TaxTMI Updates e-Newsletter
Aug 03,2018

Resolution of TRAN-1 filing stuck due to IT glitches - Grievance redressal mechanism under Circular No.39/13/2018-GST dated 03.4.2018 - Appointment and role of Nodal Officers - Procedure for forwarding representations by Assessing Officer - Limitation on amendment of TRAN-1 amounts during rectification process

Appointment and role of Nodal Officers - Grievance redressal mechanism under Circular No.39/13/2018-GST dated 03.4.2018 - Nodal Officers should be appointed and utilised to address taxpayers' inability to upload FORM GST TRAN-1 due to technical glitches, and the State/central authorities must follow the circular's procedure. - HELD THAT: - The Court noted that CBIC Circular No.39/13/2018-GST dated 03.4.2018 establishes a grievance redressal mechanism to identify and resolve TRAN-1s stuck on account of IT glitches, and contemplates appointment of Nodal Officers by GSTN and Governmental formations to address such issues. The Court rejected the submission that paragraph 5 of the circular is confined to non-TRAN-1 matters, holding that paragraph 5's procedure for appointment and identification of issues applies to the TRAN-1 difficulties as well. The Court recorded that the State had nominated a State-level Nodal Officer and that GSTN/Commissioner had already appointed nodal personnel, and directed appointment where not already made. [Paras 10, 11]

Commissioners of GST and Central Excise for Tamil Nadu to appoint Nodal Officer(s) (if not already appointed) within two weeks to implement the circular's grievance redressal mechanism.

Resolution of TRAN-1 filing stuck due to IT glitches - Procedure for forwarding representations by Assessing Officer - Limitation on amendment of TRAN-1 amounts during rectification process - Procedure and timelines for taxpayers to seek redress for inability to upload TRAN-1, and for assessing officers, nodal officers and the Grievance Committee to process such applications. - HELD THAT: - Relying on paragraph 8 of the CBIC circular, the Court directed that the petitioner shall submit an application in accordance with that paragraph to the jurisdictional Assessing Officer within two weeks of receipt of the order. The Assessing Officer must forward the application to the Nodal Officer within one week. The nominated Nodal Officer, in consultation with GSTN, shall refer grievances to the Grievance Committee which shall decide the matter within three weeks from receipt of the properly filed application. The Court noted the circular's limitation that taxpayers identified as affected by IT glitches may be allowed to complete TRAN-1 filing without generally extending the filing deadline, and that amounts recorded in the original (stuck) TRAN-1 shall not be amended during this process except as permitted by the procedure. [Paras 8, 12]

Petitioner to file representation within two weeks; Assessing Officer to forward to Nodal Officer within one week; Nodal Officer/Grievance Committee to decide within three weeks, following the circular and without permitting arbitrary amendment of TRAN-1 amounts beyond the recorded (stuck) figures.

Final Conclusion: Writ petition disposed of by directing appointment of Nodal Officer(s) (if not already appointed) and by mandating that the petitioner pursue redress under CBIC Circular No.39/13/2018-GST (submit application to Assessing Officer within two weeks, forwarding and decision to follow the prescribed timelines), with the grievance to be considered and decided by the Grievance Committee in consultation with GSTN.

Public Interest Litigation - complimentary tickets as supply under GST - newspaper reports not sufficient evidence - impeadment of parties and amendment of cause-title - liberty to revive petition on collection of credible material

Impeadment of parties and amendment of cause-title - Application for impleadment of respondent Nos.7 and 8 allowed and cause-title to be amended. - HELD THAT: - The Court considered I.A.No.3573/2018, wherein the petitioner sought impleadment of respondent Nos.7 and 8. Having regard to the reasons stated in the application, the Court allowed the prayer for impleadment and directed that the cause-title be amended accordingly. The order on the application was final and operative insofar as impleadment and amendment of the cause-title are concerned.

Prayer for impleadment of respondent Nos.7 and 8 is allowed and the cause-title shall be amended.

Public Interest Litigation - complimentary tickets as supply under GST - newspaper reports not sufficient evidence - Public interest petition alleging non-payment of GST on complimentary IPL tickets, founded on newspaper reports, is not maintainable and is dismissed. - HELD THAT: - The petitioner filed a PIL seeking directions for recovery of GST on complimentary tickets allegedly distributed for IPL matches, relying primarily on local newspaper reports. The Court observed that the allegations rest on press cuttings and no other material was produced to establish the claims. Applying the principle reiterated by the Apex Court that newspaper reports by themselves do not constitute legally acceptable evidence sufficient to sustain a PIL, the Court concluded that the present petition cannot be entertained on that basis and dismissed it. The Court noted prior authorities where petitions based solely on newspaper reports were dismissed and held that credible material is required to proceed.

The public interest petition founded on newspaper reports is dismissed for want of credible material to support the allegations of GST liability.

Liberty to revive petition on collection of credible material - Petitioner granted liberty to file a fresh petition if credible material is collected. - HELD THAT: - Although the petition was dismissed for being based only on newspaper reports, the Court expressly granted the petitioner liberty to approach the Court again upon gathering credible material to substantiate the allegations. This preserves the petitioner's right to seek judicial relief if evidentiary support is later procured.

Liberty granted to the petitioner to file afresh upon collection of credible material.

Final Conclusion: Application for impleadment was allowed and the cause-title amended; the PIL alleging non-payment of GST on complimentary tickets, being founded solely on newspaper reports without credible supporting material, was dismissed, with liberty to file a fresh petition upon collection of credible evidence.

Reopening proceedings under Section 148 read with Section 147 - sanction under Section 151(2) - jurisdiction to reopen assessment - requirement of satisfaction by designated officer - non-delegability of statutory satisfaction to superior officer

Sanction under Section 151(2) - requirement of satisfaction by designated officer - non-delegability of statutory satisfaction to superior officer - reopening proceedings under Section 148 read with Section 147 - The reopening notice dated 25th March, 2011 is without jurisdiction because the final sanction required by Section 151(2) was not granted by the Additional Commissioner of Income Tax but by the Commissioner of Income Tax. - HELD THAT: - The record (reasons form and inter-office letters) shows that the Additional Commissioner recorded a view that the case was fit for reopening but that view was expressly subject to the approval of the Commissioner, and the Commissioner ultimately granted the approval. The statute mandates satisfaction by the designated officer (Additional Commissioner) and does not permit substitution by a superior officer. Following this Court's earlier decision in Ghanshyam K. Khabrani, the satisfaction required by Section 151(2) must be recorded by the Additional Commissioner himself; approval by the Commissioner does not cure the lack of sanction. The Tribunal correctly quashed the reassessment proceedings as being without jurisdiction for want of valid sanction, and there is no substantial question of law arising from this conclusion. [Paras 6, 9, 10, 11]

Reopening proceedings quashed for want of valid sanction under Section 151(2); final approval by the Commissioner cannot substitute for satisfaction by the Additional Commissioner.

Final Conclusion: The appeal is dismissed; the Tribunal's order quashing the reassessment for Assessment Year 2004-05 for want of valid sanction under Section 151(2) is upheld and no substantial question of law is made out.

Transfer under Section 2(47)(v) - transfer under Section 2(47)(vi) - part performance and registration requirement under Section 53A/Indian Registration Act - conversion of capital asset into stock-in-trade - receipt versus income

Transfer under Section 2(47)(v) - part performance and registration requirement under Section 53A/Indian Registration Act - No transfer of land took place in the relevant previous year within the meaning of Section 2(47)(v) of the Act. - HELD THAT: - The Tribunal's finding that the Development Agreement dated 20th April, 2007 was not a registered document is determinative: after the statutory amendment, agreements relying on part performance under Section 53A do not effect transfer for the purposes of Section 2(47)(v) unless registered under the Indian Registration Act. The Agreement here was not registered and, applying the law as explained by the Apex Court, the impugned Development Agreement cannot be treated as effecting a transfer under Section 2(47)(v). Consequently the question of levy of capital gains in the subject year does not arise on this ground. [Paras 11]

Question (a) not entertained; no transfer under Section 2(47)(v) in the relevant year.

Transfer under Section 2(47)(vi) - transfer in fact enabling enjoyment as owner - No transfer of land took place in the relevant previous year within the meaning of Section 2(47)(vi) of the Act. - HELD THAT: - The Development Agreement did not grant exclusive possession or such enjoyment of the property to the developer as would amount to transfer in fact akin to ownership. The clauses in the Agreement expressly preserve possession with the landowners and provide that nothing therein shall be construed as grant of possession in part performance for purposes of Sections 2(47)(v) and 2(47)(vi). The Tribunal rightly treated the developer's rights as a licence/user and not as transfer of the immovable property enabling enjoyment as owner. [Paras 12]

Question (b) not entertained; no transfer under Section 2(47)(vi) in the relevant year.

Receipt versus income - The deposit received under the Development Agreement was not held to be income in the Assessment Year 2008-09. - HELD THAT: - The Agreement records receipt of a deposit; however, not every receipt constitutes income. Since no transfer took place under the Development Agreement, the Revenue must establish that the receipt constitutes income and under which head. Absent such a determination, the mere recording of receipt in the Agreement does not make it taxable income for the subject year. [Paras 13]

Question (c) not entertained as academic; Rs. 13.75 Crores recorded as deposit is not automatically taxable income in AY 2008-09.

Conversion of capital asset into stock-in-trade - Section 45(2) - Questions regarding conversion of the land into stock-in-trade, the date and value of such conversion, and consequent taxation under Section 45(2) are academic for Assessment Year 2008-09 and are not adjudicated on merits in these appeals. - HELD THAT: - Because the Court has upheld that no transfer occurred in the previous year relevant to AY 2008-09, issues as to whether the capital asset was converted into stock-in-trade, the date or value of conversion, and liability under Section 45(2) do not arise for decision in the present appeals. The Court expressly refrained from approving or rejecting the Tribunal's findings on date and valuation of conversion and observed that such matters, if they become relevant in the year in which a transfer/sale is held to have occurred, must be independently decided by the assessing authorities in that year after considering submissions. [Paras 14, 16, 17]

Questions (d), (e) and (f) not entertained as academic; date and value of conversion to be determined independently when and if transfer year arises.

Perversity - appellate interference - The impugned Tribunal order is not shown to be perverse in the circumstances of these appeals. - HELD THAT: - The Revenue's contention that the Tribunal erred or acted perverse in treating the date of conversion is rendered academic by the primary finding of no transfer in the relevant year. No other persuasive material was shown to establish perversity of the Tribunal's order. [Paras 15]

Question (g) not entertained; no perversity made out.

Conversion of capital asset into stock-in-trade - re-examination by assessing authorities - Remanded/left open for future adjudication: the year of transfer (if any), and in that year the date and value of conversion of capital asset into stock-in-trade will be determined independently by the authorities. - HELD THAT: - The Court clarified that its refusal to entertain the academic questions should not be construed as approval of the Tribunal's findings on date and valuation of conversion. If in a subsequent assessment year the authorities hold that transfer/sale has occurred, they must independently determine the date and value of conversion and the tax consequences, after considering the assessee's submissions. Thus, issues concerning the date and valuation of conversion are left open for fresh consideration in the appropriate assessment year. [Paras 16, 17]

Questions on date and value of conversion are left open for independent determination in the assessment year in which transfer is held to have occurred.

Final Conclusion: Both appeals are dismissed; the Tribunal's finding that no transfer took place in the previous year relevant to Assessment Year 2008-09 is upheld, questions dependent on a transfer (including conversion date/value and Section 45(2) consequences) are academic and left to be determined independently if and when a transfer year arises.

Distinct treatment of employer's and employee's contributions - deduction under Section 36(1)(va) only upon payment by the due date as per the Explanation - Section 43B(b) applies to employer's contribution and permits deduction only on actual payment - employee's contribution treated as income under Section 2(24)(x) - non-obstante clause and its limited effect vis-a -vis a specific statutory restriction - deletion of proviso to Section 43B does not override specific restriction in Section 36(1)(va)

Employee's contribution treated as income under Section 2(24)(x) - deduction under Section 36(1)(va) only upon payment by the due date as per the Explanation - Whether employees' contributions deducted from salaries and remitted belatedly qualify for deduction in the assessment year claimed. - HELD THAT: - The Court held that employee's contributions are treated as income of the employer under Section 2(24)(x) and their deductibility is governed specifically by Section 36(1)(va) read with its Explanation. That provision permits deduction only if the contribution so deducted from employees' salaries is credited to the relevant fund on or before the statutory due date. Section 43B does not displace this specific scheme. The Division Bench in Merchem Ltd. was correctly decided on this point and is followed: belated remittance of employees' contributions which were not credited within the statutory due date cannot be allowed as a deduction in a later year. [Paras 8, 14, 15, 16, 18]

Employee's contributions deducted from salaries but not remitted by the due date are not allowable as a deduction under Section 36(1)(va); appeal on this ground dismissed.

Section 43B(b) applies to employer's contribution and permits deduction only on actual payment - non-obstante clause and its limited effect vis-a -vis a specific statutory restriction - deletion of proviso to Section 43B does not override specific restriction in Section 36(1)(va) - Whether Section 43B(b) (including effect of the deletion of its proviso) covers employees' contributions or is confined to the employer's contribution and whether the deletion of the proviso has the effect of permitting deduction of belated employee contributions. - HELD THAT: - The Court concluded that Section 43B(b) refers to sums payable by the assessee as employer (i.e., the employer's own contribution) and operates in a different field from Section 36(1)(va) which deals with employees' contributions. Although Section 43B is a non-obstante clause making certain deductions allowable only on actual payment, that restrictive character cannot be converted into an enabling device to override a specific provision (Section 36(1)(va) and its Explanation) which conditions employee-contribution deduction on payment by the fund's due date. The deletion of the proviso to Section 43B does not render the Explanation to Section 36(1)(va) otiose, nor does it permit belated remittance of employee contributions to be deducted. [Paras 11, 12, 13, 17]

Section 43B(b) applies to employer's contribution only; deletion of the proviso to Section 43B does not entitle belatedly paid employees' contributions to deduction; appeal on this ground dismissed.

Final Conclusion: The Division Bench decision in Merchem Ltd. is affirmed; employees' contributions not remitted to the welfare funds within the statutory due date are not deductible under Section 36(1)(va), Section 43B(b) applies to employer's contribution only, and the appeal is dismissed.

