TaxTMI Updates e-Newsletter
Aug 30,2019

Interpretation of exemption notification - charitable activities exemption - strict construction of tax exemption - agricultural extension service - service classification (SAC 9992) - composite supply - classification of goods (CTH 05.11 vs CTH 23.09 vs CTH 03) - advance ruling - scope and binding effect

Charitable activities exemption - Interpretation of exemption notification - strict construction of tax exemption - composite supply - Whether the appellant is wholly exempt from GST by virtue of registration under Section 12AA of the Income Tax Act and entries at Sl. No. 1/Notification No.12/2017-C.T.(Rate) - HELD THAT: - Sl. No.1 of Notification No.12/2017-C.T.(Rate) grants exemption only for "services by an entity registered under Section 12AA... by way of charitable activities" and defines "charitable activities" (inter alia) as relating to preservation of environment including watershed, forests and wildlife. Exemption notifications are to be strictly construed and ambiguities resolved in favour of revenue; the burden lies on the claimant to show applicability. The appellant's varied R&D, testing, training and supplies do not, on the material before the Authority, fall within preservation of environment including watershed, forests or wildlife. The appellant's mission statement and Section 12AA registration do not automatically extend the exemption to all its activities. Further, the supplies are discrete stand-alone supplies to diverse recipients and are not a naturally bundled composite supply under Section 8(a). Consequently the exemption at Sl. No.1 does not apply to the appellant's entire activities and the appellant is liable to register under GST if otherwise meeting statutory thresholds. [Paras 10]

The exemption under Sl. No.1 of Notification No.12/2017-C.T.(Rate) is not applicable to all supplies of the appellant; the appellant is not wholly exempt and is required to register under GST subject to other statutory conditions.

Agricultural extension service - Interpretation of exemption notification - Whether the research and development activities imported/undertaken by the appellant fall within "agricultural extension service" and are exempt under Sl. No.54 of Notification No.12/2017-C.T.(Rate) - HELD THAT: - The notification defines "agricultural extension" as application of scientific research and knowledge to agricultural practices through farmer education or training. The appellant's imported R&D (research and experimental development in agricultural sciences; SAC 998114) involves technology development and does not itself amount to farmer education or training. Explanatory notes counsel preferring a more specific description (R&D under SAC 998114) over a general one. Reliance on earlier orders where appeals were withdrawn does not alter the legal scope of the exemption. Accordingly, the R&D activities are not covered by Sl. No.54 and are not exempt under that entry. [Paras 11]

The appellant's research and development activities are not agricultural extension services under the notification and are not exempt under Sl. No.54.

Agricultural extension service - Whether the testing services carried out by the appellant qualify as agricultural extension services exempt under Sl. No.54 of Notification No.12/2017-C.T.(Rate) - HELD THAT: - Entry No.54 exempts services relating to cultivation and rearing by way of, inter alia, agricultural extension, which the notification defines as application of scientific research and knowledge through farmer education or training. The appellant's testing activities (pathogen testing, chemical analysis, gene sequencing) are services provided to farmers for consideration and do not, in themselves, involve farmer education or training. Therefore, they fall outside the defined concept of agricultural extension and do not attract the exemption under Sl. No.54. [Paras 12]

The testing services are not agricultural extension services as defined and are not exempt under Sl. No.54.

Service classification (SAC 9992) - Whether the training activities provided by the appellant to students, academia and others are taxable and correctly classified under SAC 9992 - HELD THAT: - Education and training services are grouped under SAC 9992 and the Rate Notification prescribes the rate at the section/head level. The appellant's training to students, academia, self-help groups for consideration constitutes education/training services within SAC 9992; even if not fitting a particular six-digit subheading (e.g., 999293 commercial training), it remains classifiable under the group (e.g., 999294) and taxable at the rate specified for SAC 9992. The activity does not qualify as agricultural extension where it is not directly provided to farmers as farmer education or training. [Paras 13]

The training activities fall under SAC 9992 and are taxable at the rates specified for that section (held by the original authority).

Classification of goods (CTH 05.11 vs CTH 23.09 vs CTH 03) - Whether Artemia cyst is classifiable under CTH 05.11 (animal products not elsewhere specified) or under CTH 23.09 (animal feeding stuffs) or CTH 03 - HELD THAT: - Chapter notes and HSN explanatory notes must be applied. Chapter 3 excludes fish/crustaceans dead/unfit for human consumption (Chapter 5) and tariff heading 0306 covers crustaceans fit for human consumption only; CTH 23.09 requires materials obtained by processing to such an extent that essential characteristics are lost. The Artemia cysts supplied are fertilized eggs/embryos which, upon incubation, yield nauplii but do not lose the essential characteristics of the original material; HSN and chapter notes identify fertile eggs for hatching and inedible fish eggs among items covered by heading 05.11. Judicial and statutory developments (including exemption/ customs notifications under the post GST regime) also identify Artemia cyst under 05.11. On this basis, the original authority's classification under CTH 05.11 is sustained. [Paras 14]

Artemia cyst is correctly classifiable under CTH 05.11; the ruling of the Advance Ruling Authority on classification is upheld.

Final Conclusion: The Appellate Authority finds no infirmity in the Advance Ruling: the appellant is not wholly exempt under Sl. No.1 of Notification No.12/2017 and is liable to register if taxable supplies are made; the R&D and testing activities do not qualify as "agricultural extension services" under Sl. No.54 and are not exempt; training to students/academia is within SAC 9992 and taxable at the prescribed rate; and Artemia cyst is classifiable under CTH 05.11. The appeal is dismissed.

