TaxTMI Updates e-Newsletter
Aug 18,2018

Deemed supplier liability of electronic commerce operator under sub-section (5) of section 9 - tax liability for intra State supplies of transportation of passengers supplied through an electronic commerce operator - notification specifying radio taxi, motorcab, maxicab and motorcycle transport services as liable to tax payable by electronic commerce operator

Deemed supplier liability of electronic commerce operator under sub-section (5) of section 9 - tax liability for intra State supplies of transportation of passengers supplied through an electronic commerce operator - Liability to GST on amounts billed by the applicant on behalf of taxi operators for passenger transportation services supplied through the applicant and whether the applicant is liable to pay such tax. - HELD THAT: - The applicant operates a taxi aggregation platform through which passengers book and avail taxi services supplied by individual taxi operators. Notification No.17/2017 specifies passenger transportation by radio taxi, motorcab, maxicab and motorcycle as a category of services the tax on intra State supplies of which shall be paid by the electronic commerce operator under sub section (5) of section 9. A conjoint reading of sub section (5) of section 9 and the Notification makes the electronic commerce operator liable and deems the operator to be the supplier for the purposes of tax liability where such services are supplied through it. Since the passenger transportation services are supplied to consumers through the applicant and the applicant issues invoices on behalf of taxi operators, the statutory scheme renders the applicant liable to pay GST on the amounts billed by it for those services. [Paras 4, 5]

The applicant is liable to tax on amounts billed by it on behalf of taxi operators for passenger transportation services supplied through its platform, under sub section (5) of section 9 read with Notification No.17/2017.

Final Conclusion: Advance Ruling: the applicant (taxi aggregator) is liable to pay GST on fares billed on behalf of taxi operators for passenger transportation services supplied through its electronic platform, in accordance with sub section (5) of section 9 and Notification No.17/2017.

Scope of supply - supply of goods - consideration - conversion of document of title into securities - securities - commodity derivative - ready deliverable contract - transfer of title - bailee and deposit acknowledged by Electronic Vault Receipt (EVR)

Bailee and deposit acknowledged by Electronic Vault Receipt (EVR) - scope of supply - Whether mere deposit of diamonds with safe vaults acknowledged by EVR constitutes supply liable to GST. - HELD THAT: - The Authority found that deposit of diamonds with the Exchange-designated safe vault results only in transfer of possession to a bailee who holds an obligation to return the same stones on production of the EVR. The depositor retains the right to reclaim the identical diamond while the EVR remains unconverted. There is no consideration for the mere act of safe custody. On these facts, the transaction is a bailment/possession transfer and not a supply of goods under the scope of supply in the GST law.

Mere deposit of diamonds with safe vaults acknowledged by EVR does not constitute a supply for the purpose of levy of GST.

Conversion of document of title into securities - transfer of title - consideration - scope of supply - Whether conversion of EVR (representing diamonds held in vaults) into e-Units constitutes supply liable to GST. - HELD THAT: - The Authority held that surrender of the EVR effects loss of the depositor's right to claim the same diamond and amounts to transfer of title in the goods. The e-Units received in exchange-though not cash-constitute consideration as defined in the GST statute. An exchange of the document of title for e-Units therefore satisfies the elements of a supply of goods in the course or furtherance of business and is taxable under the GST enactment at the applicable rate.

Conversion of EVR into e-Units constitutes a supply of diamonds liable to tax under the Goods and Services Tax law.

Securities - commodity derivative - scope of supply - Whether e-Units are securities and whether transactions in e-Units fall outside the GST levy. - HELD THAT: - Applying the statutory scheme, the Authority noted that the GST definition of 'securities' adopts the meaning in the SCRA, which includes 'derivatives' and, in turn, 'commodity derivatives.' Diamonds were notified as an underlying commodity for commodity derivatives. Where e-Units have diamonds as the underlying commodity and operate as the Exchange's derivative instruments, they fall within the statutory definition of securities. Transactions that are transactions in securities are neither 'goods' nor 'services' for GST purposes and thus lie outside the scope of GST.

E-Units are securities and transactions in e-Units remain out of the scope of GST levy.

Commodity derivative - transaction in securities - ready deliverable contract - Whether derivative contracts in e-Units and their settlement are transactions in securities and therefore outside GST when they involve only e-Units (without physical diamonds). - HELD THAT: - The Authority observed that the derivative contracts launched by the Exchange are commodity-derivative instruments in e-Units and attract commodity transaction tax, and that SEBI had authorised diamond futures on the Exchange. Where contracts and settlements are confined to e-Units without involvement of physical diamonds, they constitute transactions in securities (commodity derivatives) as defined and are not supplies of goods or services under GST. Accordingly such transactions are not taxable under the GST Acts.

Derivative contracts in e-Units and their settlement, insofar as they involve only e-Units without physical diamonds, are transactions in securities and remain outside the GST levy.

Conversion of document of title into securities - supply of goods - consideration - Whether conversion of e-Units into physical diamonds constitutes supply liable to GST. - HELD THAT: - The Authority held that when an e-Unit holder surrenders e-Units to obtain physical diamonds, the Exchange supplies diamonds in return for consideration in the form of surrendered e-Units. That exchange results in transfer of goods for consideration in the course or furtherance of business and accordingly meets the statutory definition of supply of goods subject to GST.

Conversion of e-Units into diamonds constitutes a supply of diamonds liable to tax under the Goods and Services Tax law.

Final Conclusion: The Authority ruled that (i) mere deposit of diamonds against EVR is not a supply for GST, (ii) conversion of EVR into e-Units is a taxable supply of diamonds, (iii) e-Units constitute securities and transactions confined to e-Units are outside GST, (iv) derivative contracts and settlements confined to e-Units are transactions in securities and not taxable under GST, and (v) conversion of e-Units into physical diamonds is a taxable supply of goods.

Summary order. Special Leave Petition dismissed on the ground of low tax effect; delay condoned.

Summary order. Special Leave Petition dismissed on the grounds of delay and on merits; pending applications, if any, disposed of accordingly.

Summary order. Delay condoned; Special Leave Petition dismissed on the ground of low tax effect; pending applications disposed of accordingly.

Service of notice - notice issued under Section 148 - deemed service by non-return of postal dispatch - validity of reassessment proceedings in absence of service - sending notice to an old/wrong address when a correct address is available with the department

Service of notice - notice issued under Section 148 - sending notice to an old/wrong address when a correct address is available with the department - Validity of service of the notice dated 28.3.2006 under Section 148 when it was sent to the address available with the bank whereas a different, updated address was on the assessee's return/Saral form. - HELD THAT: - The Tribunal's conclusion that the notice under Section 148 was validly served because the dispatch by speed post was not returned unserved was examined in the light of departmental material showing that the assessee had filed his return at a different address (2, Rishi Marg) and the A.O.'s enquiries (performed pursuant to directions under Section 250(4)) recorded that the assessee had shifted from 109, North Idgah Colony about two years earlier. Where the department possessed the correct address of the assessee, sending the Section 148 notice to an older address available only in bank records amounted to service at a wrong address. The court held that the presumption of service drawn from non-return of the postal item could not sustain valid service when the department had the correct address on its own records and the A.O.'s report established non-residence at the address used for dispatch. Consequently, the requirement of valid service for initiation of proceedings under Section 148 was not satisfied. [Paras 14, 15, 19, 20, 21]

Notice dated 28.3.2006 under Section 148 held to be invalidly served as it was sent to an old/wrong address despite the department having the assessee's correct address; assessment proceedings founded on that notice were invalid.

Deemed service by non-return of postal dispatch - validity of reassessment proceedings in absence of service - Whether proceedings under Section 147/148 can be initiated or sustained where service of the initiating notice is not properly effected and the department relies on presumption of service because the speed post was not returned unserved. - HELD THAT: - The court rejected the Department's reliance on the presumption that a notice is served merely because a speed-post dispatch was not returned. That presumption cannot override the fundamental requirement of actual or properly deemed service where facts show the notice was sent to an incorrect address and the department had knowledge of the correct address through the assessee's return and related records. In such circumstances, initiation and sustenance of reassessment proceedings are vitiated by the absence of valid service. [Paras 18, 19, 20, 21]

Proceedings under Section 147/148 could not be sustained; presumption of service from non-return of postal item rejected where the department had the correct address and had sent notice to an incorrect address.

Final Conclusion: The Tribunal's order was set aside. The questions of law were answered in favour of the assessee and against the Revenue: the Section 148 notice dated 28.3.2006 was not validly served and the reassessment proceedings based thereon are invalid.

Concealment of particulars of income - furnishing inaccurate particulars of income - mens rea requirement for Section 271(1)(c) - discretionary jurisdiction under Section 271(1)(c)

Concealment of particulars of income - furnishing inaccurate particulars of income - mens rea requirement for Section 271(1)(c) - Whether penalty under Section 271(1)(c) was rightly imposed for treating loss on sale of assets as business loss instead of capital loss. - HELD THAT: - The Court applied the settled principle that Section 271(1)(c) requires either concealment of particulars of income or furnishing of inaccurate particulars, and that mens rea is an essential element. Relying on the test that an assessee must have failed to prove that the explanation is bona fide and that all material facts were disclosed, the Court found that the assessee had in fact disclosed the particulars of the loss on sale of assets in the return. The error was one of classification - treating a capital loss as a business loss - and amounted to a wrong belief rather than deliberate concealment or deliberate furnishing of inaccurate particulars. Consequently the requisite state of mind to attract Section 271(1)(c) was not established. [Paras 16, 17, 18]

Penalty under Section 271(1)(c) could not be sustained as there was no concealment or furnishing of inaccurate particulars with the requisite mens rea.

Discretionary jurisdiction under Section 271(1)(c) - penalty not leviable where assessed income is nil - Whether penalty proceedings and levy could be sustained where the assessment was subsequently rectified under Section 154 resulting in assessed income being Nil. - HELD THAT: - The assessee relied on the assessment order under Section 154 which resulted in income being assessed at Nil and argued that if there was no income there could be no concealment attracting penalty. The Court observed that, given the absence of concealment or deliberate inaccuracy in particulars, initiation and imposition of penalty were unsustainable. The subsequent rectification to Nil assessment reinforced that no tax was evaded by the disclosed transaction and that penal consequences were inappropriate. [Paras 5, 6, 11, 18]

Penalty proceedings and the penalty order could not be sustained in view of the absence of concealment and the assessment being rectified to Nil.

Final Conclusion: Appeal allowed; Tribunal's order confirming penalty under Section 271(1)(c) set aside. Questions of law answered in favour of the assessee and against the Revenue.

Admissibility of expenditure on consumable stores - Disallowance of expenses on ad-hoc basis - Comparative analysis of expenses vis-a -vis turnover and production - Concurrent findings of fact by assessing authority, CIT(A) and ITAT - Power to reject books of account under Section 145 and make best judgment assessment under Section 144

Admissibility of expenditure on consumable stores - Disallowance of expenses on ad-hoc basis - Comparative analysis of expenses vis-a -vis turnover and production - Concurrent findings of fact by assessing authority, CIT(A) and ITAT - Validity of the ad-hoc 10% disallowance of expenditure claimed as 'Consumable Stores' and the methodology by which the authorities compared such expenditure with immediate preceding and succeeding years - HELD THAT: - All three fact-finding authorities found that the assessee failed to produce bills, vouchers or stock registers to substantiate the steep rise in consumable-stores expenditure in AY 2001-02 compared to the immediate preceding year. The assessing officer, CIT(A) and the Tribunal made a comparative examination of consumable-stores expenditure, turnover and production for adjacent years and concluded that the more than 100% increase in consumable expenditure was disproportionate to marginal increases in production and turnover. The AO, though empowered to reject books under Section 145 and proceed to best-judgment assessment under Section 144, adopted a liberal approach by making only a 10% ad-hoc disallowance; that approach was upheld as permissible in view of the concurrent factual findings. The matter involved no substantial question of law but rested on concurrent findings of fact, which the Court declined to disturb.

The ad-hoc 10% disallowance of consumable-stores expenditure was validly made and upheld; the concurrent factual findings sustaining the disallowance are not interfered with.