Addition to income on basis of suspicion - burden of proof on revenue to show expenditures are not bona fide business expenditure - vouching and evidence for disallowance of expenses - appellate interference where no substantial question of law is raised

Vouching and evidence for disallowance of expenses - addition to income on basis of suspicion - Deletion of the addition of Rs. 75,16,013 made by the Assessing Officer out of Project Monitoring Expenses and Erection and Commissioning Charges was sustainable where no instance of expenses being unvouched, inflated, bogus or used for non-business purposes was brought on record. - HELD THAT: - The Tribunal and the Commissioner of Income Tax (Appeals) found that the Assessing Officer did not produce any specific evidence showing that the questioned expenses were not genuine business expenditures. There was no material pointing to vouchers being forged, expenditures being diverted to non-business purposes, or any particular item being artificially inflated. The assessee had explained that projects during the year were carried out at different locations, accounting for increased expenses. Absent concrete evidence, mere discrepancy between turnover and net profit or an assertion that no prudent businessman would increase business at the cost of profit cannot justify additions. The appellate authorities applied the principle that suspicion alone cannot support a sustainable addition and required the revenue to establish non-bonafide nature of expenditure before making an addition.

The deletion of the addition by the Commissioner (Appeals) and its affirmation by the Tribunal was upheld.

Appellate interference where no substantial question of law is raised - Maintainability of the appeal under Section 260A raised as substantial questions of law was negatived; no substantial question of law arose from the order of the Tribunal warranting interference by the High Court. - HELD THAT: - The High Court examined the grounds framed as substantial questions of law and concluded that they did not disclose any point of law of substance warranting interference. The factual appraisal by the Tribunal and the Commissioner (Appeals) regarding absence of evidence to sustain the addition did not give rise to a substantial legal question. Accordingly, the appellate remedy under Section 260A was not available on the facts and reasoning recorded by the lower authorities.

The appeal under Section 260A was dismissed for lack of any substantial question of law.

Final Conclusion: The High Court dismissed the Revenue's appeal under Section 260A, upholding the deletion of the addition relating to Project Monitoring Expenses and Erection and Commissioning Charges because the Assessing Officer failed to produce evidence to show the expenditures were not bona fide, and no substantial question of law warranted interference.

Disallowance under Section 14A read with Rule 8D of the Income tax Rules - double addition - own funds versus borrowed funds in relation to exempt income investments - burden to prove source of investment - remand for verification of source of investment pursuant to Dhanuka & Sons

Disallowance under Section 14A read with Rule 8D of the Income tax Rules - double addition - Deletion of the addition made under Rule 8D(2)(iii) where the assessee had already made a disallowance in the return. - HELD THAT: - The Tribunal noted that the assessee had on her own made a disallowance in the return and that the Assessing Officer's further disallowance under Rule 8D(2)(iii) would result in duplication. The Coordinate Bench's earlier order in the assessee's own case for the immediately preceding year was applied to the facts, showing that the AO had failed to account for the amount disallowed by the assessee motu. On that basis the Tribunal upheld the CIT-A's deletion of the impugned addition under Rule 8D(2)(iii) as amounting to double addition and not sustainable. [Paras 7]

The deletion of the addition under Rule 8D(2)(iii) is upheld; the ground of Revenue is not sustained on this point.

Disallowance under Section 14A read with Rule 8D of the Income tax Rules - own funds versus borrowed funds in relation to exempt income investments - burden to prove source of investment - remand for verification of source of investment pursuant to Dhanuka & Sons - Whether the addition under Rule 8D(2)(ii) could be sustained without verification of the source of investment in exempt yielding securities/PPF despite apparent sufficiency of own funds. - HELD THAT: - Although the CIT-A had deleted the addition by observing that the assessee's own capital exceeded the investments, the Tribunal examined the decision of the Jurisdictional High Court in Dhanuka & Sons which places the onus on the assessee to demonstrate the source of acquisition of shares/ investments. The Tribunal held that, irrespective of the arithmetic sufficiency of own funds, the question whether the impugned investments were financed out of own funds or borrowings must be verified by the AO. Consequently the Tribunal restored the issue to the file of the AO with a direction to examine and verify the source of the investments in light of Dhanuka & Sons before making any final disallowance under Rule 8D(2)(ii). [Paras 8]

The matter under Rule 8D(2)(ii) is remanded to the Assessing Officer for verification of the source of the investments; no final decision on the quantum of disallowance is recorded by the Tribunal.

Final Conclusion: The Tribunal declined to interfere with the CIT Appeals' deletion of the disputed addition under Rule 8D(2)(iii) (deletion upheld as avoidance of double addition) but remanded the issue under Rule 8D(2)(ii) to the Assessing Officer for verification of the source of investment in accordance with the principles laid down in Dhanuka & Sons; appeal allowed for statistical purposes to that extent.

Disallowance under section 14A read with Rule 8D(2)(iii) - limitation of Rule 8D disallowance to the quantum of exempt income - application of section 43B to interest and penal/compensatory levies - definition of public financial institution for section 43B

Disallowance under section 14A read with Rule 8D(2)(iii) - limitation of Rule 8D disallowance to the quantum of exempt income - Deletion of disallowance u/s 14A r.w. Rule 8D(2)(iii) as it cannot exceed the exempt dividend income - HELD THAT: - The Tribunal followed coordinate-bench precedents holding that mechanical application of Rule 8D(2)(iii) may produce absurd results and that any disallowance under Rule 8D must be confined to expenditure relatable to earning exempt income and in no case exceed the amount of exempt income actually earned. As there was no finding that the assessee incurred expenditure for earning the exempt dividend and the Rule 8D computation produced a disallowance exceeding the exempt income, the AO was directed to delete/limit the disallowance accordingly. The Tribunal applied those principles to the facts of this case and set aside the disallowance made by the AO under Rule 8D(2)(iii). [Paras 10]

Disallowance under section 14A r.w. Rule 8D(2)(iii) deleted/limited and ground allowed.

Application of section 43B to interest and penal/compensatory levies - definition of public financial institution for section 43B - Deletion of disallowance under section 43B in respect of interest on service tax, excise duty, ESI delay and interest to a private bank - HELD THAT: - The Tribunal examined whether the amounts disallowed by the AO under section 43B fell within its statutory ambit. Relying on the principle that interest levied as a compensatory charge (for breach/delay) is not covered by section 43B, the Tribunal held that interest on service tax, excise duty and ESI (being compensatory) do not attract section 43B. Further, interest paid to HDFC Bank was held outside section 43B because HDFC Bank is not a public financial institution within the meaning relevant to clause (d)/(e). On these bases the Tribunal deleted the disallowance of the amounts constituting Rs. 1,76,564 out of the total unpaid statutory liabilities. [Paras 13]

Amounts representing interest on service tax, excise duty, ESI delay and interest to private bank are not disallowable under section 43B; disallowance deleted and ground allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2013-14: the section 14A disallowance computed under Rule 8D(2)(iii) was deleted/limited as it cannot exceed the exempt income, and the disallowance under section 43B in respect of the specified interest amounts was deleted since those amounts do not fall within section 43B.

Deduction under section 80P(2)(a)(i) for cooperative credit societies - distinction between a cooperative society and a primary cooperative bank - principle of mutuality and loss of identity between contributors and participants - application of section 80P(4) excluding cooperative banks from deduction - limited remand for verification of nominal members in light of Citizen Co operative Society

Deduction under section 80P(2)(a)(i) for cooperative credit societies - distinction between a cooperative society and a primary cooperative bank - application of section 80P(4) excluding cooperative banks from deduction - Whether the assessee is a cooperative society (eligible for deduction under section 80P(2)(a)(i) and 80P(2)(d)) or a primary cooperative bank (excluded by section 80P(4)) for AY 2012-13. - HELD THAT: - The Tribunal examined the materials placed on record, the bye laws and audited accounts and noted absence of evidence that the society provided typical banking services to the public or held an RBI banking licence. The authorities below had not shown that the appellant satisfied the cumulative conditions in the Banking Regulation Act definition of a primary cooperative bank - in particular the primary business being banking and a prohibition on admission of other cooperative societies as members - both of which were not established. Transactions with non members were insignificant and the bye laws confined membership to present and past employees. In these circumstances the Tribunal agreed with the CIT(A) that the assessee cannot be characterised as a cooperative bank for the purposes of section 80P(4) and is therefore eligible to claim deduction to the extent income arises from providing credit facilities to its members; any income attributable to dealings with non members would not be covered by section 80P. [Paras 6]

Assessee is a cooperative society and not a primary cooperative bank for AY 2012-13; deduction under section 80P(2)(a)(i) and 80P(2)(d) allowed to the extent income is from credit facilities to members.

Principle of mutuality and loss of identity between contributors and participants - limited remand for verification of nominal members in light of Citizen Co operative Society - Whether the existence and role of 'nominal members' breaches the principle of mutuality (as discussed in The Citizen Co operative Society) and thereby disentitles the assessee to deduction under section 80P. - HELD THAT: - The Tribunal observed that the assessee's bye laws create categories of members including 'nominal members' (post retirement members who may deposit savings but do not borrow) and that the Supreme Court's decision in The Citizen Co operative Society requires scrutiny of whether such arrangements destroy the identity between contributors and participants. Because the Assessing Officer had not examined or decided this question on the present materials, and given the potential impact on entitlement to section 80P, the Tribunal directed a limited remand to the AO to verify the rights, roles and financial interplay of nominal members and to determine whether mutuality is breached. The AO is to afford the assessee opportunity to produce evidence and be heard; the remand is for fresh consideration of this specific issue, not for rehearing matters already decided. [Paras 6]

Issue remanded to the Assessing Officer for limited verification of the position and role of 'nominal members' and to decide whether principles of mutuality are breached, in light of The Citizen Co operative Society; AO to afford full opportunity to the assessee.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that the society is not a primary cooperative bank and allowed deduction under section 80P(2)(a)(i) and 80P(2)(d) for AY 2012-13 to the extent income arises from credit facilities to members, but remanded for limited verification whether 'nominal members' breach mutuality (per The Citizen Co operative Society), directing the AO to decide that discrete issue after affording the assessee an opportunity to be heard.

Admission of additional evidences under Rule 46A of the Income-tax Rules, 1962 - remand for de-novo assessment under section 254(1) of the Income-tax Act, 1961 - disallowance of payments to labour (Mukadam) for lack of documentary evidence - application of provisions of Section 40(a)(ia) for failure to deduct tax at source - estimation of profits by appellate authority in absence of admitted evidence - time-barred cross-objections and condonation of delay under section 253(4) of the Income-tax Act, 1961 - dismissal of grounds as not pressed - admission of additional ground of appeal

Dismissal of grounds as not pressed - Grounds 3, 4 and 5 of the assessee's memo of appeal were not pressed and dismissed. - HELD THAT: - The assessee's counsel expressly disclaimed grounds 3 to 5 in the memo of appeal before the tribunal and sought their dismissal as not pressed. The Revenue did not object to the dismissal. The tribunal recorded the concession and dismissed those grounds as not pressed. [Paras 5]

Grounds 3, 4 and 5 are dismissed as not pressed.

Admission of additional ground of appeal - The assessee's additional ground challenging rejection of audited books / disallowance of expenses when books are audited under Section 44AB was admitted. - HELD THAT: - Counsel for the assessee sought admission of an additional ground of law asserting that when books are audited under Section 44AB and expenses are supported by vouchers and authorisations, disallowance is not warranted. The tribunal found this to be a legal ground fit for admission and directed its inclusion in the appeal. [Paras 6]

The additional ground is admitted.

Time-barred cross-objections and condonation of delay under section 253(4) of the Income-tax Act, 1961 - The Revenue's cross-objection filed 930 days late without any application for condonation of delay was dismissed as time-barred. - HELD THAT: - The Revenue filed Cross Objections on 30-05-2018 which the tribunal found to be delayed by 930 days beyond the period prescribed under section 253(4). No application for condonation of delay, no affidavit, and no explanation were filed by the Revenue to justify the delay despite participation in appellate proceedings. In these circumstances the tribunal held that the CO was time-barred and dismissed it. [Paras 11]

Cross Objections filed by the Revenue are dismissed as time-barred.

Admission of additional evidences under Rule 46A of the Income-tax Rules, 1962 - remand for de-novo assessment under section 254(1) of the Income-tax Act, 1961 - disallowance of payments to labour (Mukadam) for lack of documentary evidence - application of provisions of Section 40(a)(ia) for failure to deduct tax at source - estimation of profits by appellate authority in absence of admitted evidence - Whether the appellate rejection of additional evidence and the consequent estimation of profit at 15% by the CIT(A) warranted remand for fresh adjudication. - HELD THAT: - The AO disallowed labour payments (Mukadam and other labour charges) for lack of particulars (names, addresses, PAN, particulars of services) and, in respect of Mukadam payments, alternatively invoked Section 40(a)(ia) for non-deduction of tax. Before the CIT(A) the assessee applied under Rule 46A to admit additional evidences explaining non-production before the AO (illness of partner, departure of accountant, etc.), but the CIT(A) rejected those documents at the threshold and proceeded to estimate profits at 15% of turnover (before partners' remuneration) without adjudicating the evidential claims on merits. The tribunal held that the CIT(A) ought to have admitted the additional evidences or forwarded them to the AO for verification under Rule 46A(3) and that procedural technicalities should not defeat substantive rights absent mala fides. Exercising powers under section 254(1), the tribunal restored the matter to the file of the AO for de-novo framing of assessment, directing the AO to admit and verify all evidences and to determine the genuineness and allowability of the labour-related expenditures and any applicability of Section 40(a)(ia) on merits with opportunity of hearing. [Paras 13]

Matter remitted to the AO for de-novo assessment to admit and verify the additional evidences and to decide the issues of genuineness of labour payments, applicability of Section 40(a)(ia) and profit estimation on merits.

Final Conclusion: The tribunal dismissed the assessee's specific unpressed grounds, admitted an additional legal ground, dismissed the Revenue's time barred cross-objections, and remitted the substantive disputes concerning disallowance of labour payments, applicability of Section 40(a)(ia) and the CIT(A)'s profit estimation to the Assessing Officer for de-novo adjudication after admission and verification of the additional evidences.