Preparations of a kind used in animal feeding - Oil-cake and other solid residues resulting from extraction of ground nut oil - General rules for interpretation of the Customs Tariff (applied to GST Tariff) - Products which have lost the essential characteristics of the original material - Exemption under Notification No. 2/2017 - Central Tax (Rate) / Integrated Tax (Rate)

Preparations of a kind used in animal feeding - Oil-cake and other solid residues resulting from extraction of ground nut oil - General rules for interpretation of the Customs Tariff (applied to GST Tariff) - Products which have lost the essential characteristics of the original material - Exemption under Notification No. 2/2017 - Central Tax (Rate) / Integrated Tax (Rate) - Classification of the product 'Cattle feed in cake form' and its entitlement to exemption under the notifications specified. - HELD THAT: - The product is manufactured by pulverising groundnut oil cake and separately pulverising rice fractions, then combining these with jaggery, salt and water, allowing the mixture to condense into a solid form and steaming it into cake form. The manufacturing process and test reports show that the final product is not merely groundnut oil cake residue but a compounded preparation containing multiple ingredients and having different compositional characteristics from the raw groundnut oil cake. Applying the General Rules for the interpretation of the Customs Tariff (as made applicable to the GST Tariff) and having regard to the Chapter Notes, Chapter Heading 23.09 covers products obtained by processing vegetable materials to such an extent that they have lost the essential characteristics of the original material and are used in animal feeding. The product in question falls within that description and is correctly classifiable as a compounded animal feed under tariff item 23099010. As such classification is established, the product is covered by the exemptions notified at Sl. No. 102 of Notification No. 2/2017 (Central Tax (Rate)) and the corresponding entries for Integrated Tax (Rate) for interstate supplies, as amended. [Paras 4, 5, 7]

The product 'Cattle feed in cake form' is classifiable under Chapter Heading 23099010 as compounded animal feed and is exempted under the cited Notifications for intra state and inter state supplies.

Final Conclusion: The Authority rules that the applicant's 'Cattle feed in cake form' is a compounded animal feed (23099010) and is exempt from tax under the relevant entries of Notification No. 2/2017 (Central and Integrated Tax (Rate)) as amended.

Time of supply - supply - agreeing to tolerate an act - classification of services

Time of supply - supply - agreeing to tolerate an act - Liability to GST of amounts received on or after 01.07.2017 towards interest, late fee and penalty relating to services of lease/rent rendered before 01.07.2017. - HELD THAT: - The original lease/rent services for which invoices were issued before 01.07.2017 have their time of supply (and hence tax liability) determined by Section 13(2)(a), so the original services are not covered under GST. However, the collection of interest/late fee/penalty for delayed payment is a separate act of tolerating delayed performance and constitutes a distinct supply of service under Section 7(1)(a). The Explanatory Notes classify such activity under 'Other miscellaneous services' and specifically as 'Agreeing to tolerate an act' (999794). In the present case separate Rent Claim Advance (RCA) invoices were raised and consideration for the tolerance was received only after 01.07.2017; therefore the time of supply for this separate service is governed by Section 13 and, on the facts, falls after 01.07.2017. Consequently, these receipts are taxable under GST.

Amounts received on or after 01.07.2017 as interest, late fee or penalty for delayed payment of lease/rent (relating to services rendered before 01.07.2017) constitute a separate supply and are liable to GST.

Final Conclusion: Advance Ruling: Receipts of interest, late fee and penalty received on or after 01.07.2017 in respect of tolerance of delayed payment for lease/rent services rendered before 01.07.2017 are taxable as a separate supply under the GST law.

Classification of goods - preparations of a kind used in animal feeding - oil-cake and other solid residues - General Rules for interpretation of the Customs Tariff - loss of essential characteristics of original material - exemption under Notification No. 2/2017

Classification of goods - preparations of a kind used in animal feeding - oil-cake and other solid residues - loss of essential characteristics of original material - Classification of the product 'Cattle feed in cake form' as between CTH 2305 and CTH 2309. - HELD THAT: - The product is manufactured by combining groundnut oil cake with broken rice, jaggery, salt and water, condensing and steaming the mixture into a cake. Applying the General Rules for interpretation of the Customs Tariff (as made applicable to GST tariff), Chapter Note 23.09 covers preparations used in animal feeding obtained by processing vegetable materials to such an extent that they have lost the essential characteristics of the original material. The applicant's product is not merely groundnut oil cake or a mere reformation of that residue but a compounded feed in which constituent proportions, test reports (showing differing composition from raw groundnut oil cake) and commercial identification (invoices describing the product as 'Cattle feed') demonstrate processing sufficient to alter the essential characteristics of the original material. On this basis the product falls within Chapter Heading 2309 as a 'compounded animal feed' (2309 90 10) rather than under 2305. [Paras 5]

The product is classifiable under Chapter Heading 23099010 as a compounded animal feed.

Exemption under Notification No. 2/2017 - classification of goods - Whether the product so classified is exempt from tax under the notifications relied upon by the applicant. - HELD THAT: - Having classified the product as 'compounded animal feed' under CTH 23099010, the Authority examined the scope of the relevant notifications. The compound animal feed (2309 90 10) is covered by the exemption entries cited by the applicant. Consequently, intra-state supplies fall under the specified entries of Notification No. 2/2017 - Central Tax (Rate) and its State counterpart, and interstate supplies are covered under the corresponding Integrated Tax notification. [Paras 5, 7]

The product, being classifiable under 23099010, is exempt as per the entries in Notification No. 2/2017 (Central and Integrated Tax) and the corresponding State notifications.

Final Conclusion: The Authority rules that 'Cattle feed in cake form' manufactured by the applicant is classifiable under CTH 23099010 as compounded animal feed and is exempt from tax under the cited Notifications.