Final Conclusion: The appeal is dismissed. The questions of law framed are answered against the assessee and in favour of the Revenue, and the ITAT order confirming the disallowance is upheld.

Reopening of assessment on ground of escapement of income - allowability of depreciation to a charitable trust despite application of income for charitable purposes - prospective effect of statutory amendment and its non-applicability to earlier assessment years - change of opinion as an invalid basis for reopening assessments

Reopening of assessment on ground of escapement of income - change of opinion as an invalid basis for reopening assessments - Validity of reopening assessment under Section 147/148 for Assessment Year 2010-11 where depreciation was claimed and allowed as application of income - HELD THAT: - The reopening of assessment was predicated solely on the view that depreciation claimed and allowed as application of income amounted to a double benefit and therefore income had escaped assessment. The Court noted that the depreciation claim was disclosed in the return, was considered during scrutiny under Section 143(3) with production and verification of accounts and records, and that the Supreme Court decision relied upon by the Revenue (Escorts Limited and its Kerala High Court follow-up) was available at the time of original assessment. Reopening on the same set of facts where the issue had been considered by the Assessing Officer amounts to a change of opinion and is not a valid reason for invoking Section 147. The Court granted interim protection earlier and reaffirmed that the reopening was unsustainable in the light of the legal position articulated by higher authority. [Paras 3, 6]

Impugned reopening proceedings set aside as being founded on an impermissible change of opinion and unsupported reason for escapement of income.

Allowability of depreciation to a charitable trust despite application of income for charitable purposes - prospective effect of statutory amendment and its non-applicability to earlier assessment years - Whether depreciation is allowable to the petitioner-trust for Assessment Year 2010-11 despite having treated the expenditure as application of income - HELD THAT: - The Court examined the subsequent decision of the Supreme Court in Commissioner of Income Tax vs. Rajasthan and Gujarati Foundation, which held that depreciation is allowable to charitable trusts even where the expenditure for acquisition of capital assets has been treated as application of income under Section 11(1)(a), and that the insertion of Section 11(6) by the Finance (No.2) Act, 2014 has effect only from Assessment Year 2015-16. Since the present dispute relates to Assessment Year 2010-11, the legal position as laid down by the Supreme Court applies and the depreciation claim is permissible for years prior to 2015-16. The respondents conceded that the Supreme Court ruling covers the issue in favour of the petitioner, and a Division Bench of this Court has taken a similar view. [Paras 4, 5, 6]

Depreciation allowable for Assessment Year 2010-11; question decided in favour of the petitioner and the reopening set aside on that basis.

Final Conclusion: Writ petition allowed; impugned reopening order and proceedings set aside insofar as they relate to Assessment Year 2010-11 because depreciation was allowable for that year and the reopening constituted an impermissible change of opinion. Miscellaneous petition closed; no costs.

Show cause notice under Section 163(1)(c) - representative assessee / agent liability - jurisdictional facts and excess of jurisdiction - quashing of notice in writ jurisdiction under Article 226 - assessment on non-resident precludes assessment on agent

Quashing of notice in writ jurisdiction under Article 226 - jurisdictional facts and excess of jurisdiction - Whether the Single Bench erred in dismissing the writ petition solely because the appellant had a right to reply to the show cause notice, without examining whether the notice was issued without jurisdiction. - HELD THAT: - The Court held that a writ petition challenging a show cause notice cannot be dismissed merely because the notice permits a reply where the core contention is that the notice is beyond jurisdiction. Exceptional interference under Article 226 is appropriate when conditions precedent for issuance of the notice are absent or jurisdictional facts have been erroneously decided. The Single Bench should have examined whether the respondent had clutched at jurisdiction by misapprehending jurisdictional facts rather than simply directing the appellant to reply. Reliance was placed on the principle that a quasi-judicial authority cannot confer jurisdiction on itself by wrongly deciding a jurisdictional fact, and on established precedents permitting judicial scrutiny of jurisdictional facts in writ jurisdiction. [Paras 14, 15, 19]

The Single Bench erred in dismissing the writ petition on the sole ground that the appellant could reply to the show cause notice; the question of jurisdiction required examination.

Show cause notice under Section 163(1)(c) - representative assessee / agent liability - assessment on non-resident precludes assessment on agent - Whether the impugned show cause notice treating the appellant as agent under Section 163(1)(c) was sustainable, and whether it should be quashed. - HELD THAT: - The Court examined the material averments in the notice - existence of a share transfer between two non-residents, draft assessment on the non-resident transferor and the proposal to treat the Indian company as agent for potential capital gains tax for AY 2014-15 - and concluded that the notice did not disclose a case warranting proceedings against the appellant. The Court applied established principles, including that where the non-resident has been assessed, the agent ought not be proceeded against in respect of the same income, and allied reasoning in General Electric Co. (Delhi High Court), to hold that mere connection of the shares to the Indian company does not render the Indian company an agent liable for the foreign company's capital gains arising from an overseas transfer. On that basis the show cause notice under Section 163(1)(c) was held to be without jurisdiction and liable to be set aside. [Paras 20, 21, 24, 25]

The impugned show cause notice under Section 163(1)(c) is without jurisdiction and is set aside.

Final Conclusion: The intra court appeal is allowed; the Single Bench's order is set aside and the impugned show cause notice under Section 163(1)(c) (relating to Assessment Year 2014-15) is quashed.

Disallowance under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules - administrative disallowance under Section 14A - treatment of loss on sale of Government fertilizer bonds as business loss or capital loss - claim for deduction under Section 80IA for captive power generation (admitted for consideration)

Disallowance under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules - administrative disallowance under Section 14A - Whether the disallowance under Section 14A (interest and administrative expenses) could be sustained where the assessee had surplus interest free funds and the Assessing Officer had not recorded requisite satisfaction before applying Rule 8D. - HELD THAT: - The Tribunal deleted the interest component of the disallowance on the basis that the assessee's own interest free funds (share capital and reserves) substantially exceeded the investments yielding exempt income and the Assessing Officer had not recorded any specific satisfaction or evidence showing that borrowed funds were applied to earn exempt dividends. The Tribunal further held that Rule 8D may be applied only after the Assessing Officer records satisfaction on the antecedent facts; the AO had mechanically applied the Rule. Applying the Division Bench's earlier binding decisions in the assessee's own case for prior years and subsequent consistent practice, the Tribunal deleted the interest disallowance and sustained only an ad hoc administrative disallowance as a lump sum. The High Court, applying the same reasoning and following the prior binding Division Bench precedent, found no error in the Tribunal's conclusion and dismissed the Revenue's challenge to deletion of interest disallowance; the administrative disallowance was sustained at the modest lump sums the Tribunal fixed. [Paras 15, 16]

Interest disallowance under Section 14A deleted for AY 2008 09 and 2009 10; administrative disallowance sustained as ad hoc lump sums (Rs.10 lakhs for 2008 09 and Rs.15 lakhs for 2009 10).

Treatment of loss on sale of Government fertilizer bonds as business loss or capital loss - Whether the loss on sale of fertilizer bonds received in lieu of subsidy is to be treated as business (revenue) loss or as capital loss. - HELD THAT: - The Tribunal examined the nature of the fertilizer bonds issued by the Central Government in lieu of subsidy credited to sales. The bonds were part of the running subsidy account and were tradeable in the market; the subsidy income itself was not business income but arose in the course of the assessee's trading operations and the bonds were not held to create an enduring capital asset. Relying on analogous authority and applying the facts, the Tribunal held that the loss on sale of those bonds was a revenue loss. The High Court agreed with the Tribunal's reasoning that there was no enduring advantage creating a capital asset and that the loss was properly treated as business loss. [Paras 17, 18, 19]

Loss on sale of fertilizer bonds allowed as business (revenue) loss; Revenue's challenge dismissed.

Final Conclusion: Tax Appeals dismissed insofar as they challenge deletion of interest disallowance under Section 14A and insofar as they challenge the Tribunal's treatment of the fertilizer bond loss as a business loss for AY 2008 09 and AY 2009 10. The common question on deduction under Section 80IA for captive power generation is admitted for consideration and remains to be adjudicated.

Valuation of opening stock by adopting preceding year's closing stock - mercantile system of accounting and accrual of liability - allowability of interest on funds used for interest free loans to related concerns where earlier identical addition was deleted - distinction between capital and revenue expenditure on issue of debentures

Valuation of opening stock by adopting preceding year's closing stock - Deletion of addition made on account of opening stock - HELD THAT: - The Assessing Officer had made an addition in respect of opening stock. The learned CIT(A) and the Tribunal held that the value of opening stock for Assessment Year 1996-97 must be adopted equal to the closing stock of 1995-96. The High Court agreed with that approach and with the Tribunal's conclusion that the addition of Rs. 55,73,818/- on account of opening stock was liable to be deleted. [Paras 3]

Addition on account of opening stock deleted; no substantial question of law arises.

Mercantile system of accounting and accrual of liability - Deletion of addition made on account of disallowance in respect of provision for interest liability on central excise refund - HELD THAT: - The Tribunal observed that, under the mercantile system of accounting followed by the assessee, the liability for interest on central excise refund accrued during the year even though payment was settled later pursuant to a High Court order. Accrual of the liability in the year under consideration precluded disallowance merely because payment occurred later. The High Court concurred and held the Tribunal rightly deleted the addition. [Paras 4]

Addition for provision for interest liability on central excise refund deleted; no substantial question of law arises.

Allowability of interest on funds used for interest free loans to related concerns where earlier identical addition was deleted - Deletion of addition made on account of disallowance of interest on funds utilized for giving interest-free loans to sister concerns - HELD THAT: - In respect of an earlier assessment year (1995-96) a similar addition for interest on funds used to give interest-free loans was deleted by the Tribunal and that decision was accepted by the Department and not pursued further. The Tribunal applied the same treatment in the year under appeal. The High Court found no error in following the prior concluded treatment and agreed with the deletion of the addition of Rs. 63,44,823/-. [Paras 5]

Addition for interest on funds used for interest-free loans to sister concerns deleted; no substantial question of law arises.

Distinction between capital and revenue expenditure on issue of debentures - Deletion of disallowance of expenditure on issue of non convertible and fully convertible debentures - HELD THAT: - The Tribunal relied on the Supreme Court decision in India Cements Ltd. which treats expenditure on the issue of debentures as revenue expenditure allowable for deduction. The Revenue's contention that the assessee treated such expenses as capital in its books was held not to be decisive; legal characterisation for tax purposes governs. The High Court agreed with the Tribunal that the disallowance was not sustainable and deleted it. [Paras 5]

Disallowance of expenditure on issue of debentures deleted; no substantial question of law arises.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's deletions in respect of opening stock, provision for interest on central excise refund, interest on funds used for interest free loans to sister concerns, and expenditure on issue of debentures are upheld.

Jurisdiction to examine a question of law arising from facts on record - Discretion to allow or refuse new grounds before the Tribunal - Deemed dividend under section 2(22)(e) of the Income tax Act, 1961 - Remand for consideration of new legal grounds

Jurisdiction to examine a question of law arising from facts on record - Discretion to allow or refuse new grounds before the Tribunal - Deemed dividend under section 2(22)(e) of the Income tax Act, 1961 - Whether the Income tax Appellate Tribunal ought to have entertained and decided, on merits, the appellants' contention regarding deemed dividend under section 2(22)(e) though that ground was raised at the appellate stage. - HELD THAT: - The Court applied the principle laid down by the Supreme Court in National Thermal Power Co. Ltd. v. CIT that, while the Tribunal has discretion to allow or refuse new grounds, it has jurisdiction to examine a question of law which arises from facts found by the authorities below when necessary to correctly assess the tax liability. The Rajasthan High Court held that the legal issue concerning claim of deemed dividend under section 2(22)(e) was a question of law arising from the assessment record and therefore should not have been refused consideration merely because it was raised at the appellate stage. In consequence, the Tribunal's refusal to decide the fresh legal issue was set aside and the matters were remitted for fresh consideration on merits in accordance with the stated legal principle. [Paras 7, 8]

Appeals allowed; impugned Tribunal order dated August 17, 2007 quashed and set aside; matters remitted to the Income tax Appellate Tribunal, Jodhpur to decide the legal issue on merits within two months from receipt of certified copy.