Income from undisclosed sources - seized document as evidence - corroborative evidence requirement - books of account as corroboration - presumption under section 132(4A) and section 292C

Seized document as evidence - income from undisclosed sources - corroborative evidence requirement - books of account as corroboration - Whether the addition of Rs. 1,87,04,166/- made by the Assessing Officer on the basis of figures recorded on a seized loose sheet represents the assessee's income from undisclosed sources and is sustainable. - HELD THAT: - The Tribunal found that the seized sheet was written by the assessee and therefore could not be treated as a 'dumb' document; however, the Assessing Officer failed to produce independent corroborative material to show that the figures noted on the sheet represented actual receipts unaccounted for in the assessee's books. The Tribunal accepted that one part of the entries (payments aggregating to Rs. 1.40 crore) were recorded in the books of account and supported by ledger evidence, and thus could not be added as undisclosed income. The Tribunal observed that other notings on the sheet (the left side entries and certain balancing figures) were rough, contradictory, bore no nexus to corroborative material and did not reliably denote realized receipts; those entries could be ignored. Notwithstanding the above, the seized paper itself recorded amounts of payments (noted as given/paid to specified parties and towards certain tax) aggregating to Rs. 31,04,166/-, which the Tribunal held were properly to be treated as payment entries reflected on the document and not satisfactorily explained or corroborated as accounted for; accordingly that portion could be sustained as addition. Applying these principles, the Tribunal restricted the addition to Rs. 31,04,166/- and held that the balance of the Assessing Officer's addition lacked requisite evidentiary foundation and was rightly deleted by the CIT(A). [Paras 7, 8]

Addition reduced: deletion upheld in part and sustained to the extent of Rs. 31,04,166/-; appeal partly allowed.

Final Conclusion: The Revenue's appeal is partly allowed: the addition made on account of alleged undisclosed receipts is restricted to the quantified amount of Rs. 31,04,166/-, while the remainder of the addition based on the seized loose sheet is deleted for want of corroborative evidence and where entries were found recorded in the books of account.

Arm's length price - comparability analysis - transfer pricing - selection of comparables - functional similarity - bench-marking under TNMM - rejection of comparables - remand for fresh selection of comparables - management and technical services - benefit test - opportunity of hearing

Arm's length price - comparability analysis - transfer pricing - selection of comparables - functional similarity - remand for fresh selection of comparables - Comparables used for benchmarking the sales and post sales support segment were functionally dissimilar and the determination of ALP on that issue is remanded to the TPO for fresh search and selection of functionally similar comparables. - HELD THAT: - The Tribunal found that both the comparables relied upon by the assessee and those adopted by the TPO were functionally different from the assessee's sales and post sales support functions. Having regard to the coordinate bench's earlier directions in the assessee's AY 2008 09, the Tribunal concluded that a fresh search for comparables with functional similarity is required. The TPO is directed to carry out a fresh selection exercise, ensuring comparability of functions for the sales and post sales support segment, and to decide the issue afresh after giving the assessee a reasonable opportunity of hearing. [Paras 16, 17]

Issue remanded to the TPO for fresh selection of functionally similar comparables and fresh adjudication after affording opportunity of hearing to the assessee.

Management and technical services - benefit test - comparability analysis - rejection of comparables - opportunity of hearing - The addition made by the TPO in respect of management and support services could not be sustained without fresh adjudication; the matter is remanded to the TPO to examine the detailed submissions and documentary evidence and determine whether the payments reflect arm's length consideration. - HELD THAT: - The Tribunal observed that the assessee had submitted details of technical and management services received from associated enterprises, which the TPO/DRP had not properly considered. Given that the assessee furnished documentary particulars (exhibited in the paper book) and the revenue did not demonstrate absence of benefit in every respect, the Tribunal directed the TPO to reconsider the issue afresh. The assessee is directed to furnish full details of the services and to demonstrate the benefits received; the TPO must decide the matter after considering those submissions and after affording reasonable opportunity of hearing. [Paras 12, 18, 21]

Matter remanded to the TPO for fresh adjudication of management and support services after consideration of the assessee's documentary evidence and affording opportunity of hearing.

Final Conclusion: All three appeals (AYs 2011 12, 2012 13 and 2013 14) are allowed for statistical purposes; the issues of benchmarking comparables for sales and post sales support and the determination in respect of management and support/technical services are remanded to the TPO for fresh consideration with directions to provide the assessee a reasonable opportunity of hearing. Stay petitions have become otiose.

Penalty under section 271(1)(c) - Concealment and furnishing of inaccurate particulars of income - Doctrine of mutuality - Reopening assessment under section 147 - Wrong claim versus false claim - Reliance Petroproducts principle

Penalty under section 271(1)(c) - Concealment and furnishing of inaccurate particulars of income - Doctrine of mutuality - Wrong claim versus false claim - Reliance Petroproducts principle - Cancellation of penalty levied under section 271(1)(c) in respect of interest on FDRs and messing commission for the assessment years 2007-08 and 2008-09 - HELD THAT: - The Tribunal found that at the time the original returns were filed the doctrine of mutuality, as applied by the Tribunal, supported the assessee's claim of exemption; only later did the jurisdictional High Court and ultimately the Supreme Court decide against the assessee, prompting reopening under section 147. The assessee had disclosed all particulars in the returns and the materials on record enabled the Assessing Officer to reopen and make additions. The Tribunal applied the principle in Reliance Petroproducts that merely making a claim which is not sustainable in law, and which is disclosed in the return, does not by itself amount to furnishing inaccurate particulars or concealment attracting penalty under section 271(1)(c). Given that the claim could at best be a wrong claim (not a falsehood) and that details were available in records, the case was not fit for levy of penalty. The Tribunal also noted consistent favourable orders in the assessee's subsequent years and the Tribunal's own decisions in the assessee's case, and therefore set aside the confirmed penalty. [Paras 14, 15, 16]

Penalty levied under section 271(1)(c) is cancelled for the assessment years 2007-08 and 2008-09.

Final Conclusion: Both appeals are allowed and the penalties confirmed by the authorities for AY 2007-08 and AY 2008-09 are set aside.

Reopening of assessment under section 147 - reason to believe - tangible material - waiver of trading liability as income under section 41(1) - remand for verification of newly produced evidence

Reopening of assessment under section 147 - reason to believe - tangible material - Validity of reopening the completed assessment under section 147 - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the authorities below and applied the principle that post-1-4-1989 reopening requires 'tangible material' having a live link with formation of belief. The record showed that the waiver of loan of Rs. 7,00,66,000/- was not disclosed as income in the return and, although the waiver appeared in the profit and loss account, it was set off against brought forward losses and thus did not amount to due disclosure. The Tribunal found that the Assessing Officer had recorded sufficient material and justification to form a belief that income had escaped assessment; precedent on formation of belief and limits of adequacy of reasons was applied to uphold reopening. [Paras 15, 16, 17, 18]

Reopening of assessment under section 147 was upheld; the reasons recorded furnished tangible material and a live link to the belief that income had escaped assessment.

Waiver of trading liability as income under section 41(1) - remand for verification of newly produced evidence - Taxability of waived loan under section 41(1) - remitted for fresh consideration - HELD THAT: - On merits the Assessing Officer and the Commissioner (Appeals) treated the waived ECB as trading liability taxable under section 41(1) because the loan was, on the materials before them, for general funding/working capital and formed part of a running account. The assessee later produced an affidavit and documents asserting the ECB proceeds were used to repay earlier loans that had financed acquisition of fixed assets and contended the waiver related to capital funds. These materials and the altered plea were not placed before the authorities below and conflicted with the loan agreement describing the ECB as for general funding. The Tribunal held that the new claim and documents require verification with original records and factual findings; accordingly the question whether the waiver is assessable under section 41(1) was remitted to the Assessing Officer for fresh consideration after verifying the veracity of the assessee's new claim. The interest under section 234B was treated as consequential to the final outcome. [Paras 6, 11, 19]

Issue as to taxability of the waived loan under section 41(1) remitted to the Assessing Officer for fresh adjudication after verification of the assessee's newly produced evidence; interest under section 234B left consequential.

Final Conclusion: Reopening of the assessment for AY 2002-03 under section 147 was upheld. The question whether the ECB waiver is taxable under section 41(1) was not finally adjudicated and is remitted to the Assessing Officer for fresh consideration after verification of the assessee's newly produced evidence; consequential interest determination to follow the outcome.

Penalty for concealment or furnishing inaccurate particulars of income under section 271(1)(c) - Bona fide mistake / inadvertent error - Disclosure in balance sheet as disclosure - Fault of chartered accountant cannot be visited on the assessee - Judicial discretion in imposing penalty

Penalty for concealment or furnishing inaccurate particulars of income under section 271(1)(c) - Bona fide mistake / inadvertent error - Disclosure in balance sheet as disclosure - Fault of chartered accountant cannot be visited on the assessee - Judicial discretion in imposing penalty - Whether the penalty imposed under section 271(1)(c) for non-addition of provision for gratuity in the computation of income for AY 2006-07 was justified or liable to be cancelled. - HELD THAT: - The Tribunal found that the provision for gratuity was disclosed in the assessee's balance sheet filed with the return and that the non-addition in the computation of income arose from an inadvertent mistake by the assessee's Chartered Accountant. The assessee had consistently added back similar gratuity provisions in preceding and subsequent years, and the Assessing Officer had access to the balance sheet disclosure during the original assessment under section 143(3). On these facts the Tribunal concluded there was no mala fide intention to conceal or to furnish inaccurate particulars. Applying settled principles that a bona fide or inadvertent error, disclosure of material facts and the fault of a Chartered Accountant ordinarily do not attract penalty, and noting the discretionary nature of penalty imposition, the Tribunal held that penalty was not warranted in the peculiar circumstances of the case and that the authorities below had not made out conscious concealment or deliberate inaccuracy.

Penalty imposed under section 271(1)(c) is cancelled.

Final Conclusion: The assessee's appeal is allowed; the penalty levied under section 271(1)(c) for AY 2006-07 is deleted on the ground that the omission to add back provision for gratuity was a bona fide inadvertent mistake disclosed in the balance sheet and not an act of concealment or furnishing inaccurate particulars.

Penalty under Section 271D - Penalty under Section 271E - Compliance with Section 269SS and Section 269T - Reasonable cause under Section 273B - Journal entries as mode of recording/assignment of debt - Preclusive effect of earlier judicial precedent and temporal applicability - Principle of consistency in disposal of related appeals

Penalty under Section 271D - Penalty under Section 271E - Compliance with Section 269SS and Section 269T - Reasonable cause under Section 273B - Journal entries as mode of recording/assignment of debt - Deletion of penalties under Sections 271D and 271E in respect of loans/deposits recorded by journal entries on the ground of reasonable cause - HELD THAT: - The Tribunal held that receipt/repayment of loans or deposits by means of journal entries does attract the mischief of Sections 269SS/269T, but levy of penalty under Sections 271D/271E is not automatic where Section 273B applies. On the material before it there was no adverse finding that the journal entries were a device to introduce unaccounted money or to evade tax; the entries were explained as adjustments, consolidation of inter-group balances, correction of errors and business exigency and were ultimately settled through banking channels. In these facts the Tribunal found that the assessee had established a reasonable cause within the meaning of Section 273B and therefore sustained the CIT(A)'s deletion of penalties. The Tribunal applied the tests laid down in precedent and declined to interfere with the factual conclusion that reasonable cause existed, noting that this is an inference of fact and not a pure question of law. [Paras 6, 7, 10, 11]

Penalties under Sections 271D and 271E deleted as reasonable cause under Section 273B is established in respect of journal-entry transactions.

Preclusive effect of earlier judicial precedent and temporal applicability - Principle of consistency in disposal of related appeals - Reasonable cause under Section 273B - Applicability of judicial decisions and consequent uniform disposal of group appeals - HELD THAT: - The Tribunal followed the decision of the Hon'ble Bombay High Court in the assessee's group case (affirming the Tribunal's view that prior practice and decisions rendered before 12.06.2012 gave rise to reasonable cause) and earlier co ordinate Bench decisions in the assessee's group. Finding those authorities directly applicable to the facts (journal entries effected prior to the High Court clarification), the Tribunal applied the principle of consistency and dismissed all Revenue appeals raising identical grounds across the listed assessment years. The Tribunal thus treated the precedents and group rulings as determinative of the existence of reasonable cause and of the outcome for all connected appeals. [Paras 8, 9, 10, 11, 12]

Following the jurisdictional High Court and co ordinate Bench precedents, all Revenue appeals in the group are dismissed; cross objections rendered academic and dismissed.

Final Conclusion: The Tribunal upheld the deletion of penalties under Sections 271D and 271E by concluding that receipt/repayment by journal entries, in the absence of any adverse finding of unaccounted money or tax evasion, constituted reasonable cause under Section 273B; applying binding and co ordinate precedents and the principle of consistency, all Revenue appeals and cross objections in the group are dismissed.

Estimation of suppressed turnover - taxation of suppressed sales by estimating reasonable profit thereon - treatment of post-search / future receipts in quantification of pre-search suppressed turnover - deletion of disallowance under Section 40(a)(ia) of the Income-tax Act

Estimation of suppressed turnover - treatment of post-search / future receipts in quantification of pre-search suppressed turnover - Quantification of suppressed turnover was upheld in principle but amounts relating to plots unsold as on date of search must be examined and excluded from pre-search suppressed turnover; matter remanded to AO for verification and adjustment. - HELD THAT: - Tribunal found that the Assessing Officer had applied a project- and plot-wise methodology based on seized material to quantify gross receipts and suppressed turnover, and the assessee failed to rebut that working. However, the Tribunal accepted the legal proposition that receipts relating to plots unsold as on the date of search (future/post-search sales) cannot prima facie be brought to tax for the pre-search period. The record did not show whether certain plots were sold in subsequent years nor did the AO or CIT(A) examine whether the assessee had accounted actual higher sale consideration post-search or only registered values. Because this factual aspect was not examined, the Tribunal directed the AO to exclude amounts pertaining to plots unsold on the date of search when quantifying suppressed turnover up to AY 2014-15 and to verify whether amounts admitted in post-search years represent actual consideration or merely registered value. The remand is for factual verification and recomputation of suppressed turnover in accordance with that direction.

Estimation of suppressed turnover upheld generally; remitted to AO to exclude amounts of plots unsold on date of search and to verify post-search accounting before final quantification (statistical allowance).

Taxation of suppressed sales by estimating reasonable profit thereon - estimation of net profit on suppressed turnover - Entire suppressed sales cannot be taxed as income; reasonable profit on suppressed turnover to be estimated at 12.5% in the facts of this real-estate case. - HELD THAT: - Following precedent that sales alone do not represent income and that only excess over cost (profit) is taxable, the Tribunal rejected AO's approach of treating whole suppressed turnover as income. Considering the facts - over 70% of total turnover was recorded in books, declared profit at 4% was accepted for declared turnover, and the nature of real-estate transactions - the Tribunal concluded that a reasonable net profit to be attributed to the suppressed turnover is 12.5%. The Tribunal noted various decisions and that profit rates are fact-sensitive; on the particular facts and industry character, 12.5% was held to meet ends of justice and the CIT(A)'s adoption of 40% was found unsupported.

Modify CIT(A) - direct AO to compute taxable income on determined suppressed turnover at net profit rate of 12.5%.