Composite supply - principal supply - tax liability of a composite supply under Section 8 - goods transport agency (GTA) service - food preparations put up in unit containers intended for free distribution - unit price inclusive of transportation as part of contract price

Composite supply - principal supply - unit price inclusive of transportation as part of contract price - Supply of Complementary Weaning Food Containing Amylase Activity together with delivery to specified ICDS centers is a composite supply and the principal supply is the food product. - HELD THAT: - The bid document and the agreement require the supplier to deliver specified quantities to designated Anganwadi centres across the State, prohibit assignment or sub letting, and make payment contingent on delivery and stock entry verification at each centre. The unit price per MT quoted in the bid is arrived at after including separately identified components such as 'Transportation- Factory to Block/Project' and 'Transportation- Block/Project to Center', and evaluation expressly includes inland transportation to final destinations. The contractual allocation of a fixed transportation component and the obligation on the supplier to effect delivery as part of the contract establish that transportation is bundled with the supply of food in the ordinary course of business. Applying the definition of composite supply and principal supply, the delivery obligation is naturally bundled with the supply of the food and the predominant element is the supply of the food product; accordingly the combined transaction constitutes a composite supply with the food as the principal supply. [Paras 6, 8]

The supply of the food together with delivery to the designated centres is a composite supply and the principal supply is the Complementary Weaning Food Containing Amylase Activity.

Tax liability of a composite supply under Section 8 - food preparations put up in unit containers intended for free distribution - The rate of GST on the composite supply (food plus delivery) is 2.5% CGST and 2.5% SGST, subject to fulfillment of the conditions of the relevant notifications. - HELD THAT: - Section 8 directs that a composite supply comprising a principal supply be treated as supply of that principal supply for tax determination. The product falls within the notification entry for 'food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central or State Government', and the applicant has produced certificates required by the notification. Therefore, the notified concessional rate applies to the entire composite supply, subject to satisfaction of the conditions specified in the notifications. [Paras 8, 9]

The composite supply is taxable at 2.5% CGST and 2.5% SGST, subject to compliance with the conditions of the cited notifications.

Goods transport agency (GTA) service - composite supply - The transportation/delivery component, when bundled into the composite supply of food to ICDS centres under the contract, is not to be treated separately as a Goods Transport Agency service for taxation purposes. - HELD THAT: - Because the contract creates a single composite supply where delivery is an integral, contracted obligation of the supplier and the unit price includes a fixed transportation component, the transaction cannot be split to treat the transportation portion independently as a GTA service. Once classified as a composite supply with the food as principal supply, the transportation element is subsumed for tax determination under Section 8 and need not be examined separately as a GTA supply. [Paras 8, 9]

Transportation/delivery in the present contract is not a GTA service but forms part of the composite supply.

Composite supply - This Authority will not prescribe the manner in which invoices for the composite supply must be raised. - HELD THAT: - Although the applicant has been issuing separate invoices for the product and for transportation for accounting purposes, the determination that the transaction is a composite supply does not entail prescribing invoice format or billing mechanics. The contract and delivery conditions determine the nature of supply; the Authority confines itself to classification and rate determination and cannot mandate specific invoice practices for the parties. [Paras 8, 9]

The Authority does not specify how invoices are to be raised for the composite supply.

Final Conclusion: The Authority rules that the supply of Complementary Weaning Food Containing Amylase Activity with delivery to the specified ICDS centres is a composite supply (principal supply: the food); the entire composite supply is taxable at 2.5% CGST and 2.5% SGST subject to the conditions of the relevant notifications; the transportation component is not to be treated as a separate GTA service; and the Authority will not dictate the invoicing format for the composite supply.

Eligibility to take input tax credit under Section 16 - Blocked input tax credit for goods used for personal consumption (Section 17(5)(g)) - In-house hospital supplies provided free of charge to employees and pensioners

Eligibility to take input tax credit under Section 16 - Blocked input tax credit for goods used for personal consumption (Section 17(5)(g)) - In-house hospital supplies provided free of charge to employees and pensioners - Entitlement of the applicant to claim input tax credit on inward supply of medicines supplied free of charge to employees, pensioners and their dependents through the applicant's in house hospital. - HELD THAT: - The applicant operates an in house hospital that provides medical treatment, medicines and related services free of charge to employees, pensioners and their dependents pursuant to regulations under the Major Port Trusts Act. Section 16 permits input tax credit where inputs are used in the course or furtherance of business, subject to restrictions; Section 17(5)(g) bars credit for goods or services used for personal consumption. The Authority found that medicines supplied in the in house hospital are consumed by employees and dependents for personal use notwithstanding that the applicant bears the cost or that provision is mandated by service rules. The method of funding (employer payment) does not alter the character of the use as personal consumption. Consequently, the inward supplies of medicines fall within the blocked category under Section 17(5)(g) and cannot be claimed as input tax credit under Section 16. [Paras 8, 9]

Input tax credit on inward supplies of medicines used to provide medical facilities to employees, pensioners and dependents in the in house hospital is not available to the applicant.

Final Conclusion: The Advance Ruling holds that the applicant is not entitled to claim input tax credit on medicines procured for use in its in house hospital for employees, pensioners and their dependents because such supplies are for personal consumption and therefore blocked under Section 17(5)(g).

Input Tax Credit - in the course or furtherance of business - blocked credit for goods or services used for personal consumption under Section 17(5)(g) - eligibility and conditions for taking input tax credit under Section 16(1)

Input Tax Credit - blocked credit for goods or services used for personal consumption under Section 17(5)(g) - in-house hospital maintained for employees and pensioners - Entitlement to input tax credit on inward supplies (medical and diagnostic equipment, apparatus, instruments, consumables, disposables, spares and repairing services) used in the applicant's in house hospital for employees, pensioners and their dependents. - HELD THAT: - The Authority noted that the in house hospital is maintained exclusively for employees, pensioners and dependents and that all medical treatment, medicines and related services are provided free of charge in discharge of obligations under regulations made under the Major Port Trusts Act. The decisive legal test is the use of the inward supplies: goods and services used for personal consumption fall within the block in Section 17(5)(g). The fact that the applicant pays for those supplies or that the hospital is a cost centre does not alter their character as supplies used for personal consumption by employees, pensioners and dependents. Consequently, such inward supplies do not qualify as being used in the course or furtherance of the applicant's business for purposes of claiming input tax credit under Section 16(1), and are excluded by the statutory bar in Section 17(5)(g).