Final Conclusion: The High Court allowed the appeals, quashed the Tribunal's order refusing to entertain the appellants' legal challenge under section 2(22)(e), and remitted the matters to the Tribunal for fresh consideration of the raised question of law on the merits within two months.

Slump sale - Computation of capital gains under Section 50B of the Income-tax Act - Sale as a going concern / intention of the parties - Assignment of consideration to individual assets and liabilities - Set-off of brought forward losses

Slump sale - Computation of capital gains under Section 50B of the Income-tax Act - Sale as a going concern / intention of the parties - Assignment of consideration to individual assets and liabilities - Whether the sale of the hotel premises on 18.01.2013 was a slump sale governed by Section 50B and therefore liable to capital gains computation under that provision. - HELD THAT: - The Tribunal examined the sale deed and surrounding facts to determine the parties' intention. Although the schedules in the deed recorded values for land and building, the deed also transferred licenses (boarding, lodging, bar etc.) and the purchaser was in the hotel business and continued hotel operations on the premises. The Tribunal found that the building and other amenities were treated as a whole without assigning values to individual items and that, consequent to the transaction, the vendor's hotel business ceased. The vendor's liabilities (including a substantial bank loan) had been closed out using sale proceeds such that, at the date of sale, only a small current liability remained. On these facts the Tribunal concluded that the assets and the business were transferred as a going concern; the transaction therefore satisfied the definition of a slump sale and Section 50B applied for computation of capital gains. The Tribunal rejected the contention that absence of transfer of liabilities to the purchaser precluded application of Section 50B, noting the commercial reality that liabilities were discharged and the transaction effected the transfer of the undertaking as a whole. [Paras 4]

Sale of the hotel premises executed on 18.01.2013 is a slump sale; Section 50B applies and capital gains are to be computed accordingly.

Set-off of brought forward losses - Consequential effect of slump sale determination - Whether the assessing officer's denial of set-off of brought forward losses and current year business loss was justified once the transaction is characterised as a slump sale. - HELD THAT: - The decision that the transaction constituted a slump sale had direct consequences on the assessability of amounts and on adjustments claimed by the assessee. The Tribunal held that because the transaction was a slump sale and taxed under Section 50B, the assessing officer's computations following that characterisation were correct. The Tribunal therefore addressed the consequential contentions raised by the assessee and the Revenue in the light of the slump sale finding. [Paras 5]

Consequential computations flowing from the slump sale characterisation (including treatment of brought forward losses) follow the Tribunal's conclusion that Section 50B applies.

Final Conclusion: The appeal filed by the Revenue is allowed: the sale of the hotel premises dated 18.01.2013 is held to be a slump sale and capital gains are to be computed under Section 50B of the Income-tax Act; consequential adjustments follow this characterisation.

Computation of holding period for capital gains - long term capital gains - short term capital gains - transfer within the meaning of section 2(47) of the Income-tax Act - benefit under section 54 of the Income-tax Act

Computation of holding period for capital gains - transfer within the meaning of section 2(47) of the Income-tax Act - long term capital gains - benefit under section 54 of the Income-tax Act - Whether the period of holding of the godown is to be reckoned from the date of the agreement for sale (24-04-2008) or from the date of registration (11-07-2008), and accordingly whether the gain on sale qualifies as long term capital gain and the assessee is entitled to relief under section 54. - HELD THAT: - The Tribunal found on facts that the assessee signed an agreement for sale dated 24-04-2008, made part payment and thereby acquired irrevocable rights, title and interest in the property; registration on 11-07-2008 was a subsequent formality. Applying the concept of 'transfer' under clauses (v) and (vi) of section 2(47), and construing 'held' for purposes of section 2(42A) and allied provisions in a pragmatic manner, the Tribunal held that de facto ownership and enjoyment from the date of the agreement determine the commencement of the holding period. The Tribunal followed the coordinate Bench decision in Anita D Kanjani and earlier High Court authorities which recognise that issuance of allotment/agreement and part payment confer holding for capital gains computation, and that registration is not a condition precedent to reckon holding period. The Tribunal therefore treated the acquisition date as 24-04-2008, held that the asset was held for more than 36 months before its sale on 30-04-2011, and directed that the gain be treated as long term capital gain with consequent entitlement to relief under section 54. [Paras 12, 13, 15, 16, 17]

The holding period is to be reckoned from 24-04-2008 (date of agreement); the gain is long term capital gain and the assessee is entitled to the benefit under section 54.

Final Conclusion: Appeal allowed: Tribunal held that, on the facts, the agreement date (24-04-2008) marks commencement of holding for capital gains purposes; the asset was held for over 36 months and the gain is long term, with entitlement to section 54 relief.

Addition of income declared in search proceeding - statement recorded under section 132(4) of the Act - offer of income in a subsequent assessment year - double addition/double taxation on same income - income offered in one year precludes addition in another year where tax consequence is neutral - remand for verification of offer in subsequent year

Addition of income declared in search proceeding - statement recorded under section 132(4) of the Act - offer of income in a subsequent assessment year - double addition/double taxation on same income - Whether the addition of undisclosed income of Rs. 50 lakhs made in AY 2012-13 on the basis of the search statement is sustainable when the assessee has placed on record that the same income has been offered in AY 2013-14. - HELD THAT: - The Tribunal noted that the assessee admitted undisclosed income of Rs. 50 lakhs in a statement recorded under section 132(4) and that the AO made an addition for AY 2012-13 on that basis. The assessee, however, produced its return for AY 2013-14 showing disclosure of the same amount and paid tax thereon. The AO did not dispute the fact of disclosure for AY 2013-14 nor give independent reasons for rejecting the return for AY 2013-14; rather the AO relied solely on the search declaration and observed absence of any retraction in respect of AY 2012-13. The Tribunal held that where the same income has been offered to tax in another assessment year and the tax rate for the two years is the same, making a further addition in the earlier year would amount to double addition without any tax consequence. Consequently, the Tribunal directed that the question be remitted to the file of the AO for verification of the assessee's claim that the Rs. 50 lakhs was offered in AY 2013-14 and, if so verified, the addition for AY 2012-13 is to be deleted. [Paras 6]

Issue set aside to the AO for verification; if the AO finds that the Rs. 50 lakhs was offered in AY 2013-14, the addition made for AY 2012-13 shall be deleted.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and remanded the matter to the AO to verify the assessee's claim that the undisclosed income of Rs. 50 lakhs was offered in AY 2013-14; upon such verification the addition for AY 2012-13 is to be deleted.

Power to seize and seal godown as preventive measure under Section 110 - extension of six-month period under proviso to Section 110(2) - requirement of show cause notice before confiscation under Section 124 - use of sealing to preserve evidence and prevent further harbouring of goods suspected to be illegally removed

Power to seize and seal godown as preventive measure under Section 110 - use of sealing to preserve evidence and prevent further harbouring of goods suspected to be illegally removed - Whether Customs authorities have the power to seal the appellant's godown and retain goods therein as a preventive measure pending investigation under Section 110. - HELD THAT: - The Court held that Section 110, read as a whole, permits the proper officer to seize goods believed to be liable to confiscation and, where seizure of goods is not practicable, to restrain removal by order. There is no prohibition on sealing premises in which goods, apparently removed from Container Freight Stations on forged documents, are found. Given intelligence and investigative material indicating repeated instances of goods being illegally removed and stored at the godown, sealing the premises and retaining the goods was an available preventive measure to ensure the godown was not used to keep illegally removed goods and to preserve evidence until confiscation proceedings are adjudicated. The Court accordingly refused the appellant's prayer for desealing at the interlocutory stage and observed that desealing cannot be permitted till finality of the proceedings under Section 124. [Paras 11, 18]

Sealing of the godown and retention of goods as a preventive measure was lawful and desealing was declined until the conclusion of proceedings under Section 124.

Extension of six-month period under proviso to Section 110(2) - requirement of show cause notice before confiscation under Section 124 - Whether the goods must be returned to the appellant because no show cause notice under Section 124 was issued within six months of seizure under Section 110(2). - HELD THAT: - The Court noted Sub section (2) of Section 110 provides for return of goods if no notice under Section 124 is issued within six months, but the proviso permits the Commissioner of Customs to extend that period on sufficient cause for up to six further months. The record showed a show cause notice dated 18.04.2018 and an order dated 24.04.2018 by the Commissioner extending the six month period. That extension, taken under the proviso to Section 110(2), was not challenged before this Court. In view of the valid extension and ongoing investigation, the statutory mandate for return had not lapsed and the appellant was not entitled to return of the goods at this stage. [Paras 15, 17]

The period for issuing a show cause notice was validly extended and, therefore, the appellant was not entitled to return of the goods on the ground that six months had elapsed.

Final Conclusion: Writ appeal dismissed; sealing and retention of the godown and goods sustained pending conclusion of proceedings under Section 124, and the extension of time under the proviso to Section 110(2) upheld.

Exemption Notification interpretation - ventilator used with anesthesia apparatus - strict construction of exemption - benefit of final Tribunal order - technological progress not to impede exemption

Ventilator used with anesthesia apparatus - Exemption Notification interpretation - strict construction of exemption - Whether the imported Anesthesia Ventilatory Systems qualify as 'ventilator used with anesthesia apparatus' and are eligible for the exemption claimed under the Notifications - HELD THAT: - The Tribunal examined the manufacturer literature, brochures and technical descriptions and found the imported goods to be composite equipment in which the ventilatory component is integrated into the anesthesia machine rather than being a mere ancillary or detachable add-on. The available material indicates that the ventilator function forms part of the design and operation of the imported systems and that the machines operate as ventilators used with anesthesia apparatus. The Tribunal further observed that there was a prior order of the Tribunal in respect of the same appellant and similar imports, which was not shown to have been challenged and has attained finality. In these circumstances there was no ambiguity in the Notification that would require application of the rule of strict interpretation to defeat the claim; the Supreme Court authority relied upon by the Revenue (on strict construction where ambiguity exists) did not apply because the Tribunal found no ambiguity. Having regard to the literature, prior final Tribunal decision in favour of the appellant and the statutory description in the Notification, the Tribunal held that the impugned equipment falls within the description 'ventilator used with anesthesia apparatus' and hence is entitled to the exemption. [Paras 5]

The imported Anesthesia Ventilatory Systems qualify as ventilators used with anesthesia apparatus and are eligible for the exemption claimed; appeal allowed.

Final Conclusion: The appeal is allowed: the impugned equipment is held to be ventilators used with anesthesia apparatus and eligible for the exemption claimed under the cited Notifications; earlier Tribunal findings in favour of the appellant and absence of ambiguity in the Notification were determinative.

Confiscation and redemption - security deposit as pre-deposit - refund of security deposit - redemption fine and penalty - limitation/time-bar in refund of security deposit

Refund of security deposit - security deposit as pre-deposit - redemption fine and penalty - confiscation and redemption - limitation/time-bar in refund of security deposit - Whether the appellant is entitled to refund of the balance security deposit after adjudication imposing redemption fine and penalty where the appellant chose not to redeem the confiscated goods and whether the refund is time barred. - HELD THAT: - The adjudicating authority imposed a redemption fine and a separate penalty and declared the goods confiscated, leaving to the appellant the option to redeem the goods by payment of the redemption fine. The security deposit was paid as a provisional/conditional security and does not constitute duty or interest. Once the adjudicatory order was passed, the appellant elected not to exercise the redemption option and instead sought return of the balance of the security deposit after adjustment of the penalty. The Tribunal holds that where the appellant does not opt to redeem the goods after the order, the balance of the security deposit (after adjusting the penalty properly imposed) must be returned. The Commissioner(Appeals)'s reliance on the absence of an express direction in the adjudicating order as to adjustment/return was incorrect because the established sequence is adjudication first and the claimant's subsequent election regarding redemption or refund. Further, the character of the amount as a security/pre-deposit means it is not a duty or interest liable to be defeated by the limitation plea urged by the Commissioner(Appeals). Accordingly, rejection of the refund claim and the finding of time bar were unjustified.