Entire sales cannot be treated as income; only profit on suppressed sales is taxable - Revenue's plea to treat entire suppressed turnover as income was dismissed. - HELD THAT: - Tribunal followed authoritative decisions holding that additions on account of unaccounted/suppressed sales are to the extent of gross profit and not entire sales amount. Applying that legal principle to the facts, and having fixed a reasonable net profit rate (12.5%) to be applied to the quantified suppressed turnover, the Tribunal found no merit in Revenue's contention that the whole suppressed turnover should be brought to tax.

Revenue grounds seeking taxation of entire suppressed turnover dismissed.

Deletion of disallowance under Section 40(a)(ia) of the Income-tax Act - Disallowance of Rs. 22,000 under Section 40(a)(ia) in AY 2013-14 deleted by CIT(A) was upheld. - HELD THAT: - The Tribunal agreed with CIT(A) that the AO's assessment did not indicate reliance on any incriminating material unearthed during search to sustain the disallowance, nor was it shown that the assessment had been abated or reopened in a manner permitting such addition. In the absence of evidence linking the disallowance to search material or other information justifying the addition, the Tribunal found no basis to interfere with the deletion made by CIT(A).

Deletion of the 40(a)(ia) disallowance for AY 2013-14 upheld; Revenue's challenge dismissed.

Final Conclusion: Assessee appeals are partly allowed (with remand to AO to exclude and verify amounts relating to plots unsold as on date of search and to compute taxable income on determined suppressed turnover at 12.5% net profit); all Revenue appeals dismissed.

Disproportionate and arbitrary penalty - Equality of treatment among similarly situated employees - Role-based differentiation in imposition of penalty - Mitigation and reduction of penalty - Penalty under Section 112 and Section 114AA of the Customs Act, 1962

Disproportionate and arbitrary penalty - Equality of treatment among similarly situated employees - Role-based differentiation in imposition of penalty - Mitigation and reduction of penalty - Penalty under Section 112 and Section 114AA of the Customs Act, 1962 - Whether the higher penalty imposed on the appellant compared to two other employees was justified and, if not, whether it should be reduced. - HELD THAT: - The Court examined the concurrent findings of the Commissioner that the appellant along with other employees participated in forging WPC import licences and that the goods were liable for confiscation and penal action under the Customs Act. The Court found no adequate differentiation in the recorded findings to justify imposing a substantially higher penalty on the appellant than on two other employees who were held to be equally culpable. The verdict shows that the lower authorities appear to have treated the appellant more severely because he held the title of Manager while the others were lower ranked, rather than on established differences in conduct or role. In these circumstances the Court concluded that the amounts imposed on the appellant were arbitrary and excessive and that mitigation was warranted. Applying the principle that similarly situated persons must receive equal treatment and that penalty quantum must reflect actual differentiated culpability, the Court reduced the appellant's penalty from the higher amounts to the same quantum as that fixed for the other two employees.

Penalty imposed on the appellant under Section 112 and Section 114AA of the Customs Act, 1962 reduced to Rs. 6 lacs under each provision.

Final Conclusion: The appeal is partly allowed; the penalties on the appellant under Section 112 and Section 114AA are reduced to Rs. 6 lacs each and the appellant is directed to deposit the reduced amount within four weeks.

Section 27 of the Customs Act, 1962 - limitation for refund claims - refund consequential upon appellate order - departmental jurisdiction to grant refunds under statute

Section 27 of the Customs Act, 1962 - limitation for refund claims - departmental jurisdiction to grant refunds under statute - Whether the appellant's refund claim falls to be governed by Section 27 of the Customs Act, 1962 and is time-barred. - HELD THAT: - The Tribunal held that any amount refundable under the Customs Act must be processed under Section 27 and that departmental authorities have no power to grant refunds outside the statutory provisions. Reliance was placed on Supreme Court precedents which establish that refund applications presented to Customs/Central Excise authorities must comply with the limitation contained in the relevant statute and cannot be dealt with under general law; remedies outside the statutory limitation may be sought in civil courts but not by the departmental authority. Applying these principles, the Tribunal found that the amount claimed related to customs duty and therefore the refund claim was governed by Section 27. Consequently, a claim filed beyond the statutory limitation before the departmental authority is not maintainable and must be rejected as time-barred.

Claim governed by Section 27 and the departmental authorities cannot entertain a refund application beyond the statutory time limit; the refund claim is time-barred.

Section 27 of the Customs Act, 1962 - refund consequential upon appellate order - limitation for refund claims - From which date the one-year limitation prescribed by Section 27(1B)(b) is to be computed where refund arises as a consequence of an appellate authority's order. - HELD THAT: - The Tribunal examined Section 27(1B)(b), which mandates that where duty becomes refundable as a consequence of a judgment, decree, order or direction of the appellate authority, the one-year limitation is computed from the date of such judgment, decree, order or direction. The Tribunal found that the Commissioner (Appeal)'s order dated 04.12.2013 set aside the demand and thereby rendered the appellant eligible for refund. Even though the departmental appeal to the Tribunal was pending thereafter, and no stay had been granted, the statutory one-year period runs from the date of the Commissioner (Appeal)'s order. CBEC Circular 572/9/2001-CX was noted to reinforce that refunds should not be withheld merely because an appeal is filed unless a stay is obtained. The Tribunal therefore concluded that the relevant date for computing the one-year limitation was the date of the Commissioner (Appeal)'s order and that the refund application filed beyond one year of that date was barred by limitation.

For refunds consequent upon an appellate order, the one-year period under Section 27(1B)(b) is computed from the date of that appellate order (here, the Commissioner (Appeal) order); the present claim was filed after that period and is barred.

Final Conclusion: The departmental order rejecting the refund as time-barred is upheld: the refund claim is governed by Section 27 of the Customs Act, 1962, and, being filed beyond one year from the Commissioner (Appeal)'s order which made the duty refundable, the claim is not maintainable before the Customs authorities.

Renewal of CHA licence under Customs Brokers Licensing Regulations - refusal of renewal for prior misconduct and penalty - separate legal effects of suspension/revocation and renewal - obligations of a CHA under Regulation 14 of CBLR - requirement to satisfy Regulation 5 conditions at renewal - principle that mens rea and adjudication of misconduct justify refusal of renewal

Renewal of CHA licence under Customs Brokers Licensing Regulations - requirement to satisfy Regulation 5 conditions at renewal - refusal of renewal for prior misconduct and penalty - Validity of the Commissioner's refusal to renew the appellant's CHA licence in view of the prior adjudication finding mens rea and imposition of penalty. - HELD THAT: - The Tribunal held that renewal of a CHA licence must satisfy the conditions of Regulation 5 of the CBLR even where suspension has been earlier revoked. Regulation 9(2) empowers renewal only if the applicant's performance is satisfactory, including absence of complaints of misconduct. The earlier order dated 02.02.2016 had found negligence in KYC and breach of Regulation 14 obligations, and had recorded mens rea and imposed a penalty; suspension was revoked on humanitarian grounds but the adjudication on misconduct remained. Given that the adjudication established misconduct and mens rea, the Commissioner was entitled to treat that adjudication as an instance of misconduct when considering renewal under Regulation 9(2)/Regulation 5 and to refuse renewal. The Tribunal therefore found no error in the impugned order denying renewal. [Paras 6, 7, 8, 9, 10]

Refusal to renew the CHA licence was valid and is upheld.

Separate legal effects of suspension/revocation and renewal - principle that mens rea and adjudication of misconduct justify refusal of renewal - principle against double vexation - Whether denial of renewal amounted to vexation twice for the same facts or was impermissible after suspension was revoked. - HELD THAT: - The Tribunal distinguished revocation/suspension proceedings from renewal proceedings, observing they operate under different provisions and serve different purposes. Revocation or suspension may be set aside or revoked on humanitarian grounds without negating the findings of misconduct; renewal requires fresh satisfaction of Regulation 5 conditions. Because the prior order recorded mens rea and imposed penalty, the appellant could not claim an unfettered right to renewal. Consequently, the plea of double vexation was rejected as not tenable where a prior adjudication had established culpability. [Paras 8, 9]

The contention of being vexed twice is untenable; refusal to renew does not amount to impermissible double vexation.

Final Conclusion: The Tribunal upheld the Commissioner's order refusing renewal of the appellant's CHA licence, holding that the adjudicated finding of misconduct and mens rea and the resultant penalty justified refusal under the renewal provisions of the CBLR; the appeal is rejected.

Penalty for acts rendering goods liable to confiscation (Section 112(a)) - Penalty for making or using false or incorrect declarations (Section 114AA) - Confiscation of goods under Section 111

Penalty for acts rendering goods liable to confiscation (Section 112(a)) - Confiscation of goods under Section 111 - Whether penalty under Section 112(a) could be imposed on the appellants and whether the quantum of penalty required modification. - HELD THAT: - The Tribunal found as an admitted fact that the goods were confiscated under the provisions of Section 111(1) and 111(m) and were subsequently redeemed on payment of redemption fine, thereby satisfying the predicate for penalty under Section 112. The impugned order records concealment by the CHA proprietor and his employee of actual weight, correct description and proper value of the goods; these acts fall within the ingredients of Section 112(a). Having held liability to penalty, the Tribunal exercised its discretion to reduce the quantum of penalty by taking into account the gravity of the offence and the amounts received by the appellants for providing CHA services, and modified the penalty from the amount imposed below to a reduced sum payable by each appellant. [Paras 4]

Penalty under Section 112(a) is sustained but the quantum is reduced.

Penalty for making or using false or incorrect declarations (Section 114AA) - Whether penalty under Section 114AA could be imposed on the appellants in absence of specific findings that they knowingly or intentionally made, signed or used false or incorrect declarations or documents. - HELD THAT: - The Commissioner (Appeals) recorded concealment regarding weighment variance, incorrect description and value, but did not make any specific finding that the appellants had knowingly or intentionally made, signed or used any declaration, statement or document which was false or incorrect in any material particular. Section 114AA requires a finding of knowledge or intention in respect of false or incorrect declarations; in absence of such specific findings the provision could not be invoked. Accordingly, the confirmation of penalties under Section 114AA was set aside. [Paras 4]

Penalty under Section 114AA is not sustainable and is set aside.

Final Conclusion: The appeals are partly allowed: penalties under Section 114AA are set aside; penalties under Section 112(a) are maintained but the quantum is reduced as ordered by the Tribunal.

Default under Section 7 - Corporate Insolvency Resolution Process - deed of guarantee independent of security - enforceability of guarantee notwithstanding regulatory approval - record or evidence of default - moratorium - appointment of Interim Resolution Professional

Default under Section 7 - record or evidence of default - Existence of default by the Corporate Debtor/Guarantor and completeness of the Section 7 application - HELD THAT: - The Tribunal found that the Financial Creditor established indebtedness and default by producing the loan agreement, the Deed of Guarantee and communications and computation of outstanding amount. The Deed of Guarantee and the contemporaneous documents and e mails were held sufficient as record/evidence of default within the meaning of the I&B Code, and the application under Section 7 was held to be complete. Reliance on statutory formats maintained with an Information Utility was not treated as indispensable where alternative documentary evidence establishes default. [Paras 3, 6, 7, 11, 15]

Default is established; the Section 7 application is complete and maintainable.

Deed of guarantee independent of security - enforceability of guarantee notwithstanding regulatory approval - Validity and enforceability of the Deed of Guarantee and the objection based on lack of RBI sanction/approval and alleged conditionality - HELD THAT: - The Deed of Guarantee, by its terms, was adjudged to be independent and distinct from any security taken or to be taken by the Financial Creditor; the guarantor waived benefits available to sureties under certain provisions of the Indian Contract Act. The plea that the guarantee is a nullity for want of RBI approval or that it could be invoked only upon transfer of shares was rejected as vague and unsustainable. The guarantor cannot evade liability by pointing to its own failure to obtain any regulatory approval that it had undertaken was complied with or capable of compliance. [Paras 5, 6, 12, 13, 14]

Objections regarding lack of RBI sanction, conditionality on transfer of shares and related contentions are rejected; the guarantee is enforceable.

Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium - Commencement of CIRP, appointment of IRP and declaration of moratorium - HELD THAT: - Having ascertained default and compliance with statutory formalities including proposal of an IRP with Form 2 consent, the Tribunal admitted the company petition and ordered commencement of the Corporate Insolvency Resolution Process. An Interim Resolution Professional was appointed to take charge and make the public announcement and call for claims. The statutory moratorium under section 14 was declared, with directions protecting supply of essential goods and services as provided in the Code. [Paras 15, 16, 17, 18, 19]

CP admitted; CIRP commenced; IRP appointed and moratorium declared.

Final Conclusion: The Tribunal admitted the Section 7 petition, having found default on the basis of the loan agreement, Deed of Guarantee and supporting documents; objections to enforceability on grounds of RBI approval, limitation and conditionality were rejected; an Interim Resolution Professional was appointed and moratorium declared to commence the Corporate Insolvency Resolution Process.

Condonation of delay - Interim stay of demand - Refund of duty and recovery proceedings - Issuance of notice

Condonation of delay - Delay in filing the petition was condoned. - HELD THAT: - The Court, upon consideration of the application for condonation, allowed the petition to proceed by condoning the delay. The order records the grant of condonation and the making of further directions to proceed with service of notice.

Delay condoned and notice ordered to be issued returnable in eight weeks.

Interim stay of demand - Refund of duty and recovery proceedings - The department's demand for refund recovery was stayed until the next date of hearing. - HELD THAT: - The petitioner informed the Court that following a favourable order by the Commissioner, the duty amount had been refunded to the petitioner and that the department was seeking to recover that amount. In light of this position the Court granted interim relief by staying the demand until the next date of hearing.

Till the next date of hearing the demand made by the department is stayed.

Final Conclusion: The Supreme Court condoned the delay, directed issuance of notice returnable in eight weeks and granted an interim stay on the department's demand for recovery of the refunded duty until the next date of hearing.

Summary order. Delay condoned; admission refused and the civil appeal dismissed.

