TaxTMI Updates e-Newsletter
Aug 09,2018

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

Summary order. The Special Leave Petition is dismissed and delay is condoned.

Remand for fresh consideration - admissibility of documents filed with Tribunal - appellate tribunal's failure to take on record paper books - hearing afresh after consideration of documents - merits to be decided by Tribunal on remand

Appellate tribunal's failure to take on record paper books - admissibility of documents filed with Tribunal - Tribunal to reconsider whether the paper books filed by the assessee were before it and ought to be taken on record. - HELD THAT: - The High Court noted the Tribunal's observation that no documents were placed before the Assessing Officer or before the Tribunal, but the assessee's authorised representatives contend that paper books were filed and acknowledged. Having regard to the miscellaneous application (M.A.No.87/CHNY-2018) seeking that the matter be decided on merits after taking the paper books into account, the Court held that this factual and procedural controversy requires fresh consideration. The Court did not adjudicate the admissibility or weight of the documents itself but remanded the matter to the Tribunal to examine the filing, formal admissibility and any consequences thereof in accordance with law.

Impugned Tribunal order set aside and matter remanded to the Tribunal to take up afresh along with M.A.No.87/CHNY-2018 and decide whether the paper books were before it and should be taken on record.

Remand for fresh consideration - merits to be decided by Tribunal on remand - Substantial question of law on entitlement to deduction for loss on premature termination of securitization agreement was not answered and is to be considered afresh by the Tribunal. - HELD THAT: - The High Court expressly refrained from deciding the substantive question on merits concerning entitlement to the deduction, observing that the merits should be considered only after the Tribunal has had an opportunity to examine the documents asserted to support the claim. The Court therefore remitted the merits to the Tribunal for fresh hearing and decision, making no observations on the substantive entitlement.

Second substantial question left undecided and remitted to the Tribunal for fresh adjudication after taking the paper books and M.A.No.87/CHNY-2018 into account.

Final Conclusion: The appeal is allowed in part; the Tribunal's order dated 10.10.2017 is set aside and the matter is remanded to the Tribunal for fresh hearing and decision on admissibility of the paper books and on the merits, to be taken up along with M.A.No.87/CHNY-2018, with no observation by this Court on the merits.

Arm's Length Price - International Transaction - interest on intra group loans - Currency linked benchmark (LIBOR) as ALP - Rejection of domestic PLR/BASE RATE as benchmark for foreign currency loans - Transfer Pricing adjustment - Precedent/Coordinate Bench followed

Arm's Length Price - International Transaction - interest on intra group loans - Currency linked benchmark (LIBOR) as ALP - Rejection of domestic PLR/BASE RATE as benchmark for foreign currency loans - Whether the transfer pricing addition made by treating interest on loans to associated enterprises in foreign currency at a domestic bank benchmark (SBI PLR / SBI base rate plus mark up) is sustainable, or whether the ALP should be the rate charged by the assessee (6% / LIBOR linked rate). - HELD THAT: - The Tribunal held that the matter was covered by a coordinate bench decision in the assessee's own case for A.Y. 2009 10 which directed computation of ALP at 6% for loans to the same associated enterprises. The Tribunal noted the inconsistency in the TPO's approach of applying a domestic lender's expected rate for some AEs while accepting lower foreign currency rates for another AE; for the same tested party identical treatment is required. Where loans are denominated in foreign currency, the appropriate benchmark is the currency linked rate (LIBOR plus appropriate margin) rather than an Indian domestic PLR or SBI base rate plus uplift. Applying the coordinate bench's reasoning, the Tribunal directed that the ALP be computed at the rate charged by the assessee (6% for the relevant AEs), thereby negating the addition made on the basis of SBI PLR/base rate plus mark up. [Paras 5, 6]

Addition on account of interest rate ALP reversed and the assessment recalculated applying the ALP as directed by the Tribunal (6%/LIBOR linked treatment for the foreign currency loans).

Final Conclusion: Appeal allowed: the transfer pricing addition in respect of interest on loans to associated enterprises in foreign currency is deleted and ALP is to be determined in conformity with the Tribunal's directions (applying the rate charged by the assessee / currency linked benchmark).

Fee for technical services - Disallowance under section 40(a)(i) - Allowability as business expenditure under section 37(1) - Withholding tax / deduction at source - Associated enterprise - Opportunity of being heard under section 144C(11) - Advance Pricing Agreement rollback

Fee for technical services - Disallowance under section 40(a)(i) - Withholding tax / deduction at source - Associated enterprise - Remand for verification of whether reimbursements characterised as salaries and travel were in fact payments to employees or constituted Fees for Technical Services, and whether TDS was correctly deducted - HELD THAT: - The Tribunal observed that Form No.16 and employee details placed on record were not examined by the authorities below. Since the classification of the amounts (salaries and travel) as payments to employees or as FTS, and the question whether tax was required to be withheld, are factual and document-intensive inquiries, the matter is restored to the Assessing Officer for verification. The Assessing Officer is directed to examine the documentary evidence, verify the nature of payments, ascertain any withholding obligation, and decide the issue afresh in accordance with law. [Paras 6]

Matter remanded to the Assessing Officer for fresh verification and decision in accordance with law with opportunity to the assessee to be heard

Allowability as business expenditure under section 37(1) - Associated enterprise - Documentary evidence - Remand for verification of disallowance of consultancy charges under section 37(1) as not wholly and exclusively for business - HELD THAT: - The Tribunal noted that vouchers and other supporting documents placed before the DRP were not considered and that the assessee had produced evidence to show the consultancy expenditure was incurred wholly and exclusively for business purposes. Given the factual nature of the enquiry and absence of examination by the authorities below, the Tribunal restored the issue to the Assessing Officer for verification of the documentary evidence and fresh adjudication in accordance with law, permitting the assessee to adduce all relevant documents. [Paras 7]

Issue remanded to the Assessing Officer for fresh verification and decision in accordance with law with reasonable opportunity to the assessee

Withholding tax / deduction at source - Credit for taxes paid/deducted - Direct the Assessing Officer to verify and grant credit for taxes paid or deducted - HELD THAT: - The Tribunal directed the Assessing Officer to verify the assessee's claim regarding credit for tax paid or deducted, and to give due credit if supported by verification. This directs a factual examination by the Assessing Officer rather than deciding the credit issue on merits in the appellate order. [Paras 8]

Assessing Officer directed to verify and grant appropriate credit for taxes paid/deducted after verification

Final Conclusion: The appeal is partly allowed: grounds 2 and 3 are treated as withdrawn; issues concerning disallowance under section 40(a)(i) (salaries and travel) and disallowance under section 37(1) (consultancy fees) are restored to the Assessing Officer for fresh verification and decision in accordance with law with opportunity to the assessee to be heard; the Assessing Officer is also directed to verify and grant due credit of taxes paid/deducted.

Project completion method - percentage of completion method - method of accounting regularly employed - mandate of section 145 regarding method of accounting - mercantile system of accounting - accrual of income on transfer of significant risks and rewards - developer's accounting method not binding on landowner in absence of statutory or contractual transfer - retrospective insertion of section 43CB (w.e.f. 1.4.2017) not affecting pre existing accounting choices

Project completion method - percentage of completion method - method of accounting regularly employed - mercantile system of accounting - Whether the Assessing Officer/CIT(A) were justified in substituting the assessee's project/completed contract method by applying percentage of completion method - HELD THAT: - On the facts the assessee, a land owner under a development agreement, consistently maintained books on the mercantile system and recognized revenue only on completion/registration of sale deeds (project/completed contract method), with such treatment accepted by revenue for earlier years. Section 145 requires computation according to the method of accounting regularly employed; substitution is permissible only where the Assessing Officer records satisfaction under section 145(3) that accounts are incorrect/incomplete or income cannot be properly deduced. The Tribunal held that neither defect nor distortion of profits was shown and that the Assessing Officer was not empowered to impose the developer's percentage completion method merely because the developer followed it. Reliance was placed on binding precedents recognizing both project completion and percentage completion as legitimate accounting methods and emphasizing the assessee's right to adopt a consistently followed method unless shown to be defective. [Paras 28, 31, 32, 33, 44]

Substitution of the assessee's project/completed contract method by percentage of completion method was not justified; addition made on that basis is set aside.

Accrual of income on transfer of significant risks and rewards - mandate of section 145 regarding method of accounting - developer's accounting method not binding on landowner in absence of statutory or contractual transfer - retrospective insertion of section 43CB (w.e.f. 1.4.2017) not affecting pre existing accounting choices - Whether the assessee's right to recognise income accrued during the years in dispute and whether reliance on developer's revenue recognition could be imposed on the assessee - HELD THAT: - The development agreement conferred on the landowner a right to 32% of constructed area only upon completion/demarcation or on expiry of the contractual period; therefore, in the years under appeal the assessee's right to sale had not crystallized and amounts received via the developer constituted advances. The Tribunal observed that accounting standards (AS 7/AS 9) and subsequent statutory insertion of section 43CB (w.e.f. 1.4.2017) do not retrospectively compel change in a taxpayer's consistently followed method for prior years. Given that the assessee offered the proceeds to tax in subsequent years when sale deeds were registered, revenue suffered no prejudice and mere deferment did not warrant rejection of the adopted method. [Paras 22, 27, 41, 43, 45]

Assessee's revenue recognition on completion/registration did not result in improper accrual in the years under appeal; amounts were advances and the addition premised on developer's recognition is deleted.

Final Conclusion: Both appeals for A.Y. 2012 13 and A.Y. 2013 14 are allowed: the Tribunal set aside the additions computed by applying percentage of completion method and deleted the impugned additions, holding that the assessee was entitled to be assessed according to the consistently followed project/completed contract method in the absence of any recorded satisfaction under section 145(3) or material showing distortion of profits.

Jurisdiction to issue notice under section 148 - validity of reassessment proceedings under section 147 when notice is issued without jurisdiction - duty to forward information to the jurisdictional Assessing Officer - centralisation of cases by order under section 127 - inapplicability of Section 292B where notice is issued without jurisdiction

Jurisdiction to issue notice under section 148 - validity of reassessment proceedings under section 147 when notice is issued without jurisdiction - duty to forward information to the jurisdictional Assessing Officer - centralisation of cases by order under section 127 - inapplicability of Section 292B where notice is issued without jurisdiction - Whether notices issued under section 148 by ITO, Ward-4, Bharatpur were valid and whether consequent proceedings under section 147/147 r/w 144 are sustainable in absence of jurisdiction. - HELD THAT: - The Tribunal found that the assessees were assessed to tax under other Assessing Officers (Delhi/Allahabad) and that Revenue did not produce any order under section 127 transferring jurisdiction to ITO, Ward-4, Bharatpur on or before issuance of notices under section 148. Where a non-jurisdictional AO is seized of information about disposal of property, the correct course is either to transmit that information to the jurisdictional AO to initiate proceedings or to centralise jurisdiction by an order under section 127; absent either step the non-jurisdictional AO has no competence to issue notices under section 148. The Revenue's failure to show any transfer of jurisdiction rendered the notices bad in law, vitiating the reassessment proceedings under section 147 (and associated order under section 144). The Tribunal noted that the position is supported by precedent relied upon in the record - Ranjeet Singh vs ACIT and CIT vs Smt. Anjali Dua - and that the defect of jurisdiction cannot be cured by invoking section 292B, which does not validate a notice issued by an authority that lacked jurisdiction to issue it. Having decided the jurisdictional defect, other grounds became infructuous. [Paras 8, 11]

Notices issued under section 148 by ITO, Ward-4, Bharatpur were without jurisdiction; consequential proceedings under section 147 r/w 144 are quashed; other grounds rendered infructuous.

Final Conclusion: Appeals allowed: notices under section 148 issued by ITO, Ward-4, Bharatpur were invalid for lack of jurisdiction and the reassessment orders under section 147 r/w 144 are quashed for AY 2008-09; remaining grounds dismissed as infructuous.