The impugned orders rejecting the refund claim are set aside; the appellant is entitled to refund of the balance security deposit after adjusting the penalty, and the appeal is allowed with consequential relief, if any.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders rejecting the refund claim, and directed return of the balance security deposit after adjustment of the penalty, holding that the deposit was a provisional security and the refund claim could not be rejected on the grounds relied upon by the department.

Summary order. Appeals dismissed as not entertained in view of the order dated 16th July, 2018 passed in Civil Appeal Nos.6788-6811 of 2018; delay condoned.

Maintainability of statutory appeal - taxability determination falling within exclusive jurisdiction of the Supreme Court under Section 35L(2) of the Central Excise Act, 1944 - appeal barred pending Supreme Court adjudication - reliance on precedent decisions subject to Supreme Court review - condonation of delay in filing appeal

Maintainability of statutory appeal - taxability determination falling within exclusive jurisdiction of the Supreme Court under Section 35L(2) of the Central Excise Act, 1944 - appeal barred pending Supreme Court adjudication - Appeal held not maintainable where the question involved taxability and the Tribunal had relied on decisions which are under challenge before the Supreme Court, bringing the matter within the exclusive jurisdiction recognised by Section 35L(2) of the Central Excise Act, 1944. - HELD THAT: - The Tribunal's decision turned on taxability of the transactions and relied upon earlier Tribunal/CESTAT orders which the Department has taken to the Supreme Court. Section 35L(2) is construed as rendering determinations relating to rate of duty (which includes taxability for assessment purposes) within the exclusive jurisdiction of the Supreme Court where that Court is seized of the issue. In those circumstances, a statutory appeal to this High Court seeking to reopen the same question is not maintainable. The court therefore dismissed the appeal while preserving the appellant's liberty to pursue appropriate remedies before the competent forum.

Appeal dismissed as not maintainable on the ground that the determinative question of taxability is subject to Supreme Court adjudication under Section 35L(2).

Condonation of delay in filing appeal - Application for condonation of delay in filing the appeal dismissed. - HELD THAT: - Given the primary dismissal of the appeal as not maintainable for the reasons stated, the application for condonation of delay in filing the appeal was also rejected.

Application for condonation of delay dismissed.

Final Conclusion: The High Court dismissed the appeal as not maintainable because the question of taxability falls within the exclusive jurisdiction of the Supreme Court under Section 35L(2) of the Central Excise Act, 1944; the application for condonation of delay was also dismissed, with liberty to the appellant to pursue appropriate remedies.

Extraordinary jurisdiction under Article 226 - Limitation for filing appeals under Section 85 of the Finance Act, 1994 - Condonation of delay - Inordinate delay as bar to equitable relief - Cenvat credit availed on improper documents

Extraordinary jurisdiction under Article 226 - Limitation for filing appeals under Section 85 of the Finance Act, 1994 - Whether the High Court should exercise its extraordinary jurisdiction under Article 226 to test the validity of the adjudication order despite expiry of the statutory limitation for appeal. - HELD THAT: - The Court acknowledged the principle (as in Panoli Intermediate (India) Pvt. Ltd.) that even where a statute prescribes a fixed, partly non-extendable limitation period, the High Court may in extraordinary circumstances examine the validity of the original adjudication under Article 226. However, application of that principle is fact-sensitive. In the present case the appeal under Section 85 (base period three months with a discretionary extension of a further three months) was not prosecuted for nearly three years. The Court found no extraordinary circumstances warranting invocation of Article 226 to bypass the statutory time-bar. The delay was inordinate and the explanation offered did not inspire confidence; consequently, the Court declined to exercise extraordinary jurisdiction to entertain the challenge to the adjudication order. [Paras 4]

Application under Article 226 refused and Court declined to test the validity of the adjudication order in view of inordinate unexplained delay.

Condonation of delay - Inordinate delay as bar to equitable relief - Cenvat credit availed on improper documents - Whether the explanation given for delay in filing the appeal (waiting for legal opinion and reliance on a favourable decision in other proceedings) justified condonation of delay and entitlement to relief from the order confirming duty demand for alleged improper Cenvat credit. - HELD THAT: - The petitioner BSNL relied on having awaited a legal opinion and on a subsequent decision in other proceedings where demand was dropped, to justify non-filing of appeal for nearly three years. The Court found these submissions insufficient to establish 'sufficient cause' for extending limitation. The factual position showed long inaction by BSNL and a lack of compelling reason to excuse the delay. Given the inordinate and unexplained delay, the Commissioner was entitled to refuse condonation and the Court would not override that refusal. [Paras 2, 4]

Explanation for delay rejected; condonation of delay not warranted and petition dismissed.

Final Conclusion: The petition challenging the adjudication and the appellate rejection was dismissed: the High Court declined to exercise extraordinary Article 226 jurisdiction in the face of an inordinate unexplained delay and found the explanation for non-prosecution of the statutory appeal insufficient to justify condonation of delay.

Cenvat Credit - option under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 - maintenance of separate records - intimation/communication to department - remand for fresh consideration

Option under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 - intimation/communication to department - maintenance of separate records - remand for fresh consideration - Appellant's contention that it had communicated the option under Rule 6(3)(ii) by letter dated 2.4.2012 required fresh adjudication by the First Appellate Authority. - HELD THAT: - The Tribunal noted that Rule 6(3) permits an assessee who has not maintained separate records to choose an option under sub-rule (3) and that the appellant produced a communication dated 2.4.2012 which bore the department's stamp as an acknowledgment. The adjudicating authority, however, recorded that the intimation was not found in office records and alleged submission of a forged letter. The Commissioner (Appeals) did not record any finding on this factual/legal preliminary issue. Because the department's case on reversal of Cenvat credit and invocation of extended limitation turns on whether the option was validly communicated, the Tribunal held that the authenticity and effect of the alleged intimation must be examined afresh by the First Appellate Authority. The parties are to be given a reasonable opportunity of hearing and may produce evidence in support of their respective contentions; the Tribunal directed the appellate authority to decide the matter uninfluenced by observations in the present order.

Matter remanded to the Commissioner (Appeals) for fresh decision on the authenticity and effect of the intimation dated 2.4.2012, after granting opportunity to both parties; appeal allowed by way of remand.

Final Conclusion: The appeal is allowed by way of remand: the question whether the appellant communicated the option under Rule 6(3)(ii) by letter dated 02.04.2012 is to be decided afresh by the First Appellate Authority with opportunity to both sides; no other issue was finally adjudicated by the Tribunal.

Classification of services as Consulting Engineer Services - Turnkey contract / implementing agency - Pure agent doctrine - Gross taxable value - Tax on advances / Point of taxation on advances - Extended period of limitation

Classification of services as Consulting Engineer Services - Turnkey contract / implementing agency - Services rendered by the respondent (NICSI) are classifiable as Consulting Engineer Services and not as Erection, Commissioning or Installation Services for the periods in dispute. - HELD THAT: - Having examined the nature of agreements, work orders and project documents, the Tribunal found that NICSI acted as an implementing/nodal agency which advised, assisted, selected and empanelled vendors and coordinated execution but did not itself perform the erection, commissioning or installation. The projects were cost-plus in character and NICSI charged only administrative/agency charges which were reflected as income in its accounts, while the gross funds advanced for projects were routed through liabilities and disbursed to vendors. On these factual and contractual features the Tribunal concluded that the dominant nature of the services rendered by NICSI was advisory/consultancy in engineering and technical matters and therefore falls within Consulting Engineer Services rather than ECIS/turnkey supply-and-installation classification. [Paras 22]

Classification upheld in favour of the respondent as Consulting Engineer Services; demand under Erection, commissioning or installation services dropped.

Pure agent doctrine - Gross taxable value - Tax on advances / Point of taxation on advances - Amounts received and disbursed by the respondent as advances/grant-in-aid for project execution are not includible in the respondent's gross taxable value; only the administrative/agency charges are taxable, and no service tax can be demanded on the gross advances or amounts spent as part of the projects. - HELD THAT: - The Tribunal found that funds received from sponsoring government departments were held and disbursed by NICSI as trustee/implementing agency and that vendors rendered invoices in the name of the sponsoring agencies. The accounts showed only the administrative charges as revenue while advances were shown under liabilities and unspent balances were returnable. Applying the well-settled principle that expenses incurred as a pure agent are not includible in gross value of services, the Tribunal held that the Revenue erred in proposing demand by including the gross advance receipts in taxable turnover. Consequently the pre-deposit and deposits made by the respondent were not a basis to sustain a demand on the gross amounts. [Paras 5, 17, 22]

No service tax leviable on advances/gross project receipts routed by the respondent as pure agent; only administrative charges taxable.

Extended period of limitation - Invocation of the extended period of limitation by Revenue for the tax periods in dispute is not maintainable for want of the requisite condition precedent (such as suppression or fraud). - HELD THAT: - The Tribunal observed that the respondent was a regular, registered assessee who filed returns and maintained proper books of account. There was absence of material establishing suppression, fraud or wilful evasion warranting invocation of the extended period. On this basis the Tribunal held that the show cause notice seeking to invoke the extended limitation could not be sustained. [Paras 21, 23]

Show cause notice invoking extended period of limitation quashed as not maintainable.

Final Conclusion: Revenue appeal dismissed; respondent's classification as a Consulting Engineer and treatment of project advances as amounts handled as a pure agent accepted, and invocation of extended limitation rejected; respondent entitled to consequential benefits in accordance with law.

Authorized service station service - taxability of painting as part of work contract / composite supply - overlap between work contract tax (sales tax) and service tax - Notification No.12/2003 ST and inclusion of value of goods in taxable service - judicial ratio in CCE, Kerala vs. Larsen & Toubro Ltd. - remand to first appellate authority for fresh consideration in light of binding precedent

Taxability of painting as part of work contract / composite supply - overlap between work contract tax (sales tax) and service tax - judicial ratio in CCE, Kerala vs. Larsen & Toubro Ltd. - Whether service tax is leviable on the painting activity carried out by the appellant and, if so, whether the matter requires fresh adjudication in the light of the Supreme Court decision in CCE, Kerala vs. Larsen & Toubro Ltd. - HELD THAT: - The appellants operated an authorized service station performing body repair and painting. There is no dispute as to taxability of repair (body job) charges. The controversy relates only to painting: the appellants contend painting is a composite work (sale of goods and service), had been subjected to work contract tax, and therefore should not attract service tax for the relevant period; they also relied on Notification No.12/2003 ST and claimed the amount received should be treated as cum tax. The Tribunal observed that the Commissioner (Appeals) had not had the benefit of the Supreme Court's decision in CCE, Kerala vs. Larsen & Toubro Ltd. and that the question whether painting (being in the nature of a work contract and involving supply of goods) is exigible to service tax requires reconsideration in light of that binding precedent and the provisions/notification relied upon by the appellants. Documentary evidence regarding valuation under Notification No.12/2003 ST was not placed on record before the Tribunal, and the nature of levy (whether service tax could be imposed notwithstanding payment of work contract tax) was left open for fresh adjudication. For these reasons the Tribunal did not decide the merits on the taxability question but set aside the impugned order and remanded the matter to the Commissioner (Appeals) for fresh decision in accordance with law and the observations in the order. [Paras 5, 6]

Impugned order set aside and matter remanded to the Commissioner (Appeals) for fresh adjudication in the light of CCE, Kerala vs. Larsen & Toubro Ltd.; all issues kept open.

Final Conclusion: The appeal is allowed only to the extent of setting aside the order under challenge and remanding the matter to the first appellate authority for fresh decision in accordance with law and the Supreme Court's decision in CCE, Kerala vs. Larsen & Toubro Ltd.; no substantive determination on tax liability was finally made by the Tribunal.