Therapeutic massage exclusion - health and fitness service - health club and fitness centre - medical supervision requirement for therapeutic treatment - therapeutic treatment under ayurvedic system

Therapeutic massage exclusion - health and fitness service - medical supervision requirement for therapeutic treatment - therapeutic treatment under ayurvedic system - Whether the ayurvedic treatments and massages provided at the resorts fall within the exclusion for therapeutic massages and therefore are not taxable as services of a health club and fitness centre. - HELD THAT: - The Tribunal examined the CBEC Circular which explains that 'health and fitness service' covers services such as massages for general well being but specifically excludes therapeutic massages, which are massages provided by qualified professionals under medical supervision for curing diseases. The records establish that the centres operate under qualified ayurvedic doctors, hold licences as ayurvedic establishments, maintain case sheets and treatment schedules, follow classical ayurvedic texts, and provide diagnosis and prescribed treatments (including Panchakarma therapies) supervised by medical practitioners. The fact that the centres are located within resorts, charge package rates, or offer treatment in an improved ambience does not negate the therapeutic character of the services where the essential indicia of therapeutic treatment - medical diagnosis, prescription, supervision by qualified doctors, and treatments drawn from recognized ayurvedic texts - are present. The Tribunal accepted the Commissioner (A)'s findings and documentary evidence (including District Medical Officer certification and treatment records) that the treatments are therapeutic under the ayurvedic system and thus fall within the exclusion set out in the Board Circular, and are not taxable as health club and fitness services. [Paras 5, 6]

The ayurvedic treatments and massages provided by the respondents are therapeutic in nature, performed under medical supervision and based on recognised ayurvedic methods, and therefore fall within the exclusion for therapeutic massages; departmental appeals are dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (A)'s finding that the ayurvedic centres at the resorts provide therapeutic treatment under medical supervision and are excluded from service tax as therapeutic massages; the departmental appeals are dismissed.

Penalty under Section 76 - failure to deposit collected service tax - waiver of penalty under Section 80 - reasonable cause - financial difficulties - payment with interest after show-cause notice

Penalty under Section 76 - failure to deposit collected service tax - payment with interest after show-cause notice - Whether penalty under Section 76 is sustainable where the assessee collected service tax but did not deposit it into Government treasury and subsequently paid the tax with interest after issuance of show-cause notice. - HELD THAT: - The Tribunal found on scrutiny of records that the assessee had collected service tax for the relevant months but failed to deposit the same in the Government treasury and only paid the tax along with interest after issuance of show-cause notice. The adjudicating authority therefore rightly imposed penalty under Section 76 for default in payment within the time prescribed, the Tribunal noting that retention of tax collected from customers is a distinct and culpable omission. The Tribunal relied on earlier precedents (including Triton Communications ) holding that financial difficulty does not excuse failure to pay tax collected, and on factual findings that the assessee had been in default in earlier months as well. On these findings the Tribunal upheld the imposition of penalty under Section 76. [Paras 6, 7]

Penalty under Section 76 sustained where service tax was collected but not deposited; impugned orders imposing penalty are upheld.

Waiver of penalty under Section 80 - reasonable cause - financial difficulties - Whether the appellants' plea of financial difficulties and delay in receipt of amounts from clients constituted reasonable cause for waiver of penalty under Section 80. - HELD THAT: - The appellants contended that cash-flow problems and delayed receipt of funds from clients compelled them to prioritise salary payments and caused delay in remitting service tax, and therefore penalty under Section 76 should be waived under Section 80. The Tribunal rejected this ground as insufficient, observing that the appellants had nevertheless collected service tax from customers and that financial crisis does not amount to a reasonable cause for non-payment once tax has been collected. The Tribunal noted prior decisions to the same effect and recorded that the assessee had earlier defaults, strengthening the conclusion that waiver under Section 80 was not warranted. [Paras 6]

Plea of financial difficulty and delayed receipt from clients does not constitute reasonable cause; waiver under Section 80 refused.

Final Conclusion: All three appeals dismissed; impugned orders imposing penalty under Section 76 are upheld as the assessee collected service tax but failed to deposit it in the Government treasury and financial difficulties do not justify waiver under Section 80.

Cenvat credit on capital goods - definition of capital goods under Rule 2(a)(A) - component, spares and accessories as qualifying capital goods - user test for accessory - office equipment not qualifying as capital goods - eligibility of optical fibre cables, HDPE cables, batteries and server-room air conditioners as inputs

Cenvat credit on capital goods - office equipment not qualifying as capital goods - user test for accessory - Validity of denial of Cenvat credit on office furniture and general office equipments listed in Annexure A - HELD THAT: - The Tribunal applied the definition of "capital goods" under Rule 2(a)(A) of the Cenvat Credit Rules, 2004 and the principle that only goods falling under the specified Chapters or components, spares or accessories of those goods qualify as capital goods. Relying on the "user test" and prior Tribunal reasoning, items which are ordinary office equipments or appliances (tables, chairs and similar items classifiable under Chapter 94) do not qualify as components, spares or accessories of goods used for transmission and reception in telecom services. There was no evidence these office items were used as inputs in providing the telecom output service. Consequently such credits were properly disallowed by the adjudicating authority and the denial was upheld. [Paras 6, 7, 9]

Cenvat credit on ordinary office furniture and general office equipments denied; denial upheld and such credits rightly disallowed.

Component, spares and accessories as qualifying capital goods - eligibility of optical fibre cables, HDPE cables, batteries and server-room air conditioners as inputs - Whether optical fibre cables, HDPE cables, batteries for running servers and air conditioners for server rooms qualify as inputs/capital goods eligible for Cenvat credit - HELD THAT: - The Tribunal found that articles which are specific to the provision of telecommunication services and are necessary for transmission and reception (including optical fibre cables, HDPE cables, batteries used for servers and air conditioners for server rooms) qualify as inputs or as components/accessories of capital goods within the meaning of Rule 2(a)(A). These items are intrinsic to the functioning of the telecom network and without them transmission/receiving and signal conversion would not be possible. The adjudicating authority had accordingly allowed credit on these items and the Tribunal endorsed that conclusion. [Paras 8, 9]

Cenvat credit is allowable on optical fibre cables, HDPE cables, batteries for servers and air conditioners for server rooms; allowance upheld.

Final Conclusion: The appeal is dismissed. The adjudicating authority's order is upheld: Cenvat credit rightly allowed only on optical fibre/HDPE cables, batteries for servers and server-room air conditioners, and rightly denied on other office equipments listed in Annexure A.

Commercial or Industrial Construction Services - completion and finishing services - abatement under Notification No. 1/2006 ST - exclusion of value of transfer of property (material) from assessable value - services rendered to Government / public authority outside ambit of taxable commercial construction - penalties for suppression and failure to self assess: Sections 76 and 78 - penalty under Section 77 dispensed with where Sections 76 and 78 imposed

Commercial or Industrial Construction Services - completion and finishing services - Whether the activities described (glazing, aluminium panels, powder coated partitions, gypsum false ceiling labour, etc.) fall within Commercial or Industrial Construction Services. - HELD THAT: - The Tribunal examined the expanded definition of Commercial or Industrial Construction Services (with effect from 16.06.2005) and found that the appellant's completion and finishing activities fall squarely within sub clause (c) of that definition. The services listed (plastering, painting, tiling, metal joinery and carpentry and similar finishing works) are within the scope of Item No.5 of Notification No.1/2006 ST. Consequently the Commissioner (Appeals) correctly held that such activities are taxable as commercial or industrial construction services but are eligible for the abatement provided in the notification where applicable. [Paras 8]

The activities described are covered by the definition of Commercial or Industrial Construction Services and the abatement under Notification No.1/2006 ST was rightly extended.

Exclusion of value of transfer of property (material) from assessable value - abatement under Notification No. 1/2006 ST - Whether value attributable to materials (transfer of property) included in contracts inclusive of material is includible in Service Tax assessable value for the impugned constructions. - HELD THAT: - The Tribunal noted that the contracts were inclusive of material and that where the total contract value amounts to transfer of property, the value of such transfer is to be excluded for service tax purposes. On that basis, and because the finishing services fell under the Notification, the Commissioner (Appeals) properly excluded the value of material/transfer of property and allowed the abatement under Notification No.1/2006 ST. [Paras 8]

Value relating to transfer of property (material) in inclusive contracts was correctly excluded and abatement under Notification No.1/2006 ST was properly allowed.

Commercial or Industrial Construction Services - services rendered to Government / public authority outside ambit of taxable commercial construction - Whether construction work carried out for Government bodies (Awas Vikas Sansthan, JVVNL) and certain residential construction fall within taxable Commercial or Industrial Construction Services. - HELD THAT: - The Tribunal observed that services rendered to Government authorities (AVS and JVVNL) fall outside the ambit of the definition of Commercial and Industrial Construction Services, and hence any demand under that head for such works was unsustainable. Similarly, contracts for residential premises do not fall within the definition of Commercial or Industrial Construction Services and those demands were rightly set aside by the Commissioner (Appeals). [Paras 9, 11]

Demands for constructions for Government bodies and for residential premises were rightly dropped as not taxable under Commercial or Industrial Construction Services.

Penalties for suppression and failure to self assess: Sections 76 and 78 - penalty under Section 77 dispensed with where Sections 76 and 78 imposed - Whether penalties for suppression and failure to file/assess Service Tax were correctly confirmed while penalty under Section 77 was waived. - HELD THAT: - The Tribunal agreed with the Commissioner (Appeals) that the assessee had failed to file ST 3 returns properly and to discharge self assessment liabilities, amounting to deliberate suppression of facts. In view of this deliberate omission, penalties under Sections 76 and 78 were sustained. The Tribunal found no infirmity in dispensing with penalty under Section 77 in light of the penalties imposed under Sections 76 and 78. [Paras 12]

Penalties under Sections 76 and 78 were correctly confirmed; penalty under Section 77 was properly not imposed.

Final Conclusion: The Commissioner (Appeals) order was upheld: demands were modified/dropped where constructions related to Government or residential works and abatement and exclusion of material value were correctly allowed; penalties under Sections 76 and 78 were sustained and the appeal is rejected.

Business Auxiliary Service - reverse charge mechanism - taxable service provided from outside India and received in India - exemption for Commission Agent Services in relation to agricultural produce - corporate guarantee as service facilitating lending

Business Auxiliary Service - exemption for Commission Agent Services in relation to agricultural produce - reverse charge mechanism - Service Tax demand on agency commission paid to foreign commission agents for procurement of export orders for rice - HELD THAT: - The Tribunal examined whether commission paid to foreign commission agents for export of rice falls within the exemption granted to 'Commission Agent Services' in relation to agricultural produce. The Bench applied the Board Circular dated 26/05/2011 which clarifies that 'rice' is included within the term 'agricultural produce' for purposes of Notification No. 13/2003-ST (as amended), and noted the earlier Tribunal decision in Kohinoor Foods holding that commission paid for export of rice to foreign agents is not subject to service tax. Applying that reasoning and the Board clarification, the Tribunal concluded that the agency commission for export of rice is exempt from Service Tax even when taxed on reverse charge basis. [Paras 10, 11]

Demand for Service Tax on agency commission paid for export of rice is set aside.

Business Auxiliary Service - taxable service provided from outside India and received in India - corporate guarantee as service facilitating lending - Service Tax demand on commission paid to parent company abroad for corporate guarantee provided to Indian banks - HELD THAT: - The Tribunal analysed the nature of a corporate guarantee and observed that it functions like a bank guarantee to facilitate lending. The facts showed that the parent company in Singapore executed corporate guarantees in favour of Indian banks to facilitate loans to the appellant and issued debit notes charging commission in foreign exchange. Applying the definition of 'Business Auxiliary Service' and the deeming provisions treating services provided from outside and received in India as taxable under reverse charge, the Tribunal held that commission paid for corporate guarantees constitutes a taxable business auxiliary service. The Tribunal rejected the contention that mere change of nomenclature from 'bank' to 'corporate' excludes the transaction from BAS, and found the demand sustainable. [Paras 9, 11]

Demand for Service Tax on corporate guarantee commission is upheld.

Final Conclusion: Appeals partly allowed: demand of Service Tax on agency commission for export of rice set aside; demand on corporate guarantee commission upheld.

Commercial training or coaching centre - taxable service in relation to commercial training or coaching - exemption for courses recognised by law - vocational training institute - extended period of limitation for wilful suppression/mis representation

Commercial training or coaching centre - taxable service in relation to commercial training or coaching - exemption for courses recognised by law - Whether the courses imparted by the appellant constitute taxable services as a commercial training or coaching centre and whether any claimed exemption applies. - HELD THAT: - The Tribunal held that the appellant was imparting the listed courses (B.Sc. Management/BBA; M.Sc. International Business; PGDM/PGP/MBA; Diploma in Design) for consideration and, absent documentary proof that the appellant itself was a university or that the degrees were granted by a statutory university, the activities fall within the definition of a commercial training or coaching centre and thus attract service tax. Mere approval under a convergence scheme or affiliation for distance education did not equate to recognition as a university constituted under law; the degrees on record were issued by the appellant and not by a statutory university. The Tribunal further observed that the exemption for coaching or training leading to a certificate, diploma or degree recognized by law (Notification No. 33/2011) was not applicable to the appellant's case for the relevant periods, and the specific exemption under Notification No. 24/2004 ST (vocational training institute affiliated to NCVT) did not apply as there was no proof of such affiliation. Consequently the demand qua these courses was confirmed. [Paras 6, 7, 9]

The services rendered by the appellant in respect of the listed courses are taxable as services of a commercial training or coaching centre and the claimed exemptions are not attracted; the demand is confirmed.

Vocational training institute - exemption for courses recognised by law - Whether the diploma in design qualifies as vocational training and whether it affects liability. - HELD THAT: - The Tribunal accepted that a vocational training institute is a species of commercial training or coaching centre but, on the facts, found no material to bring the appellant within the limited definition of vocational training institute under the relevant exemption (which required affiliation to NCVT or similar). The appellant had conceded liability in relation to the diploma in design insofar as affected by the Notification dated 27.02.2010; otherwise the adjudicating authority correctly declined the exemption under Notification No. 24/2004 ST for lack of requisite affiliation. [Paras 8, 9]

Diploma in design does not attract the claimed exemptions on the material on record; demand in respect of this course is confirmed (subject to the appellant's concession regarding post February 2010 liability).

Extended period of limitation for wilful suppression/mis representation - Whether the Department was entitled to invoke the extended period of limitation and to impose penalties for wilful suppression/mis representation. - HELD THAT: - The Tribunal found that the appellants, being an educational institute charging substantial fees, had advanced multiple untenable pleas (charitable trust, deemed university, recognition under convergence/affiliations) without documentary support and had thus deliberately sought to evade tax. The Tribunal held that this conduct amounted to mis representation and suppression of facts, displacing any claim of bona fide doubt and justifying invocation of the extended period of limitation as well as imposition of penalties. The Tribunal relied on precedent recognizing suppression of facts and deliberate non disclosure as grounds for extended limitation. [Paras 10]

Department entitled to invoke extended period of limitation and to recover proportionate interest and penalties on the confirmed demand.