Permanent Establishment - installation project - Activity based PE and the twelve months threshold - Preparatory/ancillary work for tendering not to be counted towards PE duration - Commencement and completion dates determined by contract effective date and cessation of economic activity - Onus on Revenue to prove continuity of site/project activities beyond threshold period - Attribution of income under Article 7 consequent upon establishment of PE

Permanent Establishment - installation project - Activity based PE and the twelve months threshold - Preparatory/ancillary work for tendering not to be counted towards PE duration - Onus on Revenue to prove continuity of site/project activities beyond threshold period - Whether the assessee had a Permanent Establishment in India under Article 5(2)(g) of the India Cyprus DTAA for the contract executed in India - HELD THAT: - The Tribunal held that Article 5(2)(g) requires the relevant site, construction, assembly or installation project activities to continue for more than twelve months to constitute a PE. Preparatory or ancillary activities undertaken purely for tendering prior to award of the contract do not, without more, amount to commencement of the installation project for the purposes of the twelve month test. On the facts the assessee's contract defined the Effective Date as 4 January 2008 and the material on record (including demobilisation of the last vessel, payment schedule and the completion certificate dated 30 September 2008) established that the project activity had ceased on or before 30 September 2008 (last vessel sailed on 25 September 2008). There was no evidence that the assessee had established any project office or performed on site preparatory works after award of the contract that would extend the period beyond the stated dates. The Revenue failed to discharge the burden of proving that substantive project activities at site continued beyond the contractual completion so as to cross the twelve month threshold. The Tribunal applied the principle in National Petroleum Construction Co. that a building site or assembly project constitutes a PE only when the enterprise commences activities at the project site, and that only preparatory activity performed at the site and directly serving the project can be included in the duration. Applying those principles to the contractual terms and factual material, the Tribunal concluded that the twelve month threshold was not crossed and no installation PE existed; consequently income attribution under Article 7 did not arise.

Threshold period of twelve months under Article 5(2)(g) not satisfied; no PE in India and no income attributable to India under Article 7 for the contract.

Attribution of income under Article 7 consequent upon establishment of PE - Consequentiality of tax credit, interest and penalty issues - Consequences of the finding on PE for the remaining grounds (tax credit, interest and penalty) - HELD THAT: - Because the Tribunal held that no PE was established and therefore no income was taxable in India under Article 7, the other grounds raised by the assessee concerning credit for tax withheld, levy of interest under section 234B and initiation of penalty proceedings under section 271(1)(c) were rendered consequential. The Tribunal did not decide those issues on merits and treated them as dependent on the primary finding that there was no taxable presence in India.

Other grounds rendered consequential and not adjudicated on merits in view of the finding that no PE existed.

Final Conclusion: The appeal is allowed: the assessee did not have an installation Permanent Establishment in India under Article 5(2)(g) for Assessment Year 2008-09, no income under the contract is taxable in India under Article 7, and the remaining contentions (tax credit, interest and penalty) are consequential to this finding.

Deemed dividend under section 2(22)(e) - loan or advance to a shareholder and payments to a concern in which such shareholder has substantial interest - assessment of deemed dividend in the hands of the registered/beneficial shareholder and not the recipient concern - beneficial shareholder concept and its relevance to section 2(22)(e) - distinction of factual matrices when applying Gopal and Sons (HUF) - applicability limited to cases where recipient is beneficial shareholder

Deemed dividend under section 2(22)(e) - loan or advance to a shareholder and payments to a concern in which such shareholder has substantial interest - assessment of deemed dividend in the hands of the registered/beneficial shareholder and not the recipient concern - beneficial shareholder concept and its relevance to section 2(22)(e) - Validity of deletion of addition of Rs. 90 crores treated as deemed dividend under section 2(22)(e) in the hands of the assessee-company - HELD THAT: - The Assessing Officer treated amounts of Rs. 90 crores received by the assessee from Portescap as deemed dividend under section 2(22)(e). The Tribunal examined the three categories covered by section 2(22)(e) and found that the assessee was not a shareholder of the payer and therefore not within the first category (loan/advance to a shareholder). The Assessing Officer relied on the second category (payment to a concern in which a shareholder has substantial interest) but the Tribunal held that even if the payment benefited the common shareholder, such deemed dividend is assessable in the hands of the registered (or beneficial) shareholder and not in the hands of the recipient concern which is neither registered nor beneficial shareholder of the payer. The Tribunal found this position supported by precedents relied upon by the CIT(A). The Revenue's reliance on Gopal and Sons (HUF) was rejected as the Supreme Court's decision turned on facts where the recipient was the beneficial shareholder (HUF), a factual situation distinguishable from the present case where Kollmorgen - and not the assessee-company - was the registered/beneficial shareholder of the payer. On this basis the Tribunal affirmed the deletion of the addition by the CIT(A). [Paras 10, 11, 12]

Deletion of the addition of Rs. 90 crores as deemed dividend under section 2(22)(e) in the hands of the assessee-company is affirmed; Revenue's appeal dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the addition treating Rs. 90 crores as not assessable as deemed dividend in the hands of the assessee-company for Assessment Year 2010-11, holding that such deemed dividend, if any, is assessable in the hands of the registered/beneficial shareholder and that the Supreme Court decision in Gopal and Sons (HUF) is distinguishable on facts.

Refund of deposit pending adjudication - voluntariness of deposits and confessions - authority to issue show cause notices - validation of earlier notices by statutory amendment - prospective operation of legislative amendment - continuation of adjudication subject to security

Refund of deposit pending adjudication - voluntariness of deposits and confessions - continuation of adjudication subject to security - High Court direction to refund amounts deposited by the respondents pending adjudication - HELD THAT: - The Court observed that the respondents had been prosecuted by DRI for exporting unfinished leather as finished goods and had deposited substantial sums; the High Court found those deposits and confessions not voluntary in some cases and ordered refunds subject to appropriate security while permitting the Revenue to issue show cause notices and conclude proceedings within a year. Given that adjudication of the show cause notices had not taken place for nearly ten years, the Court declined to interfere with the High Court's refund directions. The Court noted that in the case of M/s Prime Leathers the amount had already been refunded and security furnished; it directed that the amounts collected in the other two appeals be refunded subject to the respondents furnishing adequate solvent security. The Court expressly left open the substantive adjudication, permitting the Revenue to proceed with adjudication in accordance with advice of the competent authority.

Refund directions of the High Court are upheld; amounts to be refunded subject to adequate solvent security and the Revenue may proceed with adjudication thereafter.

Authority to issue show cause notices - validation of earlier notices by statutory amendment - prospective operation of legislative amendment - Effect of delay in adjudication and impact of statutory amendment validating notices on the pending appeals - HELD THAT: - The Court noted the Revenue's contention that amendment to Section 28 (by insertion of sub section (11)) sought to validate earlier notices issued even by improper officers, but also observed that a Delhi High Court decision held the amendment prospective; that decision is stayed by this Court. Notwithstanding these contentions, the absence of adjudication for nearly a decade weighed with the Court in favour of upholding refunds ordered by the High Court. The Court did not decide the substantive question of the retrospective or prospective operation of the amendment; it confined itself to the equitable consequence of inordinate delay and permitted the Revenue to resume adjudication as appropriate.

The Court did not disturb the High Court's refund direction despite the legislative amendment dispute, and left the question of adjudication/validation to be pursued by the Revenue.

Continuation of adjudication subject to security - Power of the Revenue to proceed with adjudication after refund and security - HELD THAT: - While directing refunds subject to security, the Court expressly permitted the appellant to proceed with adjudication of the show cause notices as per advice of the competent authority, thereby preserving the Revenue's right to determine liability on merits despite interim refunds.

Adjudication proceedings may be continued by the Revenue notwithstanding refund, subject to its own administrative advice and the security furnished by respondents.

Vires of notifications and circulars - Transfer Petition (C) No. 2055/2017 seeking transfer on premise of identical issue - HELD THAT: - The Court examined the writ petitions sought to be transferred and found they challenged the vires of certain notifications and circulars, which was not the same question as in the referenced Special Leave Petitions. Consequently, similarity of subject matter was absent and transfer was not warranted.

Transfer petition dismissed.

Final Conclusion: The appeals are disposed by upholding the High Court's directions for refund of deposits (with respondents required to furnish adequate solvent security where applicable) because adjudication has been inordinate and pending; the Revenue is permitted to proceed with adjudication thereafter. The transfer petition is dismissed as the matters are not sufficiently similar.

Relinquishment of title of warehoused goods - no liability to pay customs duty upon relinquishment before clearance - Proviso to Section 62 - exemption consequent on relinquishment - taxable event for warehoused goods is removal from warehouse - remand for quantification of rent, interest and other charges and penalties

Relinquishment of title of warehoused goods - no liability to pay customs duty upon relinquishment before clearance - Proviso to Section 62 - exemption consequent on relinquishment - taxable event for warehoused goods is removal from warehouse - Whether the appellants, having relinquished title to warehoused goods after expiry of the warehousing period but before clearance for home consumption, are liable to pay customs duty. - HELD THAT: - The Tribunal accepted that the appellants relinquished title to the goods on 11.12.2006 and that the show cause notice was issued thereafter. Relying on the principle that the taxable event in respect of warehoused goods is the removal from warehouse, and on judicial authorities holding that an owner may relinquish title before an order for clearance is made, the Tribunal held that relinquishment after the relevant statutory amendment attracted the benefit of the proviso and precluded imposition of customs duty. The Tribunal noted authorities recognizing the right to relinquish title even after expiry of the warehousing period and observed that upon such relinquishment duty is not payable though rent, interest and other charges and penalties may be leviable. Because the SCN was issued after relinquishment, no duty could be charged from the appellants. [Paras 7]

Appellants entitled to relinquish title of warehoused goods and, therefore, no customs duty is payable.

Remand for quantification of rent, interest and other charges and penalties - quantification of consequential liabilities arising from relinquishment - rent, interest, other charges and penalties. - HELD THAT: - While holding that no customs duty is payable, the Tribunal directed that the matter be remitted to the original adjudicating authority to quantify and determine any rent, interest, other charges and penalties payable by the appellants consequent to their relinquishment of title. The remand is for computation and imposition, if any, consistent with the acceptance of relinquishment. [Paras 8]

Matter remanded to the adjudicating authority to quantify rent, interest, other charges and penalties, if any, while accepting relinquishment of title.

Final Conclusion: Appeal allowed in part: no customs duty shall be payable by the appellants on the relinquished warehoused goods; the matter is remanded to the original authority to quantify rent, interest, other charges and penalties, if any, consistent with acceptance of relinquishment.

Rule 7 of the ISFTA Rules - value addition threshold for non originating materials (65% test) - Certificates of Origin issued by the competent authority of the exporting Contracting Party as determinative in bilateral Free Trade Agreement cooperation - consultation and mutual verification mechanism under ISFTA/Rule 13 of the ISFTA Rules - denial of preferential treatment for circumvention of Rules of Origin - penalty under Section 112(a) of the Customs Act, 1962 and imposition of penalties under Section 114A / 114AA - enforcement consequences

Rule 7 of the ISFTA Rules - value addition threshold for non originating materials (65% test) - Certificates of Origin issued by the competent authority of the exporting Contracting Party as determinative in bilateral Free Trade Agreement cooperation - consultation and mutual verification mechanism under ISFTA/Rule 13 of the ISFTA Rules - Validity of Certificates of Origin for 25 Bills of Entry and entitlement to exemption under Notification No.26/2000 Cus. (ISFTA) in respect of the impugned imports - HELD THAT: - The Tribunal found that the dispute turned on whether the consignments satisfied the Rule 7 threshold that non originating materials not exceed 65% of FOB value. The DRI raised discrepancies and sought re verification from Sri Lankan authorities; Sri Lankan Customs and Department of Commerce conducted factory verification and, except for two Certificates of Origin (Nos. CO/ISFTA/06/6523 and CO/ISFTA/06/6661), confirmed that the remaining COOs complied with the Rules of Origin and there was no necessity to cancel them. The Tribunal emphasised the ISFTA/Rule 13 framework which provides for consultation, mutual assistance and acceptance of the outcome of bilateral verifications. On the material before it, the Tribunal held that the bilateral consultations and re certification by Sri Lankan authorities extinguished the basis for denying the concession; the isolated discrepancies related to specific ingredients in the two cancelled COOs and did not warrant peremptorily treating the other COOs as invalid. Reliance was placed on precedents which restrict domestic adjudicators from sitting as final arbiters over origin determinations made by the designated authority of the exporting Contracting Party. Applying these principles, the adjudicating authority's rejection of the COOs, denial of exemption under Notification No.26/2000 Cus., demand of differential duty and interest and imposition of penalty under Section 112(a) could not be sustained and were set aside. [Paras 8, 9, 10]

Appeal by the importer allowed; impugned order denying ISFTA benefits, demand and penalty set aside and importer entitled to consequential benefits as per law.