Agent entitled to exemption available to principal - exemption under Notification No.22/2006-S.T. - statutory definition that assessee includes agent - agency relationship-agent stepping into the shoes of principal - powers of Reserve Bank to appoint agents for government business - strict interpretation of exemption notification not warranted

Agent entitled to exemption available to principal - exemption under Notification No.22/2006-S.T. - statutory definition that assessee includes agent - powers of Reserve Bank to appoint agents for government business - Whether the appellant bank, acting as agent of the Reserve Bank of India in receiving/receipting payments on behalf of the Government of India, is entitled to the exemption from service tax under Notification No.22/2006-S.T. in respect of commission received - HELD THAT: - The Tribunal accepted the principle that an agent representing a principal steps into the shoes of the principal and is therefore entitled to the same exemption which the principal enjoys. Relying on the Supreme Court exposition applied in the earlier Tribunal decision in Canara Bank and upheld by the Larger Bench in State Bank of Patiala (Tri.-LB), the Tribunal held that exemption available to RBI must extend to its agents performing the same functions. The Finance Act's recognition that an "assessee" includes an agent supports this conclusion, and the RBI Act authorises RBI to nominate banks as its agents for specified government business. In that factual and legal matrix, the exemption granted to RBI by Notification No.22/2006-S.T. covers the services performed by the appellant as RBI's agent, and the departmental contention for a strict narrow interpretation of the exemption was found not to be warranted. [Paras 5, 6]

The appellant bank, being an agent of RBI for the specified functions, is entitled to the benefit of the exemption under Notification No.22/2006-S.T.; the appeals are allowed.

Final Conclusion: Appeals allowed: the bank, acting as agent of the Reserve Bank of India in discharging the contested functions, is entitled to the exemption under Notification No.22/2006-S.T., and the impugned orders confirming service-tax demand are set aside.

Exemption notifications have prospective effect - commercial training or coaching service taxable where no exemption in force - definition of "vocational training institute" not extend exemption retrospectively - study material sale not constitutive of Intellectual Property Service - penalty under Section 78 of the Finance Act, 1994 - liability and waiver considerations where nil returns filed and department aware

Commercial training or coaching service taxable where no exemption in force - exemption notifications have prospective effect - Liability to pay service tax for the period 01.07.2004 to 09.09.2004 in respect of Commercial Training or Coaching - HELD THAT: - The Tribunal rejected the appellant's contention that the exemption applicable before 01.07.2004 and from 10.09.2004 onwards should be treated as having effect for the intervening period. The impugned Notification No.24/2004-ST is effective from 10.09.2004 and there is no express provision making it retrospective. Exemption notifications operate prospectively unless explicit retrospective effect is provided. The decision in Ashu Exports (relied upon by the appellant) dealt with applicability of a later-narrowed definition to earlier notifications and did not address extending exempt status to an intervening period where no notification existed; consequently its ratio is not applicable to confer retrospective exemption for 01.07.2004 to 09.09.2004. Prior Tribunal authority holding taxability for that intervening period was noted. Accordingly the demand for service tax and interest for the period 01.07.2004 to 09.09.2004 is upheld. [Paras 5, 6, 7]

Demand of service tax and interest in respect of Commercial Training or Coaching for 01.07.2004 to 09.09.2004 is upheld.

Study material sale not constitutive of Intellectual Property Service - penalty under Section 78 of the Finance Act, 1994 - waiver considerations where nil returns filed and department aware - Whether provision of study material to trainees amounts to Intellectual Property Service and the consequent demand for service tax, interest and penalty - HELD THAT: - The Tribunal accepted the appellant's contention, following its earlier decision in M/s. Cerebral Learning Solutions Pvt. Ltd., that sale/supply of study material in the facts of this case does not attract the characterisation as Intellectual Property Service. The adjudicating authority's classification was therefore held unsustainable and the demand of service tax, interest and penalty made in relation to Intellectual Property Service was set aside. [Paras 8]

Demand of service tax, interest and penalty in respect of Intellectual Property Service is set aside.

Penalty under Section 78 of the Finance Act, 1994 - liability and waiver considerations where nil returns filed and department aware - Validity of penalty under Section 78 in respect of the services adjudicated - HELD THAT: - The Tribunal upheld the demand and equivalent penalty under Section 78 in respect of the franchise service because that issue was not contested by the appellant. However, in respect of Commercial Training or Coaching and Intellectual Property Service the penalty under Section 78 was set aside: the appellant had been regularly filing nil returns and the Department was aware that service tax had not been paid for the non-exempt period, rendering the penalty unjustified on the facts. [Paras 5, 8, 9]

Penalty under Section 78 upheld for the uncontested franchise service; penalty under Section 78 set aside for Commercial Training or Coaching and for Intellectual Property Service.

Final Conclusion: The appeal is partly allowed: the demand (with interest) and penalty for franchise service is upheld; the demand (with interest) for Commercial Training or Coaching for 01.07.2004 to 09.09.2004 is upheld; the demand (and education cess), interest and penalty in respect of Intellectual Property Service are set aside; penalties under Section 78 are set aside in respect of Commercial Training or Coaching and Intellectual Property Service.

Manpower Recruitment or Supply Agency Service - supply of manpower - supply of manpower to work under his superintendence or control - classification of service - contract for execution of work versus supply of manpower - consideration based on quantum of work (per unit) not man hours

Manpower Recruitment or Supply Agency Service - supply of manpower to work under his superintendence or control - classification of service - contract for execution of work versus supply of manpower - consideration based on quantum of work (per unit) not man hours - Whether the services rendered by the appellants to TATA and others amounted to 'Manpower Recruitment or Supply Agency Service' attracting service tax - HELD THAT: - The Tribunal examined the contracts and communications between the appellants and the service recipients and applied the statutory scope of 'manpower recruitment or supply agency' and the Service Tax Rules definition of 'supply of manpower'. The court held that the taxable concept requires actual supply of manpower, temporarily or otherwise, such that manpower is at the disposal or effective control of the service recipient and consideration is related to the number of persons supplied. By contrast, where a contractor undertakes to execute specified work and is paid on the basis of quantum of work done (per kg, per MT, per unit, or lump sum/monthly fee) and the workforce remains under the control and superintendence of the contractor, the activity lacks the essential characteristics of manpower supply. The Tribunal followed earlier precedents of the same and other Benches which consistently held that providing labour to actualize a contracted job does not convert the contract into manpower supply when control remains with the contractor and payment is not on per person basis. The agreements (packing, ETP maintenance, ETP consultancy, bagasse/boiler operations) showed obligations to obtain licenses, perform specified processes, maintain machinery, and be responsible for execution; consideration was tied to output or a fixed fee and not to number of men supplied. The adjudicating authority's finding that appellants had charged and collected service tax was not supported by the accounting particulars relied upon. Applying these legal principles to the material, the Tribunal concluded that the services were not covered by 'Manpower Recruitment or Supply Agency Service' and set aside the impugned order. [Paras 5, 6]

The services rendered by the appellants are not manpower recruitment or supply agency services; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Appeal allowed; impugned adjudication holding the appellants liable under 'Manpower Recruitment or Supply Agency Service' set aside on classification grounds, with consequential reliefs as per law.

Extended period of limitation - Renting of immovable property service - Levy of service tax - Precedential effect of tribunal/high court decision that renting of immovable property is not a taxable service - Penalty under Section 76 of the Finance Act, 1994

Extended period of limitation - Renting of immovable property service - Precedential effect of tribunal/high court decision that renting of immovable property is not a taxable service - Extended period of limitation invoked for demand of service tax under the category of Renting of Immovable Property Service is not invokable. - HELD THAT: - The Tribunal accepted the appellant's concession that the levy of service tax was not disputed but examined whether the department could invoke the extended period of limitation. Relying on the legal position that Renting of Immovable Property Service has been held not to be a taxable service by earlier judicial authority, the Tribunal held that the extended period could not be validly invoked in the facts of this case and therefore the demand insofar as it rested on the extended period of limitation could not be sustained. [Paras 3]

Demand based on the extended period of limitation is set aside.

Penalty under Section 76 of the Finance Act, 1994 - Extended period of limitation - Whether penalty is imposable consequent to the demand set up for the extended period. - HELD THAT: - Because the demand relating to the extended period of limitation was set aside, the Tribunal concluded that the ancillary penalty contingent upon that demand cannot be imposed. The reasoning is consequential to the finding that the extended period invocation was unsustainable. [Paras 4]

No penalty is imposable on the appellant in respect of the set-aside demand.

Levy of service tax - Interest on service tax - Penalty under Section 76 of the Finance Act, 1994 - Obligation of the appellant to pay the admitted service tax and interest and consequences of non-payment. - HELD THAT: - The appellant did not dispute the levy of service tax for the period in question. The Tribunal directed payment of the admitted service tax along with interest within thirty days from receipt of the order. It further recorded that failure to comply would render the appellant liable to penalty proceedings under Section 76 of the Finance Act, 1994. [Paras 4]

Appellant directed to pay the service tax with interest within 30 days; failure will attract penalty under Section 76, Finance Act, 1994.

Final Conclusion: Appeal disposed: demand based on extended period of limitation set aside; no penalty on that account; appellant to pay admitted service tax with interest within 30 days, failing which penalty under Section 76 of the Finance Act, 1994 may be imposed.

Revenue neutrality - judicial review of tribunal findings

Revenue neutrality - judicial review of tribunal findings - The finding of the Customs, Excise and Service Tax Appellate Tribunal on revenue neutrality was upheld. - HELD THAT: - The Supreme Court examined the order of the Customs, Excise and Service Tax Appellate Tribunal and found that the Tribunal had correctly arrived at its conclusion on the point of revenue neutrality. Having accepted the Tribunal's determination, the Court declined to entertain the appeal. The Court also recorded that delay in filing the appeal was condoned and proceeded to address the substantive contention only to dismiss the appeal on the basis of the Tribunal's correct finding.

Appeal dismissed; delay condoned.

Final Conclusion: The Court dismissed the appeal, upholding the Tribunal's finding on revenue neutrality and condoning the delay in filing the appeal.

True and complete disclosure - process of settlement - scope of judicial review under Article 226 - entitlement to invoke settlement proceedings - availability of alternative remedy - appealability to CESTAT despite limitation

True and complete disclosure - process of settlement - scope of judicial review under Article 226 - Whether the Settlement Commission was justified in rejecting the settlement application on the ground that the assessee had not made a true and complete disclosure and remitting the matter to the jurisdictional Commissioner, and whether the High Court could interfere under Article 226 with findings of the Settlement Commission on facts. - HELD THAT: - The Court affirmed that invocation of the Settlement Commission requires utmost good faith and a true and complete disclosure of all material facts; the scheme of settlement confers exclusive powers and is intended to be used where the applicant acts bona fide. Where there is evidence suggesting misuse of the settlement process or elements of bad faith - including discrepancies in documents and transport records and findings of diversion of imported material - the Settlement Commission is entitled to refuse settlement and remand the matter to the assessing authority. The High Court's jurisdiction under Article 226 was held to be limited: it cannot reappraise or reassess factual findings recorded by the Settlement Commission but may examine illegality in procedure or violation of principles of natural justice. Applying these principles to the record, the Court found that the Settlement Commission had considered the materials, recorded a conclusion of incomplete disclosure, and complied with procedural requirements; there was no basis for interference by the Writ Court with the Commission's factual conclusion or its order remitting the matter to the Commissioner. [Paras 14, 15, 18, 19]

The dismissal of the writ challenging the Settlement Commission's order was upheld; no interference with the Settlement Commission's factual conclusion or remand order.

Availability of alternative remedy - appealability to CESTAT despite limitation - Whether the writ petition challenging the re-assessment order passed by the Commissioner could be entertained when an efficacious alternative remedy by way of appeal to the CESTAT was available. - HELD THAT: - The Court held that the Commissioner's reassessment order is an appealable order to the Central Excise and Service Tax Appellate Tribunal and, therefore, the existence of an efficacious alternative statutory remedy precludes exercise of writ jurisdiction. Having dismissed the connected intra court appeal which raised the Settlement Commission's order, the Court found no jurisdictional irregularity in the Commissioner's action. In the interests of justice and because the writ petitioner had delayed while related proceedings were pending, the Court permitted filing of an appeal to the CESTAT within 30 days and directed the CESTAT to entertain the appeal without going into limitation. [Paras 20, 21, 22]

The writ petition against the Commissioner's reassessment order was dismissed for availability of alternative remedy; liberty granted to file appeal to the CESTAT within 30 days and direction issued to CESTAT to entertain it despite limitation.

