(A) order on the disputed 'power and fuel' expenditure and remitting the matter to the Assessing Officer for fresh adjudication after the assessee files supporting details and is given an opportunity of hearing; the assessee's cross objection is dismissed as not pressed.

Treatment of unexplained cash deposits under section 68 - veracity of unregistered sale agreement and necessity to produce buyers - remand for verification under Rule 46A of the Income Tax Rules, 1962 - appellate authority's duty to obtain remand report before admitting fresh evidence

Appellate authority's duty to obtain remand report before admitting fresh evidence - remand for verification under Rule 46A of the Income Tax Rules, 1962 - Ld. CIT(A) erred in considering a General Power of Attorney (GPA) filed before the CIT(A) without calling for a remand report from the Assessing Officer and thereby violated Rule 46A of the Income Tax Rules, 1962; the CIT(A)'s order deleting the addition was set aside and the matter remitted to the AO for fresh consideration. - HELD THAT: - The Tribunal observed that the GPA relied upon by the CIT(A) had not been placed before the AO during assessment and that the CIT(A), before admitting and acting upon that document, ought to have called for a remand report under Rule 46A so that the AO could verify the contemporaneity and relevance of the GPA and comment on it. The GPA does not refer to the earlier unregistered sale agreement and records only a market value; it does not state that the sale consideration was received from the purported purchaser. In these circumstances, the CIT(A)'s acceptance of the GPA without remand deprived the AO of an opportunity to verify the transaction and was procedurally unsound. For these reasons the CIT(A)'s deletion could not be sustained and the Tribunal directed that the AO examine the matter afresh after giving the assessee a reasonable opportunity. [Paras 6]

Order of the CIT(A) deleting the addition is set aside and the matter is remitted to the Assessing Officer for fresh adjudication after due opportunity and verification.

Treatment of unexplained cash deposits under section 68 - veracity of unregistered sale agreement and necessity to produce buyers - The Assessing Officer's initial doubt about the genuineness of the unregistered sale agreement and the cash deposits was held to be prima facie reasonable because the unregistered sale agreement lacked complete particulars of the buyers and the assessee did not furnish addresses or produce the buyers; the question of whether the deposits are creditable under section 68 requires further inquiry by the AO. - HELD THAT: - The Tribunal recorded that the unregistered sale agreement dated 23.08.2011 did not contain full particulars of the purchasers, and the assessee failed to supply buyers' addresses or to produce the buyers when called upon. Given the absence of corroborative evidence before the AO, the AO's classification of the cash deposits as unexplained under section 68 was founded on genuine doubt. Rather than finally adjudicating the matter on the limited material before the AO or permitting the CIT(A) to sustain deletion without verification, the Tribunal found that the factual issues concerning receipt of consideration and identity/credit-worthiness of payers must be examined afresh by the AO in the remand proceedings. [Paras 6]

The AO's treatment of the deposits as unexplained was not finally disturbed by the Tribunal; the issue is remitted to the AO for fresh enquiry and decision in accordance with law.

Final Conclusion: The CIT(A)'s order deleting the addition is set aside and the matter is remitted to the Assessing Officer for fresh adjudication after verification and opportunity to the assessee; the Revenue's appeal is allowed for statistical purposes and the assessee's cross-objection is dismissed.

Time barred penalty - limitation for initiation and completion of penalty proceedings - penalty under section 271D for contravention of section 269SS - penalty under section 271E for contravention of section 269T - requirement that penalty proceedings relate to the correct assessment year

Penalty under section 271D for contravention of section 269SS - penalty under section 271E for contravention of section 269T - time barred penalty - requirement that penalty proceedings relate to the correct assessment year - Validity of deletion by the Commissioner of Income Tax (Appeals) of penalties imposed under sections 271D and 271E in respect of cash receipt and repayment of loans - HELD THAT: - The Tribunal examined the factual matrix and records and accepted the CIT(A)'s finding that the Assessing Officer had originally levied penalties in assessment year 2005-06 though the alleged transactions related to assessment years 2004-05 and 2002-03. The Tribunal noted that the assessment order for 2005-06 contained no reference to the impugned cash transactions for the earlier years and that the original penalty proceedings initiated in 2010 (and concluded in 2011) in respect of AY 2005-06 were time barred. After the ITAT earlier dismissed the revenue's appeals against those penalties on the ground that the AO cannot levy penalty in an assessment year on facts relatable to other years, the department initiated fresh penalty proceedings for the years in which the transactions occurred. The CIT(A) concluded, after examining the record, that the subsequently framed penalty orders were barred by limitation. The Tribunal found no factual error in the CIT(A)'s reasoning, observed that the ITAT's earlier order did not direct initiation of fresh proceedings for the correct years, and held that the penalties could not be sustained as they were time barred and had been imposed in the wrong assessment year.

Findings of the CIT(A) deleting the penalties under sections 271D and 271E are upheld and the department's appeals are dismissed.

Final Conclusion: Both departmental appeals challenging deletion of penalties under sections 271D and 271E are dismissed; the penalties are held to be time barred and were wrongly imposed in an incorrect assessment year, and the CIT(A)'s orders deleting those penalties are affirmed.

Penalty under section 271(1)(c) for concealment of particulars or furnishing inaccurate particulars - requirement of a clear and unambiguous show-cause notice in penalty proceedings - right to fair opportunity to meet the charge / doctrine of natural justice

Penalty under section 271(1)(c) for concealment of particulars or furnishing inaccurate particulars - requirement of a clear and unambiguous show-cause notice in penalty proceedings - right to fair opportunity to meet the charge / doctrine of natural justice - Validity of the notice dated 31.05.2016 initiating penalty proceedings and consequence of its ambiguity as to whether charge was concealment of particulars of income or furnishing inaccurate particulars. - HELD THAT: - The Tribunal examined the notice issued by the Assessing Officer and the challenge raised before the Commissioner (Appeals) that the notice failed to specify whether the assessee was being charged with concealment of particulars of income or with furnishing inaccurate particulars of income. The authorities below, including the CIT(A), applied the principle that penal proceedings require an unequivocal and unambiguous charge so that the assessee has a proper opportunity to defend. The Tribunal, following the decisions relied upon below (including the jurisdictional High Court and relevant precedents), held that a show-cause notice which clubs both charges with an 'or' and proceeds as if both charges are established creates such ambiguity that it vitiates the proceedings. Because the ambiguity in the notice deprived the assessee of a clear charge and thereby of a fair opportunity to meet the case, the penalty levied could not be sustained and had to be quashed. The Tribunal found no infirmity in the CIT(A)'s admission of the additional ground and cancellation of the penalty in light of these principles.

The show-cause notice was invalid for being ambiguous as to the charge; consequentially the penalty under section 271(1)(c) was quashed and the revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeal, upholding the CIT(A)'s finding that the penalty proceedings were invalid because the show-cause notice failed to clearly specify whether the charge was concealment of particulars or furnishing inaccurate particulars, and accordingly the penalty under section 271(1)(c) was cancelled.

Summary order. Special Leave Petition dismissed; delay condoned.

Summary order. Special Leave Petition dismissed; delay condoned.

Summary order. Special leave petitions dismissed; delay condoned; pending applications, if any, disposed of.

Summary order. Special Leave Petition dismissed for delay of 159 days and, notwithstanding consideration of merits, dismissed on merits.

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

Inclusion of licence fees in assessable value under Rule 10(1)(c) of Customs Valuation (Determination of Imported Goods) Rules, 2007 - Mis declaration of value attracting confiscation under Section 111(m) of the Customs Act, 1962 - Imposition of penalty under Section 112(a) of the Customs Act, 1962

Inclusion of licence fees in assessable value under Rule 10(1)(c) of Customs Valuation Rules - Mis declaration of value and resultant confiscation under Section 111(m) - Liability to penalty on importer under Section 112(a) - Licence fees payable under the import licence agreements are includable in the assessable value; mis declaration of value by the importer justified enhancement of value, confiscation of goods, and imposition of penalty on the importer. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that the licence/royalty amounts disclosed in the licence agreements fall within the ambit of Rule 10(1)(c) and therefore must be included in the assessable value. The declared invoice/CBE values omitted these licence fees; examination of the contracts established the actual licence obligations and the assessable values were enhanced accordingly. The importer, having statutory responsibility to ensure truthful declaration and to produce relevant invoices/documents, failed to prove that it had informed or instructed the courier to include licence fees; absence of such evidence sustains the finding of mis declaration. The Tribunal upheld confiscation under Section 111(m) and the penalty on the importer under Section 112(a), concluding that breach of the declaration obligation attracts those consequences irrespective of asserted lack of intention to evade duty. [Paras 5, 6, 9]

Enhancement of assessable value by including licence fees is sustained; goods confiscated and penalty on the importer upheld.

Civil liability of courier for mis declaration where courier unaware of material facts - Imposition of penalty under Section 112(a) on courier - Courier M/s DHL Express cannot be held liable to penalty under Section 112(a) for non inclusion of licence fees where the courier was not aware of the licence contract and did not suppress the facts. - HELD THAT: - Although the assessable value was enhanced due to suppression of the licence contract, the Tribunal found that the non inclusion arose from facts not known to the courier. Liability to penalty under Section 112(a) requires culpability linked to the act of mis declaration; where the courier was unaware of the licence arrangements and did not participate in suppression, imposition of penalty on the courier is not justified. Accordingly, the penalty imposed on M/s DHL Express was set aside. [Paras 9]

Penalty on the courier set aside; appeal of M/s DHL Express allowed.

Final Conclusion: Licence fees under the licence agreements were rightly included in assessable value and the importer's appeal is dismissed with confiscation and penalty upheld; the courier M/s DHL Express, being unaware of the licence contracts, is not liable to penalty and its appeal is allowed.

Strict construction of exemption notification - burden of proof on claimant - compliance with bond conditions for duty-free import - proof of re-export - non-production of documentary evidence disentitles to benefit

Strict construction of exemption notification - burden of proof on claimant - Legal principle governing entitlement to benefit under the conditional Notification dated 02.05.1979 - HELD THAT: - The Tribunal applied settled law that an exemption or concession in a taxing statute is to be construed strictly and the person claiming the exemption bears the burden of proving entitlement. Where an exemption is made conditional, the conditions must be complied with; only where conditions are directory and do not affect the essence of the notification can limited latitude be shown. The Tribunal relied on the reasoning in Hari Chand Shri Gopal to reaffirm that in case of doubt the benefit goes to the State and that mandatory conditions must be obeyed exactly. [Paras 6]

The legal principle is affirmed that the burden of proof lies on the claimant and conditional notifications are to be strictly construed.