Penalty under Section 112(a) of the Customs Act, 1962 and imposition of penalties under Section 114A / 114AA - enforcement consequences - denial of preferential treatment for circumvention of Rules of Origin - Sustainability of Revenue's claim for imposition of penalties under Sections 114A and 114AA of the Customs Act in respect of the same imports - HELD THAT: - Revenue's appeal sought imposition of penalties under Section 114A and Section 114AA, contending collusion and suppression of facts with the Sri Lankan exporter. The Tribunal held that since Sri Lankan authorities after verification upheld the validity of the remaining COOs (except the two identified certificates) and the bilateral consultation mechanism under ISFTA had been exhausted with that outcome, Revenue's case for imposing additional penalties lacked merit. The factual and legal foundation for treating all COOs as invalid on account of the two cancelled COOs was not established. [Paras 10, 11]

Revenue appeal dismissed; imposition of penalties under Sections 114A and 114AA not sustained.

Final Conclusion: The Tribunal accepted the bilateral verifications by Sri Lankan authorities and, applying the ISFTA consultation framework and Rule 7 criteria, allowed the importer's appeal setting aside denial of ISFTA benefits, demand and penalty; the Revenue's cross appeal for further penalties was dismissed.

Jurisdiction to seize and confiscate in Special Economic Zone - SEZ deemed to be territory outside the Customs Territory - absence of jurisdiction renders confiscation, redemption fine and penalties unsustainable

Jurisdiction to seize and confiscate in Special Economic Zone - SEZ deemed to be territory outside the Customs Territory - Customs authorities outside the SEZ had no jurisdiction to seize, adjudicate and confiscate goods imported into a unit located in a Special Economic Zone under licence for re-export. - HELD THAT: - The appellants were located in a Special Economic Zone and imported goods under a licence for processing and re-export. Relying on the Tribunal's earlier reasoning in Morgan Tectronics Ltd., and on the statutory concept that an SEZ is to be treated as outside the Customs Territory, the adjudicating authority sitting outside the SEZ had no jurisdiction to seize or confiscate the goods or to levy consequent demands. Since the impugned seizure and confiscation were effected by an authority without jurisdiction, those actions are legally unsustainable. The consequences that flow from lack of jurisdiction include setting aside the seizure, quashing the confiscation, and negating any resulting demand, redemption fine and penalties imposed by that authority.

Seizure set aside; confiscation quashed; no demand can be confirmed; redemption fine and penalties not imposable.

Final Conclusion: The appeals are allowed: seizure and confiscation of the goods effected by the external Customs authority are set aside for want of jurisdiction, and consequential demands, redemption fine and penalties are quashed; appellants entitled to consequential relief, if any.

Valuation of export goods - transaction value - interpretation of 'payable' in transaction value - provisional assessment / provisional invoice - refund claim as challenge to assessment - post export price adjustment with Reserve Bank of India approval - finalisation of provisional shipping bill

Refund claim as challenge to assessment - provisional assessment / provisional invoice - Filing of a refund claim under Section 27 in respect of a provisionally-assessed export consignment constitutes a challenge to the assessment and is maintainable. - HELD THAT: - The Tribunal accepted the First Appellate Authority's conclusion that where the shipping bill and invoice are provisional and the assessment has not been finalised, the filing of a refund claim amounts to seeking re assessment rather than an impermissible collateral attack. The First Appellate Authority relied on precedents treating refund applications as challenge to assessment, and the Bench found on the record that the assessing officer had endorsed the shipping bill as provisional and had not finalised it. Given that factual position, the refund claim was properly entertained as a challenge to the provisional assessment. [Paras 7, 10]

Filing of the refund claim was a valid challenge to the provisional assessment and therefore maintainable.

Valuation of export goods - transaction value - interpretation of 'payable' in transaction value - post export price adjustment with Reserve Bank of India approval - provisional invoice and post-export price adjustment - The reduced price, subsequently agreed and approved by the Reserve Bank of India, correctly constitutes the transaction value 'paid or payable' for the exported goods and entitles the exporter to refund of differential duty. - HELD THAT: - The Tribunal applied the statutory scheme for valuation of export goods, observing that Section 14 mandates transaction value as the price actually paid or payable. Where the invoice is provisional and the price payable is subsequently reduced and accepted - as in the present case where RBI granted permission to reduce the invoice value and directed adjustment of incentives - the later accepted reduced price falls within the meaning of 'payable' for determining transaction value. The Bench considered the decision in Bureau Veritas on deferred price and agreed with the First Appellate Authority that the reduced, RBI accepted price represents the correct basis for valuation and refund. [Paras 8, 9]

The First Appellate Authority was correct in accepting the reduced RBI approved price as the transaction value payable and in allowing refund of differential duty.

Finalisation of provisional shipping bill - The provisional shipping bill had not been finalised by the assessing officer and therefore the matter of finalisation and consequential refund was remitted to the assessing officer for action in accordance with law. - HELD THAT: - On the Bench's specific query the respondent conceded that the assessing officer had not finalised the provisional assessment. The Tribunal recorded that the shipping bill therefore requires formal finalisation by the assessing officer, who must consider the documentation (including the RBI letter) and relevant authorities while completing finalisation and computing any differential refund. The Tribunal accordingly remitted the matter for finalisation and compliance with applicable law and precedents. [Paras 7, 10]

Issue of finalisation of the provisional shipping bill remitted to the assessing officer for completion and refund computation in accordance with law.

Final Conclusion: The Tribunal upheld the First Appellate Authority's allowance of the refund: filing a refund claim against a provisional assessment is a valid challenge; the RBI approved post export reduction constitutes the transaction value 'paid or payable' entitling the exporter to differential refund; the provisional shipping bill was not finalised and is remitted to the assessing officer to finalise the assessment and effect the refund in accordance with law.

Eligibility for exemption under customs exemption notification - interpretation of list entries in an exemption notification - classification of spinal needles as assistive devices or as cannula for intra corporal spaces - precedential effect of earlier tribunal decisions - binding effect of dismissal of revenue appeal by the Supreme Court

Eligibility for exemption under customs exemption notification - interpretation of list entries in an exemption notification - classification of spinal needles as assistive devices or as cannula for intra corporal spaces - precedential effect of earlier tribunal decisions - binding effect of dismissal of revenue appeal by the Supreme Court - Whether the imported spinal needles qualify for the benefit of the exemption notifications claimed by the appellant. - HELD THAT: - The Tribunal examined whether spinal needles imported in bulk fall within the items covered by the exemption notification as assistive/rehabilitation devices or, alternatively, as cannula for intra corporal spaces. The Tribunal noted that this question is not res integra in view of earlier tribunal decisions which have accepted similar items as eligible for exemption. It further recorded that the Revenue's appeal against those tribunal decisions was dismissed by the Supreme Court, conferring binding precedent. In light of those precedents, the Tribunal concluded that the appellant is entitled to the claimed benefit and that the Commissioner (Appeals) erred in denying the exemption. [Paras 6, 7, 8, 9]

Appeal allowed; benefit of the exemption notification granted to the imported spinal needles with consequential relief, in view of the binding precedents.

Final Conclusion: The Tribunal allowed the appeal and granted the exemption benefit claimed for the imported spinal needles, relying on earlier tribunal precedents and the fact that the Revenue's challenge to those precedents was dismissed by the Supreme Court.

Transaction value as correct assessable value - customs valuation under Rule 9 read with Section 14 - need for corroborative evidence to rebut invoice - confiscation for import without licence - redemption fine and penalty reduced as percentage of assessable value - precedential application of tribunal decision upheld by High Court

Transaction value as correct assessable value - need for corroborative evidence to rebut invoice - customs valuation under Rule 9 read with Section 14 - Validity of enhancement of assessable value where invoice (transaction value) was not otherwise rebutted and enhancement rested on Chartered Engineer's opinion. - HELD THAT: - The Tribunal held that the foreign suppliers' invoices constituted the transaction value and were not successfully rebutted by Revenue. The enhancement of declared value was based solely on the opinion of a Chartered Engineer and there was no other legal or corroborative evidence on record to show that the declared consideration was incorrect. Consequently, the assessable values declared in the Bills of Entry could not be displaced merely by the engineer's opinion; the declared invoice value must stand as the correct assessable value in absence of rebuttal. [Paras 7]

Declared invoice values accepted as correct assessable values; enhancement on basis of Chartered Engineer's opinion set aside.

Confiscation for import without licence - redemption fine and penalty reduced as percentage of assessable value - precedential application of tribunal decision upheld by High Court - Whether goods could be confiscated and penalties/ redemption fines imposed for import of old and used tyres without required licence, and appropriate quantification of redemption fine and penalty. - HELD THAT: - The Tribunal found that the imports required a licence which the appellant did not produce; on that ground confiscation of the goods and imposition of penalty were upheld. However, applying the principle laid down in this Tribunal's earlier decision in M/s Jibran Overseas Vs Commissioner of Customs, Ghaziabad (which was upheld by the High Court), the Tribunal exercised its discretion to moderate the financial consequences. The redemption fine and penalty imposed by the lower authorities were reduced by adopting fixed percentages of the assessable value. [Paras 3, 4, 5, 6, 7]

Confiscation and penalty for import without licence upheld; redemption fine reduced to 15% of assessable value and penalty reduced to 10% of assessable value.

Final Conclusion: Appeals are partly allowed: enhancements of value based solely on Chartered Engineer's opinion are set aside and declared invoice values accepted; confiscation for import without licence upheld but redemption fine and penalty reduced to 15% and 10% of assessable value respectively in line with tribunal precedent.

Clarificatory amendment retrospective effect - import restriction and clearance under DGFT notifications - redemption fine under Section 125 of the Customs Act - confiscation under Section 111(d) of the Customs Act

Import restriction and clearance under DGFT notifications - confiscation under Section 111(d) of the Customs Act - Whether the goods imported during the period when DGFT Notification No.64(RE-08)/04-09 (24/11/2008) imposed restriction were liable to confiscation and penalty where the bills of entry for warehousing were filed before the restriction was lifted but ex-bond clearance was effected after the restriction was withdrawn by Notification No.81(RE-08) (16/01/2009). - HELD THAT: - The Tribunal examined the timing of import, filing of warehousing (in bond) bill of entry and the subsequent ex bond clearance in light of the DGFT notifications. Although the restriction was operative between 24/11/2008 and 16/01/2009, the Tribunal accepted that the order for import was placed before restriction and that ex bond clearance occurred only after DGFT lifted the restriction by Notification No.81(RE 08). Applying the principle that a subsequent DGFT clarification restoring prior import freedom affects the legal consequence of clearance, the Tribunal found that confiscation and penalty could not be sustained where the effective clearance (ex bond) took place after the restriction was lifted.

Confiscation under Section 111(d) and related penal consequences could not be upheld; the impugned order imposing such consequence was set aside.

Clarificatory amendment retrospective effect - redemption fine under Section 125 of the Customs Act - Whether Notification No.81(RE-08) dated 16/01/2009 is clarificatory and should be given retrospective effect so as to preclude imposition of the redemption fine under Section 125 for the imported S S Seamless Tubes. - HELD THAT: - Relying on precedents recognizing that clarificatory notifications restoring prior position operate as if the relief existed earlier, the Tribunal accepted that Notification No.81(RE 08) functioned as a clarification restoring duty free import of the goods. Given that the ex bond clearance occurred after the lifting of restriction, the Tribunal held that the redemption fine imposed under Section 125 was contrary to the combined scheme of Customs law and DGFT circulars and therefore unsustainable.

Notification No.81(RE 08) is to be treated as clarificatory for the purposes of these clearances; the redemption fine under Section 125 was set aside.

Final Conclusion: The adjudicating authority's order imposing redemption fine and upholding confiscation was set aside on the merits; the importer's appeal is allowed and the Revenue's appeal is dismissed.