Final Conclusion: The appellant's appeal is rejected and the Department's appeal is allowed; the demands confirmed by the adjudicating authority are upheld with proportionate interest and penalty.

Commercial or Industrial Construction Service - commercial activity - statutory mandate and regulatory functions - service tax liability

Commercial or Industrial Construction Service - commercial activity - statutory mandate and regulatory functions - service tax liability - Whether the activity of providing and laying water supply system for Greater Noida falls within the definition of Commercial or Industrial Construction Service and attracts service tax. - HELD THAT: - The Tribunal considered the legislative purpose and the decision of the Hon'ble High Court of Delhi holding that the Greater Noida Industrial Development Authority performs regulatory and administrative functions and its activities are not commercial in nature. Applying that reasoning, the Tribunal found that the work of laying the water supply system for Greater Noida was intrinsically connected to the statutory mandate and regulatory functions of the Authority and was not undertaken on commercial lines. Consequently, the activity does not fall within the definition of Commercial or Industrial Construction Service and does not give rise to a service tax liability under the Finance Act, 1994. [Paras 5]

The activity is not covered by the definition of Commercial or Industrial Construction Service; service tax demand is not sustainable.

Final Conclusion: The impugned Order-in-Appeal is set aside and the appeal is allowed, holding that the work of laying the water supply system for Greater Noida during the stated period does not attract service tax as a Commercial or Industrial Construction Service.

Constitution of a Larger Bench - delegation of powers of the President of the Tribunal - reference of points under Section 129C(5) - incidental and ancillary powers of the Tribunal - Head of Department administrative orders vis-a -vis statutory delegation

Constitution of a Larger Bench - reference of points under Section 129C(5) - incidental and ancillary powers of the Tribunal - Validity of the Larger Bench as reconstituted by the Member (Judicial)/HOD following a reference made earlier by the President - HELD THAT: - The bench constituting member held that Section 129C(5) contemplates reference where members of a bench differ in opinion on any point and that the power of the President to refer or constitute a Larger Bench may be exercised in a manner that effectuates the statute's purpose. The reconstitution in the present matter merely followed an earlier reference made by the President and was necessitated by superannuation/transfer of members. The Tribunal also relied on the principle that a tribunal has such incidental and ancillary powers as are necessary to make effective the express statutory grant and that a reconstitution to continue the hearing is permissible within those powers. On that view the preliminary objection raised by Revenue was dismissed and the Larger Bench was held to have been rightly constituted, permitting the matter to proceed on merits. [Paras 6]

Preliminary objection dismissed; Larger Bench held properly constituted and to proceed with hearing.

Delegation of powers of the President of the Tribunal - Head of Department administrative orders vis-a -vis statutory delegation - constitution of a Larger Bench - Whether, in the absence of a President (and without appointment of Vice President), the Central Government's administrative orders designating a Member as Head of Department validly empower that Member to constitute or reconstitute a Larger Bench to decide referred points - HELD THAT: - A majority of the bench concluded that the statutory scheme confines the power to constitute a Larger Bench to the President (or Vice President where provided by statute) and that the Central Government cannot, by administrative notification or designation of a Member as Head of Department, supplant or delegate that statutory authority to any other Member. The majority observed that 'Head of Department' connotes administrative and financial control and does not import the judicial powers vested in the President by chapter XV of the Customs Act, 1962; further, section 129/129C does not furnish an enabling provision for such delegation to members other than the Vice President. Reliance was placed on authorities establishing that delegation of a statutory power must flow from the statute and cannot be effected by administrative order where the statute does not permit it. In light of the potential jurisdictional controversy and the imminence of appointment of a President, the majority held that it is appropriate to await constitution of a Larger Bench by the President before proceeding. [Paras 20, 21]

Hearing on merits deferred; proceedings adjourned sine die pending constitution of a Larger Bench by the President.

Final Conclusion: The bench is divided. The majority holds that administrative designation of a Member as Head of Department does not empower that Member to constitute/reconstitute a Larger Bench in place of the President (or Vice President) and therefore has adjourned the hearing sine die to await constitution of a Larger Bench by the President; a minority view had upheld the reconstitution and would have proceeded on merits.

Extended period of limitation - Suppression or mis statement with intent to evade - Limitation bar to demand

Extended period of limitation - Suppression or mis statement with intent to evade - Limitation bar to demand - Whether demands for the period 01/05/2006 to 30/05/2007 could be sustained by invoking the extended period of limitation on the ground of suppression or mis statement by the appellants - HELD THAT: - The Tribunal found as an admitted fact that from 01/06/2007 the appellants had registered and were discharging service tax under the category of "Renting of Immovable Property", and that the values of both the renting and the infrastructural/furniture components were reflected in their ST 3 returns from that date. The adjudicating authority invoked the extended period on the basis that the appellants had suppressed material facts by reflecting gross values and thereby intended to evade tax. The Tribunal held that invocation of the extended period requires positive evidence of suppression or mis statement with intent to evade payment of duty. Given that the Revenue was aware of the appellants' activities (and the returns filed) at least from 01/06/2007, and there was no positive evidence of deliberate suppression prior to the period in question, the extended period could not be validly invoked. Consequently, demands raised beyond the normal limitation period were held to be time barred. [Paras 7, 8]

No suppression with intent to evade was established; extended period of limitation cannot be invoked and the demands for the said period are barred by limitation.

Final Conclusion: The impugned order confirming demands, interest and penalties (based on invocation of the extended period) is set aside; all three appeals are allowed with consequential relief to the appellants.

Summary order. Special Leave Petitions dismissed on the ground of low tax effect; question of law left open; delay condoned.

Summary order. Delay condoned and appeals dismissed consequentially to dismissal of Civil Appeal No.16914/2017 by this Court's order dated 13-10-2017.

Inherent jurisdiction under Section 482 CrPC - quashing of criminal proceedings - effect of adjudication on criminal prosecution - abuse of process of court - exoneration by higher court - withdrawal of prosecution where assessee is exonerated in adjudication

Effect of adjudication on criminal prosecution - exoneration by higher court - quashing of criminal proceedings - abuse of process of court - inherent jurisdiction under Section 482 CrPC - Criminal complaint based on demands and findings set aside by the Hon'ble Supreme Court is liable to be quashed as an abuse of process. - HELD THAT: - The complaint before the Special Judge was founded upon the order in Original Case No.03/95 dated 29.12.1995 which confirmed demands and penalties. That original order was set aside by appellate and ultimately by the Hon'ble Supreme Court by its judgment dated 10.09.2004, thereby exonerating the petitioner and setting aside all demands. In those circumstances the foundational adjudicatory findings on which the criminal complaint was based no longer survive. Continuance of criminal proceedings in reliance upon an order that has been nullified by the authoritative pronouncement of the Supreme Court would amount to an abuse of the process of the Court and would cause unwarranted harassment of the petitioner. The Court also noted the existence of administrative guidance directing withdrawal of prosecutions where the assessee has been exonerated in adjudication proceedings, and that a discharge application under Section 245(2) CrPC was pending in the trial court. Exercising inherent jurisdiction under Section 482 CrPC, the Court concluded that the entire criminal proceeding initiated on the basis of the vacated adjudication must be quashed. [Paras 15, 16, 17]

Complaint Case No.303-C of 1998 pending before the Special Judge (Economic Offences), Patna, launched on the basis of the order in Original Case No.03/95 dated 29.12.1995 is quashed.

Final Conclusion: The petition under Section 482 CrPC is allowed and the criminal proceedings in Complaint Case No.303-C of 1998 are quashed because the adjudicatory foundation for the prosecution has been set aside by the Hon'ble Supreme Court, rendering continuation of the trial an abuse of process.

Final disposal of appeal - interim orders and interim relief - abeyance of operative direction - preservation of parties' rights to challenge interim directions - obstruction to the course of justice - supply of documents relied upon by Revenue - duty of adjudicatory forum to decide on merits without undue delay

Final disposal of appeal - duty of adjudicatory forum to decide on merits without undue delay - Direction to the Tribunal to decide the pending appeal finally on merits rather than by tentative or piecemeal interim orders. - HELD THAT: - The Court observed that, given the age of the proceedings and the difficulties in obtaining opportunities to argue old appeals, the Tribunal ought to have taken the available material and disposed of the appeal finally. Prima facie or tentative interim observations which prolong hearing and delay final adjudication harm public interest. Consequently the Tribunal was directed to pass a final order in the appeal, while reserving rights of the parties to raise appropriate contentions in relation to interim directions alongside their contentions on merits. [Paras 5, 6]

Tribunal directed to pass final order in the appeal expeditiously, with the parties' rights to challenge interim directions preserved.

Abeyance of operative direction - interim orders and interim relief - Operative direction in the Tribunal's subsequent order (Exhibit-B) restraining interim relief and threatening vacatur was ordered to be held in abeyance until the appeal is finally decided. - HELD THAT: - The Court found that the latter order of the Tribunal, which proposed to issue show-cause, vacate interim stay and seek contempt proceedings for alleged non-cooperation, should not be given effect until the Tribunal has decided the appeal on merits. The Tribunal was accordingly restrained from implementing that operative direction pending final disposal. [Paras 7]

Order at Exhibit-B to remain in abeyance and not be given effect until the appeal is finally decided.

Preservation of parties' rights to challenge interim directions - interim orders and interim relief - Parties' rights to raise all contentions concerning interim directions are preserved to be urged along with merits before the Tribunal. - HELD THAT: - The Court expressly reserved the rights of both sides to press appropriate contentions regarding interim directions when the Tribunal decides the appeal on merits. Thus no party is precluded from challenging interim rulings and such challenges may be entertained in conjunction with the final adjudication of the appeal. [Paras 6]

All contentions relating to interim directions are kept open to be raised with the merits of the appeal.

Obstruction to the course of justice - duty of adjudicatory forum to decide on merits without undue delay - Guidance that, if parties obstruct the Tribunal's process, the Tribunal may report such obstruction to the High Court in its final orders for appropriate action. - HELD THAT: - The Court advised that where parties fail to cooperate or otherwise obstruct the Tribunal's ability to decide appeals, the Tribunal can record and report those facts to the High Court in its final orders. The Court emphasised that any complaint of obstruction should be specifically mentioned in the Tribunal's final order so that the High Court may take such steps as appropriate. [Paras 8]

Tribunal may report instances of obstruction to the High Court in its final orders; such reporting is the appropriate recourse rather than interim punitive measures prior to final adjudication.

Final Conclusion: Writ petition disposed directing the CESTAT to decide the pending appeal finally and expeditiously; the Tribunal's later operative order (Exhibit-B) is to remain in abeyance until final disposal; parties retain the right to raise contentions on interim directions along with merits; Tribunal may record and report any obstruction to the High Court in its final order. No costs.

Confirmation of excise duty demand based solely on confession - penalty under Section 11AC as consequential on confirmed demand - confiscation of seized goods - onus of proof to establish manufacture on undeclared machines - non-excisability of bought-out packing material

Confirmation of excise duty demand based solely on confession - onus of proof to establish manufacture on undeclared machines - Confirmation of Central Excise duty demand for July, 2008 based solely on the proprietor's confessional statement. - HELD THAT: - The Tribunal found that the Original Authority confirmed the duty demand for July, 2008 exclusively on the basis of the confessional statement of the proprietor recorded under Section 14. Applying the principle, as followed from the cited High Court authority, that a confessional statement alone, without corroborative and cogent evidence, cannot constitute a sustainable foundation for levying excise duty on the basis of alleged evasion, the Tribunal held that the demand could not be sustained. The finding rejects the conclusion that the finished goods seized necessarily resulted from manufacture on the five undeclared machines during the relevant month in absence of independent evidence linking production to those machines.

Demand for Central Excise duty for July, 2008 confirmed on the basis of confession set aside.

Penalty under Section 11AC as consequential on confirmed demand - Liability to penalty under Section 11AC when the underlying duty demand is not sustained. - HELD THAT: - Since the Tribunal has held that the impugned demand is unsustainable, the punitive consequence predicated on that demand equally fails. The penalty was imposed as a consequence of the alleged duty evasion; without a validly confirmed demand, imposition of the corresponding penalty lacks foundation and must be set aside.

Penalty under Section 11AC set aside as it was dependent on the unsustainable demand.

Confiscation of seized goods - non-excisability of bought-out packing material - Validity of confiscation of seized finished goods, loose Gutkha and packing material. - HELD THAT: - The Tribunal accepted the appellant's contentions that the revenue failed to establish that the seized finished goods were manufactured on undeclared machines and that loose Gutkha (unbranded) and bought-out packing material were not shown to be excisable in the manner alleged. In light of the failure to sustain the duty demand and absence of independent evidentiary foundation for treating the goods as liable to confiscation, the Tribunal concluded that confiscation of the seized goods was not sustainable.

Confiscation of the seized finished goods, loose Gutkha and packing material set aside.

Final Conclusion: Impugned Order-in-Original is set aside: the demand for duty, the consequential penalty and the confiscation of seized goods are quashed; appeal allowed with consequential reliefs as per law.

Imposition of penalty for suppression of facts and wilful default under proviso to Section 11AC - bonafide conduct and offer to assessment - onus on department to prove suppression - provisional assessment request under Rule 7(1) - interest liability predicated on differential duty

Imposition of penalty for suppression of facts and wilful default under proviso to Section 11AC - bonafide conduct and offer to assessment - onus on department to prove suppression - Whether the appellant's conduct amounted to suppression of facts warranting imposition of penalty under the proviso to Section 11AC. - HELD THAT: - The appellant had itself sought provisional assessment by a letter dated 18th January, 2013 and disclosed details which led the Department to raise a demand. Prior to issuance of the show cause notice the appellant deposited the differential duty and interest for relevant years. The Tribunal relied on authority that 'suppression of facts' requires deliberate act to evade duty and that mere omission or subsequent disclosure does not amount to suppression. In the absence of material showing deliberate concealment, and given that the appellant offered its activities to assessment and paid the differential duty, the conduct was held bonafide. The burden to prove suppression lies on the Department and no evidence was produced to establish fraud, collusion or wilful default. Accordingly the finding of honest conduct in the impugned order is upheld and imposition of penalty on the ground of suppression is not warranted.

Appellant's conduct is bonafide; there was no suppression of facts and penalty under the proviso to Section 11AC on that ground is not justified.