Final Conclusion: The High Court dismissed the intra court appeal upholding the Settlement Commission's finding of lack of true and complete disclosure and refusal to entertain settlement, and dismissed the writ against the Commissioner's reassessment order on the ground of alternative remedy while permitting an appeal to the CESTAT within a limited time and directing the Tribunal to waive limitation.

Anticipatory bail under Section 438 Cr.P.C. - cognizable and non-bailable offences - exercise of jurisdiction by Sessions Court - imminence of arrest and scope of pre-arrest relief - requirement of sufficient incriminating material to disturb bail order - conditions of bail including cooperation with investigation and surrender of passport

Anticipatory bail under Section 438 Cr.P.C. - imminence of arrest and scope of pre-arrest relief - requirement of sufficient incriminating material to disturb bail order - conditions of bail including cooperation with investigation and surrender of passport - Validity of the Sessions Court order granting anticipatory bail to the respondent - HELD THAT: - The Sessions Court had granted anticipatory bail after considering the material then before it and imposed conditions including cooperation with the inquiry and surrender of passport. The petitioner challenged that exercise of jurisdiction on the ground that no steps had been taken to arrest the respondent. The High Court found that the petitioner failed to produce any updated information or any incriminating material obtained during the continuing investigation that would justify disturbing the Sessions Court's order. The court noted that mere seriousness of the alleged offence or the respondent being a suspect, without fresh or sufficient evidence showing complicity, did not warrant setting aside a considered anticipatory bail order. The petitioner's casual and unsubstantiated pursuit of the challenge, and its inability to show any material that escaped the Sessions Court's notice, led the court to decline interference. The High Court left open the petitioner's right to oppose regular bail if and when prosecution is instituted after completion of investigation. [Paras 4, 5]

Petition challenging the anticipatory bail order dismissed; Sessions Court's grant of anticipatory bail upheld and petitioner may oppose regular bail if prosecution is instituted.

Final Conclusion: The High Court dismissed the petition and upheld the Sessions Court's anticipatory bail order as there was no fresh or sufficient incriminating material to disturb the order; the petitioner remains free to oppose regular bail upon institution of prosecution.

Valuation at point of removal - factory gate valuation - exemption notification relief limited to duty leviable - refund under Section 11B

Valuation at point of removal - factory gate valuation - Excise duty for the goods in question is to be levied on the value at the removal point (factory gate) and not at the consumers' entry point. - HELD THAT: - The Court affirmed the findings of the adjudicating authority and the First Appellate Authority that for applying the exemption notification the relevant value for levy of excise duty is the price of the goods at the removal point - the factory exit of the manufacturer - and not the customers' entry point. Consequently, freight and insurance charges included by the assessee in the value at the point of delivery cannot be treated as part of the excisable value at the removal point for purposes of the notification. The tribunal's confirmation of the Commissioner's conclusion on this legal position was upheld.

Assessed value for excise duty is the value at the point of removal (factory gate); inclusion of freight and insurance charged up to the customers' entry point is not permissible for levy under the notification.

Exemption notification relief limited to duty leviable - refund under Section 11B - Refund under the exemption notification is confined to excise duty that was 'leviable'; any excess duty appropriated by authorities beyond what was leviable must be sought and refunded through the regular statutory refund mechanism (Section 11B). - HELD THAT: - On construing the applicable exemption notification, the Court held that entitlement to refund under the notification extends only to the duty which was leviable in respect of goods manufactured within the notified area. Where the assessee has paid or the authorities have appropriated sums beyond the duty so leviable, such excess cannot be restored by invoking the notification; instead the excess should be pursued as a refund claim under the ordinary provisions of law, exemplified by treatment of the claim as one under Section 11B of the Central Excise Act, 1944. The Court therefore permitted the appellant to seek refund of any such excess through the regular refund channel rather than by the notification route.

Refund under the notification is limited to duty leviable; excess amounts appropriated must be recovered/refunded through the statutory refund procedure (Section 11B).

Final Conclusion: The appeal is disposed by affirming that valuation for excise is at the removal point (factory gate) and that the exemption notification refunds only duty that is leviable; any excess duty appropriated must be sought back under the ordinary refund provisions (Section 11B). No order as to costs.

Availability of CENVAT credit - benefit of more beneficial notification - conflict between concurrent exemption/ concessional notifications - no substantial question of law

Availability of CENVAT credit - benefit of more beneficial notification - Assessee entitled to claim CENVAT credit by availing the notification that is more beneficial where two concurrent notifications apply. - HELD THAT: - The Court held that where two exemption/concessional notifications equally cover the goods for the same period - one permitting availment of CENVAT credit and the other prohibiting it - the assessee is entitled to avail the benefit of the more beneficial notification. The judgment records that Notification No.02/2008-C.E. (permitting credit) was applicable for the period 07.07.2009 to 26.02.2010 and that the assessee claimed credit only after the anomalous position between the two notifications was removed by the Central Government on 27.02.2010. Relying on the Supreme Court precedent that an assessee may claim the benefit of the more beneficial notification when two notifications apply, the Court concluded that mere declaration in ER-1 under the other notification does not bind the assessee to the less favourable condition and does not preclude claiming credit under the notification that allows it, provided the conditions of that notification are otherwise satisfied. [Paras 10, 12, 13]

Claim for CENVAT credit was allowable in view of the applicability of the notification permitting credit and the settled principle that the assessee may choose the more beneficial notification.

Conflict between concurrent exemption/ concessional notifications - no substantial question of law - No substantial question of law arises warranting interference with the Tribunal's decision allowing the assessee's claim. - HELD THAT: - The Court found that the adjudicating authority itself admitted the applicability of Notification No.02/2008 for the period in question and that the assessee did not act with malafide in claiming credit only after the government's change removing the anomaly. The Court observed that the existence of overlapping notifications - one with a condition and another without - is a matter for the Central Government to rectify and does not, in the circumstances, give rise to a substantial question of law for this Court to consider. Having regard to the admitted factual position and settled authorities permitting choice of the more beneficial notification, the appeal by Revenue lacked merit. [Paras 10, 11, 14]

Revenue's appeal does not raise any substantial question of law and is liable to be dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal's order allowing the assessee to claim CENVAT credit (in light of the applicable notification permitting credit and the principle allowing claim of the more beneficial notification) is upheld.

Clarificatory amendment - retrospective effect of legislative amendment - treatment of supplies to a Special Economic Zone developer as export - application of Cenvat Credit Rules to supplies to SEZ developers - overriding effect of Special Economic Zones Act

Clarificatory amendment - retrospective effect of legislative amendment - treatment of supplies to a Special Economic Zone developer as export - application of Cenvat Credit Rules to SEZ developers - Amendment of Rule 6(6)(i) of the Cenvat Credit Rules, 2004 by substitution in 2008 is clarificatory, retrospective in effect, and its benefit extends to goods cleared to a developer of a Special Economic Zone for authorized operations. - HELD THAT: - The Court accepted the reasoning of the cognate bench in Commissioner of C. Ex. & S.T., Bangalore v. Fosroc Chemicals (India) Pvt. Ltd., holding that the substitution effected in Rule 6(6)(i) was intended to remove doubt by reading the words "to a developer of the SEZ for their authorized operation" into the original Rules. In light of the SEZ Act's scheme - including the deeming of SEZ territory as outside Customs territory for authorized operations and the statutory definition treating supplies from Domestic Tariff Area to a Unit or Developer as "export" - the amendment is to be construed as clarificatory and retrospective. The Court noted the legislative and administrative context, including the SEZ Act's provision overriding inconsistent laws and earlier circulars treating such supplies as in the nature of exports, and concluded that the amended Rule 6(6)(i) applies to supplies to SEZ developers from inception. The Tribunal's grant of relief to the assessee pursuant to that view was therefore upheld. [Paras 13, 14, 15, 16]

The amendment is clarificatory and retrospective; Rule 6(6)(i) as amended in 2008 applies to goods cleared to SEZ developers for authorized operations, and the appeal is dismissed.

Final Conclusion: The High Court, following the cognate-bench precedent, dismissed the Revenue's appeal holding that the 2008 substitution to Rule 6(6)(i) is clarificatory and retrospective and extends Cenvat benefit to supplies to SEZ developers for authorized operations; no substantial question of law is remitted for consideration.

Refund of CENVAT credit - deemed export - physical export - Rule 5 of Cenvat Credit Rules, 2004 - Section 11B(2)(c) of the Central Excise Act, 1944

Refund of CENVAT credit - deemed export - physical export - Rule 5 of Cenvat Credit Rules, 2004 - Section 11B(2)(c) of the Central Excise Act, 1944 - Refund under Rule 5 for supplies to a Mega Power Project treated as deemed exports for the period March 2015 to June 2015. - HELD THAT: - The appellant filed refund claims under Rule 5 of the Cenvat Credit Rules, 2004 for quarters including the period after 1.3.2015. Rule 5, as amended by Notification No.6/15-CE (NT) dated 1.3.2015, inserted Explanation 1(1A) defining "export goods" as goods "to be taken out of India to a place outside India", thereby limiting refund under Rule 5 to physical exports. Prior to the amendment, refunds were allowed for physical exports as well as deemed exports; the legislative amendment manifested intent to restrict refunds to physical exports and to exclude deemed exports thereafter. Section 11B(2)(c) enables refund of credit of duty paid on inputs "in accordance with the rules made, or any notification issued, under this Act". There is no inconsistency between Section 11B(2)(c) and the amended Rule 5: the parent statute contemplates refunds as governed by subordinate rules and notifications, and Rule 5 operates within that legislative mandate. The Tribunal, therefore, held that the amendment legitimately restricts refund to goods physically exported out of India and that Rule 5 does not conflict with or supplant Section 11B. Consequently, refund claims for deemed exports falling after the amendment (post 1.3.2015, i.e. March 2015 to June 2015 period) are not admissible under Rule 5. [Paras 10, 11, 12, 13, 23]

The refund claims in respect of deemed exports to the Mega Power Project for the period March, 2015 to June, 2015 are not admissible under Rule 5; Rule 5 is in harmony with Section 11B(2)(c).

Final Conclusion: The Tribunal dismissed the appeals and sustained the order of the Commissioner (Appeals), holding that after the amendment of Rule 5 by Notification No.6/15-CE (NT) dated 1.3.2015 refund under Rule 5 is restricted to physical exports and refunds for deemed exports for the period in question are not admissible; Rule 5 is consistent with Section 11B(2)(c) of the Act.

Manufacture - entitlement to Cenvat credit - reversal of Cenvat credit on clearances on payment of duty - application of Section 2(f) of Central Excise Act, 1944 read with Section VI of the Central Excise Tariff

Manufacture - entitlement to Cenvat credit - application of Section 2(f) of Central Excise Act, 1944 read with Section VI of the Central Excise Tariff - Whether the processes performed by the appellant on purchased CI castings amount to manufacture and consequently entitle the appellant to avail Cenvat credit on such inputs. - HELD THAT: - The appellant purchased raw CI castings and subjected them to processes including shot blasting, grinding, erasing, chipping, painting, oiling, proof machining and measuring before sale. The Tribunal found that these processes change the raw CI castings into a form usable by customers and thus alter the essential character of the input. Applying Section 2(f) of the Central Excise Act, 1944 read with the relevant entries in Section VI of the Central Excise Tariff, the activity was held to amount to manufacture. The Tribunal therefore concluded that denial of Cenvat credit on the ground that the activity did not amount to manufacture was unsustainable. [Paras 9]

The processes constitute manufacture; the appellant is entitled to Cenvat credit on the CI castings.