Disqualification under Section 164(2)(a) of the Companies Act, 2013 - definition of financial year under Section 2(41) of the Companies Act, 2013 - retrospective operation of legislation - strike off under Section 248 of the Companies Act, 2013 - operation of law - principles of natural justice

Disqualification under Section 164(2)(a) of the Companies Act, 2013 - definition of financial year under Section 2(41) of the Companies Act, 2013 - retrospective operation of legislation - Whether the respondents rightly computed the three continuous financial years for attracting disqualification under Section 164(2)(a) prior to 1.4.2014 and gave the provision retrospective effect - HELD THAT: - Section 164(2)(a) was brought into force with effect from 1.4.2014 and must be read with the definition of "financial year" in Section 2(41). Accordingly the first financial year for the purpose of Section 164(2)(a) is 1.4.2014-31.3.2015, the second 1.4.2015-31.3.2016 and the third 1.4.2016-31.3.2017. The Registrar's identification of defaults beginning with 2013-14 entails giving the disqualification a retrospective operation which is not warranted. The Ministry's General Circular No.08/14 (4.4.2014) confirming that provisions apply to financial years commencing on or after 1.4.2014 reinforces that the new disqualification regime cannot be applied to periods before 1.4.2014. Further, since Section 164 refers to filing of annual returns and financial statements, relevant filing deadlines (AGM and statutory filing periods, and the then-available additional period under Section 403 proviso) determine when disqualification could be triggered; on the facts legal effect could arise only on or after the applicable post-1.4.2014 filing deadlines. The respondents therefore misapplied Section 164(2)(a) by treating defaults antecedent to 1.4.2014 as attracting the new disqualification. [Paras 22, 23, 24, 25, 26]

The impugned disqualification based on defaults commencing in 2013-14 is legally unsustainable; Section 164(2)(a) cannot be given retrospective effect and must be applied from financial year 1.4.2014 onwards.

Strike off under Section 248 of the Companies Act, 2013 - disqualification under Section 164(2)(a) of the Companies Act, 2013 - operation of law - Whether striking off a company under Section 248(1) automatically and without further notice entitles the Registrar to disqualify directors of other companies immediately by operation of law - HELD THAT: - Striking off under Section 248(1) (permissible where a company has not carried on business for two financial years) and disqualification under Section 164(2)(a) (which requires failure to file statements/returns for three continuous financial years) are distinct statutory consequences. While removal of a company's name and disqualification of directors in the defaulting company are inseparable when the statutory pre-conditions for disqualification are satisfied post-1.4.2014, the Registrar cannot bypass the correct temporal test for disqualification or dispense with required filing time-lines. Identification of disqualification by 'operation of law' does not justify applying Section 164(2)(a) to defaults that pre-date the operative commencement and filing deadlines under the 2013 Act. [Paras 21, 22, 29]

The Registrar's treatment that struck-off status alone justified the immediate disqualification of directors (including in other companies) without regard to the correct temporal scope of Section 164(2)(a) is unsustainable in the circumstances of these petitions.

Principles of natural justice - disqualification under Section 164(2)(a) of the Companies Act, 2013 - Whether the respondents were required to afford prior notice/hearing before publishing disqualification of directors so as to prevent deprivation of their right to continue as directors in other companies - HELD THAT: - Although Section 164(2)(a) and Section 167 operate by reason of statutory default, the consequences imposed (deprivation of the right to hold directorship in other companies) are substantial and affect proprietary and status rights. Where an administrative action results in such civil consequences and the statute is silent about prior hearing, the principles of natural justice require that a fair opportunity (show cause and hearing) be provided before deprivatory action is given effect in respect of directors' continuance in other companies. The Registrar issued public notices under the strike-off provisions, but the Court finds that affected directors ought to have been given specific prior notice regarding prospective disqualification that would impact their directorships in other compliant companies. [Paras 27, 28, 29]

Directors cannot be deprived of their right to continue as directors in other companies without being afforded prior notice and an opportunity to be heard; the Registrar ought to have issued show cause notices before publishing disqualification affecting third-party directorships.

Disqualification under Section 164(2)(a) of the Companies Act, 2013 - operation of law - principles of natural justice - Relief to be granted in consequence of the identified legal infirmities in the impugned lists and disqualification notices - HELD THAT: - Given the Registrar's miscalculation of the three relevant financial years (including years prior to 1.4.2014), the premature publication of disqualification lists, and the failure to afford prior notice before depriving directors of their right to serve in other companies, the impugned disqualification listings suffer from incurable legal infirmity. The Court also notes the availability of schemes and provisos (CLSS/CODS and the then-available 270-day additional filing period) which were not properly factored in for some defaults. In these circumstances equity and law require setting aside the impugned deactivations/published lists and permitting appropriate restoration subject to lawful compliance and procedure. [Paras 29, 30, 31]

The impugned disqualification listings are set aside; the writ petitions are allowed and associated orders quashed, with directions for administrative reconciliation of deposits as recorded.

Final Conclusion: The Court set aside the impugned disqualification listings and orders as vitiated by (i) erroneous retrospective application of Section 164(2)(a) to financial years prior to 1.4.2014, (ii) incorrect computation of the three continuous financial years and failure to respect applicable filing timelines (including relevant AGM and filing deadlines and the then-available additional filing period), and (iii) omission to afford affected directors prior notice and opportunity to be heard before depriving them of the right to hold directorships in other companies; the writ petitions are allowed, connected petitions closed, no costs, and the Registry directed to transmit deposits for reconciliation with the Registrar of Companies.

Advertisement of winding up petition - representative character of advertisement - right of creditors to participate in winding up proceedings - recall of court order - sine die adjournment pending reference to BIFR and effect of IBC

Advertisement of winding up petition - right of creditors to participate in winding up proceedings - recall of court order - Order dated June 07, 2018 directing winding up was liable to be recalled because the court ought to have directed fresh advertisement to enable secured and other creditors to participate. - HELD THAT: - The Court found that after the earlier advertisement published on September 14, 2015 the hearing of the winding up petition had been adjourned sine die when the company was registered with BIFR, and that the company had later asserted that the 2015 advertisement was invalid. In those circumstances the Court held that before passing the final winding up order on June 07, 2018 it ought to have directed publication of a fresh advertisement so as to give secured creditors and other creditors an opportunity to participate. The failure to direct fresh advertisement and thereby to afford the applicant bank an opportunity to place before the Court the pendency of its IBC proceeding before the NCLT rendered the June 07, 2018 order unsustainable. The petitioning creditor's arguments that the prior advertisement sufficed and that Rule 99 required only a single advertisement were rejected on the facts, and the Court concluded that recall was necessary to secure participation of affected creditors and to meet the circumstances created by the sine die adjournment and subsequent proceedings under the IBC.

Order dated June 07, 2018 is recalled and the matters (C.A. No. 51 of 2018 with C.P. No. 822 of 2014) are directed to be listed for fresh advertisement of the winding up application.

Final Conclusion: The application succeeds; the June 07, 2018 winding up order is recalled and the matters are to be listed for directions to publish a fresh advertisement so secured and other creditors may be enabled to participate; no order as to costs.

Pre-existing dispute - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational creditor - sham or illusory defence - doctrine of limitation - evidence of dispute by debit notes and communications

Pre-existing dispute - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - evidence of dispute by debit notes and communications - sham or illusory defence - Whether a pre-existing dispute existed between the parties such that the Section 9 application by the operational creditor was not maintainable. - HELD THAT: - The Tribunal found that contemporaneous communications from the corporate debtor, including emails of June and July 2012 complaining of defective and non-conforming supplies and lack of service, were not denied by the operational creditor and establish that the dispute pre-dated the Section 8 notice. Further, dispatch records, speed post receipts and a website extract supported the corporate debtor's case that debit notes were sent in 2015 asserting specific defects and rejections. The Tribunal applied the Mobilox principle to determine that the defence raised by the corporate debtor was not a mere sham or afterthought but a plausible and substantive dispute which could not be resolved in summary proceedings under Section 9. The transactions between the parties were to be viewed holistically and not piecemeal, and the existence of earlier correspondence and debit notes rendered the present claim unsuited for initiation of CIRP by summary adjudication.

The Section 9 application was dismissed on the ground that a pre-existing dispute was established and the defence was not a sham or illusory.

Doctrine of limitation - operational creditor - criminal proceedings under Negotiable Instruments Act - Whether pending criminal proceedings under the Negotiable Instruments Act constituted an adequate explanation to save the operational creditor's claim from being time barred. - HELD THAT: - The Tribunal observed there was an inordinate delay by the operational creditor in initiating civil recovery despite invoices dated in 2010-2011 and a criminal complaint in 2012. It held that proceedings under the Negotiable Instruments Act before the criminal court, which had not attained finality, cannot be equated to civil proceedings for recovery and therefore are not a sufficient explanation to toll limitation. Noting existing divergence in appellate authorities on limitation under the IBC and that the Supreme Court is seized of the broader question, the Tribunal nonetheless recorded that it was not convinced that the pending criminal action justified the delay, but declined to determinatively resolve the limitation question in view of higher court developments.

Pending criminal proceedings did not constitute an adequate explanation to save the delayed claim; however, the Tribunal refrained from finally adjudicating the broader limitation question in view of higher court consideration.

Final Conclusion: The Section 9 petition filed by the operational creditor is dismissed without costs because a bona fide pre-existing dispute-evidenced by emails and debit notes-exists between the parties; the Tribunal also recorded that pending criminal proceedings under the Negotiable Instruments Act do not, in itself, justify the delay in prosecuting the civil claim.

Provisional attachment under the Prevention of Money Laundering Act - priority of secured creditors / priority of secured debts over other claims - mortgaged property as security and bona fide mortgagee rights - innocent third party / bona fide purchaser without knowledge - confiscation and vesting proviso regarding encumbrances - interaction between SARFAESI/Recovery Act amendments and PMLA

Provisional attachment under the Prevention of Money Laundering Act - mortgaged property as security and bona fide mortgagee rights - innocent third party / bona fide purchaser without knowledge - Whether the provisional attachment (and its confirmation) of properties mortgaged to the consortium of banks could be sustained where the mortgaged properties were acquired prior to the alleged proceeds-of-crime and banks/secured creditors are innocent parties - HELD THAT: - The Tribunal held that the mortgaged properties were acquired and mortgaged much prior to the dates of the alleged criminality and there is no material before the Adjudicating Authority showing that the encumbrances in favour of the banks were created to defeat the PMLA. The Act is not intended to penalise innocent secured creditors or bona fide purchasers without knowledge; where the properties are not derived from proceeds of crime and the bank is a victim and mortgagee with prior charge, the provisional attachment confirmed by the Adjudicating Authority could not be maintained. The Tribunal applied the statutory scheme and precedents recognising that an innocent party can approach the Adjudicating Authority to prove non-involvement and obtain release of attached property; it found no allegation or evidence that the banks knowingly assisted money-laundering or that the securities were created to defeat the Act. For these reasons the Tribunal set aside the impugned order confirming attachment and quashed the provisional attachment as to the mortgaged properties. [Paras 54, 57, 64, 66, 79]

Impugned confirmation of provisional attachment set aside and provisional attachment quashed in respect of properties mortgaged to the consortium; bank's appeal allowed and borrowers' appeals disposed accordingly.

Priority of secured creditors / priority of secured debts over other claims - interaction between SARFAESI/Recovery Act amendments and PMLA - confiscation and vesting proviso regarding encumbrances - Whether the amendments granting priority to secured creditors (including amended Section 31B of the Recovery Act and Section 26E of SARFAESI) affect or preclude attachment/vesting under PMLA in respect of secured assets - HELD THAT: - The Tribunal noted the amendments (effective 01.09.2016) which declare that secured creditors' rights to realise secured debts shall have priority over other debts and government dues, and observed judicial decisions upholding that priority even in pending lis. It treated the amendments as materially relevant to protect bona fide secured creditors whose securities were created earlier and held that where there is no finding that the encumbrance was created to defeat the PMLA, the proviso to the PMLA's vesting provision does not operate to divest the secured creditor of its charge. The Tribunal relied on precedents construing the effect of the amendment and concluded that the amended statutory scheme supports the banks' entitlement to realise their security and that the attachment could not override those rights in the absence of proof that the encumbrance was sham or created to defeat the Act. [Paras 38, 40, 41, 46, 48]

Amendments recognising priority of secured creditors are material and support the conclusion that the banks' prior charge cannot be displaced by PMLA attachment in absence of proof that encumbrances were created to defeat the Act; accordingly banks' rights prevail.

Final Conclusion: The Tribunal allowed the bank's appeal, set aside and quashed the Adjudicating Authority's confirmation of provisional attachment dated 16th November 2016 insofar as it affected properties mortgaged to the consortium of banks, disposed of the borrowers' appeals in view of that finding, and directed that the provisional attachment does not survive.