The applicant is not entitled to take input tax credit on the specified inward supplies used to provide medical facilities to employees, pensioners and dependents in the in house hospital.

Final Conclusion: Advance Ruling: Input tax credit is denied for inward supplies of medical and diagnostic equipment, apparatus, instruments, consumables, disposables, spares and related repair services used in the Chennai Port Trust's in house hospital for employees, pensioners and their dependents, being supplies for personal consumption covered by the statutory block.

Advance ruling - classification and rate of tax - HSN classification - rejection of application for non-production of documents - burden to furnish technical details - Principle of Natural Justice

Classification and rate of tax - HSN classification - rejection of application for non-production of documents - Whether the Advance Ruling application seeking classification, HSN code and rate of tax for circulating Oil Lubrication Systems could be adjudicated in the absence of the technical details undertaken to be furnished by the applicant. - HELD THAT: - The Authority examined the application and noted that classification and the applicable rate/HSN require technical specifications, drawings and component details to determine the characterisation of the assembled circulating Oil Lubrication Systems. The applicant had undertaken at hearing to furnish a technical write-up, usage particulars, drawings and invoices but failed to produce these documents despite being granted multiple opportunities in the interest of natural justice. The jurisdictional Commissioner had furnished a contrary view classifying certain pumps under Chapter 8413, but the Authority held that it could not arrive at a conclusive classification or rate without the applicant's technical material which was necessary to assess whether the supply is an assembled system, a composite supply, or falls to specific headings. For lack of the requisite technical details the Authority was unable to determine the HSN code or rate and therefore could not make the requested ruling. [Paras 6]

Application rejected as the relevant technical details required for classification and determination of CGST/SGST rate were not produced.

Final Conclusion: The Authority rejected the applicant's request for an advance ruling on the HSN classification and rate for circulating Oil Lubrication Systems because the applicant failed to furnish the technical details necessary for classification despite repeated opportunities.

Admissibility of input tax credit - Advance Ruling - Withdrawal of application

Admissibility of input tax credit - Withdrawal of application - Application for advance ruling withdrawn; no adjudication on the admissibility of input tax credit on long term lease of industrial plots. - HELD THAT: - The applicant, M/s. Indo Autotech Ltd., sought an advance ruling on whether input tax credit is admissible on GST charged by the developer on long term lease of industrial plots. A personal hearing was fixed and the authorised representatives attended. At the personal hearing held on 04.07.2019 the applicant submitted an application dated 04.07.2019 requesting withdrawal of the advance ruling application. Although the jurisdictional officer had furnished comments on admissibility, the Authority did not proceed to examine or decide the substantive question because the application was withdrawn by the applicant prior to pronouncement of any ruling.

Application withdrawn by the applicant; no ruling delivered on the substantive question of input tax credit admissibility.

Final Conclusion: The applicant withdrew the application during the personal hearing; consequently the Authority recorded no ruling and did not decide the admissibility of input tax credit on the long term lease.

Advance Ruling - Applicability of a notification issued under the Act - Admission of application under Section 97(2)(b) - Withdrawal of advance ruling application - Exemption from GST on long term lease of industrial plots

Admission of application under Section 97(2)(b) - Advance Ruling - Whether the applicant's matter was admissible for pronouncement of advance ruling under the specified head. - HELD THAT: - The Authority recorded that the question raised by the applicant fell within the ambit of the provision dealing with the Applicability of a notification issued under the Act and that the applicant was a registered person. The Authority therefore admitted the application for pronouncement of an advance ruling under the stated proviso and proceeded to grant personal hearing. These factual and admissibility conclusions were recorded by the Authority prior to the applicant's subsequent withdrawal.

Application admitted for advance ruling under the cited category; personal hearing granted.

Withdrawal of advance ruling application - Advance Ruling - Exemption from GST on long term lease of industrial plots - Effect of the applicant's withdrawal on issuance of a substantive ruling on the GST liability question. - HELD THAT: - At personal hearing the authorised representatives expressly requested withdrawal of the advance ruling application and submitted a written request to that effect. In consequence, the Authority refrained from pronouncing any substantive ruling on the question whether the developer is liable to charge GST on the lease amount or on the applicability of the exemption notifications. The Authority noted the comments filed by the jurisdictional officer but, owing to the withdrawal by the applicant, did not adjudicate the merits of those contentions.

No substantive ruling issued because the applicant withdrew the application.

Final Conclusion: The Authority admitted the application for advance ruling but, on the applicant's written and oral withdrawal at personal hearing, declined to pronounce any substantive ruling and closed the matter without decision on the merits.