Compliance with bond conditions for duty-free import - proof of re-export - non-production of documentary evidence disentitles to benefit - Application of the above principle to the facts: whether the appellant was entitled to exemption for 16 containers despite non-production of re-export evidence and its plea of destruction of documents by fire - HELD THAT: - On the facts the appellant failed to produce any documentary evidence to prove re-export of the 16 containers or to substantiate the asserted destruction of records. The asserted destruction occurred at premises belonging to another company and no plausible evidence was placed before the authorities to connect the missing documents to the appellant's claim. Because the mandatory conditions of Notification dated 02.05.1979 and the bond executed by the appellant were not complied with, the appellant could not establish entitlement to the exemption. Applying the strict-construction and burden principles, the Tribunal found that non-production of proof disentitled the appellant to the benefit of the Notification. [Paras 2, 3, 6, 7]

The adjudged demand was legally sustainable and the appellant's claim for exemption in respect of the 16 containers was rightly rejected.

Final Conclusion: The appeal is dismissed: the Tribunal upheld that (i) entitlement under the conditional exemption Notification must be strictly proved by the claimant, and (ii) on the facts the appellant failed to comply with the Notification and bond conditions or to produce credible evidence of re export, so the duty demand was confirmed.

Import restriction on second-hand/refurbished electronic goods - permission from Ministry of Environment and Forests for import of waste electrical and electronic assemblies - chartered engineer certificate for residual life of refurbished spares - confiscation under Section 111(d) of the Customs Act, 1962 - redemption fine and penalty under Section 112(a)(i) of the Customs Act, 1962 - customs valuation acceptance

Import restriction on second-hand/refurbished electronic goods - permission from Ministry of Environment and Forests for import of waste electrical and electronic assemblies - chartered engineer certificate for residual life of refurbished spares - confiscation under Section 111(d) of the Customs Act, 1962 - Goods imported as refurbished data graphic display tubes are not to be treated as restricted imports liable to confiscation. - HELD THAT: - The Tribunal applied its earlier determination in the appellant's own, identical imports that refurbished/reconditioned spares of capital goods (other than personal computers/laptops) are freely importable subject to conditions in the Handbook of Procedures (production of Chartered Engineer certificate evidencing at least 80% residual life). The appellants produced the Chartered Engineer certificate and permission from the Ministry of Environment and Forests under the CBEC circular for items under the schedule relating to waste electrical/electronic assemblies. On that basis the adjudicating authority's conclusion that the imports were restricted and confiscable under the Customs Act could not be sustained. [Paras 6, 7]

Holding that the goods are not restricted and cannot be confiscated is set aside.

Redemption fine and penalty under Section 112(a)(i) of the Customs Act, 1962 - customs valuation acceptance - Redemption fine and penalty imposed on the appellant are not sustainable; valuation assessed by the adjudicating authority is upheld. - HELD THAT: - Because the Tribunal held the imports were not restricted and hence not liable to confiscation, the consequent redemption fine and penalty imposed could not be sustained and were set aside. Separately, the appellant had not contested the valuation determined by the adjudicating authority and had accepted the value; accordingly the Tribunal upheld the valuation as assessed. [Paras 7, 8]

Redemption fine and penalty are set aside; the valuation assessed is upheld.

Final Conclusion: Appeals allowed to the extent of setting aside confiscation, redemption fine and penalty; valuation as accepted by the appellant is sustained and appeals are disposed.

Retesting of samples - NABL accredited laboratory - competence of CRCL laboratory - provisional assessment and finalization - principles of natural justice

Retesting of samples - NABL accredited laboratory - principles of natural justice - Direction to get samples re-tested from a laboratory other than CRCL and to finalize provisional assessments on the basis of those reports - HELD THAT: - The Tribunal upheld the appellate direction that, in the interest of justice, samples covered by the test memos should be re-tested at a government-approved laboratory other than CRCL which is equipped to report on all ten points of the test memo. The record shows CRCL had earlier returned samples for lack of facilities and another NABL-accredited laboratory (Spectro Analytical Labs Ltd.) conducted XRD/SEM tests and distinguished the crystalline structure as Natural Uncoated Ground Calcium Carbonate. The department's own RTI responses and a subsequent circular corroborate that CRCL lacks the requisite facilities to test natural calcite powder. In these circumstances the directive for re-testing elsewhere and for the adjudicating authority to finalize the provisional assessments after following principles of natural justice was supported by the material on record.

Direction to re-test samples at a laboratory other than CRCL and to finalize provisional assessments on the basis of those reports is upheld.

Competence of CRCL laboratory - provisional assessment and finalization - Whether CRCL was competent and equipped to perform the tests required by the test memo for Natural Calcium Carbonate - HELD THAT: - The Tribunal accepted evidence that CRCL and the Indian Bureau of Mines declined or were unable to conduct the required analyses for calcite powder due to lack of equipment. CRCL's correspondence and RTI replies expressly stated non-possession of X-Ray Diffraction facilities and that no new equipment had been installed after the dates when samples were returned. Given CRCL's admitted incapacity and the availability of NABL-accredited laboratories able to perform the specified tests, the Revenue's contention that CRCL was fully equipped was rejected.

CRCL was not equipped to carry out the tests specified in the test memo; Revenue's challenge to the retesting direction is rejected.

Final Conclusion: Appeal by Revenue dismissed. The appellate direction for re-testing the samples at a laboratory other than CRCL and for finalization of provisional assessments in accordance with the re-test reports and principles of natural justice is affirmed.

Assessable value - Rejection of declared transaction value - Undervaluation - Section 14 of the Customs Act, 1962 - Standard of proof/evidence required for enhancement of value

Assessable value - Rejection of declared transaction value - Section 14 of the Customs Act, 1962 - Standard of proof/evidence required for enhancement of value - Whether the Commissioner (Appeals) was correct in setting aside the Original Authority's enhancement of the assessable value of imported Mini Booster Pumps - HELD THAT: - The Tribunal accepted the reasoning of the Commissioner (Appeals) that under Section 14 the assessable value is to be arrived at on the basis of the price actually paid and that the transaction value can be rejected only when it is shown that the price is not the sole consideration or other statutory grounds exist. Reliance was placed on this Tribunal's earlier decision in the case of M/s Sanjivani Non Ferrous Trading Limited which was applied to the facts. The Tribunal found that the Original Authority enhanced value on the basis of NIDB data without conducting the detailed inquiries or collecting material evidence necessary to establish undervaluation or that the declared price was not the sole consideration. In the absence of such evidence or enquiries, the enhancement was unsustainable and the Commissioner (Appeals) rightly rejected the enhanced value.

The enhancement of assessable value by the Original Authority was set aside; the Commissioner (Appeals) order rejecting the enhanced value is upheld.

Final Conclusion: Revenue's appeal is dismissed and the impugned Order-in-Appeal dated 28.02.2017 is upheld; stay applications disposed of.

Confiscation - penalty under Section 114(i) of the Customs Act, 1962 - redemption fine under Section 125 of the Customs Act, 1962 - smuggling - burden of proof and corroboration - reliance on precedent

Confiscation - smuggling - burden of proof and corroboration - redemption fine under Section 125 of the Customs Act, 1962 - Whether consignments were liable to confiscation and redemption fine where no seizure was effected and smuggling was not proved by corroborative evidence - HELD THAT: - The Tribunal found that the case against the consignors and related persons rested on presumptions and uncorroborated inferences drawn from documents and statements; there was no seizure of pulses and no evidence that any of the parties carried or delivered goods in a Customs area or otherwise committed acts amounting to smuggling. The adjudicating authority's conclusion that the impugned consignments were liable to confiscation and a redemption fine was unsustainable in absence of legal proof of smuggling or of complicity by the Dal mills. Reliance was placed on an earlier decision of the Tribunal addressing identical facts where penalties and confiscation were set aside because suspicion cannot substitute for proof. Applying that reasoning, the Tribunal allowed the appeals and set aside the redemption fine and confiscation-based consequences. [Paras 8, 9, 12]

Confiscation and redemption fine set aside; penalty not sustainable in absence of seizure or corroborative proof of smuggling.

Penalty under Section 114(i) of the Customs Act, 1962 - reliance on precedent - assessment of monetary gain in imposition of penalty - Whether penalty under Section 114(i) could be sustained against the broker and other persons when complicity and monetary gain were not proved - HELD THAT: - The Commissioner (Appeals) had reduced penalties after finding that complicity of Dal mills was not established and that it was not shown they derived monetary gain from the alleged activity. The Tribunal concurred with the approach that imposition and quantum of penalty for smuggling-related offences must rest on proof of participation and financial advantage; where such proof is lacking and the case is premised on suspicion, penalty cannot be sustained. Having regard to the Tribunal's earlier decision on identical factual matrix, the penalties imposed were set aside. [Paras 9, 12]

Penalties under Section 114(i) set aside or reduced as unsustainable for want of proof of complicity and monetary gain.

Final Conclusion: Appeals allowed; confiscation, redemption fine and penalties set aside for lack of seizure and absence of corroborative proof of smuggling, relying on earlier Tribunal precedent.

Non-arbitrability of winding up proceedings - distinction between rights in rem and rights in personam - effect of arbitration clause on jurisdiction to wind up a company - admissibility of new factual pleas not pleaded in reply - choice of foreign law in contract and pleading requirement to demonstrate its effect - provisional liquidation under the Companies Act

Admissibility of new factual pleas not pleaded in reply - insurance cover for loan and subrogation - The respondent cannot raise, at the hearing, an unpleaded contention that insurance proceeds discharge its liability; such factual pleas must be pleaded and particularised earlier. - HELD THAT: - The Court observed that the respondent did not plead the alleged insurance recovery in its written reply and therefore could not, at the stage of arguments, rely upon that contention. Facts within the respondent's knowledge which are not pleaded cannot be introduced for the first time during argument. Even if insurance monies had been received by the creditor, principles of subrogation and the creditor's duty to account to the insurer mean the debtor cannot defeat the petition on that vague basis; any adjustment between creditor and insurer would not absolve the respondent of liability in the winding up proceedings. [Paras 7, 9]

The insurance-based defence, being unpleaded and speculative, is rejected.

Non-arbitrability of winding up proceedings - effect of arbitration clause on jurisdiction to wind up a company - distinction between rights in rem and rights in personam - An arbitration agreement cannot oust the Court's jurisdiction to entertain a petition for winding up or to grant relief under the Companies Act; insolvency and winding up matters are non-arbitrable. - HELD THAT: - Relying on the Supreme Court's exposition in Booz Allen and Hamilton and the Full Bench decision of this Court, the Court reiterated that disputes concerning insolvency and winding up are non-arbitrable because an arbitrator lacks power to order winding up. The Court accepted the legal distinction that rights in rem (which concern proprietary or public-interest aspects such as winding up) are not referable to arbitration, whereas rights in personam may be. A prayer to refer the present petition to arbitration therefore cannot be sustained, as the relief sought-winding up and ancillary orders under the Companies Act-falls outside the competence of an arbitral tribunal. [Paras 10, 11, 12, 13]

The arbitration clause does not bar the Court from proceeding with the winding up petition; the plea to refer the matter to arbitration is repelled.