Taxable service in relation to photography - photography studio or agency - photography - manufacture exclusion from service tax - essential character / single supply test for composite contracts - jurisdiction to issue show-cause notice

Taxable service in relation to photography - photography - photography studio or agency - essential character / single supply test for composite contracts - Preparation of Electoral Photo Identity Cards (EPIC) by the petitioner does not attract Service Tax under the Finance Act, 1994 - HELD THAT: - The contracts in question are for the preparation of EPIC as an indivisible supply whose end product is an EPIC incorporating a photograph. Photography (taking and incorporating the photograph) is only one component of the composite, indivisible contract. Applying the essential-character / single-supply analysis and having regard to precedents treating indivisible works/contracts as not taxable pre-1 June 2007, the transaction cannot be artificially bifurcated to treat the photographic component as a separate taxable service. Authority cited holding that issuance/preparation of EPIC does not fall within definitions of photography or photography studio or agency is binding on the department and supports the conclusion that no separate photography service was rendered to attract tax. Consequently the contractual activity, as framed and performed here, is not liable to Service Tax and the show-cause notice premised on such liability is without merit.

The petitioner did not render a taxable photography service in relation to the EPIC contracts and therefore is not liable to pay Service Tax on those contracts.

Jurisdiction to issue show-cause notice - Validity of the impugned show-cause notice dated October 16, 2007 - HELD THAT: - A writ court may refuse to permit continued prosecution by show-cause notice when the notice is shown to be without jurisdiction. Having held that the subject contracts do not attract Service Tax, the Court concluded that requiring the petitioner to respond to the impugned show-cause notice would be harsh and that the notice was without jurisdiction in the facts of this case. The petition, pending since 2008 and fully heard, warranted quashing of the notice rather than relegation to the adjudicating authority.

The show-cause notice dated October 16, 2007 is without jurisdiction and is quashed.

Manufacture exclusion from service tax - Challenge to vires of provisions of the Finance Act, 1994 - HELD THAT: - The Court expressly refrained from deciding the constitutional challenge to the vires of the impugned statutory provisions and left that question open for future adjudication. No determination on the constitutional validity of Sections relied upon was made.

The question of vires of the provisions of the Finance Act, 1994 as raised by the petitioner is left open.

Jurisdiction to issue show-cause notice - Refund of deposits made pursuant to interim order - HELD THAT: - An interim order had required the petitioner to apply for registration and make payment without prejudice, and provided for refund with interest if the petitioner succeeded. Following allowance of the writ petition, the respondents were directed to refund the deposits made by the petitioner along with statutory interest applicable to service-tax refunds, to be paid within four weeks from communication of the order.

Respondents to refund the deposits made by the petitioner with statutory interest within four weeks.

Final Conclusion: Writ petition allowed: the show-cause notice dated October 16, 2007 is quashed on the ground that the preparation of EPIC under the contracts in question did not constitute a taxable photography service; the constitutional challenge to the Finance Act provisions is left undecided; respondents directed to refund deposits with statutory interest within four weeks.

Service tax on royalty payments - Intellectual Property Right Service - Precedential value of earlier tribunal decision - Follow-the-own-decision principle

Service tax on royalty payments - Intellectual Property Right Service - Precedential value of earlier tribunal decision - Validity of the demands of service tax on royalty paid to Unisys treated as 'Intellectual Property Right Service' for the periods April 2008 to March 2009 and April 2009 to March 2010. - HELD THAT: - The Tribunal noted that the identical issue in respect of the appellant had already been considered and decided in the appellant's own earlier decision reported at 2016 (41) STR 121 (Tri-Mumbai) in relation to the show cause notice dated 7.01.2009. As the present demands are squarely covered by that decision and no fresh contrary matter was placed before the Tribunal, the Tribunal followed its earlier conclusion and held that the demands confirmed by the adjudicating authority and upheld on appeal could not be sustained. The Tribunal therefore set aside the impugned orders. [Paras 4]

Orders confirming the demands were set aside and the appeals allowed, following the Tribunal's earlier decision in the appellant's favour.

Final Conclusion: Appeals allowed; orders of the Commissioner (Appeal) confirming service tax demands on royalty payments set aside as the issue is covered by the Tribunal's earlier decision in the appellant's own case.

Penalty under Section 78 - suppression of facts - payment of tax before issuance of show cause notice - waiver of penalty in view of payment and absence of deliberate evasion - change of cause title consequential to GST introduction

Penalty under Section 78 - suppression of facts - payment of tax before issuance of show cause notice - waiver of penalty - Validity of the equal penalty imposed under Section 78 of the Finance Act, 1994 for the period February, 2009 to December, 2009. - HELD THAT: - The Tribunal considered that the appellants had paid substantial amounts of service tax and interest prior to issuance of the Show Cause Notice and completed payment thereafter. The adjudicating authority's finding of suppression with intent to evade was not supported by evidence of any deliberate act of concealment; the short payment and non-filing of returns were found to be attributable to financial difficulty and administrative problems in the manpower recruitment business. Reliance was placed on earlier decisions distinguishing wilful suppression from mere delayed payment and observing that an assessee who pays tax belatedly but before adjudication merits different treatment. In light of the absence of materials demonstrating deliberate evasion and in view of the mitigating fact of full payment with interest, the Tribunal held that imposition of penalty under Section 78 was unwarranted and should be set aside, while leaving the demand, interest and other penalties undisturbed.

Penalty under Section 78 set aside; remaining demand, interest and other penalties left intact.

Change of cause title - consequential to GST introduction - Application for change in the name of the respondent in the cause title of the appeal. - HELD THAT: - The Department's Miscellaneous Application for amendment of the cause title to reflect the changed designation following introduction of GST and alteration in jurisdiction was allowed. The Registry was directed to amend the cause title as prayed.

Miscellaneous application for change in cause title allowed and cause title amended as prayed.

Final Conclusion: The appeal is partly allowed: the equal penalty under Section 78 is set aside for the period February, 2009 to December, 2009, the original demand, interest and other penalties remain undisturbed, and the Department's application to amend the cause title is allowed.

Litigation Policy - Joint imposition of penalty - Individual liability for penalty - Penalty under Section 78 of Chapter V of the Finance Act, 1994 - Penalty not imposable where service tax deposited under amended Section 80

Litigation Policy - Joint imposition of penalty - Individual liability for penalty - Rectification application by Revenue to reopen dismissal of appeal under the Litigation Policy - HELD THAT: - The Tribunal examined the adjudicating authority's order which imposed a penalty of Rs. 11,12,040 but did not specify the name(s) of the person(s) liable nor use the word "each". From the order and the Revenue's own clarification that the demand related to 'Renting of Immovable Property' of two co-owners, the Tribunal inferred that the penalty was treated as a collective obligation and, on that basis, construed the liability as equally borne (50% each). That construction is determinative for application of the Litigation Policy threshold. Independently, the Tribunal observed that joint imposition of penalty on both co-owners without specifically imposing it on each is unjustified and that Commissioner (Appeals) correctly set aside the penalty. The Tribunal also noted that under the amended provisions of Section 80 the penalty would not be imposable where service tax had been deposited within the specified period, which the respondents had done; this further negates requirement for imposition of penalty. On these grounds the Tribunal found no merit in the Revenue's rectification application to reopen the earlier dismissal under the Litigation Policy. [Paras 3, 4, 5]

Rectification application rejected; no justification to reopen dismissal under the Litigation Policy.

Final Conclusion: The Revenue's rectification application against the dismissal of its appeal under the Litigation Policy is refused: the penalty was not validly or distinctly imposed on each co-owner, Commissioner (Appeals) correctly set aside the penalty, and in any event deposit of service tax within the period under amended Section 80 precluded imposition of penalty.

Reverse charge liability - effect of insertion of Section 66A making recipient liable - retrospective validity of Rule 2(1)(d)(iv) - taxability of services received from non-residents - consulting engineer's service - classification between consulting engineering and erection/commissioning services - remand for recalculation - penalty under Section 76

Reverse charge liability - effect of insertion of Section 66A making recipient liable - retrospective validity of Rule 2(1)(d)(iv) - Lawfulness of service-tax demand on reverse charge basis for services received from non-resident foreign suppliers prior to the insertion of Section 66A. - HELD THAT: - The Tribunal applied the ratio in the Bombay High Court decision (as reproduced) to hold that Rule 2(1)(d)(iv) and notifications relied upon could not validly shift the charge of service tax to recipients prior to statutory authority being conferred. The court accepted that only after the insertion of Section 66A did the statute permit treating an Indian recipient as liable for taxable services received from non-residents; therefore demands raised for periods before 18/04/2006 (i.e., before Section 66A took effect) are not sustainable.

Demand of service tax on the appellant under reverse charge for periods prior to 18/04/2006 is not sustainable and is set aside.

Consulting engineer's service - classification between consulting engineering and erection/commissioning services - Whether the services received from foreign establishments fall within "Consulting Engineer's Service" or should be classified as erection/commissioning/installation services. - HELD THAT: - The Tribunal examined the contracts and the definition of "Consulting Engineer" in the Finance Act, 1994, and found that the foreign suppliers rendered advice, consultancy and technical assistance (specifications, installation diagrams and relevant technical data) which squarely fits the statutory definition of consulting engineer's service. On that basis the Tribunal upheld the adjudicating authority's classification and rejected the appellant's contention that the services were to be treated as erection/commissioning/installation.

Services availed by the appellant are correctly classified as Consulting Engineer's Service; the classification in the impugned order is sustained.

Remand for recalculation - Whether the matter requires remand for computation in view of the setting aside of tax liability for the pre-18/04/2006 period. - HELD THAT: - Because the Tribunal held that liability up to 18/04/2006 is unsustainable but the impugned order confirmed demand covering the period 01-01-2005 to 31-03-2008, it directed a limited remand to the original adjudicating authority to recompute the tax liability confined to the period after the effective date specified for taxation (as stated in the order). The remand is for the narrow purpose of recalculating service tax for the post-effective period.

The case is remanded to the original adjudicating authority for limited purpose of re-calculating service tax for the period after 16/04/2008.

Penalty under Section 76 - Validity of Revenue's appeal seeking imposition of penalty on the assessee under Section 76 for failure to pay service tax. - HELD THAT: - The Tribunal noted that the assessee had been filing their returns regularly and found no deficiency in the Order-in-Original warranting imposition of penalty. On that basis the Tribunal dismissed the Revenue's contention for penalty under Section 76.

Revenue's appeal for imposition of penalty is dismissed; no penalty to be imposed on the assessee under Section 76.

Final Conclusion: The Tribunal set aside demand to the extent it related to periods prior to 18/04/2006, upheld the classification of services as Consulting Engineer's Service, remanded the matter for limited recomputation of tax liability for the post-effective period (after 16/04/2008), and dismissed the Revenue's appeal for imposition of penalty.

Advertising Agency Services - Sale of Advertising Space/Time - Imposition of penalty for alleged tax default - Renting of Immovable Property as taxable service - Cenvat credit reversal under Rule 6(3) of the Cenvat Credit Rules - Exempted services and scope of 'service' - Invocation of extended period of limitation for suppression or misstatement

Advertising Agency Services - Sale of Advertising Space/Time - Imposition of penalty for alleged tax default - Whether penalty could be sustained where demand for service tax was confirmed under Advertising Agency Services though activity amounted to sale of advertising space/time and there was confusion in the field. - HELD THAT: - The Tribunal noted that though service tax demand for advertising was confirmed, the activity amounted to sale of advertising space/time and not rendering of Advertising Agency Services; the show cause notice did not allege rendering of Advertising Agency Services. Reliance on earlier decisions and Board clarification showing sale of allotted space not falling within 'Advertisement Services' and the contemporaneous confusion in the field led the Tribunal to hold that imposition of penalty was not justified. The appellant had deposited service tax and interest and did not contest the tax confirmation; the challenge was only to the penalty. In view of absence of clear allegation of the specific service and the unsettled position in law, the Tribunal set aside the penalty while leaving the demand confirmed as not contested.

Penalty imposed on the demand relating to Advertising Agency Services set aside; demand for tax confirmed (not contested).