Reverse charge mechanism - liability to pay tax on transportation by goods transport agency - services of a goods transport agency (GTA) - Notification No. 13/2017 - recipient liable where GTA supplies - Notification No. 12/2017 - exemptions for transportation of specified goods - exemption for transportation of agricultural produce, milk and food grains

Reverse charge mechanism - services of a goods transport agency (GTA) - Notification No. 13/2017 - recipient liable where GTA supplies - Notification No. 12/2017 - exemptions for transportation of specified goods - Whether the applicant is liable to pay GST under the reverse charge mechanism on freight paid for transportation of cotton seed oil cake (HSN 2306). - HELD THAT: - The applicant procures transportation services from a goods transport agency and is therefore the recipient of GTA services. Invoices before the Authority show no GST charged on the supply of goods. Notification No. 13/2017 envisages that where a GTA supplies transportation of goods by road falling within its scope, the recipient specified therein is liable to pay tax under the reverse charge mechanism. Notification No. 12/2017 exempts GTA services only for specified categories such as agricultural produce, milk and food grains, and other listed items. Cotton seed oil cake (khal) is not included within the exempted descriptions in Notification No. 12/2017 as amended. Because the transportation of cotton seed oil cake is not covered by the exemption notification and the applicant is the recipient of GTA services, the tax liability on freight arises on the applicant under the reverse charge mechanism as prescribed by Notification No. 13/2017. [Paras 5, 6]

The applicant is liable to pay GST on freight under the reverse charge mechanism as the recipient of GTA services; transportation of cotton seed oil cake is not exempt under the notified exemption.

Final Conclusion: Advance Ruling: Applicant liable to discharge GST under reverse charge on freight paid to GTA for transportation of cotton seed oil cake, since the supply of such transportation is not covered by the exemptions in Notification No. 12/2017 and the recipient is made liable under Notification No. 13/2017.

Grant of bail in offences under GST involving bogus invoices and fraudulent input tax credit - arrest under the statutory power exercisable under Section 69 of the Central Goods and Services Tax Act, 2017 - offences under Section 132(1)(a), (b) and (c) of the Central Goods and Services Tax Act, 2017 relating to issuance of invoices without supply and availing of input tax credit - admissibility and evidentiary value of statement recorded under Section 70 of the Central Goods and Services Tax Act, 2017 - seriousness and magnitude of tax evasion as a factor in bail consideration

Grant of bail in offences under GST involving bogus invoices and fraudulent input tax credit - admissibility and evidentiary value of statement recorded under Section 70 of the Central Goods and Services Tax Act, 2017 - seriousness and magnitude of tax evasion as a factor in bail consideration - Application for bail of the accused arrested in connection with alleged bogus billing and evasion of input tax credit was rejected. - HELD THAT: - The court considered the prosecution case that the accused, as alleged accountant of the firm, participated in issuance of bogus and fabricated bills and showed false supplies to enable unlawful availment and transfer of input tax credit during the financial years 2017-18 and 2018-19. The statutory framework was noted that the Commissioner has power to arrest under Section 69 of the CGST Act and that offences under Section 132(1)(a),(b) and (c) attract enhanced punishment where amounts involved exceed the statutory threshold. The court placed weight on the admitted statement recorded under Section 70 of the CGST Act in which the applicant purportedly admitted being the accountant and issuing bills of bogus firms without supply of goods. Having regard to the nature of the allegations, the magnitude of the alleged tax evasion and that the investigation was pending, the court was not inclined to enlarge the applicant on bail at this stage. [Paras 5, 6]

M.Cr.C. for grant of bail is rejected and the applicant is not released on bail.

Final Conclusion: Bail application dismissed: on the record of alleged involvement in issuance of bogus invoices, the applicant's admissible statement and the substantial alleged tax evasion during 2017-18 and 2018-19, the court declined to grant bail while investigation remains pending.

Deductibility of corporate social responsibility expenditures under section 37(1) wholly and exclusively for purposes of business - Commercial expediency test for business expenditure - Rule of consistency in income-tax assessments and preclusion of flip flop by Revenue - Non retrospective operation of Explanation 2 to section 37(1) (statutory CSR obligation)

Deductibility of corporate social responsibility expenditures under section 37(1) wholly and exclusively for purposes of business - Commercial expediency test for business expenditure - Claim for deduction under Section 37(1) in respect of various contributions and donations for AY 2010-11 was allowable as business expenditure. - HELD THAT: - The Court applied settled authorities holding that an expenditure voluntarily incurred may still be "wholly and exclusively" for business where it is laid out on grounds of commercial expediency and directly or indirectly facilitates the carrying on of business. The Court observed that the concept of "business" is wide and includes measures to gain goodwill of the local community and regulatory agencies, particularly where the undertaking is polluting and the contributions are directed to local welfare, education and health projects. Having regard to the nature of the payments and the authorities cited (including Sri Venkata Satyanarayana Rice Mill Contractors Co., Sassoon J. David, Madras Refineries, Mysore Kirloskar and related decisions), the impugned expenditures satisfy the commercial expediency nexus required under Section 37(1) and are deductible for AY 2010 11. [Paras 8, 10]

Deduction under Section 37(1) allowed for the claimed CSR type expenditures for Assessment Year 2010 11.

Rule of consistency in income-tax assessments and preclusion of flip flop by Revenue - Appellate Tribunal rightly relied on its earlier order in the assessee's own case for AY 2009 10; Revenue could not take a different inconsistent stand in AY 2010 11 absent material change. - HELD THAT: - The Court explained and applied the rule of consistency (as expounded by the Supreme Court and various High Courts): where a fundamental aspect permeates assessment years and there is no material change justifying a different view, Revenue ought not to reopen the question or take a contradictory stance. The CIT(A) erred in casually declining to follow the Tribunal's prior decision for AY 2009 10. In the absence of convincing reasons or material change, the Tribunal was justified in following its earlier finding in favour of the assessee. [Paras 6]

Tribunal's reliance on its earlier decision for AY 2009 10 was appropriate and the Revenue's inconsistent approach was rejected.

Non retrospective operation of Explanation 2 to section 37(1) (statutory CSR obligation) - Explanation 2 to Section 37(1) (excluding statutory CSR expenditure under Companies Act, 2013 from deduction) does not apply to the assessment year in issue. - HELD THAT: - The Court noted that Explanation 2 was inserted with effect from 1 April 2015 and is not retrospective. The impugned expenditures were not incurred pursuant to a statutory obligation under section 135 of the Companies Act, 2013 for the period under consideration; therefore the disabling provision in Explanation 2 could not be invoked for AY 2010 11. [Paras 8]

Explanation 2 to Section 37(1) is inapplicable to the facts and period before the Court; it does not bar deduction for the voluntary CSR expenditures in issue.