Choice of foreign law in contract and pleading requirement to demonstrate its effect - A bare contention that Swedish law governs and may bar the petitioner's claim, without particulars or demonstration of how that law defeats the claim, is insufficient and is rejected as vague and unsubstantiated. - HELD THAT: - The respondent alleged that the agreement was governed by the laws of Sweden and that the claim might be barred under Swedish law. The Court held this contention to be speculative because the respondent failed to specify which provisions of Swedish law would operate to defeat the petitioner's claim or to provide particulars demonstrating a bona fide defence under that law. Mere possibility that foreign law may create a bar does not constitute a valid defence to resist the winding up petition. [Paras 14]

The plea based on applicability of Swedish law is vague, unparticularised and rejected.

Final Conclusion: The petition for winding up is admitted; the Official Liquidator is appointed as Provisional Liquidator to take possession of assets and records, citations for the petition are ordered to be published, and the matter is listed for further hearing on the specified date.

Winding up petition - bona fide dispute as a bar to winding up - transfer of property under the Sales of Goods Act, 1930 (section 19) - company court not to decide disputed questions of fact which belong to civil suit - acknowledgement limited to adjustment against future purchases

Transfer of property under the Sales of Goods Act, 1930 (section 19) - acknowledgement limited to adjustment against future purchases - Whether the respondent was liable to refund the price of returned/unsold goods or remained liable only to adjust the amount against future purchases - HELD THAT: - The Court examined the alleged acknowledgement dated 31.08.2015 and subsequent emails and found that the respondent admitted a pending amount only on the footing that it would be adjusted against future supplies. There is no clause in the vendor agreement obliging the respondent to accept returned stock and refund the consideration. Under section 19 of the Sales of Goods Act the property in goods passes according to the intention of the parties; on the material before the Court there is nothing to show that title did not pass to the petitioner on purchase. In these circumstances the respondent cannot be held liable, in summary winding-up proceedings, to refund the claimed amount where the admission is expressly conditional on adjustment against future purchases and the contractual terms do not support a right of return and refund. [Paras 6, 7, 8, 9, 11]

The Court held that there was no basis in the agreement or in the acknowledgement for a summary finding that the respondent was liable to refund; the acknowledgement was limited to adjustment against future purchases and title passed to the petitioner.

Bona fide dispute as a bar to winding up - company court not to decide disputed questions of fact which belong to civil suit - Whether the winding up petition was maintainable in the face of bona fide disputes as to liability - HELD THAT: - Relying on the settled principle that a company court should dismiss a winding up petition where the debt is bona fide disputed on substantial grounds, the Court found that the respondent had raised bona fide disputes about liability and the terms of acceptance/adjustment of returns. The company court is not the forum for adjudicating such disputed factual and contractual questions which should be determined in an appropriate civil suit; a winding up petition cannot be used to compel payment of a genuinely disputed debt. [Paras 12, 13, 14]

The Court concluded that the disputes raised by the respondent were bona fide and substantial and therefore the petition for winding up was not maintainable; it should be dismissed and the creditor must seek relief by ordinary action if so advised.

Final Conclusion: The winding up petition was dismissed as the respondent had raised bona fide disputes concerning liability and the alleged entitlement to refund, and the company court refused to decide disputed contractual and factual issues in summary winding-up proceedings.

Financial debt - default - consideration for the time value of money - loan repayable on demand - moratorium under Section 14 - corporate insolvency resolution process - appointment of interim resolution professional

Financial debt - consideration for the time value of money - A financial debt was owed by the Respondent Company to the Applicants. - HELD THAT: - The Applicants produced bank ledger statements evidencing advances, audited balance sheets of the Corporate Debtor recording the amounts as 'Unsecured Loan', and income-tax returns showing TDS paid by the Corporate Debtor on interest. Those materials indicate that the sums were disbursed against the consideration for the time value of money rather than as mere capital contributions. The Respondent's contention that the advances were quasi-capital was unsupported: it did not explain why the amounts were reflected as unsecured loans, remained silent on payment of TDS and legal notices, and the settlement agreement relied upon did not expressly deal with the Applicants' dues nor was shown to have been executed. On this basis the Tribunal held that the advances qualify as financial debt within the meaning of the Code and were owed to the Applicants. [Paras 8, 9, 10, 11, 12]

Financial debt exists in favour of the Applicants and is owed by the Corporate Debtor.

Default - loan repayable on demand - There was a default in repayment of the financial debt. - HELD THAT: - No written repayment terms or date had been fixed and, applying the established principle that a loan without a specified repayment date is repayable on demand, the Applicants' demand notices made the debt due and payable. The Respondent produced no replies to the demand notices and no proof of payment. Consequently the Tribunal found that the debt had crystallised as due on demand and remained unpaid, constituting default under the Code. [Paras 13, 14, 15, 16]

A default in payment of the financial debt has occurred and the Applicants are entitled to invoke the Code.

Final Conclusion: The application under the Insolvency and Bankruptcy Code is admitted; Mr. Madhusudhan Sharma is appointed as Interim Resolution Professional; moratorium is declared under Section 14 and the Board of Directors of the Corporate Debtor stands suspended, with consequential directions to communicate the order to the parties and IBBI.

Admissibility and evidentiary value of diary entries - Admissibility of disclosure statements recorded in custody - Requirement of independent corroboration for statements of co-accused - Right to cross-examine as facet of principles of natural justice in adjudication proceedings - Issue estoppel arising from prior criminal discharge - Presumption as to documents under FERA - Burden of proof in adjudication under FERA

Admissibility and evidentiary value of diary entries - Admissibility of disclosure statements recorded in custody - Presumption as to documents under FERA - Reliability and admissibility of the pocket diary entries and the appellant's statement dated 8.9.1998 as evidence for imposing penalty under FERA - HELD THAT: - The Tribunal held that the entries relied upon by the Enforcement Directorate are tainted and cannot be relied upon. The criminal court earlier discharged the accused on the specific finding that the pocket diary entries did not represent honest and real transactions; that finding has attained finality and operates as issue estoppel. The appellant's statement recorded on 8.9.1998 in judicial custody is shown to be suspicious on its face (material corrections, lack of attestation by jail superintendent, signatures only on the last page, absence of initials of recording officers) and is to be rejected in toto. The Tribunal rejected the submission that special presumptions under FERA as to documents (Section 72) cure these infirmities, noting that the evidentiary defects and contradictions (for example, diary entries covering periods when the appellant was not in India) negate reliance on these materials. [Paras 12, 29, 31, 32, 33]

Diary entries and the disputed custodial disclosure statement are inadmissible/unreliable for the purpose of adjudication and cannot support the penalty.

Requirement of independent corroboration for statements of co-accused - Whether a retracted statement of a co-accused can be acted upon against the appellant without independent corroboration - HELD THAT: - The Tribunal reiterated the settled rule that before relying on a statement of a co-accused against another accused, independent corroboration is required. The statement of Mohd. Muslim (Gullu) stands retracted and, in the absence of independent supporting evidence, cannot be used to sustain the adjudication against the appellant. [Paras 24, 28]

Retracted statement of co-accused is not admissible against the appellant without independent corroboration and cannot support the penalty.

Right to cross-examine as facet of principles of natural justice in adjudication proceedings - Burden of proof in adjudication under FERA - Whether denial of opportunity to cross-examine witnesses and test the veracity of relied-upon statements rendered the adjudication vitiated and whether the ED discharged its burden of proof - HELD THAT: - The Tribunal found that the appellant sought permission to cross-examine prosecution witnesses and officers whose statements and actions were the basis of the adjudication, and that crossexamination in such circumstances is a relevant facet of principles of natural justice. Reliance on untested statements and documents, particularly when their genuineness was disputed, deprived the appellant of a meaningful opportunity to meet the case. Taking the totality of infirmities in the evidence (tampered statement, discredited diary, retracted co-accused statement, contradictions with passport records) the ED failed to prove contravention even on a preponderance of probabilities. [Paras 35, 36, 37, 38, 39]

Denial of the opportunity to cross-examine and the failure of the ED to prove its case rendered the adjudication unsustainable.

Final Conclusion: The appeal is allowed; the adjudicating authority's imposition of penalty is set aside because the primary evidence relied upon was inadmissible or unreliable, the retracted co-accused statement lacked independent corroboration, the appellant was not afforded a proper opportunity to test the evidence by cross-examination, and the ED failed to discharge the burden of proof.

Provisional attachment - confirmation of provisional attachment order - proceeds of crime - prima facie satisfaction under section 5(1) of the PMLA - notice under section 8(1) of the PMLA - principles of natural justice

Proceeds of crime - prima facie satisfaction under section 5(1) of the PMLA - provisional attachment - Whether the Adjudicating Authority reached a clear prima facie finding that the Rs. 70 lakh received by the appellant was part of proceeds of crime and thus satisfied the requirements for confirmation of the provisional attachment. - HELD THAT: - The Tribunal found that the Adjudicating Authority failed to give any specific finding after examining the record as to whether the Rs. 70 lakh received by the appellant originated from the portion of the account of M/s Indu Builders classified as proceeds of crime (approximately Rs. 85.28 crore) or from the portion asserted to be legitimate (approximately Rs. 19 crore). The Adjudicating Authority accepted that the appellant received Rs. 70 lakh from M/s Indu Builders and recorded other account credits, but did not explain how it concluded that the amount received by the appellant was tainted. No clear prima facie nexus, knowledge, or possession of proceeds of crime by the appellant was established on the record; the appellant had used most of the money for business payments, obtained a subsequent loan and repaid the amount, and was not an accused in the FIR at the relevant time. In absence of cogent reasons and findings to satisfy the first requirement of section 5(1)-possession of proceeds of crime on the date of provisional attachment-the confirmation of the provisional attachment could not be sustained. [Paras 29, 30, 31, 32, 34]

The Adjudicating Authority did not reach the requisite prima facie conclusion that the Rs. 70 lakh constituted proceeds of crime; the confirmation of the provisional attachment on that basis was unsustainable.

Notice under section 8(1) of the PMLA - principles of natural justice - Whether the notice and order under section 8(1) issued to the appellant complied with the requirements of reasons and the principles of natural justice and Article 14. - HELD THAT: - The appellant challenged the notice and the order issued under section 8(1) as not disclosing reasons and as presumptive of guilt, contrary to Article 14 and audi alteram partem. The Tribunal observed that the notice and the order did not furnish reasons explaining the basis for issuing the notice or call upon the appellant to disclose the source of the funds, and the Adjudicating Authority refused to furnish reasons when requested. Given the absence of stated reasons and failure to adhere to the procedural requirements necessary to protect the appellant's right to be heard, the notice and consequent proceedings were found to be defective. [Paras 13, 14, 15, 36]

The notice under section 8(1) and the order thereon did not satisfy the procedural requirements of reasons and natural justice and were therefore invalid.