Interest liability predicated on differential duty - provisional assessment request under Rule 7(1) - Whether penalty may be sustained because interest for 2009-10 and 2010-11 was not deposited, thereby bringing the case within the proviso to Section 11AC. - HELD THAT: - The Tribunal noted that duty for the years 2009-10 and 2010-11 was in fact paid by the appellant and that interest is payable only where a differential duty remains unpaid. There was no evidence or finding establishing any outstanding differential duty for those years. Interest for subsequent years had been deposited along with the differential duty. In view of the finding of absence of malafide intention and absence of any outstanding differential duty attracting interest for 2009-10 and 2010-11, the case does not fall under the proviso to Section 11AC. Therefore the reduced penalty sustained by the Commissioner (Appeals) cannot stand.

Penalty set aside because there was no outstanding differential duty or interest for 2009-10 and 2010-11 and the proviso to Section 11AC did not apply.

Final Conclusion: The Tribunal upheld the finding of bonafide conduct and absence of suppression, and, finding no outstanding differential duty or interest for the earlier years, set aside the penalty; the appeal is allowed.

Clandestine removal - confiscation and duty demand - corroborative evidence - statements recorded under alleged duress - use of power-consumption as basis for production suppression - effect of acquittal in related criminal proceedings on revenue adjudication

Clandestine removal - corroborative evidence - use of power-consumption as basis for production suppression - Validity of the confiscation and duty demand premised on alleged excess stock, production suppression and power-consumption analysis in absence of concrete corroborative evidence. - HELD THAT: - The Tribunal examined the Department's case that excess stock and clandestine removal were established by an eye-estimate Mahazar, comparison with power-consumption and documents/statements seized during searches. It noted that the Department's case lacked concrete and corroborative evidence to establish clandestine removals: the excess stock was based on an eye-estimate in the Mahazar and alleged production suppression inferred from power consumption was not supported by independent, reliable proof. The Tribunal also recorded that statements relied upon were said to be made under duress and were not buttressed by further investigation or corroboration. Applying these considerations, the Tribunal found the confirming order of the Commissioner unsustainable for want of adequate evidentiary foundation and therefore liable to be set aside. [Paras 6]

The confirmation of confiscation and the demand of duty based on the alleged excess stock and power-consumption inference was set aside for lack of concrete corroborative evidence.

Effect of acquittal in related criminal proceedings on revenue adjudication - statements recorded under alleged duress - confiscation and duty demand - Whether the acquittal of the company and its officers by the Special Court for Economic Offences is a strong ground to set aside the revenue order. - HELD THAT: - The Tribunal took cognisance of the Special Court's order acquitting the accused on the basis that the criminal complaint lacked credibility, specific investigation was not conducted, and the alleged indicators (such as excess electricity consumption and the manager's statement about consignments) were not backed by corroborative inquiry. Viewing the criminal court's findings as a material factor, the Tribunal held that the discharge in criminal proceedings constituted a strong reason to conclude that the revenue's order confirming confiscation and duty demand was not sustainable. The Tribunal followed precedent principles cited by the appellants that where the criminal proceedings exonerate the accused for lack of credible and corroborative evidence, the revenue action founded on the same allegations may be set aside. [Paras 6, 7]

The acquittal by the Special Court was accepted as a strong ground to allow the appeals and set aside the impugned orders.

Final Conclusion: The appeals are allowed; the Tribunal set aside the Commissioner's orders of confiscation and duty demand on the grounds that the Department failed to produce concrete, corroborative evidence of clandestine removal and in view of the Special Court's acquittal of the company and its officers, which the Tribunal treated as a decisive factor.

Limitation - time-bar - suppression of facts - non-speaking order - classification of goods - duty leviability on printed plastic labels - remand for reconsideration

Limitation - time-bar - non-speaking order - remand for reconsideration - Whether the order of the Commissioner (Appeals) properly adjudicated the question of limitation/time bar in view of the correspondence placed on record by the appellant. - HELD THAT: - The Tribunal found that the appellant had produced correspondence and other material asserting a bona fide belief, based on an earlier Supreme Court decision, that printed plastic stickers were not liable to excise duty, and that the appellant had surrendered registration under that belief. The impugned order of the Commissioner (Appeals) merely recorded concurrence with the adjudicating authority's conclusion on classification and suppression without dealing with the materials relied upon by the appellant. The Tribunal held that the Commissioner (Appeals) did not pass a speaking order on the determinative question of limitation and consequently directed that the issue of limitation/time bar be reconsidered afresh by the Commissioner (Appeals). The Tribunal did not decide the merits of classification or levy while remanding the limitation issue for detailed consideration of the materials on record.

Impugned order set aside insofar as it relates to limitation; matter remanded to the Commissioner (Appeals) for fresh and speaking consideration of the time bar plea.

Classification of goods - duty leviability on printed plastic labels - Whether the Tribunal reopened the correctness of the adjudication on classification and levy of duty on printed plastic labels. - HELD THAT: - The Tribunal explicitly declined to reopen the merits of classification or the levy of duty. Having remanded only the limitation issue for reconsideration, the Tribunal left the adjudication on classification and duty levy intact and not open for fresh consideration before it.

Merits regarding classification and levy of duty not reopened or decided by the Tribunal.

Final Conclusion: Appeals allowed to the extent of setting aside the impugned order on limitation and remanding the matter to the Commissioner (Appeals) for fresh, speaking consideration of the time bar plea; the substantive question of classification and duty levy remains undisturbed and is not reopened.

Condonation of delay - suppression/misstatement of material facts - abuse of process/fraud on court - inherent power to set aside orders obtained by fraud - registered post acknowledgement as proof of receipt - liability of consignor and effect of warehouse/receipt certificate

Condonation of delay - registered post acknowledgement as proof of receipt - suppression/misstatement of material facts - Whether the refusal to condone the delay in filing the appeal before the Commissioner (Appeals) was justified. - HELD THAT: - The Tribunal examined the records and accepted the Commissioner (Appeals)'s finding that the order-in-original had been dispatched by Registered Post AD on 04.03.2010 and the AD was received back on 15.03.2010, whereas the appellant had initially represented receipt as 05.04.2010. On that basis the Commissioner held the appeal to be filed 21 days beyond the statutory two-month period. The appellant's subsequent plea that security personnel at a factory (20 km away) received the letter and that this explained the delay was not raised originally and was treated as a deliberate mis-statement. The Tribunal found the explanation improbable and observed that such registered communications are unlikely to be handled so casually as to cause a three-week delay. Reliance was placed on established authority that a party who approaches the forum with falsehood or suppression of material facts disentitles itself to relief and that courts have inherent power to guard against fraud upon the process. Having found suppression/mis-statement and an absence of sufficient cause for delay, the Commissioner's refusal to condone the delay was held to be proper. [Paras 4, 5, 8]

Refusal to condone the delay is upheld and the appeal on merits is not admitted due to the unexplained/suppressed delay.

Liability of consignor and effect of warehouse/receipt certificate - abuse of process/fraud on court - Whether the adjudicating authority's disallowance of the claimed nil-duty clearance on ground of non-production of proof (Form ARE-1/AR-3) undermines the result, and whether documentary claims could be accepted despite the appellant's conduct. - HELD THAT: - The Tribunal noted that the first adjudicating authority disallowed the appellant's claim for removal at nil rate on the ground that proof of dispatch of ARE-1 to the Superintendent was not produced. While observing that consignor's liability ordinarily ceases upon receipt of the warehouse/receipt copy from the consignee, the Tribunal was not persuaded to accept the appellant's documentary proofs because of the appellant's conduct in suppressing the delay and the improbability that the receipt copies were not anti-dated or subsequently manufactured. On the record, the appellant's conduct in mis-stating dates and suppressing material facts vitiated confidence in the veracity of the documentary claims. [Paras 8]

The disallowance of the claim and the doubt cast on the genuineness of the documentary proof are sustained in consequence of the appellant's conduct.

Final Conclusion: The Commissioner (Appeals)'s orders refusing condonation of delay and upholding the disallowance are affirmed; the appeals are dismissed.

Clandestine removal - interconnected evidence from co-located units - binding effect of a Tribunal decision in related proceedings - relevance and sufficiency of documents and statements recovered during search - penalty under Section 11AC of the Central Excise Act

Clandestine removal - interconnected evidence from co-located units - binding effect of a Tribunal decision in related proceedings - Whether the demand of duty and penalties confirmed against the manufacturing unit at Fatehpur could be sustained when the Tribunal had earlier set aside the demand against the related Kanpur unit based on the same records. - HELD THAT: - The appeals arise from an adjudication alleging clandestine removal of raw material from the Fatehpur unit to the Kanpur unit, the case against the Kanpur unit having been earlier set aside by the Tribunal. The adjudicating authority attempted to distinguish the Tribunal's order, treating the records as different and therefore refusing to extend relief. The Tribunal in the present proceedings rejects that differentiation: the allegations and evidentiary foundation in both proceedings derive from the same documents and investigative material recovered from the Kanpur premises, and revenue's own case was that the Kanpur unit received unaccounted raw material from the Fatehpur unit. By setting aside the demand against the Kanpur unit, the Tribunal necessarily did not accept revenue's case that raw material was procured from Fatehpur; consequently the foundational premise for holding clandestine removal from Fatehpur fails. Given the interconnected nature of evidence and the Tribunal's earlier conclusion, the duty demand and penalties confirmed against the Fatehpur manufacturing unit and its directors are unsustainable. [Paras 6, 7]

The demand of duty and the penalties confirmed against the Fatehpur manufacturing unit and the directors are set aside; appeals allowed.

Final Conclusion: The Tribunal held that, since the Tribunal had earlier set aside the demand against the related Kanpur unit based on the same recovered records, the duty demand and penalties imposed on the Fatehpur manufacturing unit and its directors could not be sustained; the impugned demand and penalties were set aside and the appeals allowed.

Validity of show cause notice - Computation of differential excise duty - Seizure and confiscation of finished goods - Confiscation of raw materials under Central Excise law - Assessable value and price cum duty treatment in duty computation - Consequential relief on setting aside adjudication

Validity of show cause notice - Show cause notice dated 20.02.2013 is not sustainable in law and the impugned adjudication based thereon is set aside. - HELD THAT: - The Tribunal found that the show cause notice was issued without proper appreciation of the material facts and without correct application of the relevant law. For these reasons the notice and the order-in-appeal founded on it could not stand. The adjudicating authority's conclusions therefore were quashed and the appeals were allowed.

Impugned show cause notice and consequent adjudication set aside; appeals allowed.

Computation of differential excise duty - Assessable value and price cum duty treatment in duty computation - The computation of differential duty in the show cause notice was not made in accordance with settled law and is not sustainable. - HELD THAT: - The Tribunal observed that the differential duty was computed on the basis of amounts collected from buyers without proper determination of the quantity of goods cleared or correct treatment of the amounts received as assessable value (including price cum duty considerations). The computation methodology in the show cause notice did not follow the established legal principles and therefore could not be sustained.

Demand based on the impugned computation is set aside.

Confiscation of raw materials under Central Excise law - Raw materials could not be confiscated under the Central Excise law as applied in the present adjudication; the proposal for confiscation is unsustainable. - HELD THAT: - The Tribunal noted that the adjudicating authority had proposed confiscation of raw materials, but held that confiscation of such raw materials was not permissible under the applicable excise law in the circumstances of the case. Consequently, the order purporting to confiscate raw materials was quashed.

Confiscation of raw materials set aside.

Seizure and confiscation of finished goods - Seizures/detentions of finished goods (including goods at the Defence Colony premises) founded upon the impugned show cause notice are not sustained and the adjudication is set aside. - HELD THAT: - The Tribunal took into account the appellants' case that certain goods were either in the course of manufacture, held as samples at a display/studio premises, or otherwise not shown to have escaped duty; coupled with the defects in the notice and duty computation, the Tribunal held the seizures and the related confiscation/demand could not be sustained and set aside the impugned order.

Seizures/detentions and related demands in respect of the finished goods are set aside.

Final Conclusion: All three appeals are allowed; the impugned show cause notice, the computation of differential duty and the orders proposing confiscation/seizure (including of raw materials and finished goods) are set aside and the appellants are entitled to consequential relief as per law.

Confirmation of duty - penalty under Section 11AC - personal penalty under Rule 26 of Central Excise Rules - clandestine manufacture / clandestine removal - inspection certificates as evidentiary basis - option to pay 25% of penalty

Confirmation of duty - inspection certificates as evidentiary basis - Duty of Rs. 6,19,602/- confirmed and interest in respect thereof treated as already paid. - HELD THAT: - The Tribunal examined the components of the demand and found that one component-computed duty based on parallel invoices-stood on record and was sustainable. The interest qua this confirmed duty has already been paid during compliance with an earlier stay order. The Tribunal therefore confirmed the specified duty amount while noting payment of interest. [Paras 5]

Duty of Rs. 6,19,602/- is confirmed and interest thereon is treated as already paid.

Penalty under Section 11AC - option to pay 25% of penalty - Penalty equal to the confirmed duty imposed under Section 11AC, with an option to discharge 25% of the penalty within a limited period. - HELD THAT: - Applying established practice in cases where duty liability is admitted or paid before issue of show cause notice, the Tribunal modified the penalty component by imposing penalty under Section 11AC equal to the confirmed duty and afforded the appellant an option to pay 25% of that penalty within 30 days from receipt of the order. The Tribunal exercised its discretion to permit the compounding/settlement option notwithstanding earlier proceedings. [Paras 5]

Penalty of Rs. 6,19,602/- under Section 11AC is imposed, with option to pay 25% of the penalty within 30 days.

Clandestine manufacture / clandestine removal - inspection certificates as evidentiary basis - Remaining demand (other than the confirmed duty component) based on alleged discrepancies, GRs without matching invoices and alleged clandestine supplies is set aside. - HELD THAT: - The Tribunal found that the balance of the demand rested on allegations of clandestine supplies and on inspection certificates and a limited number of GRs lacking matching invoices. Applying the principle that clinching evidence (such as proof of procurement of raw material, realization of sale proceeds or clear flow of goods/funds) is required to sustain claims of clandestine manufacture/removal, and in view of the weak evidentiary basis beyond inspection certificates/isolated GRs, the Tribunal set aside the remaining demand. [Paras 5]

The remaining demand is set aside.

Personal penalty under Rule 26 of Central Excise Rules - Personal penalty of Rs. 13 lakhs imposed under Rule 26 on the managing director is set aside for lack of confiscation or basis for imposition. - HELD THAT: - The Tribunal noted that there was no confiscation of goods in the proceedings and applied the established view that in the absence of confiscation or involvement in dealing with goods liable for confiscation, imposition of personal penalty under Rule 26 is not sustainable. Consequently, the personal penalty imposed on the other appellant was set aside. [Paras 5]

Personal penalty under Rule 26 is set aside.