Reversal of Cenvat credit on clearances on payment of duty - entitlement to Cenvat credit - Whether payment of duty on clearance of CI castings by the appellant operates as reversal of Cenvat credit thereby addressing revenue's demand. - HELD THAT: - The Tribunal noted that the appellant had been clearing CI castings on payment of duty. Relying on the reasoning in the cited High Court precedent referred to by the parties, payment of duty on such clearances was treated as effectively reversing the Cenvat credit to the extent required. In view of that, the Tribunal observed that the Revenue's purpose of reversal is achieved by the duty-paid clearances and there was no merit in sustaining the demand that denied credit on the manufacturing finding. [Paras 10]

Payment of duty on clearances of CI castings amounts to reversal of Cenvat credit as required; no further denial of credit is warranted.

Final Conclusion: The impugned order denying Cenvat credit is set aside; appeal allowed with consequential reliefs, the activity being held to amount to manufacture and duty-paid clearances treated as reversal of credit as appropriate.

Dissolution of company upon scheme of amalgamation - penalty on juristic person - liability for central excise duty linked to goods manufactured and cleared - recovery of penalty from successor company

Liability for central excise duty linked to goods manufactured and cleared - Demand for duty along with interest - HELD THAT: - The Tribunal confirmed the demand together with interest. The order records that the Tribunal has considered the matter on merits and sustained the demand, leaving intact the duty liability but distinguishing it from the question of penalty recovery.

Demand along with interest is confirmed.

Dissolution of company upon scheme of amalgamation - penalty on juristic person - recovery of penalty from successor company - Whether the penalty imposed on the dissolved transferor company can be recovered from the successor (Havells India Limited) - HELD THAT: - The larger bench found that upon the scheme of amalgamation coming into effect the transferor company (M/s. Standard Electricals Ltd.) stood dissolved as a juristic person, which ends its existence. Since a penalty is imposed on a person (juristic or natural), the successor company cannot be fastened with the penalty liability of the dissolved transferor. Applying that principle, the Tribunal set aside recovery of the penalty from M/s. Havells India Limited.

Penalty imposed on M/s. Standard Electricals Limited cannot be recovered from M/s. Havells India Limited; recovery from the successor is set aside.

Final Conclusion: The appeal is disposed by confirming the duty demand with interest, and by setting aside any attempt to recover the penalty imposed on the dissolved transferor company from the successor company, M/s. Havells India Limited.

Litigation policy limiting appeals below Rs.20 Lakhs - substantial question of law - demand of interest - wrongly availed Cenvat credit - dismissal of revenue appeal

Litigation policy limiting appeals below Rs.20 Lakhs - substantial question of law - demand of interest - Whether the Revenue's appeals involving demand of interest and revenue below Rs.20 Lakhs should be entertained in view of the Department's litigation policy when no substantial question of law is shown. - HELD THAT: - The Tribunal applied the departmental litigation policy which instructs not to file or to withdraw appeals before the Tribunal where the amount in dispute is less than Rs.20 Lakhs and no substantial question of law is involved. The appeals concern a demand of interest arising from the claim that Cenvat credit was wrongly availed. The Appellate Representative for the Revenue contended that a question of law existed but did not identify or explain any specific substantial question of law to the bench. The Tribunal found that the case was fact-based and that no substantial question of law had been brought to its notice; accordingly the litigation policy requirement was satisfied and justified dismissal of the appeals filed by the Revenue. [Paras 1, 2, 3]

Appeals by the Revenue dismissed under the litigation policy as the amount in dispute is below Rs.20 Lakhs and no substantial question of law was shown in respect of the demand of interest.

Final Conclusion: The Tribunal dismissed the Revenue's appeals concerning demand of interest because the amount in dispute was below Rs.20 Lakhs and no substantial question of law was demonstrated, notwithstanding the Revenue's factual contention regarding Cenvat credit.

Cenvat credit admissibility - proof of receipt of goods - interpretation of delivery particulars in invoices - maintenance of records for Cenvat credit - Application of Rule 9(6) of the Cenvat Credit Rules, 2004

Cenvat credit admissibility - proof of receipt of goods - interpretation of delivery particulars in invoices - Denial of Cenvat credit on the ground that invoices stated "Delivery: Bansal Processing House" and, therefore, goods were allegedly not received by the appellant. - HELD THAT: - The Tribunal examined the invoices produced by the appellant and noted the description "Delivery: Bansal Processing House." The Revenue construed that notation to mean delivery to Bansal Processing House and non-receipt by the appellant. The appellant explained, and the invoices indicate, that the supplier maintained a godown at Bansal Processing House from which goods were delivered to the appellant. The appellant also produced Form 26 from the VAT department demonstrating that the goods crossed the Inter State Board and were received at the appellant's factory. On these materials the Tribunal found that mere recital of "Delivery: Bansal Processing House" on the invoices did not establish non-receipt by the appellant and was insufficient to deny Cenvat credit.

Impugned denial of Cenvat credit of Rs. 13,95,415/- on this ground is set aside and the credit is allowed.

Maintenance of records for Cenvat credit - Application of Rule 9(6) of the Cenvat Credit Rules, 2004 - Denial of Cenvat credit on the basis that the appellant did not maintain proper records as required under Rule 9(6) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal noted that the appellant had recorded the Cenvat credit in the Cenvat Credit Account on the strength of invoices. There is no prescribed statutory format for maintenance of account records contended by the Revenue. Given that the appellant had taken credit in their Cenvat Credit Account supported by invoices, the Tribunal held that this sufficed as maintenance of proper accounts for availing Cenvat credit. Consequently, the requirement invoked under Rule 9(6) to deny credit was not made out on the facts presented.

Impugned denial of Cenvat credit of Rs. 6,24,117/- for lack of proper records is set aside and the credit is allowed.

Final Conclusion: The appeal is allowed; the impugned order denying Cenvat credit for the period April 2006 to March 2008 is set aside and the credits challenged on the two grounds are restored with consequential relief, if any.

Validity of appellate order where adjudication is pending - effect of dropping adjudication proceedings on prior appellate action - classification of goods under Central Excise Tariff - admissibility of area based exemption subject to value addition norms

Validity of appellate order where adjudication is pending - effect of dropping adjudication proceedings on prior appellate action - Impugned order passed by the Commissioner (Appeals) while adjudication of the originating show cause notice was pending is not sustainable where the departmental proceedings have subsequently been dropped. - HELD THAT: - The Tribunal examined the record and found that the show cause notice dated 7.5.2014, which was the foundation of the proceedings reviewed by the Commissioner (Appeals), had not been adjudicated at the time the impugned appellate order was passed. An appellate order founded on an unadjudicated notice was therefore inappropriate. Further, the departmental proceedings initiated by that show cause notice were subsequently dropped by the Commissioner (Appeals) (as recorded in the proceedings challenged), which reinforced that the impugned order could not stand. In these circumstances the proper course was to set aside the impugned order and grant consequential relief to the appellant rather than permit an appellate determination predicated on an inadmissible foundation to remain effective. [Paras 5]

Impugned order set aside and appeal allowed with consequential relief because the appellate order was passed despite the originating show cause notice not being adjudicated and the proceedings having been dropped.

Final Conclusion: The appeal is allowed: the Commissioner (Appeals) order dated 6.7.2015 is set aside as unsustainable since it was rendered while the originating show cause notice had not been adjudicated and the proceedings were subsequently dropped; consequential relief, if any, to be granted.

Remand for de novo adjudication - principles of natural justice - opportunity of personal hearing - setting aside an order for want of defence - remand of co-noticees' penalty proceedings

Principles of natural justice - opportunity of personal hearing - setting aside an order for want of defence - Impugned adjudication passed without affording the appellants a proper opportunity to put forth their defence was to be set aside and matter remanded for fresh adjudication. - HELD THAT: - The Tribunal found that although dates of personal hearing were fixed and communicated, the appellants had requested that proceedings be kept in abeyance pending a review petition before the High Court. The adjudicating authority proceeded to decide the matter without accepting that request and without any substantive defence being placed on record. In view of the absence of an effective opportunity to be heard, the impugned order cannot stand. The Tribunal accordingly set aside the impugned order and remanded the matter to the adjudicating authority for de novo consideration after affording a proper opportunity to the appellants to present their defence. [Paras 5]

Impugned order set aside and matter remanded for fresh adjudication after affording proper opportunity to the appellants.

Remand of co-noticees' penalty proceedings - remand for de novo adjudication - Penalties imposed on co-noticees were remanded for reconsideration along with the main adjudication. - HELD THAT: - Since the main appellant's adjudication was remanded for fresh consideration, the Tribunal also remanded the appeals of the co-noticees in respect of penalties so that all related issues can be raised and decided afresh before the adjudicating authority. The co-noticees are permitted to raise the contentions previously urged before the Tribunal during the rehearing. [Paras 5]

Penalties on co-noticees remanded for fresh consideration along with the main matter.

Final Conclusion: All appeals allowed by remand; impugned order set aside and matter remitted for de novo adjudication with directions to afford proper opportunity to the appellants; adjudication to be completed preferably within three months and parties to cooperate.

SSI exemption limit - classification of clearances as manufactured or traded - bona fide belief - penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation of seized goods

Classification of clearances as manufactured or traded - SSI exemption limit - Part of the demand based on inclusion of traded goods' clearances in the assessee's manufactured clearances was not sustainable and was set aside. - HELD THAT: - The Tribunal noted that the Revenue had taken into account clearances attributable to trading activity while treating all clearances as the assessee's own manufactured goods. Having regard to an earlier final order in the same assessee's case and the submissions of the parties, the Tribunal held that the portion of the impugned order which confirmed demand by including traded clearances could not be sustained and therefore set aside that part of the order and the consequent confirmation of demands arising from traded clearances. [Paras 6, 7]

The confirmation of demand insofar as it arose from traded clearances is set aside.

SSI exemption limit - bona fide belief - penalty under Rule 26 of the Central Excise Rules, 2002 - Duty liability for clearances of the assessee's own manufactured goods after crossing the SSI exemption limit was upheld; penalty on that count was sustained. - HELD THAT: - The Tribunal accepted the appellants' concession that clearances of their own manufactured goods exceeded the exemption limit and confirmed duty to that extent. The period of overreach (2006-07 to 2011-12) and prolonged non-payment of duty led the Tribunal to reject the plea of bona fide belief. The Tribunal observed that as beneficiaries of the SSI exemption the assessee ought to have been aware of the aggregate limit and taken steps to disclose or pay duty upon crossing it; accordingly the demand of duty of Rs. 18,75,963/- was upheld and the penalty relating to that count was maintained. [Paras 4, 8, 9]

Demand of duty on manufactured clearances is upheld and penalty on that count is sustained.

Confiscation of seized goods - penalty under Rule 26 of the Central Excise Rules, 2002 - Confiscation of finished goods and raw material and penalties imposed on individuals were set aside. - HELD THAT: - Although the manufacturing unit was held liable for duty and penalty on its own manufactured clearances, the Tribunal found that separate penalties on individual officers and confiscation of seized finished goods and raw material were not justified in the circumstances. Accordingly, the confiscation order and penalties imposed on the individual persons were vacated while liability of the manufacturing unit for duty and related penalty on the confirmed count was left intact. [Paras 1, 9]

Confiscation of seized goods and individual penalties are set aside.

Final Conclusion: Appeals allowed in part: the demand insofar as based on traded clearances, confiscation of goods and penalties on individuals are set aside; the demand of duty of Rs. 18,75,963/- in respect of the assessee's own manufactured clearances and the penalty on that count are upheld.

Clubbing of clearances - SSI exemption benefit - merger of show cause notice into order-in-original - invalidity of addendum issued after withdrawal of order-in-original

Merger of show cause notice into order-in-original - invalidity of addendum issued after withdrawal of order-in-original - Validity of an Addendum to a Show Cause Notice issued after the earlier Order-in-Original (originating from that SCN) was withdrawn by the Revenue before the Supreme Court - HELD THAT: - The Tribunal held that the earlier Show Cause Notice had merged with the Order-in-Original pronounced on its adjudication. Once the Revenue withdrew that Order-in-Original before the Supreme Court, nothing survived of the adjudication or the merged SCN for fresh proceedings. Consequently, an Addendum issued later - incorporating names of parties who were not originally served with the SCN and which sought adjudication afresh on the basis of the prior SCN - could not stand as lawful adjudication. The Tribunal applied the same reasoning as adopted in an identical set of cases where the earlier Order-in-Original had been withdrawn and the subsequent Addendum-based adjudication was set aside; following that view, the impugned confirmations of demand and penalties founded on the Addendum were held to be without legal sanction. [Paras 5, 6]

Impugned order confirming demands and imposing penalties (based on the Addendum) set aside; appeals allowed and consequential relief granted.