Final Conclusion: The appeal is allowed. The impugned order dated 28.09.2017 confirming the provisional attachment is set aside and the provisional attachment order is quashed for lack of requisite prima facie findings and for procedural infirmity in the notice; no costs.

Status quo - contempt for breach of interim order - restitution of property pending adjudication - inherent power to undo acts done in violation of court orders

Status quo - breach of interim order - The interim status quo order passed on 28.11.2017 was violated by transfer of the subject equity shares on the same date. - HELD THAT: - The Tribunal recorded that an interim order directing that "status quo shall be maintained by both the parties in respect of attached property" was passed on 28.11.2017 in the presence of counsel for both sides. Although no transfer had been effected till the morning of 28.11.2017, the equity shares were transferred later that afternoon. The Tribunal found that the order had not been complied with and that there was a breach on the face of it, noting communications to and from the bank and that the transfer occurred after the interim order had been pronounced. The factual finding of non-compliance of the status quo order underpins the consequent reliefs directed by the Tribunal. [Paras 5, 19, 20, 21, 22]

There was a breach of the Tribunal's interim status quo order passed on 28.11.2017.

Contempt for breach of interim order - maintainability of contempt application - The application for initiation of contempt proceedings against respondent No.1 was not granted for want of material showing the transfer was effected at the instance of the respondent. - HELD THAT: - While the Tribunal emphasised the necessity that orders of superior fora be obeyed, it observed there was no material on record to show that the respondent had specifically instructed the bank to transfer the shares after the interim order. The Tribunal therefore declined to initiate contempt proceedings against respondent No.1, noting absence of direct evidence that the respondent caused the transfer, even though it concluded that the status quo order had been violated. [Paras 22]

Prayer to initiate contempt proceedings against respondent No.1 is refused for lack of material showing the respondent instigated the transfer.

Restitution of property pending adjudication - inherent power to undo acts done in violation of court orders - Respondent No.1 was directed to re-transfer the equity shares to the appellants' demat account forthwith notwithstanding the earlier transfer. - HELD THAT: - Relying on the principle that courts must set right acts done in disobedience of their orders and prevent the perpetuation of wrongdoing, the Tribunal held that respondent No.1 could not take advantage of a transfer effected in breach of the interim order. Although the Tribunal did not find sufficient basis for contempt proceedings, it exercised its power to restore the parties to the status quo ante by directing the respondent to re-transfer the subject equity shares to the appellants' demat account forthwith. The Tribunal clarified that this direction pertains only to the present appeal and does not affect other proceedings or voting rights dealt with by other fora. [Paras 22, 26, 27, 28]

Respondent No.1 directed to re-transfer the subject equity shares to the appellants' demat account forthwith; order limited to present appeal.

Final Conclusion: The Tribunal found a clear breach of its interim status quo order of 28.11.2017 but declined to initiate contempt proceedings against respondent No.1 for lack of material showing direct instigation; however, in exercise of its power to undo acts done in disobedience of its order, the Tribunal directed respondent No.1 to re-transfer the contested equity shares to the appellants' demat account forthwith, the direction being confined to the subject matter of the present appeal.

Business Auxiliary Service - transactional documents and other evidence - application of Larger Bench precedent (Pagariya Auto Center) - remand for de novo consideration - limitation / time-bar of proceedings - penalties under Sections 77 and 78 set aside

Business Auxiliary Service - transactional documents and other evidence - application of Larger Bench precedent (Pagariya Auto Center) - remand for de novo consideration - limitation / time-bar of proceedings - Whether the transactions between the respondent and financial institutions fall within the definition of Business Auxiliary Service and require fresh consideration in light of the Larger Bench decision - HELD THAT: - The Tribunal applied the ratio of the Larger Bench in Pagariya Auto Center, which requires case by case analysis with scrutiny of transactional documents and other evidence to determine whether activities fall within the contours of Business Auxiliary Service. The SCN and lower orders relied largely on a single witness statement and did not analyse the communications and worksheets noted in the SCN's annexures nor fully examine the respondents' contention on limitation. In view of the Larger Bench principle that mere provision of space may not constitute BAS and that substantial activities must be demonstrated by transactional evidence, the matter is remanded to the original adjudicating authority for de novo consideration applying those tests and for determination of the limitation plea, with opportunity to the respondents to produce additional documents. [Paras 7, 9]

Matter remanded for de novo adjudication by the original authority to apply the Larger Bench tests and to examine the contention of limitation, with opportunity to the respondent to place additional evidence.

Penalties under Sections 77 and 78 set aside - application of Larger Bench precedent (Pagariya Auto Center) - limitation / time-bar of proceedings - Whether penalties imposed under Sections 77 and 78 should be sustained - HELD THAT: - The Tribunal observed that subsequent decisions applying the Larger Bench ratio have consistently set aside penalties even where tax liability was sustained, often on grounds of bona fide belief, interpretational difficulty, or limitation. Relying on that consistent line of decisions, the Tribunal held that penalties cannot be sustained in the present case and therefore set aside the penalties imposed under the specified provisions. [Paras 8, 9]

Penalties under Sections 77 and 78 are set aside.

Final Conclusion: Appeal allowed by way of remand: the taxability issue is remitted to the original adjudicating authority for fresh consideration under the tests laid down in the Larger Bench decision, the limitation plea to be examined afresh, and the penalties under Sections 77 and 78 stand set aside.

Penalty under Section 78 - Reasonable cause and Section 80 - Suppression versus mere delay in payment - Demand and interest sustained despite waiver of penalty

Penalty under Section 78 - Reasonable cause and Section 80 - Suppression versus mere delay in payment - Whether penalty imposed under Section 78 is leviable where service tax was collected but not paid and delay is attributed to financial hardship, and whether Section 80 applies to waive penalty. - HELD THAT: - The appellants collected labour charges for erection, commissioning or installation services and did not discharge service tax for the period in question, but paid the tax and interest prior to issuance of the show cause notice and completed payment of the differential amount soon after the SCN. There is no material on record of any positive act of suppression or deliberate concealment by the appellants; the figures for quantification of demand were taken from the assessee's own accounts and nothing was unearthed by the department to show intentional evasion. The Tribunal found that the delay arose from financial difficulty and delay in receipt of payments, which constituted a reasonable cause. In these circumstances the conditions for imposing penalty under Section 78 are not satisfied and Section 80 is attractable to relieve the assessee from penalty. The Tribunal therefore exercised its power to set aside the penalty while leaving the confirmed demand and interest undisturbed.

Penalty under Section 78 set aside by invoking Section 80; demand and interest confirmed remain undisturbed.

Final Conclusion: Appeal partly allowed: penalty under Section 78 quashed by application of Section 80 on findings of mere delay due to financial hardship and absence of suppression with intent to evade; confirmed demand and interest upheld.

Admissibility of Cenvat credit on tax paid for repair services - input service - service used for providing an output service - distinction between recipient of service and beneficiary of service - TRU clarification that insurer as service receiver can claim credit for taxes paid to hospitals - procedural non-compliance (invoice in name of third party) not fatal to credit entitlement

Admissibility of Cenvat credit on tax paid for repair services - input service - service used for providing an output service - distinction between recipient of service and beneficiary of service - Cenvat credit on service tax paid to Authorized Service Stations for repair of insured vehicles is admissible to the insurer as an input service used for providing general insurance service. - HELD THAT: - The Tribunal held that where an insurer settles repair bills (either by direct payment to the Authorized Service Station or by reimbursement to the insured) as part of providing general insurance, the service tax paid on such repair services falls within the definition of input service because it is used by the insurer in rendering its output service of general insurance. The adjudicating authority's focus on the ultimate beneficiary (the vehicle owner) was rejected; applying the distinction between beneficiary and recipient, the insurer is the recipient obliged to pay (or discharge) the repair charges in settlement of claims and thus qualifies to avail credit. The Tribunal relied on analogous administrative clarification concerning health insurance to support that the insurer, as service receiver, is entitled to credit for taxes paid on behalf of the insured. The Tribunal therefore applied this reasoning to allow credit to the appellant proportionate to the amount borne by it. [Paras 6]

Allowed; the insurer is entitled to Cenvat credit on service tax paid to ASS for repairs that are part of claim settlement as input service used to provide general insurance.

Procedural non-compliance (invoice in name of third party) not fatal to credit entitlement - Absence of invoice in the name of the insurer is a procedural irregularity and does not by itself disentitle the insurer from claiming proportionate Cenvat credit where the claim settlement and restriction of credit to the portion borne by the insurer are established. - HELD THAT: - The Tribunal recognised that invoices for repair services are often issued in favour of vehicle owners who presented the vehicle for repair. In the factual matrix where the insurer admits claims after survey, restricts credit to the portion it reimburses or pays, and there is no evidence that the vehicle owner has claimed the credit, the procedural fact that the invoice is not addressed to the insurer should not be used to deny an otherwise permissible credit. The Tribunal characterised the invoicing issue as a procedural infraction only and refused to allow it to defeat substantive entitlement. [Paras 6]

Allowed; lack of invoice in insurer's name is only a procedural defect and cannot be a ground to deny Cenvat credit where entitlement is otherwise established and credit is restricted to amount borne by insurer.

Final Conclusion: The impugned orders rejecting Cenvat credit were set aside; appeals allowed and credit permitted to the insurer in accordance with the Tribunal's reasoning, with consequential benefits as per law.

Refund of service tax on input services used for export - requirement of nexus between input services and exported output services - Rule 5 of the Cenvat Credit Rules, 2004 - simplified refund scheme - Notification No.27/2012-C.E.(N.T.) dated 18.6.2012 - refund entitlement for exporters of service - Tax Research Unit Circular dated 16.3.2012 - proportionate refund based on export turnover to total turnover - Parliamentary/ Budgetary clarification against voluminous documentation for refunds

Refund of service tax on input services used for export - requirement of nexus between input services and exported output services - Tax Research Unit Circular dated 16.3.2012 - proportionate refund based on export turnover to total turnover - Availability of refund of service tax (cenvat) on input/services tax paid where the assessee's output services are wholly exported and whether a specific nexus between each input service and the exported output service is a precondition for refund - HELD THAT: - The appellant provided its entire output services to overseas clients and none to domestic recipients. The Court relied on the legislative intent expressed in the Budget speech and the clarification issued by the Tax Research Unit (Circular dated 16.3.2012) which substituted Rule 5 of the Cenvat Credit Rules, 2004 with a simplified scheme that does not require detailed correlation between specific input services and exported output services. Under that scheme, duties or taxes paid on inputs/input services are refundable in the ratio of export turnover to total turnover. The authorities below denied refund solely on the ground of absence of nexus between the particular input services and the exported service despite no dispute on the fact of exports or on the appellant's computation of export turnover to total turnover. In light of the statutory amendment, the TRU clarification and the Budget-floor clarification discouraging voluminous documentation, insisting on specific nexus was not permissible, and the denial on that ground was unsustainable. [Paras 6, 7, 8, 9]

Denial of refund on the ground of absence of nexus set aside; appeals allowed and refund claim to be granted in accordance with Rule 5 as clarified by the TRU Circular (i.e., on the basis of the ratio of export turnover to total turnover).