Final Conclusion: The Tribunal modified the impugned order by confirming duty of Rs. 6,19,602/- (interest paid), imposing penalty under Section 11AC with an option to pay 25% within 30 days, setting aside the remaining demand, and setting aside the personal penalty under Rule 26; the appeals are allowed in part.

Limitation - normal period versus extended period - penalty and mala fide requirement for invocation of extended limitation - Cenvat Credit reversal under Rule 6(1) and its effect on demand under Rule 6(3) - remand for quantification of proportionate credit reversal

Limitation - normal period versus extended period - penalty and mala fide requirement for invocation of extended limitation - Part of the demand raised beyond the normal period of limitation is not sustainable and is set aside. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) finding that penalty was not sustainable, which evidences bona fides on the part of the appellant. Since imposition of penalty and invocation of extended limitation both presuppose mala fide conduct to evade duty, setting aside the penalty precludes reliance on extended limitation. Applying settled precedents and the appellate finding, the Tribunal held that the Revenue's demand insofar as it is time-barred beyond the normal limitation period is not justified and is therefore set aside. [Paras 4]

Demand raised beyond the normal period of limitation is set aside.

Cenvat Credit reversal under Rule 6(1) and its effect on demand under Rule 6(3) - remand for quantification of proportionate credit reversal - A part of the demand falling within the limitation period is to be discharged by reversal of proportionate Cenvat credit; matter remanded to quantify the amount to be reversed and, upon reversal, no demand under Rule 6(3) would arise. - HELD THAT: - The appellant undertook to reverse the proportionate Cenvat credit attributable to exempted/trading activities for the period within limitation. The Tribunal relied on precedents holding that reversal of credit operates as if no credit had been availed and thus meets the condition of Rule 6(1), obviating the necessity for a separate demand under Rule 6(3). Since quantification of the credit to be reversed is factual and computational, the Tribunal remanded the matter to the Original Adjudicating Authority for determination of the amount required to be reversed and consequent action. [Paras 5]

Remand to Original Adjudicating Authority to quantify the proportionate credit to be reversed; upon reversal, demand under Rule 6(3) will not be called for.

Final Conclusion: The appeal is disposed by setting aside the portion of the demand barred by the normal period of limitation and remanding the matter to the Original Adjudicating Authority for quantification of the proportionate Cenvat credit to be reversed for the period within limitation; upon reversal, no separate demand under Rule 6(3) will survive.

Benefit of exemption notification - certificate requirement under the exemption notification - intended use versus actual use - no obligation on supplier to verify end-use - supply pursuant to order of Apex body and payment by cheque

Certificate requirement under the exemption notification - benefit of exemption notification - Late production of certificates does not disentitle the appellant to the benefit of the notifications where certificates were ultimately produced. - HELD THAT: - The Tribunal had earlier observed that certificates from the National Handloom Development Corporation (NHDC) were produced subsequently and that late production cannot be a ground to deny the exemption. That earlier finding settled the revenue's contention relating to non-production at the time of clearance. The appellate decision recognises that the condition requiring production of certificate (condition no.16) stands satisfied by the appellant and the point is no longer in dispute between the parties. [Paras 4, 6]

Benefit of the notifications is not to be denied on account of late production of the required certificate once the certificate has been produced.

Intended use versus actual use - no obligation on supplier to verify end-use - supply pursuant to order of Apex body and payment by cheque - The appellant is not required to verify whether the societies actually used the yarn on handlooms; meeting the conditions of supply by NHDC and receipt of payment by cheque suffices for exemption. - HELD THAT: - The notifications require supply on the basis of orders placed by the Apex body (NHDC), production of the specified certificate and payment by cheque drawn by the Cooperative/Corporation. Those conditions were admittedly fulfilled. There is no express condition in the notifications obliging the supplier to ensure or verify actual end-use by the ultimate societies; the expression "for use" in the notification denotes "intended to be used" rather than proof of actual use. The adjudicating authority cannot import an end-use condition not provided in the exemption; responsibility to distribute and ensure proper use lies with the Apex body. [Paras 7, 8, 9]

As long as the notifications' conditions (order by NHDC, certificate and payment by cheque) are satisfied, the supplier is entitled to the exemption and is not liable to have the benefit denied for lack of independent verification of actual use by the societies.

Final Conclusion: The impugned order confirming demand and penalty is set aside; the appellant is held entitled to the benefit of the notifications insofar as the statutory conditions (order by NHDC, production of certificate and payment by cheque) are satisfied, and there is no obligation on the supplier to verify actual use by the societies.

Exemption under Notification No. 6/2002-C.E. for pipes used in water treatment projects - construction of exemption notifications - eligibility of pipes used beyond the first storage point - requirement of certificate from the District Collector (or District Magistrate/Deputy Commissioner) for claiming exemption - appealability of communications by subordinate Central Excise officers - rejection of strict construction to import the word 'first' into the notification

Eligibility of pipes used beyond the first storage point - exemption under Notification No. 6/2002-C.E. for water project supplies - construction of exemption notifications - requirement of certificate from the District Collector (or District Magistrate/Deputy Commissioner) for claiming exemption - appealability of communications by subordinate Central Excise officers - Whether PVC pipes and fittings supplied for delivery of water from the plant to storage facilities beyond the first storage point are eligible for exemption under Notification No. 6/2002-C.E. as amended, and whether the departmental communication by a subordinate officer excluding exemption is appealable. - HELD THAT: - The Tribunal applied its earlier reasoning in Electrosteel Casting Ltd. and held that the unamended Notification exempts pipes needed for delivery of water from the plant to the storage facilities without any express limitation to the 'first' storage point; had the Government intended such a restriction it would have been so worded. The Tribunal noted that the required certificates from the District authority were obtained, demonstrating that the pipes were needed for delivery to storage facilities. The contention that the Notification should be strictly construed to import the word 'first' was rejected as the Department itself had sought to supply that restriction. Further, a communication by a subordinate Central Excise officer which effectively denied exemption and imposed a restriction on clearance was held to be a decision/communication which aggrieved persons could appeal under the statutory appellate scheme; therefore the lower appellate authority rightly entertained the appeal against such communication. Applying these principles, the Tribunal set aside the impugned adjudicatory order which denied the exemption and allowed the appeal. [Paras 6, 7]

Impugned order denying exemption set aside; appeal allowed and exemption extended to the PVC pipes and fittings used beyond the first storage point for the period in issue.

Final Conclusion: The Tribunal, following its earlier precedent in Electrosteel Casting Ltd., allowed the appeal, holding that the exemption under Notification No. 6/2002-C.E. applies to pipes used to deliver water beyond the first storage point (subject to the requisite district certificate) and that communications by subordinate officers denying exemption are appealable; the impugned order is set aside for clearances made during February 2005 to March 2006.

Exemption from filing official translation - refusal to interfere with impugned High Court order - dismissal of Special Leave Petition - leave to seek appropriate direction from the High Court

Exemption from filing official translation - Application for exemption from filing official translation was allowed. - HELD THAT: - The Court considered the petitioner's application for exemption from filing an official translation and granted the same. The order records that the learned counsel was heard and the relevant material was perused before allowing the application for exemption.

Application for exemption from filing official translation allowed.

Refusal to interfere with impugned High Court order - dismissal of Special Leave Petition - leave to seek appropriate direction from the High Court - The Special Leave Petition was dismissed and the Supreme Court declined to interfere with the impugned order of the High Court, while permitting the petitioner to approach the High Court for appropriate directions if any doubt remains. - HELD THAT: - After hearing the petitioner and perusing the material, the Court stated it was not inclined to interfere with the impugned High Court order and accordingly dismissed the Special Leave Petition. The Court further clarified that if the petitioner entertains any doubt regarding the availability of further remedy under the High Court's order, the petitioner may, if so advised, seek appropriate directions from the High Court.

Special Leave Petition dismissed; no interference with the impugned High Court order; petitioner permitted to seek directions from the High Court if advised.

Final Conclusion: The Supreme Court allowed the petitioner's application for exemption from filing official translation, declined to interfere with the impugned High Court order and dismissed the Special Leave Petition, while leaving open the limited procedural option for the petitioner to seek appropriate directions from the High Court if any doubt remains.

Summary order. Delay condoned and the review petitions are dismissed.

Service versus sale - transfer of right to use goods - taxable event for sale of goods - electromagnetic waves not goods - composite contract of service and sale - service tax versus sales tax jurisdiction

Service versus sale - electromagnetic waves not goods - service tax versus sales tax jurisdiction - Whether the provision of cellular mobile telephone/voice transmission services by the petitioner amounts to 'goods' or a 'sale' exigible to sales tax under the Maharashtra Sales Tax Act. - HELD THAT: - Applying the law declared by the Supreme Court in Bharat Sanchar Nigam Ltd. and subsequent decisions, the Court held that the activity of providing mobile telephone connections is fundamentally a service and not a sale. Electromagnetic waves or radio frequencies used to transmit voice are not 'goods' within the meaning of the Constitution or State sales tax statutes and cannot form the basis of a transfer of right to use goods. While a composite contract may contain a sale element limited to tangible deliverable items (notably handsets), the provision of access/telephone connection itself does not put the subscriber in possession of any deliverable goods and therefore does not attract State sales tax; service tax remains the appropriate levy for the telecommunication service element. [Paras 16, 17, 20]

The impugned notices seeking to tax the petitioner's voice telecommunication service as a sale of goods are quashed; the service element is not exigible to sales tax.

Composite contract of service and sale - transfer of right to use goods - taxable event for sale of goods - Whether any sale or transfer of right to use goods (such as handsets or SIM cards) by the petitioner to subscribers has been shown so as to sustain assessment to sales tax. - HELD THAT: - The Court recognised that where the service provider has in fact sold or supplied tangible deliverables (for example handsets) to subscribers, that sale element may be taxable under State sales tax law to the extent the consideration relates to the sale and not to the service component. The judgment also noted prior authorities which treated SIM cards and activation charges on their facts. Because the assessing authority had not finally determined, on the available material, whether the petitioner merely rendered services or also effected taxable transfers of goods, the matter of any sale component must be examined afresh by the assessing authority with opportunity to the petitioner to be heard. [Paras 15, 18, 19, 21]

Matter remitted to the assessing authority to determine, after factual inquiry and hearing, whether any sale or transfer of right to use goods occurred and, if so, to quantify and assess only the sale element.

Final Conclusion: Writ petition allowed: notices issued to tax the petitioner's voice telecommunication service as sale are quashed; assessment authority is directed to reconsider and, after factual enquiry and hearing, determine whether any handset/SIM or other tangible goods were sold or transferred (and assess only that sale element), leaving the service element subject to service tax.

Limitation for assessment under Section 8(5) - assessment where no return is filed - obligation to file return-cum-challan and pay entry tax on entry - pre-assessment demand notice and recovery - right to be heard and natural justice in assessment - classification of goods as "specified goods" to be determined at assessment

Limitation for assessment under Section 8(5) - assessment where no return is filed - Scope and applicability of the three-year bar in Section 8(5) of the Entry Tax Act. - HELD THAT: - The court construed Section 8 and the procedural scheme of the Entry Tax Act and Rules to hold that the three-year limitation in Section 8(5) applies to orders under sub-sections (3) and (4) where a return-cum-chalan has been furnished and the assessment process is invoked on that basis. Where an importer has not filed the statutory return at all, subsection (5) is not applicable and the bar of three years (as framed in that provision) does not operate to nullify assessment/demand proceedings initiated in the absence of a return. The court relied on the scheme of the Act and Rules (including Rule 6 and Rule 7 timelines) and accepted the position adopted by the Kerala High Court that the limitation in Section 8 is directed to cases where returns have been filed and deemed accepted if not assessed within three years. [Paras 11]

Section 8(5)'s three-year bar applies to assessment orders where a return has been furnished; it is not applicable to cases where no return was filed.

Obligation to file return-cum-challan and pay entry tax on entry - pre-assessment demand notice and recovery - Legality of issuing demand notices and requiring payment prior to completion of assessment, and the obligation to furnish return-cum-challan when goods are brought into the State. - HELD THAT: - The court held that under the statutory scheme the tax liability arises on entry of specified goods and the statutory machinery requires filing of return-cum-challan and payment (with different timeframes for registered and unregistered importers). A demand notice calling for payment may be issued where the authority forms the view that goods have entered and tax remains unpaid; the question whether goods are 'specified goods' is to be examined in assessment, but the Act contemplates payment and filing of the return in the first instance. Consequently, challenges that a demand notice sent prior to assessment is impermissible were rejected. [Paras 11, 12, 15]

Demand notices and calls for payment prior to completion of assessment are permissible under the Act; importers are obliged to file return-cum-challan and pay tax as per the statutory scheme.

Classification of goods as "specified goods" to be determined at assessment - Whether hydraulic excavators are 'specified goods' and liable to entry tax. - HELD THAT: - The court declined to decide the substantive question of classification on the writ petitions. It observed that the issue of whether the hydraulic excavators are 'specified goods' falls to be examined during the statutory assessment process once the importer files the return-cum-challan and responds to the assessment notice. The court directed that classification and related contentions be considered on their merits in the assessment proceedings. [Paras 15]

The question whether the excavators are 'specified goods' is left to be decided in the assessment proceedings and is not determined by this order.

Right to be heard and natural justice in assessment - Validity of the assessment order dated 13.06.2016 in SCA No. 5379 insofar as it relates to breach of principles of natural justice. - HELD THAT: - The court examined the circumstances under which the assessment order was passed and found the order to have been passed hastily with inadequate opportunity afforded to the petitioner; the presence/hearing of a consultant recorded in the order was disputed by the petitioner. In view of the procedural infirmity and the short notice given, the court concluded that principles of natural justice were not complied with and that the assessment must be revisited. The court therefore quashed the impugned assessment order and remanded the matter to the appropriate authority to pass a fresh assessment on merits after affording adequate opportunity, subject to the petitioner first filing the return-cum-challan and making payment as required by the Act. [Paras 16, 17]

Assessment order dated 13.06.2016 is quashed for breach of natural justice and the matter is remanded for fresh adjudication after giving the petitioner an opportunity and subject to filing of return-cum-challan and payment.

Final Conclusion: The petitions were partly allowed: the court held that the three-year limitation in Section 8(5) applies only where returns have been filed and is not available to those who have not filed returns; demand notices and calls for payment prior to assessment are permissible and importers must file return-cum-challan and pay tax as per the statute; the substantive question whether excavators are 'specified goods' is left to be decided in assessment; the assessment order dated 13.06.2016 in SCA No. 5379 was quashed for breach of natural justice and remitted for fresh consideration after opportunity and statutory compliance. Special Civil Application No. 7844 was dismissed with observations, SCA No. 5379 was partly allowed as above.