Renting of Immovable Property as taxable service - Imposition of penalty for alleged tax default - Invocation of extended period of limitation for suppression or misstatement - Whether penalty could be sustained in respect of confirmed demand under renting of immovable property where there was bona fide confusion about taxability and appellant had paid tax with interest. - HELD THAT: - The Tribunal observed that the taxability of rental income and the period and basis for levy were the subject of litigation and confusion during the relevant years. The appellant had paid the service tax along with interest and there was material to show a bona fide belief that tax was not payable or was payable only on actual receipt. Given the state of uncertainty in the field and the existence of interim orders in other forums, the Tribunal found that penal action was not warranted. Consequently, although the demand was confirmed (and not challenged on merits), the penalty imposed was set aside.

Penalty in respect of demand for renting of immovable property set aside while demand confirmed (not contested).

Cenvat credit reversal under Rule 6(3) of the Cenvat Credit Rules - Exempted services and scope of 'service' - Invocation of extended period of limitation for suppression or misstatement - Whether the demand for reversal of Cenvat credit under Rule 6(3) is sustainable where the alleged exempt activities (sharing of film revenue, sale of eatables, parking charges) are not proved to be taxable services and the extended period of limitation was invoked. - HELD THAT: - The Tribunal held that the adjudicating authority failed to identify or classify the alleged exempt services or to show that those activities were taxable services; Board circulars and precedents were noted to the effect that revenue-sharing, trading of eatables and parking charges do not necessarily amount to 'service'. If an activity is not a service, Rule 6(3) cannot apply. Further, the revenue invoked the extended period without producing evidence of suppression or misstatement; mere non-seeking of departmental clarification was not sufficient to invoke the longer limitation period. On both merits and limitation, the Tribunal found the demand, interest and penalties under Rule 6(3) unsustainable and set them aside.

Confirmation of demand, interest and penalties under Rule 6(3) set aside on merits and as barred by limitation.

Final Conclusion: The appeal is disposed by setting aside penalties imposed on the advertising-related count and the renting-of-immovable-property count (tax demands left as not contested), and by setting aside the confirmation of demand, interest and penalties under Rule 6(3) of the Cenvat Credit Rules for the period 2007-08 to 2010-11 on merits and limitation grounds.

Limitation under Section 11B - refund of erroneously collected service tax - statutory bar on extending period of limitation by tribunal - limits on exercise of extraordinary jurisdiction

Limitation under Section 11B - refund of erroneously collected service tax - statutory bar on extending period of limitation by tribunal - Refund claim filed beyond one year from the relevant date is time-barred and Section 11B applies even where the tax is alleged to have been not payable. - HELD THAT: - The Tribunal examined the claim for refund of service tax paid under a contract where rates were inclusive of all taxes and the recipient had deposited the tax with the exchequer. The claim was filed after the one-year period prescribed by Section 11B. The appellant conceded delay and that payment was not provisional nor under protest, but contended that limitation would not apply because the tax was not required to be paid. The Tribunal held that allowing all refund claims without regard to limitation whenever the tax is said to be not payable would render Section 11B redundant. Relying on precedents of the Supreme Court, the Tribunal affirmed that revenue authorities and statutory fora are bound by the time-limits in the Act and cannot, as a creature of statute, extend the statutory period for refund; the extraordinary jurisdiction available to High Courts under Article 226 cannot be exercised by revenue authorities or tribunals to circumvent statutory limitation. As the refund claim was admittedly filed after the one-year period, the lower authorities rightly rejected it as barred by limitation. [Paras 6, 7]

Impugned orders rejecting the refund claim as barred by limitation under Section 11B are upheld and the appeal is rejected.

Final Conclusion: The appeal is dismissed; the refund claim filed beyond the one year period prescribed by Section 11B is time barred and cannot be entertained despite contentions that the service tax was not payable.

Appropriation of deposits against tax demand - penalty under Section 78 - requirement of fraud, collusion, willful misstatement or suppression

Appropriation of deposits against tax demand - Remand to Commissioner (Appeals) to verify and appropriate amounts deposited by the appellant - HELD THAT: - The appellant produced copies of challans and informed the Commissioner (Appeals) of deposits totalling Rs. 7,29,700/-. The Tribunal found that the deposited amounts had been evidenced before it and that the Commissioner (Appeals) had not yet appropriated those sums. In view of the documentary proof of payment, the matter is remitted to the Commissioner (Appeals) for verification of the challans and appropriate allocation of the deposited amounts against the demand arising for the period 2006-07 to 2010-11. [Paras 5]

Matter remanded to Commissioner (Appeals) to verify and appropriate the deposited amount.

Penalty under Section 78 - requirement of fraud, collusion, willful misstatement or suppression - Penalty under Section 78 of the Finance Act set aside for lack of material establishing requisite culpability - HELD THAT: - The adjudicating authority imposed penalty under Section 78. The Tribunal examined the record and found no material to demonstrate fraud, collusion, willful misstatement or suppression of facts by the appellant. Absent such material, imposition of penalty under Section 78 is unwarranted. Accordingly, the impugned order is modified to delete the penalty under Section 78. [Paras 5]

Penalty under Section 78 is held to be unwarranted and is set aside.

Final Conclusion: The appeal is partly allowed: the matter is remanded to the Commissioner (Appeals) for verification and appropriation of the deposits shown by the appellant, and the penalty under Section 78 of the Finance Act is deleted.

Interpretation of the phrase 'may be taken immediately' in Rule 4(1) of the Cenvat Credit Rules - absence of prescribed time-limit for availment prior to introduction of the one year proviso w.e.f. 01.09.2014 - Principles of natural justice - duty to disclose verification report and to call for relevant documents before adjudication - Proof of receipt of inputs - admissibility and relevance of transport documents (Lorry Receipts) and goods receipt notes - Limitation and extended period - mixed question of law and fact where fresh adjudication is required

Interpretation of the phrase 'may be taken immediately' in Rule 4(1) of the Cenvat Credit Rules - absence of prescribed time-limit for availment prior to introduction of the one year proviso w.e.f. 01.09.2014 - Whether belated availment of Cenvat credit for inputs received during 2007-2008 to 2013-2014 could be disallowed solely on account of delay. - HELD THAT: - The Tribunal held that Rule 4(1) only provided a facility that credit may be taken immediately on receipt of inputs and did not prescribe any outer time-limit for availment during the relevant period. The one year time limit was inserted only by the 3rd proviso to Rule 4(1) with effect from 01.09.2014, which confirms that no statutory time bar existed for the earlier period. Consequently, mere belated availment of credit for the period prior to the proviso could not, by itself, justify disallowance. The Tribunal noted consistency of this view with earlier decisions of the same Tribunal on similar facts.

Belated availment of Cenvat credit for the period before 01.09.2014 cannot be disallowed solely for delay; the adjudicating authority's conclusion on this ground is untenable.

Principles of natural justice - duty to disclose verification report and to call for relevant documents before adjudication - Proof of receipt of inputs - admissibility and relevance of transport documents (Lorry Receipts) and goods receipt notes - Whether the adjudicating authority violated principles of natural justice by relying on a verification report and by declining credit for want of Lorry Receipts without calling for them from the appellant. - HELD THAT: - The Tribunal found that the Commissioner relied upon a verification report from the jurisdictional range office and observed documentary correlation except for two bill of entries, but recorded that in absence of original transport documents (Lorry Receipts) receipt of goods could not be ascertained. The verification outcome and the need for Lorry Receipts were not placed before the appellant, nor were the LRs called for from the appellant before passing the order. Those omissions constituted a breach of natural justice. Further, the appellant produced Lorry Receipts and pointed to goods receipt notes containing transport details before the Tribunal. Because these documents were not considered by the adjudicating authority, the Tribunal held that the matter required fresh consideration on receipt evidence.

Adjudicating authority erred in not affording opportunity and in failing to call for Lorry Receipts; order set aside and matter remanded for fresh adjudication on proof of receipt.

Limitation and extended period - mixed question of law and fact where fresh adjudication is required - Whether the demand was time barred and whether extended period could be invoked in the facts of the case. - HELD THAT: - The Tribunal observed that the question of limitation involves mixed questions of law and fact and is intertwined with factual findings such as disclosure and suppression. Since the matter is being remanded for fresh consideration of receipt and related documents, the Tribunal kept the limitation issue open for the adjudicating authority to decide afresh in the light of evidence and following the principles elucidated in this order.

Limitation issue not finally decided; left open and to be considered de novo by the adjudicating authority on remand.

Final Conclusion: The impugned order is set aside and the matter is remanded to the adjudicating authority for de novo adjudication: (i) the authority must consider that Rule 4(1) prior to 01.09.2014 did not prescribe a time limit and mere belated availment is not a ground for disallowance; (ii) the authority must afford opportunity, consider the verification report in the appellant's presence and examine the produced Lorry Receipts and goods receipt notes to decide receipt of inputs; and (iii) the question of limitation/extended period shall be decided afresh in light of the evidence.

Clandestine removal - third party evidence - requirement of clinching/tangible evidence to prove clandestine removal - penalty on directors not sustainable where primary charge is not proved - upholding droppage of demand where Revenue does not contest or appeal

Upholding droppage of demand where Revenue does not contest or appeal - The part of the demand dropped by the adjudicating authority in respect of alleged excess electricity consumption. - HELD THAT: - The Tribunal noted that the Department has not challenged the adjudicating authority's decision to drop the demand relating to excess electricity consumption and has not filed any appeal against that relief. The Tribunal therefore upheld the droppage of that portion of the demand, observing that the Commissioner (Appeals) had relied upon precedent and that Revenue's concession/inaction amounted to acceptance of the order on that aspect. [Paras 5]

The order dropping the demand for excess electricity consumption is upheld.

Clandestine removal - third party evidence - requirement of clinching/tangible evidence to prove clandestine removal - penalty on directors not sustainable where primary charge is not proved - Validity of confirmation of demand and penalties for alleged clandestine removal based primarily on third party statements/documents without corroborative/clinching evidence. - HELD THAT: - The Tribunal examined the Revenue's case which relied on statements and records of a third party (buyers). Relying on precedent of High Court and Tribunal decisions, it held that the serious charge of clandestine removal cannot be sustained on the basis of uncorroborated third party documents or memory based statements; tangible, clinching evidence of clandestine manufacture and removal is required. In absence of such corroboration, the confirmation of demand and the consequential penalties (including on directors) were found to be unsustainable. The Tribunal concluded that the Commissioner (Appeals) erred in upholding the demand insofar as it rested on third party evidence and set aside that part of the order. [Paras 5, 6]

The confirmation of demand and imposition of penalties in respect of alleged clandestine removal, based on third party evidence without clinching corroboration, is set aside; consequential penalties on directors also stand vacated.

Final Conclusion: Appeals allowed: the order is upheld insofar as the demand for excess electricity consumption (not contested by Revenue) and is set aside insofar as the demand and penalties for alleged clandestine removal which were founded on uncorroborated third party evidence.

Rectification of Mistake - Consequential relief - Refund of pre-deposit - Setting aside Order-in-Original

Rectification of Mistake - Consequential relief - Refund of pre-deposit - Amendment of the Tribunal's earlier order to provide consequential relief, including refund of amounts pre-deposited by the appellant. - HELD THAT: - The application for rectification of mistake sought amendment of paragraph six of the Tribunal's order dated 12 June, 2017 to record that, since the appeal was allowed and the show cause notice was held not sustainable, the impugned Order in Original dated 25 July, 2006 was set aside and the appeal allowed with consequential relief. The Tribunal noted that the appellant had pre deposited amounts during the course of adjudication before the Tribunal and that those amounts were required to be refunded. In view of the earlier conclusion allowing the appeal, the Tribunal directed that paragraph six be read to grant consequential relief, if any, thereby entitling the appellant to refund of the pre deposited amounts.

Rectification allowed; paragraph six amended to state that the Order in Original is set aside and the appeal is allowed with consequential relief, if any, including refund of pre deposited amounts; Miscellaneous Application disposed accordingly.

Final Conclusion: The Tribunal allowed the rectification application and amended its earlier order to grant consequential relief, including refund of amounts pre deposited by the appellant, and disposed of the Miscellaneous Application accordingly.