Final Conclusion: The impugned orders rejecting the refund claims for want of nexus between input services and exported output services are set aside; the appeals are allowed and the refund entitlement is to be determined under the simplified scheme embodied in Rule 5 as clarified by the TRU Circular dated 16.3.2012.

Input service - Cenvat credit entitlement - used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products - consultancy engineering services for carbon credit management - inclusive definition of input service

Input service - Cenvat credit entitlement - consultancy engineering services for carbon credit management - Entitlement of the assessee to Cenvat credit of service tax paid on consultancy engineering services relating to sale of Certified Emission Reductions (carbon credits). - HELD THAT: - The definition of input service under the Cenvat Credit Rules, 2004 is inclusive and covers any service "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal". The determinative test is whether the service was utilized by the manufacturer directly or indirectly in or in relation to manufacture of the final product or was used in relation to the business. Consultancy services procured for greenhouse gas emission reduction and carbon credit management, including activities required under environmental regulation and Kyoto Protocol compliance that reduce clinker use and CO2 emissions in cement manufacture, fall within that broad definition when they are utilised in relation to the manufacture. The Tribunal followed precedents where identical services were held cenvatable (Heidelberg Cement India Ltd. and Shree Bhawani Paper Mills Ltd.) and applied that ratio to the facts of the present case, concluding that the service tax paid on the consultancy was eligible as Cenvat credit. Consequently the demand confirmed by the lower authorities was set aside.

The impugned orders confirming the demand were set aside and the appeal allowed; the service tax credit on the consultancy engineering services relating to carbon credit management is held admissible as Cenvat credit.

Final Conclusion: Appeal allowed; the Tribunal held that consultancy engineering services for carbon credit management are covered by the inclusive definition of input service and the Cenvat credit claimed for Financial Year 2010-11 is admissible, setting aside the orders below.

Penalty under Section 78 - concealment or suppression - Penalty under Section 77 for failure to file return and electronic payment - Admission of taxable receipts in belated ST-3 returns and part payment of tax - No contumacious conduct or suppression of facts - Verification and quantification of interest and deposits on remand

Penalty under Section 78 - concealment or suppression - Admission of taxable receipts in belated ST-3 returns and part payment of tax - No contumacious conduct or suppression of facts - Validity of penalties under Section 78 and Section 77 imposed for short payment and delayed filing where tax was admitted in returns and partly paid belatedly. - HELD THAT: - The Tribunal found as admitted that the appellant had disclosed taxable receipts in ST-3 returns (filed belatedly for 2006-07 to 2009-10), had admitted the tax liability and had deposited part of the tax before issuance of the show cause notice. The appellant further deposited interest and the remaining amounts before adjudication. On these facts the Tribunal concluded there was no suppression of facts, falsification of accounts or contumacious conduct warranting the imposition of the penal consequences under Section 78. Consequently the punitive measure premised on deliberate evasion was not attracted where the default arose from shortage of funds and taxes were admitted and paid (in part and subsequently in full as directed). [Paras 5]

Penalty imposed under Sections 77 and 78 set aside.

Penalty under Section 77 for failure to file return and electronic payment - Verification and quantification of interest and deposits on remand - Directive to adjudicating authority to verify interest and amounts deposited and to inform appellant of any outstanding liability. - HELD THAT: - Although penalties under Sections 77 and 78 were set aside on merits, the Tribunal directed a ministerial verification of the interest amounts and deposits recorded by the adjudicating authority. The Tribunal required the adjudicating authority to verify the interest amounts already claimed to have been deposited by the appellant and, if any further amount was payable after such verification, to inform the appellant so that the appellant may deposit the verified outstanding amount forthwith. This constitutes a remand limited to quantification and verification, not a fresh adjudication on the question of suppression or penal liability. [Paras 5]

Matter remanded to adjudicating authority for verification and quantification of interest and deposits and for informing the appellant of any verified balance payable.

Final Conclusion: The Tribunal set aside the penalties imposed under Sections 77 and 78 on the basis that there was no suppression or contumacious conduct where tax was admitted in belated returns and partly paid, and remanded the limited task of verifying interest and deposited amounts to the adjudicating authority for quantification and communication to the appellant.

Export of services - Business Auxiliary Service - Export of Service Rules, 2005 - place of consumption - destination based consumption tax - quantification of Cenvat credit reversal - Cenvat Credit Rules

Export of services - Business Auxiliary Service - place of consumption - Export of Service Rules, 2005 - destination based consumption tax - Whether the services rendered by the appellant to foreign principals amounted to taxable Business Auxiliary Service performed in India or constituted export of services under the Export of Service Rules, 2005 and thus were not leviable to service tax. - HELD THAT: - The Tribunal applied settled principles that export of service must be determined strictly under the Export of Service Rules, 2005 and that the recipient who requests and pays for the service is the relevant consumer for determining destination. The Tribunal followed earlier decisions holding that where foreign principals are the recipients and payers of the services and the place of consumption is outside India, such activities-although performed in India to promote the principals' market-qualify as export of services. The Tribunal observed that the service tax is a value added, destination based consumption tax and hence place of consumption governs classification for Category III (Business Auxiliary Service). Applying these principles to the facts, the Tribunal held that the services were exported and not taxable as BAS in India.

Demand confirmed under BAS set aside; services held to be export of services and not taxable as Business Auxiliary Service.

Quantification of Cenvat credit reversal - Cenvat Credit Rules - Whether the methodology adopted by the Original Authority for quantifying reversal of Cenvat credit on account of exempted/trading activity was permissible under the Cenvat Credit Rules. - HELD THAT: - The Tribunal examined the Original Authority's approach which computed the value of exempted service as the difference between sale price and cost of goods sold or 10% of cost of goods sold, whichever was higher, and thereby determined reversal under the Rules. Noting absence of any statutory formula during the material period, the Tribunal accepted that the Explanation inserting trading as "exempted service" was clarificatory and, in the absence of any other statutory method, found the Original Authority's methodology to be fair and justified. The Tribunal rejected the Revenue's contention that reversal should be based on proportion between value of traded goods and service income or that utilization should be limited to 20% of duty liability, observing lack of legal backing for those propositions.

Methodology adopted by the Original Authority for quantification of Cenvat reversal upheld; Revenue's alternate bases rejected.

Final Conclusion: Appeal allowed: the demand for service tax under Business Auxiliary Service was set aside as the services qualified as export of services; the quantification of Cenvat credit reversal adopted by the Original Authority was sustained.

Inclusion of value of goods in assessable value - Exemption under Notification No.12/2003-S.T. where goods are sold separately - Documentary proof of sale and payment of Sales Tax/VAT - Determination of assessable value under Section 67 of the Finance Act - Distinction between supply of goods and provision of service for valuation

Inclusion of value of goods in assessable value - Exemption under Notification No.12/2003-S.T. where goods are sold separately - Documentary proof of sale and payment of Sales Tax/VAT - Determination of assessable value under Section 67 of the Finance Act - Whether Service Tax is includible on the value of spare parts and lubricants shown separately in invoices and on which Sales Tax/VAT has been paid, for the period October, 2006 to September, 2011. - HELD THAT: - The Tribunal applied the settled position that where the value of goods supplied in the course of repair/servicing is shown separately in the invoice and Sales Tax/VAT is paid on that component, the transaction in respect of those goods is to be treated as sale and not as part of the service for valuation purposes. Relying on the Tribunal's decision in Samtech Industries and its affirmation by the High Court of Allahabad, and having regard to the C.B.E. & C. communication recording that where documentary proof indicates value of goods and Sales Tax/VAT has been paid, demand of Service Tax for cost of such goods during repair is not sustainable, the Tribunal concluded that the Commissioner erred in including the value of spare parts and lubricants in the assessable value under Section 67. The Commissioner himself had recorded that the appellant showed spares and lubricants separately and paid VAT on them; consequently the exemption under Notification No.12/2003-S.T. applies and Service Tax cannot be levied on the separately invoiced goods component.

Impugned demand of Service Tax in respect of value of spare parts and lubricants for October, 2006 to September, 2011 set aside; appeal allowed with consequential benefits.

Final Conclusion: The Tribunal allowed the appeal, set aside the Order-in-Original insofar as it demanded Service Tax on the value of spare parts and lubricants shown separately in invoices (with Sales Tax/VAT paid) for October, 2006 to September, 2011, and granted consequential relief in accordance with law.

Service tax on maintenance and repair of roads - Services provided to statutory local bodies - Commercial character of the service recipient as determinant for taxability - Exclusion of government/statutory authority from taxable service recipient

Service tax on maintenance and repair of roads - Services provided to statutory local bodies - Commercial character of the service recipient as determinant for taxability - Whether the services rendered by the assessee to the Cantonment Board, Jabalpur, attract service tax as services of management, maintenance or repair of roads. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that the Cantonment Board is a statutory local body functioning under the Ministry of Defence and is not a commercial organisation. Because the recipient is a statutory government local authority and not a commercial entity, the services rendered to it do not fall within taxable services characterised as management, maintenance or repair of roads for the purpose of service tax. The Tribunal agreed with and upheld the appellate authority's reasoning and conclusion that taxability cannot be imposed on such services provided to the Cantonment Board. [Paras 4]

The finding of the Commissioner (Appeals) that the services are not subject to service tax is upheld and the department's appeals are dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)'s order that services supplied to the Cantonment Board, a statutory local body under the Ministry of Defence, are not taxable as management/maintenance/repair of roads; the department's appeals were dismissed.

Service tax liability under Sub-rule 7 of Rule 6 of Service Tax Rules, 1994 - option to pay service tax on basic fare under Rule 6(7) - Air Travel Agent - incentive from airline considered as part of taxable consideration - assessment of consideration for service tax

Service tax liability under Sub-rule 7 of Rule 6 of Service Tax Rules, 1994 - option to pay service tax on basic fare under Rule 6(7) - incentive from airline considered as part of taxable consideration - Air Travel Agent - Whether an air travel agent who has discharged service tax under Sub-rule 7 of Rule 6 of the Service Tax Rules, 1994, is required to include incentives received from airlines in the taxable consideration. - HELD THAT: - The appellant was registered as an Air Travel Agent and had discharged service tax liability in terms of Sub-rule 7 of Rule 6 (Rule 6(7)) by paying tax on the basic fare value of air tickets. The department issued a show cause notice treating incentives received from airlines as part of the total consideration and sought tax thereon. The original authority held that the appellant had validly exercised the option under Rule 6(7) to pay service tax on the basic fare and therefore did not require inclusion of airline incentives in the taxable value. The Commissioner (Appeals) set aside that finding, but the Tribunal found the original authority's view sustainable in law and concluded that the appellant, having paid under the option available in Rule 6(7), was not required to pay service tax on the incentives received from the airlines.