Final Conclusion: The Tribunal set aside the confirmation of demands and penalties imposed pursuant to the Addendum issued after withdrawal of the earlier Order-in-Original, allowing the appeals and granting consequential relief.

Declaration in Form F - directory versus mandatory construction of statutory provisions - burden of proof in transfers otherwise than by way of sale - acceptance of annexures with Form F - distinction between Form F declarations and Forms C/D for concessional tax - precedential weight of judicial interpretation

Declaration in Form F - directory versus mandatory construction of statutory provisions - acceptance of annexures with Form F - Validity and effect of a single Form F covering stock/branch transfers for periods exceeding one calendar month under Rule 12(5) of the CST (R & T) Rules, 1957 - HELD THAT: - The Court examined Rule 12(5) which provides that the declaration under Section 6A shall be in Form F and contains a proviso that a single declaration may cover transfers effected during a period of one calendar month. The court held that the use of the permissive term "may" renders the first proviso directory rather than mandatory and that the second proviso permits furnishing particulars by annexure forming part of Form F. Consequently, a Form F covering transfers beyond one calendar month cannot be invalidated solely on that ground. The tribunal correctly relied on the Calcutta High Court decision in Cipla Limited and the Supreme Court's treatment of the word "may" in P.K. Noorjahan to construe Rule 12(5) as conferring procedural flexibility; the essential burden of proof under Section 6A remains on the dealer and acceptance of the declaration depends on inquiry and satisfaction of the assessing authority, not on literal compliance with the one-calendar-month phrasing. [Paras 7, 8]

Single Form F declarations covering periods beyond one calendar month and annexures thereto may be accepted for claiming exemption under Section 6A; Rule 12(5) is directory and non-compliance with the one-month proviso alone does not invalidate the declaration.

Burden of proof in transfers otherwise than by way of sale - distinction between Form F declarations and Forms C/D for concessional tax - Effect of filing Form F on tax liability and the role of assessing authority's inquiry under Section 6A of the CST Act - HELD THAT: - The Court reiterated that Section 6A places the burden on the dealer to prove that interstate movement was by way of transfer and not sale, and that filing of Form F supplies particulars in support of that claim. However, taxability is not conclusively determined by mere filing of Form F; the assessing authority must hold an inquiry and be satisfied on the facts. The Court further noted the legal and functional distinction between Form F (declaration for transfers otherwise than by sale) and Forms C/D (which enable concessional tax treatment for sales), and observed that availability of exemption under Section 6A does not hinge solely on procedural compliance with the first proviso of Rule 12(5). [Paras 4, 5, 8]

Filing of Form F is evidentiary of the dealer's claim but does not automatically determine tax liability; the assessing authority's inquiry under Section 6A is required, and Form F operates differently from Forms C/D used for concessional sales treatment.

Precedential weight of judicial interpretation - Whether the Appellate Tribunal erred in following precedents construing Rule 12(5) - HELD THAT: - The High Court found that the Tribunal's reliance on the Calcutta High Court decision in Cipla Limited and the Supreme Court's pronouncement in P.K. Noorjahan was warranted. Those authorities supported a permissive/directory reading of Rule 12(5) and the exercise of discretion where the form covers transactions beyond one calendar month. The High Court found no reason to take a different view and concluded that no substantial question of law arose for interference with the Tribunal's order. [Paras 6, 7]

The Tribunal correctly followed binding and persuasive precedent in construing Rule 12(5); its conclusion was sustained.

Final Conclusion: The revision petitions are dismissed; the High Court affirms that Rule 12(5) is directory, Form F declarations (including those covering periods beyond one calendar month and accompanied by annexures) can be accepted subject to assessment inquiry under Section 6A, and no substantial question of law arises to disturb the Tribunal's order.

Summary order. Delay condoned; Special Leave Petition dismissed as no legal or valid ground for interference was found.

Reopening of assessment / reassessment under Section 29(7) of the Uttar Pradesh Value Added Tax Act, 2008 - effect of appellate order deciding on merits on subsequent reassessment proceedings - allowing appeal on merit and limitation - continuance of appellate remedy and pendency of departmental appeal before Tribunal

Reopening of assessment / reassessment under Section 29(7) of the Uttar Pradesh Value Added Tax Act, 2008 - effect of appellate order deciding on merits on subsequent reassessment proceedings - continuance of appellate remedy and pendency of departmental appeal before Tribunal - Validity of the impugned order dated 17th June, 2017 granting permission for reassessment for A.Y. 2011-12 under Section 29(7) of the Act after an appellate authority had set aside the assessment on merits as well as on limitation, and while the Department's appeal to the Tribunal was pending. - HELD THAT: - The appellate authority's order dated 31st December, 2016 allowed the petitioner's appeal both on merit and on the ground of limitation. The show-cause notice and the impugned order wrongly proceeded on the premise that the appellate order succeeded only on limitation, which is contrary to the appellate record. Given that the appellate authority decided the matter on merits as well as limitation, the Department could not legitimately invoke proceedings under Section 29(7) to reopen the assessment for the same period. The existence of a departmental appeal to the Tribunal against the appellate order does not validate the impugned permission to reassess where the appellate authority has already addressed the merits; accordingly, the impugned order cannot be sustained. [Paras 10, 11]

Impugned order dated 17th June, 2017 under Section 29(7) is set aside and reassessment permission quashed.

Final Conclusion: Writ petition allowed; the order dated 17th June, 2017 granting permission for reassessment for A.Y. 2011-12 is quashed.

Attachment and sale of property to realize tax dues - lifting of attachment upon deposit - auction of attached properties by tax department - breach of undertaking and contempt - dismissal of application as withdrawn

Dismissal of application as withdrawn - lifting of attachment upon deposit - Application seeking modification of earlier order and direction to lift attachment on agricultural land was not pressed and dismissed as withdrawn; prior court directions remain enforceable. - HELD THAT: - The applicants sought modification of the order dated 28.03.2017 permitting sale of the agricultural land and lifting of attachment on deposit of a stipulated amount. At the hearing the applicants' counsel informed the Court that the proposed purchaser was not willing to proceed and therefore the application was not pressed. The Court recorded that the indulgence previously shown had been misused, the undertakings given were not complied with, and the applicants have not acted in terms of the earlier order. Consequently the present application was dismissed as withdrawn and the prior directions regarding lifting of attachment upon deposit (as contained in the order dated 28.03.2017) remain in the record and enforceable.

Present application dismissed as withdrawn; earlier order's terms remain effective.

Attachment and sale of property to realize tax dues - auction of attached properties by tax department - breach of undertaking and contempt - Court directed the Department to put attached properties (except the property subject to a separate proceeding) to public auction within a fixed period to realize dues and preserved the Department's right to initiate contempt proceedings for breach of undertakings. - HELD THAT: - The Court found that substantial dues remain outstanding to the VAT/Entry Tax Department and that the undertakings given by the petitioners and co-owners were not honored. Noting that the previously proposed purchaser would not proceed, the Court ordered that the properties under attachment, except the property which is the subject matter of SCA No.11249 of 2018, shall continue under attachment and be sold by public auction by the Department to realize the dues. The sale consideration recovered is to be appropriated towards the Department's dues. The Court directed that the auction be completed at the earliest and not later than four months from the date of the order, and expressly left open the Department's right to initiate appropriate contempt proceedings for breach of the undertakings given in SCA No.2173 of 2017.

Department to auction attached properties (except property at Sr. No.3) within four months and appropriate sale proceeds towards dues; attachment to continue until then; right to pursue contempt preserved.

Final Conclusion: The application for modification of the earlier order was dismissed as withdrawn; the attached properties (other than the one subject to a separate proceeding) shall remain under attachment and be sold by public auction by the Department within four months to realize dues, with proceeds appropriated towards the Department and reservation of the Department's rights to seek contempt proceedings for breach of undertakings.

Forfeiture of gratuity - right to better terms under contract or award - interpretation of terms in statutory non-obstante clause - forfeiture to extent of loss - forfeiture for offence involving moral turpitude - requirement of conviction for forfeiture under Section 4(6)(b)(ii)

Forfeiture of gratuity - forfeiture not automatic on dismissal - sub-Sections (5) and (6) of Section 4 - Forfeiture of gratuity is not automatic on dismissal from service; it is governed by the provisions of Section 4(5) and Section 4(6) of the Payment of Gratuity Act, 1972. - HELD THAT: - The Court held that dismissal alone does not operate to forfeit gratuity. The statutory scheme must be applied: sub-Section (5) is an overriding provision giving an employee the right to choose better terms under a contract or award, and sub-Section (6) prescribes the limited circumstances and manner in which gratuity may be forfeited. Consequently, forfeiture cannot be treated as an automatic consequence of dismissal but only in conformity with the conditions laid down by Section 4(5) and Section 4(6). [Paras 22]

Forfeiture of gratuity is not automatic on dismissal; it is subject to Section 4(5) and Section 4(6) of the Act.

Right to better terms under contract or award - interpretation of terms in statutory non-obstante clause - bipartite settlement governing forfeiture - Where a contract or bipartite settlement provides better or different terms regarding forfeiture of gratuity, those terms must be given effect and an employee must choose between the statute and the contract as a whole. - HELD THAT: - The Court rejected the Bank's submission that sub-Section (5) deals only with quantum and not entitlement or other terms. Relying on precedent, the word 'terms' in Section 4(5) ordinarily means all the terms of the contract; an employee cannot selectively adopt parts of the statute and parts of the contract. The Bank's bipartite settlement expressly limits forfeiture to cases where misconduct causes financial loss to the Bank and only to that extent. In the absence of any claim of loss, the respondent is entitled to the protection of the bipartite settlement. [Paras 10, 12, 13, 14, 15]

The bipartite settlement's term limiting forfeiture to cases of financial loss prevails as a better term; the employee is entitled to choose that contract term over the statute.

Forfeiture for offence involving moral turpitude - requirement of conviction for forfeiture under Section 4(6)(b)(ii) - criminal character of offence - Forfeiture under Section 4(6)(b)(ii) is permissible only where the act constituting an offence involving moral turpitude is such an offence under law and is established by conviction of the employee by a court of competent jurisdiction. - HELD THAT: - The Court explained that sub-Section (6)(b)(ii) applies only when the termination is for an act which constitutes an offence involving moral turpitude. 'Offence' means an act made punishable by law, and it is for the criminal process and courts, not the employer, to determine commission of an offence. In the present case the Bank had not initiated criminal proceedings nor was there any conviction; therefore forfeiture on the ground that the misconduct 'amounts to acts involving moral turpitude' was unjustified. [Paras 17, 18, 19, 20]

Forfeiture under Section 4(6)(b)(ii) requires an offence under law and conviction; absent initiation of criminal proceedings and conviction, forfeiture cannot be sustained on that ground.

Forfeiture to extent of loss - operation of Section 4(6)(a) - Under Section 4(6)(a) gratuity may be forfeited only to the extent of damage or loss caused to the employer and such loss must be quantified. - HELD THAT: - The Court noted that sub-Section (6)(a) operates in a different field from sub-Section (6)(b) and permits forfeiture only to the extent of the damage or loss caused by the employee's act, wilful omission or negligence. The disciplinary authority must quantify such loss; absent a case by the Bank that financial loss was caused and quantified, forfeiture under sub-Section (6)(a) cannot be invoked. [Paras 16, 19]

Forfeiture under Section 4(6)(a) is limited to quantified damage or loss caused to the employer; without proof and quantification of loss forfeiture cannot be sustained.

Final Conclusion: The appeal fails. Forfeiture of gratuity is not automatic on dismissal and must comply with Section 4(5) and Section 4(6) of the Payment of Gratuity Act; in view of the bipartite settlement and absence of proven or convicted offence or quantified loss, the respondent is entitled to gratuity. Appeal dismissed; no costs.