Final Conclusion: The High Court dismissed the Revenue's appeal, upheld the ITAT's allowance of the CSR type expenditures as deductible under Section 37(1) for Assessment Year 2010 11, affirmed application of the rule of consistency in favour of the assessee, and held that Explanation 2 to Section 37(1) does not apply to the year in dispute.

Assessment under Section 153A - addition to income on account of alleged business of potatoes versus operation of a cold storage - addition on account of unexplained cash / discrepancy between books and seized documents - reliance on documents seized from third parties (chartered accountant) and evidentiary value of such documents - presumption not a substitute for evidence - reversal of concurrent findings of fact by appellate fora - regulatory compliance under the U.P. Regulation of Cold Storage Act, 1976 and its relevance to tax additions

Addition to income on account of alleged business of potatoes versus operation of a cold storage - reliance on documents seized from third parties (chartered accountant) and evidentiary value of such documents - regulatory compliance under the U.P. Regulation of Cold Storage Act, 1976 and its relevance to tax additions - presumption not a substitute for evidence - Deletion of the addition made by the Assessing Officer relating to alleged investment/transactions in potatoes was upheld. - HELD THAT: - The Tribunal found, and this Court concurs, that the authorities below made the addition on the basis of presumption and assumption without material to establish that the assessee carried on the business of dealing in potatoes. The assessee operated a licensed cold storage and maintained storage and delivery registers (bhandaran and nikasan) which tallied with stock; no evidence of purchase, sale or unaccounted stock belonging to the assessee was found during search or survey. No notice or proceedings under the U.P. Regulation of Cold Storage Act, 1976 (which governs licensing, storage receipts and penal consequences for contraventions) were produced by the Revenue to show violation of licence conditions. Documents relied upon were seized from the residence of the chartered accountant and were not shown to be authored or signed by the partners; such material, absent corroboration, could not support the addition. Consequently, the Tribunal's deletion of the addition on the ground that the authorities lacked material to treat the entries as indicative of the assessee's trading in potatoes was justified.

Addition deleted; Tribunal's finding that addition was based on presumption and lacking material is upheld.

Addition on account of unexplained cash / discrepancy between books and seized documents - application of provisions treating unrecorded money as unexplained cash - presumption not a substitute for evidence - Deletion of the addition made on account of alleged lesser cash in hand as per seized documents vis-a -vis books of account was upheld. - HELD THAT: - The Tribunal held that the transaction did not fall within the provisions invoked by the Assessing Officer for treating the discrepancy as unexplained income because the books of account recorded higher cash in hand than what was found on search. At best, the authorities could have presumed that the assessee had expended the difference, but such an inference was insufficient to sustain an addition under the provisions relied upon. The Court agrees that mere discrepancy between seized papers and books, without material showing the difference was the assessee's unexplained income, did not justify the addition. Accordingly the Tribunal's deletion of that addition was proper.

Addition on account of cash discrepancy deleted; Tribunal's conclusion that the discrepancy did not justify an addition is upheld.

Final Conclusion: The appeal is dismissed. The Tribunal's deletions of the two impugned additions are sustained as the Revenue failed to produce material to show the assessee traded in potatoes or that the cash discrepancy constituted unexplained income; the questions of law are answered against the Revenue and in favour of the assessee.

Dismissal for want of prosecution - duty to decide on merits - restoration of appeals - power under Section 254 - time barred miscellaneous applications

Dismissal for want of prosecution - duty to decide on merits - Whether the Tribunal was justified in dismissing the appeals in limine for non appearance without deciding them on merits. - HELD THAT: - The High Court examined the Tribunal's order dismissing the appeals because no one appeared for the assessee when the matters were called. Relying on established precedent beginning with the decision in S. Chenniappa Mudaliar and subsequent High Court authorities, the Court held that the Tribunal ought not to have dismissed the appeals without adverting to the merits. Decisions which permit summary dismissal in such circumstances (as relied upon by the Tribunal) were treated as inapplicable: the correct approach is to adjudicate appeals on merits and, if necessary, later entertain restoration on sufficient cause. In view of this settled principle and the authorities cited, the impugned dismissal for want of prosecution was set aside and the appeals were restored for decision on merits.

Order dismissing the appeals for non prosecution set aside; appeals restored to the Tribunal for adjudication on merits.

Restoration of appeals - time barred miscellaneous applications - Whether the Tribunal correctly dismissed the miscellaneous petitions for restoration as time barred. - HELD THAT: - The Tribunal rejected the assessee's miscellaneous petitions for restoration on the ground that they were filed beyond the six month period. The High Court, having concluded that the original dismissal itself should not have been made without deciding the merits, held that the consequential orders refusing restoration could not stand. The Court set aside the Tribunal's order dismissing the restoring applications and remitted the matters to the Tribunal so that the appeals may be heard on merits.

Order rejecting restoration applications as time barred set aside; restoration granted by restoring the appeals to the file of the Tribunal for merits.

Final Conclusion: The impugned common orders dated 15.3.2017 and 21.12.2018 are set aside; the appeals for AY 2012-13 and AY 2013-14 are restored to the Tribunal for adjudication on merits and the substantial questions of law are answered in favour of the assessee.