The finding of the original authority is upheld; the demand treating airline incentives as part of taxable consideration is not sustained.

Final Conclusion: The Order-in-Appeal is set aside; Order-in-Original No.39/STC/A.C./LKO/Div-1/2010-11 dated 30.12.2010 is restored and the appeal by the appellant is allowed.

Entitlement to Cenvat credit on supplementary invoices - validity of supplementary invoices as documents for availing Cenvat credit under the Cenvat Credit Rules, 2004 - absence of fraud or suppression in availing Cenvat credit - recurring legal controversy pending before the Supreme Court

Entitlement to Cenvat credit on supplementary invoices - validity of supplementary invoices as documents for availing Cenvat credit under the Cenvat Credit Rules, 2004 - absence of fraud or suppression in availing Cenvat credit - recurring legal controversy pending before the Supreme Court - Appellant entitled to take Cenvat credit on the supplementary invoices issued by the supplier and there is no element of fraud or suppression in availing such credit. - HELD THAT: - The Tribunal examined that the appellant received 98 supplementary invoices issued by the supplier during the period from 13.03.2013 to 5.3.2014 charging additional duty and cess, which the appellant paid and recorded in its Cenvat credit register. The Revenue contested the credit on the ground that original invoices did not include certain charges and that supplementary invoices were not valid for credit under Rule 9(1)(b) of the Cenvat Credit Rules, 2004. The Tribunal took note of the pendency before the Supreme Court of similar issues and of the Tribunal's earlier disposal in connected matters granting liberty to suppliers to approach after the Supreme Court's final verdict. Applying these considerations, and being satisfied that there was no element of fraud or suppression by the appellant, the Tribunal held that the issue is recurring and that denial of credit on the present facts was not tenable, and therefore the appellant was entitled to take Cenvat credit on the supplementary invoices.

Appeal allowed; appellant entitled to Cenvat credit on the supplementary invoices in question.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant is entitled to avail Cenvat credit on the supplementary invoices issued for supplies made during 13.03.2013 to 5.3.2014 and found no fraud or suppression warranting denial of credit; consequential relief granted.

Assessable value - amortization of moulds and dies - amount recovered from the buyer - payment of duty on value not recovered - liability to pay duty on goods supplied free of cost - Board Circular No. 170/4/96-CX dt. 23.01.1996

Assessable value - amount recovered from the buyer - payment of duty on value not recovered - Whether inclusion of amortized cost of moulds and dies in the assessable value is vitiated because that amortized cost was not recovered from the principal manufacturer/buyer. - HELD THAT: - The Tribunal examined the sample invoice which recorded the assessable value as cost plus 10% and the amortized cost of moulds and dies, and found that duty had been paid on the amortized cost. The Revenue's premise conflated the concept of assessable value with the quantum actually recovered from the buyer. The determinative question is whether duty was paid on the assessable value; if duty has been discharged on the amortized component, non-recovery of that component from the buyer does not negate its inclusion in assessable value nor create additional liability. The Commissioner (Appeals) correctly found on the record that duty was paid on the amortization amount, and the Tribunal saw no infirmity in that factual and legal conclusion.

Finding that duty was paid on the amortized cost, the contention that non-recovery from the buyer made the respondent liable to further duty was rejected.

Amortization of moulds and dies - Board Circular No. 170/4/96-CX dt. 23.01.1996 - liability to pay duty on goods supplied free of cost - Whether compliance with Board Circular No. 170/4/96-CX was satisfied and whether proceedings against the respondent were maintainable when duty had been paid on the amortized cost of moulds and dies supplied free of cost by the principal manufacturer. - HELD THAT: - The Tribunal noted that the invoice showed the amortized cost component and that duty was paid on that component. Given payment of duty on the amortized amount, the conditions set out in the Board Circular were satisfied. The Revenue's initiation of further proceedings proceeded from a misunderstanding of assessable value and payment versus recovery. The Commissioner (Appeals) had examined the matter and set aside adjudication; the Tribunal upheld that conclusion as supported by the invoice and record.

Proceedings were unnecessary as the respondent had complied with the Board Circular by paying duty on the amortized cost; the adjudication orders were rightly set aside.

Final Conclusion: The appeals filed by the Revenue are dismissed; the Commissioner (Appeals) orders upholding payment of duty on the amortized cost are affirmed.

Transaction value as assessable value - sale to principal manufacturer not a related person - free distribution of physical samples - Rule 9 of the Central Excise Valuation Rules, 2000

Transaction value as assessable value - sale to principal manufacturer not a related person - Rule 9 of the Central Excise Valuation Rules, 2000 - Transaction value is the assessable value where physical samples are sold to the principal manufacturer who is not a related person. - HELD THAT: - The Tribunal applied established precedents of this Tribunal and other benches which hold that when physical samples are sold to the principal manufacturer on the transaction value and the purchaser is not a related person, the transaction value constitutes the assessable value for levy of duty. Although Revenue contended that value in the open market for free distribution should be treated as assessable value, the admitted fact that the appellant sold the samples to a non-related principal manufacturer and paid duty on the transaction value led the Tribunal to follow the precedent and reject Revenue's contention. Consequently the demand under the valuation rules could not be sustained against the appellant.

Impugned order demanding duty under the valuation rules set aside and appeal allowed.

Final Conclusion: The appeal is allowed; the demand premised on treating open-market value of samples as assessable value is rejected where the samples were sold to the principal manufacturer who was not related to the appellant and duty was paid on the transaction value.

CENVAT credit on structural and foundation materials used in factory premises - definition of "input" and capital goods - user test and integral part test - scope of Explanation 2 vis-a -vis Rule 2(k)(i) - admissibility of CENVAT credit prior to 07.07.2009

CENVAT credit on structural and foundation materials used in factory premises - admissibility of CENVAT credit prior to 07.07.2009 - Legitimacy of the adjudicating authority's acceptance and allowance of CENVAT credit to the extent of the amount determined in favour of the assessee. - HELD THAT: - The Tribunal found that the adjudicating authority had examined the factual material, recorded that photographs and defence replies were verified by Central Excise Officers, and arrived at a conclusion to allow CENVAT credit to the extent upheld. The Revenue's contention that the assessee was non cooperative and that the materials were construction items used in civil works did not succeed because the adjudicating authority had considered and verified the evidence. Reliance on the Larger Bench decision in Vandana Global Ltd was held to be misplaced given subsequent High Court rulings (including Gujarat) striking it down; earlier decisions of the Apex Court and other authorities were distinguished on facts. Consequently the allowance made by the adjudicating authority stands.

Allowance of CENVAT credit as recorded by the adjudicating authority is upheld and the Revenue's challenge to that allowance is rejected.

Definition of "input" and capital goods - user test and integral part test - scope of Explanation 2 vis-a -vis Rule 2(k)(i) - Whether CENVAT credit denied on specified structural items, cement and similar materials used for foundations, fabrication and erection in the factory premises is permissible. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble High Court of Madras in Thiru Arooran Sugars, which held that structurals, cement, iron and steel used to erect foundations and support plant and machinery fall within the definition of 'input' as forming part of capital goods and are therefore eligible for CENVAT credit. The Tribunal concurred that Explanation 2 cannot be read so as to constrict the main provision (Rule 2(k)(i)) and that either by the 'user test' or by the 'integral part' test such materials qualify for credit. On the facts, there was no dispute that the items were received and consumed in the factory premises and were integral to plant and machinery; accordingly the denial of credit was reversed.

Denial of CENVAT credit on the structural and foundation materials is set aside and credit is allowed.

Final Conclusion: The assessee's appeal is allowed and the Revenue's appeal is rejected; CENVAT credit allowed on the relevant structural, fabrication and foundation materials used in the factory premises for the period April, 2006 to March, 2007.

Confiscation - contravening goods - physical control of factory - recording in RG-1 - redemption fine - liability for goods not proved to be manufactured by assessee

Confiscation - contravening goods - physical control of factory - recording in RG-1 - Confiscation of 15,000 sticks of cigarettes found within the appellant's factory premises - HELD THAT: - The Tribunal found that goods lying within the factory premises, which had not been removed for clearance, were not contravening goods and had not violated the provisions of the Central Excise law. Where the unit was under physical control of factory and no clearance can take place without inspectorial presence, such goods could not be treated as clandestinely removed. The appropriate course would have been to direct recording of the goods in the RG-1 register so that duty would be levied upon lawful clearance, rather than ordering confiscation. Consequently, confiscation of the 15,000 sticks was not sustainable. [Paras 5]

Confiscation of the 15,000 sticks found within the factory set aside; goods to be recorded in RG-1 for lawful clearance.

Redemption fine - liability for goods not proved to be manufactured by assessee - physical control of factory - Liability of appellants to pay redemption fine and duty demand for cigarettes seized at transporter, trading premises, railway station and at residential premises of an employee - HELD THAT: - The Tribunal held that redemption fines and duty demands could not be sustained in respect of goods seized outside the manufacturing premises where it was not established that those goods were manufactured by the appellant. In particular, where the manufacturer's unit remained under physical control, it was not shown how manufactured goods could be removed clandestinely; therefore goods found at the transporter, trading premises, railway station and the residential premises could not be fastened on the appellants. In the circumstances the imposition of redemption fine and confirmation of demand in respect of those goods was not justified. [Paras 5]

Redemption fine and duty demand in respect of goods seized outside the factory, and the impugned confiscation/penalty relating thereto, set aside as not sustainable.

Final Conclusion: Impugned Order-in-Appeal set aside and appeals allowed; confiscation of goods found within the factory and redemption fines/demands in respect of goods not proved to be manufactured by the appellants are quashed; appellants entitled to consequential relief as per law.