SSI exemption subject to conditions - restriction on CENVAT credit for inputs used in manufacture of specified goods - Cenvat Credit Rules - Rule 11(2) - payment/adjustment on opting for exemption - denial of CENVAT credit on inputs incorporated in capital goods where such inputs are used in manufacture of specified goods - penalty not warranted for bona fide interpretation of exemption notification

Restriction on CENVAT credit for inputs used in manufacture of specified goods - SSI exemption subject to conditions - Whether the manufacturer could avail CENVAT credit on inputs while availing exemption under Notification No. 8/2003-CE dated 01.03.2003 - HELD THAT: - Paragraph 2(iii) of the Notification expressly disallows availing credit of duty on inputs under the Cenvat Credit Rules in respect of inputs used in the manufacture of the specified goods cleared for home consumption. The Tribunal held that the restriction is on inputs used in the manufacture of the specified goods and is a self-contained condition of the exemption. Consequently, violation of that condition disentitles the manufacturer from claiming CENVAT credit on such inputs, and the demand of CENVAT credit on inputs along with interest was upheld. [Paras 4]

Demand of CENVAT credit on inputs upheld.

Denial of CENVAT credit on inputs incorporated in capital goods where such inputs are used in manufacture of specified goods - Whether inputs used in the manufacture of capital goods are exempt from the restriction in paragraph 2(iii) of the Notification - HELD THAT: - The Tribunal interpreted the phrase 'inputs used in the manufacture of the specified goods' to include inputs that are part of capital goods when those inputs are also used in the manufacture of the specified goods. Therefore, inputs forming part of capital goods do not escape the prohibition and CENVAT credit on such inputs cannot be allowed. [Paras 4]

CENVAT credit on inputs used in capital goods denied if such inputs are also used in manufacture of the specified goods.

Cenvat Credit Rules - Rule 11(2) - payment/adjustment on opting for exemption - Whether the demand relating to CENVAT credit on input services should be sustained - HELD THAT: - While paragraph 2(iii) forbids credit on inputs used in manufacture of specified goods, it does not impose the same restriction expressly on input services. Applying the Notification and the Cenvat Credit Rules, the Tribunal found that the demand of CENVAT credit relating to input services could not be sustained and set aside that portion of the demand. [Paras 5]

Demand of CENVAT credit on input services set aside.

Penalty not warranted for bona fide interpretation of exemption notification - Whether penalty for wrongful availment of CENVAT credit should be imposed in view of the interpretation of the Notification - HELD THAT: - The Tribunal accepted the appellant's contention that the matter involved interpretation of the exemption Notification. Given that the issue turned on interpretation, the Tribunal exercised discretion to relieve the appellant from imposition of penalty and therefore set aside the penalty imposed by the lower authority. [Paras 5]

Penalty set aside.

Final Conclusion: The appeal was disposed by upholding the demand of CENVAT credit on inputs (including inputs forming part of capital goods when used in manufacture of specified goods) with interest, while setting aside the demand relating to input services and quashing the penalty; the impugned order was modified accordingly.

Provisional assessment - Central Excise Valuation Rules - Rule 5 - Central Excise Valuation Rules - Rule 7 - Finalization of assessment - Re-assessment and refund

Provisional assessment - Central Excise Valuation Rules - Rule 5 - Central Excise Valuation Rules - Rule 7 - Finalization of assessment - Whether, having ordered provisional assessment for want of data on cost of transportation under Rule 5, the revenue could thereafter finalize assessment by invoking Rule 7 for transactions to Depots and Consignment Agents. - HELD THAT: - The Tribunal found that the provisional assessment was expressly ordered because data on cost of transportation - the specific requirement for finalisation under Rule 5 - was not available at the time of provisional assessment. On that factual and legal basis, Revenue could not change its stance after provisional assessment and invoke Rule 7 for finalisation. The determinative legal principle applied is that assessment finalisation must proceed according to the category and reason for which provisional assessment was originally ordered; where the absence of transport-cost data dictated provisional treatment under Rule 5, the Original Authority is bound to finalise the assessment by resorting to Rule 5 when the requisite data is supplied. Consequently, the impugned Commissioner (Appeals) order directing invocation of Rule 7 for all transactions was held to be unsustainable. The Tribunal directed remand to the Original Authority to re-calculate duty (or refund) by applying Rule 5 and to allow any due refund immediately. [Paras 5]

Impugned order is set aside; matter remanded to Original Authority to finalise assessment under Rule 5 and re-determine duty payable or refund, with any refund to be allowed immediately.

Final Conclusion: Appeal allowed by way of remand: assessment finalisation must be under Rule 5 (transport-cost based provisional assessment) and the Original Authority is directed to re-calculate duty or allow refund accordingly.

Cenvat Credit of Service Tax on Goods Transport Agency (GTA) services - admissibility of input service credit for transportation to sister concern depots/factories - remand for reconsideration in light of subsequent precedent and administrative circular - re adjudication of limitation - quantification of credit

Cenvat Credit of Service Tax on Goods Transport Agency (GTA) services - admissibility of input service credit for transportation to sister concern depots/factories - remand for reconsideration in light of subsequent precedent and administrative circular - Impugned orders set aside and the question of admissibility of Cenvat credit of Service Tax on GTA services in respect of transportation to sister concern depots/factories remanded for fresh consideration in light of the Hon'ble Supreme Court decision in CCE & ST vs. Ultra Tech Cement Ltd. and Circular No. 1065/4/2018 CX dated 08.06.2018. - HELD THAT: - Both parties conceded that the Supreme Court decision and the subsequent departmental circular were not before the authorities below and sought remand. The Tribunal accepted that position, observed that each case must be decided on its own facts in the light of the said developments, and therefore set aside the impugned orders and remitted the matter to the adjudicating authority for fresh decision on admissibility. The Tribunal expressly refrained from expressing any view on the merits. [Paras 5]

Matter remanded to the adjudicating authority for fresh consideration of admissibility of Cenvat credit in light of the Supreme Court decision and the departmental circular; no finding on merits.

Re adjudication of limitation - remand for reconsideration in light of subsequent precedent and administrative circular - Question of limitation (including invocation of longer period) kept open and to be re adjudicated by the adjudicating authority on remand. - HELD THAT: - The Tribunal accepted the appellant's request that the issue of limitation be kept open for the adjudicating authority to consider afresh when re examining the matter in light of the Supreme Court decision and the departmental circular. The adjudicating authority is to afford the appellant a reasonable opportunity to be heard on limitation. [Paras 5]

Limitation to be re adjudicated by the adjudicating authority on remand; issue kept open.

Quantification of credit - remand for reconsideration - Dispute as to quantification of Cenvat credit permitted to be raised before the adjudicating authority and to be decided on remand. - HELD THAT: - The Tribunal allowed the appellant liberty to raise any quantification dispute before the adjudicating authority when the matter is re examined pursuant to remand. The Tribunal made no pronouncement on substantive quantification and left it to the adjudicating authority to decide after fresh consideration. [Paras 5]

Appellant permitted to raise quantification issues before the adjudicating authority; quantification to be decided on remand.

Final Conclusion: Both appeals are allowed by way of remand: the impugned orders are set aside and the matters are remitted to the adjudicating authority for fresh adjudication in the light of the Supreme Court decision and the departmental circular; issues of admissibility of credit, limitation and quantification are kept open for re adjudication, and no finding is recorded on merits.

Entitlement to CENVAT credit on canteen and food services where maintenance of canteen is factory obligation - CENVAT credit on professional fees for selection of managerial personnel - CENVAT credit on services for removal/shifting of manufacturing waste outside factory as integral to production - exclusion of renovation of recreation/union room from input services 'used in or in relation to manufacture'

Entitlement to CENVAT credit on canteen and food services where maintenance of canteen is factory obligation - CENVAT credit on services relating to cooking, providing food, cleaning and washing for workers' canteen is admissible - HELD THAT: - The Tribunal examined denial of credit on input services consisting of cooking, providing food, and cleaning/washing used in the workers' canteen and noted that the appellants were required to maintain a canteen. Relying on earlier decisions of the Tribunal cited in the impugned order, the Tribunal held that such canteen-related services fall within the ambit of input services for which credit may be availed and accordingly set aside the denial of credit in respect of these services. [Paras 6]

Denial of CENVAT credit on canteen and food services overturned; credit allowed.

CENVAT credit on professional fees for selection of managerial personnel - CENVAT credit on professional fees paid for selection of a manager is not admissible - HELD THAT: - The Tribunal referred to earlier Tribunal decisions relied upon by the adjudicating authorities and concluded that professional fees for selection of managerial personnel do not qualify as input services used in or in relation to manufacture of final product. On that basis the Tribunal sustained the denial of credit in respect of the professional fee paid for selection of manager. [Paras 7]

Denial of CENVAT credit on professional fees for selection of manager upheld.

CENVAT credit on services for removal/shifting of manufacturing waste outside factory as integral to production - CENVAT credit on service of shifting burnt blade/ash to area outside factory premises is admissible - HELD THAT: - The Tribunal considered denial of credit on services for shifting burnt blade with ash outside the factory and observed that such activity is necessary to ensure uninterrupted production. Reliance was placed on Tribunal precedents noted in the impugned order that treat removal/handling of manufacturing waste as an input service connected with manufacture. Accordingly, the Tribunal set aside the denial of credit in respect of this activity. [Paras 8]

Denial of CENVAT credit on shifting burnt blade/ash outside factory set aside; credit allowed.

Exclusion of renovation of recreation/union room from input services 'used in or in relation to manufacture' - CENVAT credit on renovation of recreation room to create a separate union room is not admissible - HELD THAT: - The Tribunal examined the claim for credit on renovation works carried out in the recreation room to form a separate union room and held that such renovation does not fall within the inclusive clause of the definition of input service used in or in relation to manufacture of the final product. The Tribunal reasoned that the renovation work could not be said to be used in or in relation to manufacture and therefore the denial of credit in respect of this renovation along with interest was upheld. [Paras 9, 10]

Denial of CENVAT credit on renovation of recreation room for separate union room upheld; other denials set aside.

Final Conclusion: The appeal is allowed in part: credit denials on canteen services and on shifting burnt blade/ash outside the factory are set aside, while denial of credit on renovation of the recreation room for a union room and the disallowance of professional fee for manager selection are upheld; the appeal is disposed accordingly.

Cenvat credit admissibility - capital goods - supporting structural non-cenvatable - precedential effect of Larger Bench decision - conflicting judicial precedents - limitation - longer period and mala fide

Cenvat credit admissibility - capital goods - supporting structural non-cenvatable - precedential effect of Larger Bench decision - conflicting judicial precedents - Cenvat credit availed on various iron and steel items used in fabrication of capital goods during the period 01/04/2006 to 31/03/2010 is allowable. - HELD THAT: - The Tribunal noted that the lower authority relied on the Larger Bench decision in Vandana Global which held certain supporting structural items to be non-cenvatable. However, the Larger Bench decision had not been approved by the Hon'ble Gujarat High Court in Mundra Ports, and this Bench had earlier decided an identical issue in favour of the assessee in Bajaj Hindustan. Having regard to the contrary authority and the usage of the items in fabrication of capital goods, the Tribunal found no merit in Revenue's stand and set aside the impugned order insofar as denial of Cenvat credit is concerned. [Paras 4]

Denial of Cenvat credit on the iron and steel items was set aside and credit allowed.

Limitation - longer period and mala fide - The demand raised by the Revenue is barred by limitation in the absence of evidence of mala fide or suppression warranting invocation of the extended limitation period. - HELD THAT: - The Tribunal observed that the show cause notice was issued invoking the longer period of limitation but there was no positive evidence to demonstrate mala fide on the part of the assessee. The appellant had disclosed the items and their use in returns, and Revenue could not justify invocation of the extended limitation. Consequently the demand was held to be time-barred. [Paras 5]

Demand is barred by limitation and cannot be sustained.

Final Conclusion: Impugned order set aside; appeal allowed and Cenvat credit allowed for the stated period, and the demand held to be time-barred, with consequential relief to the appellant.

Clubbing of clearances - small scale exemption - dummy unit - independent and self-sufficient units - financial intertwining - registration with statutory authorities as indicia of independence

Clubbing of clearances - dummy unit - small scale exemption - independent and self-sufficient units - financial intertwining - Whether the clearances of M/s Prakash Ispat Udyog Pvt. Ltd. and M/s Saraswati Steels are to be clubbed as dummy units for denial of small scale exemption under Notification No.08/03-CE dated 01/03/2003. - HELD THAT: - The Appellate Tribunal affirmed the Commissioner (Appeals) finding that the two units are separate, independent manufacturing units, each possessing sufficient machinery to produce their final product and independently registered with statutory authorities. The Tribunal found absence of evidence that clearances of one unit were made in the name of the other, or that the units were not independently capable of manufacture. It reiterated that mere familial relationship between partners/directors or management activity by a family member does not establish that units are dummy; clubbing is warranted only where a unit is not fully equipped to manufacture independently or there is financial intertwining indicating they are effectively one unit. As the Revenue produced no evidence of operational dependence, subterfuge in clearances, or financial intermingling, the Tribunal declined to disturb the appellate authority's conclusion and rejected the contention for clubbing of clearances. [Paras 2, 3, 4]

The clearances of the two units are not to be clubbed; the appeals filed by the Revenue are rejected.