Waiver of interest - remand for fresh consideration - personal hearing - setting aside administrative order - precedential effect of co-sharer decision

Waiver of interest - precedential effect of co-sharer decision - setting aside administrative order - remand for fresh consideration - personal hearing - Impugned rejection of the petitioner's application for waiver of interest under Section 234B and Section 234C is set aside and remanded for fresh consideration with directions. - HELD THAT: - The petitioner, being a co-sharer in the property involved in an earlier Tax Case Appeal in which fair market value was upheld for other co-sharers, sought waiver of interest; the Court observed that the earlier Division Bench order in the connected Tax Case Appeal is a relevant circumstance warranting reconsideration. Having regard to the petitioner's position (including her status as a senior citizen) and the absence of any final adjudication on the waiver itself, the Court found it appropriate to set aside the impugned administrative order dated 25.10.2011 and remit the matter to the first respondent for fresh adjudication. The petitioner was permitted to produce copies of the connected Tax Case Appeal and to place any additional objections. The first respondent is directed to consider all materials and objections afresh, afford the petitioner an opportunity of personal hearing, and pass final orders expeditiously within the four-week period specified by the Court.

Impugned order dated 25.10.2011 is set aside; matter remitted to the first respondent for fresh consideration, with liberty to the petitioner to file relevant material and with a direction to afford personal hearing and pass final orders within four weeks.

Final Conclusion: Writ petition disposed of by setting aside the impugned order and remanding the matter for fresh consideration by the first respondent with liberty to file additional materials and a direction to decide the application after personal hearing within four weeks; no costs.

Remand to Assessing Officer - substitution of fair market value as on 1/4/1981 - computation of long term capital gains and cost of acquisition - claim of exemption under section 54EC - admission of additional evidence before appellate forum - burden to show reasonable cause for non-production of evidence

Remand to Assessing Officer - admission of additional evidence before appellate forum - Validity of the ITAT's decision to set aside the issue and remit the matter to the Assessing Officer for fresh adjudication. - HELD THAT: - The High Court held that the tribunal did not commit any error in remanding the matters to the Assessing Officer. The tribunal recorded reasons (reproduced in its paras.7-9) directing the AO to decide afresh the claim of the assessee to substitute the fair market value as on 1/4/1981 as the cost of acquisition and to consider the claim of exemption under the law, after giving the assessee an opportunity of being heard. The Court observed that the tribunal's directions were grounded in the principle that when statute affords an option to the assessee to adopt a particular valuation, that option cannot be denied and therefore fresh consideration was warranted. The Court further noted that the tribunal correctly addressed the question of additional evidence and the requirement that the assessee demonstrate reasonable cause for not producing such evidence earlier; no such reasonable cause was shown to the tribunal. Consequently, the tribunal's remand did not call for interference. [Paras 6]

The tribunal's remand was upheld and not interfered with by this Court.

Substitution of fair market value as on 1/4/1981 - computation of long term capital gains and cost of acquisition - claim of exemption under section 54EC - burden to show reasonable cause for non-production of evidence - Scope and effect of the remand - matters to be decided afresh by the Assessing Officer. - HELD THAT: - The Court directed that the Assessing Officer shall decide the issue afresh in light of the assessee's claim for substituting the fair market value as on 1/4/1981 as the cost of acquisition, with the assessee required to furnish necessary details supporting that claim. The AO is also directed to consider the assessee's claim of exemption under the applicable provisions (including the claim under section 54EC) in accordance with law and relevant CBDT guidance, after affording reasonable opportunity of hearing. The Court confirmed that evidence not previously considered was not admitted before the lower authorities because the assessee failed to demonstrate a reasonable cause for non-production; however, the remand permits the AO to reassess these contentions on fresh material if properly placed. [Paras 7]

Matter remitted to the Assessing Officer to determine substitution of the 1/4/1981 fair market value for cost of acquisition and to decide the exemption claim (including under section 54EC) afresh after receiving necessary particulars and hearing the assessee.

Final Conclusion: Both revenue appeals are dismissed. No substantial question of law arises; the ITAT's order remitting the issues to the Assessing Officer is affirmed and the AO is directed to decide afresh the substitution of fair market value as on 1/4/1981 for cost of acquisition and the claim of exemption (including under section 54EC) after giving the assessee an opportunity to furnish supporting details and to be heard.

Disallowance of commission - deduction of business expenditure - onus of proof on the assessee - verification of payment and TDS compliance - remand for fresh consideration

Disallowance of commission - verification of payment and TDS compliance - onus of proof on the assessee - remand for fresh consideration - Addition of Rs. 21,35,426 made by the Assessing Officer by disallowing commission paid by the assessee is remitted to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to substantiate the claim. - HELD THAT: - The Assessing Officer disallowed the commission claimed by the assessee on the grounds that multiple brokers claimed commission for the same sales, commissions were claimed on amounts exceeding recorded sales, some purchaser parties denied involvement of any intermediary, and the payments purportedly were not made in the relevant year despite TDS entries. The assessee relied on account-payee cheques, TDS compliance and confirmations from recipients. While noting the settled legal position that the onus to substantiate a claim of expenditure lies on the assessee, the Tribunal found that the Assessing Officer's adverse conclusions and the appellate confirmation had not been finally resolved on a complete evidentiary basis. In the interest of justice, and having regard to the competing factual contentions (including payment by cheque, TDS deduction and recipient confirmations versus inconsistencies noted by the AO), the Tribunal directed that the issue be restored to the file of the Assessing Officer to afford the assessee one more opportunity to substantiate the allowability of the commission and for the Assessing Officer to decide the matter afresh on facts and law. [Paras 12, 13]

The matter is remitted to the Assessing Officer for fresh consideration with a direction to afford the assessee another opportunity to substantiate the claim of commission; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the orders under appeal only to the extent of restoring the issue of disallowance of commission to the Assessing Officer for fresh adjudication after giving the assessee an opportunity to prove the payment and nexus to business; appeal allowed for statistical purposes.