Clandestine removal - burden of proof - corroborative evidence - recovery of loose slips - confessional statement - assessing sufficiency of evidence

Clandestine removal - recovery of loose slips - confessional statement - burden of proof - corroborative evidence - Whether the revenue discharged the burden of proving clandestine manufacture and removal of final products by the respondents on the basis of recovered loose slips and recorded statements. - HELD THAT: - The appeal was founded on recovery of loose slips from third-party premises and recorded statements of representatives of raw-material suppliers and of the respondent's managing director. The Tribunal applied the settled principle that allegations of clandestine removal must be supported by positive and corroborative evidence beyond suspicion. The Commissioner (Appeals) examined the managing director's statement and found no clear admission of clandestine removal, observing that the statement raised only suspicion and that there was no recovery of unaccounted raw-materials, no evidence of manufacture and clearance without genuine invoices, no proof of absence of other essential inputs, and no demonstrated clandestine flow of money. The Tribunal noted precedent cited in the order-Commissioner Vs Vishwa Traders Pvt. Ltd. and Commissioner Vs Sunil Kumar Gupta -for the proposition that in absence of evidence of unrecorded procurement and use of raw material, or other corroboration, a finding of clandestine removal cannot be sustained. Applying these principles, and noting that the revenue produced no additional evidence on appeal, the Tribunal concluded that the revenue failed to discharge the burden of proof and that there were no justifiable reasons to interfere with the appellate authority's order setting aside the demand. [Paras 4, 6]

The demand and penalties premised on alleged clandestine removal were not sustained for lack of corroborative evidence; the Commissioner (Appeals) order was upheld.

Final Conclusion: Both appeals by the revenue are rejected for failure to prove clandestine manufacture and removal by the respondents, the revenue having not discharged the onus of producing positive and corroborative evidence.

Manufacture under Central Excise - adjustment of service tax against central excise duty - no double jeopardy where service tax paid in bona fide belief - penalty not leviable for bona fide interpretation dispute

Manufacture under Central Excise - adjustment of service tax against central excise duty - no double jeopardy where service tax paid in bona fide belief - Adjustment of service tax already paid on mould-developing charges against the central excise duty demand. - HELD THAT: - The Tribunal accepted that the activity was one of manufacture and that the appellants had bona fide paid service tax on the mould-developing charges. Relying on the reasoning in M/s K.R. Packaging (para-7 of that order), the Tribunal held that where service tax was paid in bona fide belief and returns were accepted by the Department, the assessee cannot be subjected to double punishment by refusing adjustment against a subsequently raised excise demand. The Tribunal noted that refund of service tax was time-barred and there was no fraud, collusion or concealment on the part of the assessee; consequently the amount of service tax paid must be set off against the excise demand and the demand reduced accordingly. [Paras 7, 8]

Demand reduced by the amount of service tax already paid; appellants entitled to adjustment of service tax against the excise demand.

Penalty not leviable for bona fide interpretation dispute - Levy of penalty under Section 11AC in respect of the disputed mould-developing charges. - HELD THAT: - The Tribunal found that the controversy was a dispute of interpretation of Central Excise law and that the appellants acted under a bona fide belief (having paid service tax and filed returns). In the absence of malafide, fraud, collusion or concealment, imposition of penalty was not justified. Accordingly, the penalty was held liable to be set aside. [Paras 8]

Penalty under Section 11AC set aside.

Final Conclusion: Appeal allowed; excise demand reduced by adjustment of service tax paid and penalty set aside; appellant entitled to consequential relief.

Penalty under Rule 26 of Central Excise Rules, 2002 - receiving dutiable goods without payment of duty - area based exemption - job work challans - Notification No.214/86-CE - falsification of records and connivance - confiscation prerequisite for imposition of Rule 26 penalty

Penalty under Rule 26 of Central Excise Rules, 2002 - receiving dutiable goods without payment of duty - Notification No.214/86-CE - job work challans - Penalty under Rule 26 was rightly imposed on the appellant for receiving job-worked goods without payment of duty and without complying with the procedural requirements applicable to excisable goods cleared on job work. - HELD THAT: - The Tribunal upheld the findings of the authorities that the appellant, though availing area based exemption, caused Continuous Cast Copper Wire rods to be processed at a Noida unit and knowingly received the job-worked goods which were dutiable without valid duty-paying documents. The records and challans indicated that the goods were processed at Noida but were clandestinely shown as cleared from Haridwar; the appellant was held aware of these facts and of the dutiability of the goods. The adjudicating authority imposed penalty under Rule 26 for contravention of the Rules and for not giving the required undertaking to the jurisdictional Assistant Commissioner in relation to the job-worker arrangement under the notification scheme. The Tribunal found no illegality or impropriety in those conclusions and rejected the appellant's contention that it had not exercised any option under Notification No.214/86-CE and therefore could not be visited with penal consequences, observing that the appellant had nevertheless received dutiable goods on the basis of job-work challans that did not indicate payment of duty. [Paras 8, 9]

The imposition of penalty under Rule 26 on the appellant is sustained.

Confiscation prerequisite for imposition of Rule 26 penalty - penalty under Rule 26 of Central Excise Rules, 2002 - The absence of any proposal for confiscation in the show cause notice or order did not invalidate the imposition of penalty under Rule 26 in the facts of this case. - HELD THAT: - The appellant contended that Rule 26 penalty is imposable only when goods are liable for confiscation and pointed to lack of any confiscation proposal or order. The Tribunal, however, endorsed the view of the lower authorities that penalty under Rule 26 could be imposed where the appellant knowingly received dutiable goods without payment of duty and in collusion or by facilitating falsification of records, notwithstanding that there was no separate confiscation proceeding. The Tribunal found the factual findings of deliberate receipt of dutiable goods and falsified challans sufficient to sustain the penalty under Rule 26. [Paras 8, 9]

The contention that penalty under Rule 26 requires prior or concurrent confiscation is not accepted on the facts; penalty was rightly imposed despite absence of confiscation.

Final Conclusion: The Tribunal dismissed the appeal and upheld the imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the appellant for knowingly receiving job-worked, dutiable goods without payment of duty and in circumstances amounting to falsification of records and connivance with the job-worker.

Cenvat credit - job work time limit / non-return within prescribed period - penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC - personal penalty under Rule 26 of the Central Excise Rules, 2002 - burden of proof of receipt of inputs

Cenvat credit - job work time limit / non-return within prescribed period - penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC - Validity of disallowance of Cenvat credit of Rs. 1,08,039/- on ground that inputs sent for job work were not returned within the prescribed period and related penalty. - HELD THAT: - The Tribunal found that the inputs sent for job work were subsequently received back in the assessee's factory and that the assessee had reversed/availed the credit on 31.03.2007, a fact to which Revenue did not object. In view of subsequent receipt and regularisation of credit, the adjudication disallowing the credit became infructuous. The confirmatory demand and the penalty confirmed by the Commissioner (Appeals) in respect of that credit were therefore set aside. The Tribunal relied on the factual finding of receipt and the absence of departmental objection to the credit taken in 2007 to conclude that penal liability could not be sustained. [Paras 8]

The disallowance of Cenvat credit of Rs. 1,08,039/- and the penalty confirmed in respect thereof are set aside.

Cenvat credit - proof of receipt: invoices, GRs, ledger, bank evidence - burden of proof of receipt of inputs - Sustainability of allowing Cenvat credit of Rs. 41,64,258/- (and setting aside penalty) where assessee produced invoices, transport documents, ledger entries, bank payments and suppliers' confirmations. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) correctly accepted the documentary evidence produced by the assessee - including cenvatable invoices, transport bills/GRs, computerized ledger accounts showing receipt entries, payment evidence and suppliers' confirmations - as sufficient proof of receipt of inputs at the factory. Given that there was no evidence of an alternative source of supply and that the inputs were necessary for manufacture of final products, the Tribunal concurred with the appellate authority's conclusion to allow the credit and to set aside the penalty related to that credit. [Paras 8]

The credit of Rs. 41,64,258/- was rightly allowed by the Commissioner (Appeals) and the related penalty set aside; the departmental appeal on this issue is dismissed.

Final Conclusion: The assessee's appeal is allowed; the departmental appeal is dismissed. The Tribunal set aside the disallowance and penalty relating to the credit of Rs. 1,08,039/- as infructuous in view of subsequent receipt and regularisation, and upheld the Commissioner (Appeals) decision allowing the credit of Rs. 41,64,258/- and setting aside the penalty.

Admissibility of Cenvat credit for Outdoor Catering Service - input service - canteen services as indispensable to manufacture - distinction between income tax precedents and Cenvat admissibility

Admissibility of Cenvat credit for Outdoor Catering Service - input service - canteen services as indispensable to manufacture - distinction between income tax precedents and Cenvat admissibility - Cenvat credit of Service Tax paid on Outdoor Catering Service (canteen facility provided to workers) is admissible as input service when such canteen services are provided by the manufacturer as required by the Factory Act. - HELD THAT: - The Commissioner (Appeals) erred in relying on a decision under the Income tax Act which did not address the admissibility of Cenvat credit; that reliance was inappropriate for deciding a service tax/Cenvat issue. The tribunal noted that authoritative rulings of the High Courts of Bombay, Gujarat and Allahabad have held that Service Tax paid on Outdoor Catering Service, where the service is availed by a manufacturer to provide the canteen facility to workers as mandated by the Factory Act, falls within the definition of input service and is therefore eligible for Cenvat credit. Applying these precedents and distinguishing the income tax decision relied upon by the lower appellate authority, the Tribunal set aside the impugned Order in Appeal and restored the Orders in Original which had allowed the credits. [Paras 5]

Impugned Order in Appeal set aside; Orders in Original allowing the Cenvat credit restored and all seven appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that Service Tax on Outdoor Catering Service used to provide canteen facilities to workers (as required by the Factory Act) is admissible as input service for Cenvat credit; the Commissioner (Appeals) decision was set aside and the original orders allowing credit were restored.

Rectification of mistake apparent on the face of record - Correction of clerical or typographical error in appellate order - Replacement of erroneous table in final order - Cenvat credit disallowance reflected as part of demand

Rectification of mistake apparent on the face of record - Correction of clerical or typographical error in appellate order - Cenvat credit disallowance reflected as part of demand - Whether the Final Order dated 07/09/2017 contained an apparent mistake in the table at Para 1 by omitting the amounts of Cenvat credit disallowed and required correction by substituting a revised table. - HELD THAT: - The Tribunal examined the miscellenous applications seeking rectification and found that the Final Order disposed of the appeals together but the table in Para 1 at Page 2 failed to show the disallowed Cenvat credit amounts alongside the Central Excise duty demands. This omission was identified as a mistake apparent on the face of the record. In consequence, the Tribunal held that the proper course was to correct the clerical/printing error by substituting the table in Para 1 with the corrected table supplied by the applicants, thereby reflecting the duty amounts together with the respective disallowed Cenvat credits. No separate adjudication on the merits of the underlying demand was undertaken; the exercise was limited to rectifying the evident error in the appellate order.

Miscellaneous Applications for rectification allowed; the table in Para 1 at Page 2 of the Final Order dated 07/09/2017 is replaced with the corrected table as stated and the Final Order is modified accordingly.

Final Conclusion: The Tribunal allowed the rectification applications, held that the omission of disallowed Cenvat credit amounts in the table was an apparent error, and ordered substitution of the corrected table in the Final Order, disposing of the applications as allowed.