Final Conclusion: Revenue appeals challenging the Commissioner (Appeals) finding of independent units and seeking clubbing of clearances were dismissed for lack of evidence of operational dependence or financial intertwining; cross objections disposed of.

Cenvat credit - Capital goods - Installation outside factory premises - Transmission of electricity - Precedent of Larger Bench

Cenvat credit - Capital goods - Installation outside factory premises - Transmission of electricity - Precedent of Larger Bench - Cables and other capital goods laid between the grid and the assessee's factory for transmission of electricity, though installed outside the factory premises, are eligible for Cenvat credit. - HELD THAT: - The Tribunal upheld the assessee's contention that cables and allied capital goods laid en route between the State Electricity Board's grid and the factory for transmitting electricity form part of cenvatable capital goods despite being located outside factory premises. The Tribunal applied the ratio of the Larger Bench decision in Parry Engineering & Electronics P. Ltd. , which held that windmills installed at distant locations are capital goods eligible for credit. By following that precedent, the Tribunal found that denying credit solely because the goods are not within factory premises is neither proper nor justifiable and accordingly set aside the confirmation of demand.

Denial of Cenvat credit in respect of the cables and other capital goods laid between the grid and factory set aside; credit allowed.

Interest - Penalty - Revenue's appeal insofar as it pertains only to interest and penalty was rejected as infructuous after the assessee's appeal was allowed. - HELD THAT: - Since the Tribunal allowed the assessee's appeal by setting aside the confirmation of demand, nothing survives in the Revenue's appeal which related solely to interest and penalty. Consequently the Revenue's challenge on those aspects was dismissed.

Revenue's appeal regarding interest and penalty rejected as infructuous.

Final Conclusion: Following the Larger Bench precedent, the Tribunal allowed the assessee's appeal by treating the cables and related capital goods laid between the grid and factory as cenvatable capital goods and set aside the demand; the Revenue's appeal limited to interest and penalty was dismissed as nothing survives.

Classification of rectified spirit as ethyl alcohol (excisable commodity) - Entitlement to Cenvat credit on inputs used in manufacture of excisable final product - Refund or re credit of reversed Cenvat credit with interest

Classification of rectified spirit as ethyl alcohol (excisable commodity) - Rectified spirit is the same commodity as ethyl alcohol and is excisable. - HELD THAT: - The Tribunal applied its earlier precedent in M/s Bajaj Hindusthan Sugar Ltd. which held that rectified spirit and ethyl alcohol are one and the same commodity. The Revenue's acceptance that the issue is covered by that decision and the Tribunal's reliance on the precedent led to the conclusion that rectified spirit is an excisable product for the purposes of the dispute before it. [Paras 3, 5]

Rectified spirit is held to be the same as ethyl alcohol and therefore an excisable commodity.

Entitlement to Cenvat credit on inputs used in manufacture of excisable final product - Refund or re credit of reversed Cenvat credit with interest - Appellant entitled to refund or re credit of Cenvat credit reversed on molasses used in manufacture of rectified spirit for the period in question, with interest. - HELD THAT: - Having determined that rectified spirit is an excisable commodity, the Tribunal found that the appellants were manufacturing an excisable final product and therefore were entitled to the Cenvat credit which had been reversed by the Central Excise authorities. The Tribunal directed the Original Authority to allow the refund or re credit of the Cenvat credit wrongly reversed and to pay due interest thereon, giving consequential relief to the appellant. [Paras 5]

The appeal is allowed; the Original Authority is directed to refund or re credit the reversed Cenvat credit for the period April, 2008 to February, 2011 along with due interest.

Final Conclusion: Appeal allowed: rectified spirit held to be same as ethyl alcohol (excisable); appellant entitled to refund or re credit of reversed Cenvat credit for April, 2008 to February, 2011 with interest.

Cenvat credit admissibility on inputs used in fabrication of capital goods - Cenvat credit on supporting structural items - Precedential effect of Tribunal Larger Bench decision vis-a -vis High Court ruling - Reliance on earlier order of same Bench

Cenvat credit admissibility on inputs used in fabrication of capital goods - Cenvat credit on supporting structural items - Reliance on earlier order of same Bench - Precedential effect of Tribunal Larger Bench decision vis-a -vis High Court ruling - Whether Cenvat credit of duty paid on various iron and steel items used as supporting structurals and in fabrication of capital goods is admissible and whether the impugned demands and penalties based on denial of such credit are sustainable. - HELD THAT: - The Tribunal examined the claims for Cenvat credit on iron and steel items (sheets, sections, angles, channels, guarder plates etc.) and noted that an earlier order of the same Bench in the assessee's case had allowed identical credit for the prior period. The Revenue's reliance was solely on the Larger Bench decision in Vandana Global which denied such credit. However, the Tribunal observed that Vandana Global was not approved by the Hon'ble Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. Consequently, applying the earlier decision of this Bench in the assessee's favour and having regard to the Gujarat High Court's non-approval of the Larger Bench ruling, the Tribunal found the denial of credit and consequent demands and penalties unsustainable. The impugned orders were therefore set aside and the appeals allowed, with consequential relief to the appellants.

Impugned orders denying Cenvat credit and confirming demands and penalties set aside; appeals allowed and consequential relief granted to appellants.

Final Conclusion: Appeals allowed; earlier Bench decision in favour of the assessee and the Gujarat High Court's non-approval of the Larger Bench ruling formed the basis for setting aside the orders denying Cenvat credit and for granting consequential relief.

Shortages alone do not establish clandestine clearance - clearance in a clandestine manner - eligibility for input tax credit on items used in fabrication of capital goods - precedential conflict between Tribunal Larger Bench decision and High Court decision requiring examination - remand for fresh adjudication with opportunity to the assessee

Shortages alone do not establish clandestine clearance - clearance in a clandestine manner - Adjudicating authority must re-examine the finding of clandestine clearance where the conclusion was based on detected shortages. - HELD THAT: - The Tribunal observed that mere detection of shortage in finished goods does not inevitably lead to a conclusion that goods were cleared clandestinely unless such allegations are corroborated by admissible and positive evidence. The matter was remitted to the original adjudicating authority to re-examine this aspect in the light of the law as settled by the Hon'ble Allahabad High Court and any other decisions relied upon by the appellant. The Tribunal declined the appellant's adjournment request but proceeded to scrutinise the impugned order and found the need for fresh consideration on this point. [Paras 3]

Finding of clandestine clearance based on shortage set aside for fresh examination by the adjudicating authority.

Eligibility for input tax credit on items used in fabrication of capital goods - precedential conflict between Tribunal Larger Bench decision and High Court decision requiring examination - Denial of input credit for various steel items remitted for fresh adjudication to determine (a) whether items were used in fabrication of capital goods and (b) applicability of conflicting precedents. - HELD THAT: - The Tribunal noted that denial of credit was premised on a Larger Bench decision of the Tribunal, but the appellant asserted that some items were used in fabrication of capital goods, which-if established-would permit credit even under the Larger Bench view. The Tribunal further observed that the Larger Bench decision has not been approved by the Hon'ble Gujarat High Court in the cited case, creating a precedential conflict that requires consideration. For these reasons, the issue was remitted to the original authority to examine the assessee's claim of use in fabrication of capital goods and the applicability of the High Court decision relied upon by the revenue. [Paras 4]

Denial of credit on steel items set aside and remitted for fresh consideration on admissibility of credit and applicability of conflicting precedents.

Remand for fresh adjudication with opportunity to the assessee - Other ancillary issues (denial of service tax credit on inward transportation, cess, and small amounts) left open for re-decision by the adjudicating authority. - HELD THAT: - Because the Tribunal remanded the two principal issues, it directed that remaining smaller issues be reconsidered by the adjudicating authority in the light of such decisions and any authorities the appellant may prefer to place before it. The Tribunal expressly provided that the appellant shall be given a reasonable opportunity to present its case on these matters. [Paras 5, 6]

Ancillary issues remitted for reconsideration and the appellant to be afforded a reasonable chance to be heard.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand to the original adjudicating authority for fresh examination of (i) the finding of clandestine clearance alleged on account of shortages, (ii) denial of input credit for steel items including claims of use in fabrication of capital goods and the effect of conflicting precedents, and (iii) related ancillary issues, with opportunity to the appellant to place evidence and submissions.

Reversal of Cenvat credit treated as if no credit was ever availed - obligation to deposit 10% of value for manufacture of exempted goods under Rule 6(3)(iii) - exemption of final product by reference to RSP threshold - requirement of separate accounts for exempted and dutiable goods

Reversal of Cenvat credit treated as if no credit was ever availed - obligation to deposit 10% of value for manufacture of exempted goods under Rule 6(3)(iii) - Whether reversal of Cenvat credit attributable to inputs used in exempted biscuits absolves the manufacturer from liability to pay 10% of the value under Rule 6(3)(iii) for exempted final products - HELD THAT: - The Tribunal accepted the appellant's undisputed fact that proportionate Cenvat credit relatable to inputs used in manufacture of exempted biscuits was reversed. Reliance was placed on the settled principle that such reversal operates to render the position that no credit was ever availed, as affirmed by the Supreme Court in Chandrapur Magnet Wires Pvt. Ltd. and followed by Tribunal decisions such as Secure Meters Ltd. Given the reversal, the rationale for invoking Rule 6(3)(iii) to levy 10% of value did not survive; the absence of a separate account or non-payment of 10% was not decisive once reversal had been effected. Applying this determinative legal principle, the Tribunal found no justification to sustain the demand made under Rule 6(3)(iii) and set aside the impugned orders.

Reversal of the credit was held to be equivalent to never having availed the credit; demand for 10% under Rule 6(3)(iii) set aside.

Final Conclusion: Impugned order directing payment of 10% of the value of exempted biscuits is set aside; appeal allowed with consequential relief to the appellant.

Assembly of components as manufacture - essential component test - excisability of machinery - immovability by installation - precedential application - uniformity of revenue decisions

Assembly of components as manufacture - essential component test - excisability of machinery - Whether assembling different segments and components of the CTC machine by the assessee amounts to manufacture so as to render the supply excisable - HELD THAT: - The Adjudicating Authority examined whether the parts/segments/components supplied or assembled by the assessee constituted an essential part of the CTC machine and whether such assembly amounted to manufacture. The Authority concluded, after considering the evidence and invoices, that the assembly did not attract a finding of manufacture for excise purposes. The Tribunal notes that the Authority's reasoning was detailed and that a similar view in an earlier appellate order against the same assessee was accepted by departmental authorities. In view of that considered conclusion and the cited precedents relied upon by the Authority, the demand raised by the show-cause notice was set aside and the Tribunal finds no reason to disturb that conclusion.

The finding that assembly of the segments and components did not amount to manufacture and hence did not give rise to excise liability is upheld; the demand is set aside.

Immovability by installation - excisability of machinery - precedential application - Whether fixation/installation of the CTC machine at the buyer's site by rooting to ground converts it into immovable property and renders it non-excisable - HELD THAT: - The Adjudicating Authority applied relevant precedents in considering whether embedding or fixing the machine to the site made it an immovable property not liable to excise. The Revenue contended that mere rooting to ground to prevent wobble or to increase efficiency does not make the machine immovable and relied on authorities to that effect; the Authority found the facts comparable to the precedent relied upon and concluded that the machine did not become immovable by reason of its installation. The Tribunal observed that the departmental appellate order had earlier adopted a similar approach and that the Authority's reasoning in this regard was thorough. On that basis the Tribunal affirmed the Authority's conclusion that installation did not convert the CTC machine into immovable property for excise purposes.

The conclusion that installation/fixation of the CTC machine does not render it immovable and non-excisable is affirmed.

Final Conclusion: The appeal is dismissed; the adjudicating authority's order setting aside the demand is upheld to maintain the considered view-also reflected in a prior departmental appellate acceptance-that the assembly did not constitute manufacture and that installation did not render the machine immovable for excise purposes.