Substantial expansion - eligibility for exemption under notification - installed capacity versus actual production - admissibility and evidentiary weight of Chartered Engineer's certificate - reliance on expert report of an independent technical authority - cross-examination of expert witness - failure to comply with tribunal directions - de novo adjudication and consequential relief

Cross-examination of expert witness - failure to comply with tribunal directions - de novo adjudication and consequential relief - Sustainability of the impugned Order-in-Original where directions of the Tribunal to permit cross-examination of the IIT expert could not be executed and no application was made for further directions - HELD THAT: - The Tribunal had earlier remanded the matter for de novo adjudication and specifically directed that the appellant be permitted to cross-examine Professor Arun Kumar, whose report the Commissioner relied upon. On remand the Commissioner recorded that cross-examination could not be conducted because Professor Arun Kumar had expired prior to the hearing. The Tribunal notes that, in such circumstances, the Revenue ought to have approached this Tribunal for further directions instead of proceeding to decide the matter without complying with the directed procedure. The Original Authority also failed to demonstrate that the Chartered Engineer's certificate relied on by the appellant was inadmissible or unreliable. Given the prior direction and the inability to test the expert opinion through cross-examination (or to seek substitute directions), the adjudication conducted on remand did not follow the mandate of the Tribunal and proceeded to base its conclusion on impermissible footing.

Impugned Order-in-Original set aside for failure to follow the Tribunal's remand directions; appeal allowed and matter returned for proper adjudication consistent with the Tribunal's directions; appellant entitled to consequential relief.

Installed capacity versus actual production - admissibility and evidentiary weight of Chartered Engineer's certificate - eligibility for exemption under notification - reliance on expert report of an independent technical authority - Whether the Commissioner correctly denied exemption by relying on actual production figures and IIT expert's report instead of material on installed capacity and the Chartered Engineer's certificate - HELD THAT: - The notification grants exemption based on substantial expansion of installed capacity; it does not premise eligibility on actual production. The Original Authority principally relied upon the IIT professor's report and on observed production levels to reject the appellant's claim. The Tribunal found that a Professor of Electronics and Computer Engineering is not necessarily better qualified than a Chartered Engineer to opine on installed capacity (a mechanical/plant-engineering discipline), and that the Commissioner did not analyze or repudiate the Chartered Engineer's certificate as inadmissible evidence. Because the adjudication focused on actual manufacture rather than installed capacity and failed to displace the engineer's certificate by proper evidentiary analysis or by permitting its testing as directed, the finding denying the exemption is unsustainable.

Findings based on actual production and untested expert opinion are set aside; denial of exemption for lack of substantial expansion not sustained; appellant entitled to relief as per law.

Final Conclusion: The impugned Order-in-Original confirming demand, interest and equal penalty is set aside. The appeal is allowed; the matter shall be adjudicated in accordance with the Tribunal's earlier directions and legal position that eligibility turns on installed capacity (substantiated by admissible evidence), and the appellant shall be entitled to consequential relief as per law.

Cenvat credit on components and accessories of capital goods - Classification of structural components as parts of boiler - Definition of capital goods under Rule 2(a)(A) of CCR, 2004 - Definition of inputs under Rule 2(k) of CCR, 2004 - Distinction between structural components integral to boiler and structural elements used for foundation/support - Fabricated structural items versus basic steel articles falling under Chapter 72/73 - Application of CBEC Circulars No.964/07/2012 and No.966/09/2012

Cenvat credit on components and accessories of capital goods - Classification of structural components as parts of boiler - Definition of inputs under Rule 2(k) of CCR, 2004 - Fabricated structural items versus basic steel articles falling under Chapter 72/73 - Application of CBEC Circulars No.964/07/2012 and No.966/09/2012 - Admissibility of Cenvat credit on various fabricated structural items, components and accessories supplied for installation of boiler and other capital goods during 2006-07 and 2007-08. - HELD THAT: - The Tribunal examined the nature of the goods supplied (including fabricated boiler structure, fabricated channels, sheeting, pipes and fittings, foundation studs with nuts and washers, fixture holders and supporting structures) and the CBEC clarifications. The report of the Chartered Engineer and documentary evidence established that the items were supplied after fabrication by the boiler supplier and function as components or accessories of the boiler and other capital goods rather than as mere raw steel falling under Chapter 72/73. In view of CBEC Circular No.964/07/2012 (classification of structural components used essentially as part of the boiler as parts of the boiler) and the Board's subsequent clarification in Circular No.966/09/2012 (which distinguishes such integral structural parts from structural components used only for foundation/support), the items in question qualify either as capital goods under Rule 2(a)(A) or as inputs under Rule 2(k) of the Cenvat Credit Rules, 2004. The Tribunal found the lower authorities erred in treating the supplies as simple steel materials or as repair/maintenance items; the items were necessary components without which the capital goods could not be erected or would not function. Reliance on relevant judicial authorities recognising fabricated structural elements used for erection of capital goods supported this conclusion. Consequently, the impugned disallowance, interest and penalty were not sustainable.

Cenvat credit availed on the disputed fabricated structural items and components used for installation of boiler and other capital goods for the periods in question is allowable.

Final Conclusion: The appeal is allowed; the Tribunal set aside the impugned order and held the appellant entitled to Cenvat credit on the disputed items used in installation of capital goods, with consequential benefits in accordance with law.

Denial of Cenvat credit - capital goods under Rule 2(a)(A)(vii) of the Cenvat Credit Rules, 2004 - storage tank used in the factory - use in manufacture and clearance of final product - transportation of finished goods by means of vehicle mounted cascades

Capital goods under Rule 2(a)(A)(vii) of the Cenvat Credit Rules, 2004 - storage tank used in the factory - use in manufacture and clearance of final product - transportation of finished goods by means of vehicle mounted cascades - Cascades/lorry mounted storage tanks used for Compressed Natural Gas qualify as capital goods eligible for Cenvat credit. - HELD THAT: - The Tribunal found that the cascades are specially designed tanks serving as primary storage for CNG produced in the appellant's factory and are used to stabilise and maintain pressure during dispensing. The cascades are filled inside the factory directly upon manufacture and are used both to store the manufactured CNG and to facilitate its delivery to daughter stations or retail outlets by vehicle. Absent use of these movable/vehicle mounted cascades, the manufacture and clearance of the final product (CNG) could not effectively take place. On that factual and functional basis the cascades constitute storage tanks used in the factory and therefore fall within the definition of capital goods contained in Rule 2(a)(A)(vii), entitling the appellant to Cenvat credit.

The impugned order denying Cenvat credit is set aside and the appeal is allowed; cascades qualify as capital goods and the appellant is entitled to consequent benefits.

Final Conclusion: The appeal is allowed: cascades used for storage and transportation of CNG are capital goods within the cited rule; the impugned order is set aside and the appellant is entitled to consequential relief in accordance with law.

Recovery of interest where Cenvat credit is taken or utilised wrongly under Rule 12 - Invocability of Section 11AB only upon invocation of Section 11A - Requirement of confirmation of demand before charging interest

Recovery of interest where Cenvat credit is taken or utilised wrongly under Rule 12 - Invocability of Section 11AB only upon invocation of Section 11A - Requirement of confirmation of demand before charging interest - Whether interest under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 11AB of the Central Excise Act, 1944 can be imposed where there is no finding that Cenvat credit was wrongly taken or utilised and no confirmation of demand under Section 11A or Rule 12. - HELD THAT: - The Tribunal examined Rule 12 of the Cenvat Credit Rules, 2002 and Section 11AB of the Central Excise Act, 1944 and held that Rule 12 provides for recovery of interest only in conjunction with recovery of Cenvat credit that has been wrongly taken or utilised. Section 11AB can operate only when Section 11A has been invoked. In the present case the Original Authority expressly held that the Cenvat credit was properly availed and correctly utilised and did not confirm any demand under Section 11A or under Rule 12. Since there was no confirmation of duty-demand under the statutory provisions which alone would attract the operation of Section 11AB, the imposition of interest could not be sustained. The Tribunal therefore concluded that the basis for charging interest was absent and the order confirming interest was unsustainable. [Paras 5]

Confirmation of interest set aside and appeal allowed.

Final Conclusion: The Tribunal set aside the confirmation of interest of Rs. 69,11,197/-, holding that interest under Section 11AB read with Rule 12 could not be levied in the absence of any finding that Cenvat credit was wrongly taken or utilised and without confirmation of demand under Section 11A or Rule 12; appeal allowed.

Summary order. The special leave petition was dismissed as withdrawn.

Sub-judice is not a ground for denial of information under the RTI Act - exemption limited to information expressly forbidden by a court or disclosure amounting to contempt of court - obligation of CPIO/FAA to supply information unless a specific judicial prohibition exists - right to information and inspection not curtailed by pendency of proceedings

Sub-judice is not a ground for denial of information under the RTI Act - exemption limited to information expressly forbidden by a court or disclosure amounting to contempt of court - Refusal to disclose information on the sole ground that the matter is sub-judice is legally untenable and the CPIO/FAA must supply the information unless disclosure has been specifically forbidden by a court. - HELD THAT: - The Commission applied the settled principle that the RTI Act contains no general exemption for matters which are sub-judice. Only where a court or tribunal has expressly forbidden publication or where disclosure would constitute contempt of court does the statutory exemption operate. Reliance on prior decisions was made to emphasise that mere pendency of litigation does not attract any of the exemptions under the Act and cannot be invoked as a reason to deny access. In the facts of the case the CPIO declined to furnish point A(iii) on the ground that the matter was sub-judice and the FAA treated that reply as null and void; the Commission found this approach incorrect and directed provision of the information, observing that denial on the basis of sub-judice was contrary to the RTI Act and the Commission's precedents.

The CPIO/FAA is directed to provide the information on point A(iii) to the applicant within 15 days; denial on the ground of sub-judice is rejected.

Obligation of CPIO/FAA to supply information unless a specific judicial prohibition exists - right to information and inspection not curtailed by pendency of proceedings - FAA acted improperly in endorsing non-disclosure and is admonished to exercise due diligence in implementation of the RTI Act. - HELD THAT: - The Commission noted that the FAA failed to act in accordance with the RTI Act by upholding or effectively endorsing the CPIO's refusal. The FAA is advised to be alert and cautious in future implementation of the Act and to ensure that decisions denying information rest on valid statutory exemptions-specifically a court order forbidding disclosure or a finding of contempt-rather than on the mere pendency of proceedings.

FAA criticised for incorrect handling and advised to exercise due diligence; no further relief against FAA other than the advisory and the primary direction to the CPIO.

Final Conclusion: Appeal disposed: the Commission directed disclosure of the requested information on point A(iii) within 15 days, held that pendency of litigation is not a ground for withholding information under the RTI Act unless disclosure is expressly forbidden by a court or would constitute contempt, and advised the FAA to act with due diligence in future RTI matters.