Invalidity of show-cause notice under Section 274 for want of specificity as to limb of Section 271(1)(c) - requirement of specific charge notifying concealment of particulars of income or furnishing inaccurate particulars of income - principles of natural justice in penalty proceedings under Section 271(1)(c) - bonafide belief of non-resident status under FEMA and its bearing on taxability of NRE interest - application of Clause (B) of Explanation 1 to Section 271(1)(c) - allowance of exemption under Section 10(4)(ii) for interest on NRE deposits where bonafide belief of non-residence exists

Invalidity of show-cause notice under Section 274 for want of specificity as to limb of Section 271(1)(c) - requirement of specific charge notifying concealment of particulars of income or furnishing inaccurate particulars of income - principles of natural justice in penalty proceedings under Section 271(1)(c) - Penalty notice dated 28.12.2010 issued under section 274 r.w.s. 271(1)(c) is invalid for failing to specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income, and consequential penalty proceedings are invalid. - HELD THAT: - The Tribunal examined the notice and found that the Assessing Officer had not deleted inappropriate words in the printed proforma, leaving it unclear which limb of clause (c) was invoked. Following the reasoning in Manjunatha Cotton & Ginning Factory and related authorities, the Tribunal held that a taxpayer must be informed specifically of the grounds on which penalty is sought so as to enable effective response; a generic printed form listing all limbs without striking out irrelevant parts offends principles of natural justice. Where proceedings are initiated on one ground, imposition of penalty on another ground is unsustainable. No contrary binding precedent was shown to apply. Consequentially, the penalty levied and upheld by the lower authorities could not stand. [Paras 15, 16, 17]

Penalty proceedings under section 271(1)(c) initiated by the notice dated 28.12.2010 are invalid and the penalty is deleted.

Bonafide belief of non-resident status under FEMA and its bearing on taxability of NRE interest - application of Clause (B) of Explanation 1 to Section 271(1)(c) - allowance of exemption under Section 10(4)(ii) for interest on NRE deposits where bonafide belief of non-residence exists - Assessee's non-disclosure of interest on NRE deposit was bona fide based on belief of non-resident status under FEMA; explanation falls within Clause (B) of Explanation 1 to Section 271(1)(c) and penalty on merits is not sustainable. - HELD THAT: - On merits the Tribunal accepted that the assessee received interest on NRE deposits in FY 2007-08 and legitimately believed herself to be a non-resident as per FEMA definitions, relying on a coordinate Bench decision with identical facts. The nondisclosure arose from a wrong interpretation of law and bona fide belief rather than deliberate concealment or furnishing of inaccurate particulars. After examining chronology and documents, the Tribunal found the explanation genuine and within Clause (B) of Explanation 1 to Section 271(1)(c), and therefore set aside the impugned order on merits as well. [Paras 18, 20, 21]

On merits, the explanation of bona fide belief of non-residence is accepted and the appeal is allowed; the penalty is set aside.

Final Conclusion: Additional legal grounds were admitted. The notice dated 28.12.2010 under section 274 r.w.s. 271(1)(c) is invalid for want of specificity and the penalty imposed is quashed; on merits the assessee's bona fide belief of non-resident status under FEMA in relation to NRE interest is accepted and the appeal is allowed.

Deduction under section 80P(2)(a)(i) - Income from other sources versus business income - Definition of "member" in a co-operative society and entitlement of nominal members to benefits under section 80P(2) - Remand to Assessing Officer for fresh factual examination in light of binding precedents

Deduction under section 80P(2)(a)(i) - Income from other sources versus business income - Application of Totgar's Co-operative Sales Society Ltd. and Tumkur Merchants precedents - Whether interest income from deposits/investments is business income entitling the assessee to deduction under section 80P(2)(a)(i) or is assessable as income from other sources - remitted to Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal observed that the question whether interest earned on deposits of surplus funds is assessable as business income (thereby attracting deduction under section 80P(2)(a)(i)) or as income from other sources has been the subject of binding authorities including the decision of the Hon'ble Supreme Court in Totgar's Co-operative Sales Society Ltd. and subsequent High Court guidance in Tumkur Merchants. The coordinate Bench and the referred precedents show that identical factual matrices require careful factual examination to determine the source and character of interest income. In view of these authorities, the Tribunal considered it appropriate to remit the issue to the Assessing Officer for fresh decision after examining the facts in the light of the cited decisions and affording the assessee opportunity to be heard. [Paras 4]

Disputed issue relating to characterisation of interest income remitted to the Assessing Officer for fresh adjudication in light of the cited precedents.

Definition of "member" in a co-operative society - Entitlement of nominal members to benefits under section 80P(2) - Reliance on Trapaj and Ammapet decisions - Nominal members are to be treated as "members" for purposes of section 80P(2) and are eligible for the benefits claimed; matter restored to Assessing Officer for consequential action and verification. - HELD THAT: - Having considered the decisions of the coordinate Bench and the High Court (including Trapaj Vibhageeya Khet Udyog Mal Rupantar Food Processing Sahakari Mandali Ltd. and Prin. CIT v. Ammapet Primary Agricultural Cooperative Bank Ltd.), the Tribunal held that where the State Act or the society's byelaws include nominal members within the definition of "member", such nominal members qualify as members for the purposes of section 80P(2). The Tribunal found these authorities applicable on facts and directed restoration to the Assessing Officer to grant the benefit to nominal members, after providing the assessee adequate opportunity to produce requisite information. [Paras 5, 6]

Nominal members to be treated as members and entitled to section 80P(2) benefits; the matter is remitted to the Assessing Officer for grant of benefit and verification.

Final Conclusion: Appeals are allowed for statistical purposes; the questions on characterisation of interest income and entitlement of nominal members are remitted to the Assessing Officer for fresh consideration in accordance with the Tribunal's directions and cited precedents.

Validity of draft assessment order under Section 144C - Mandatory pre condition of issuing draft order where Transfer Pricing Officer proposes variation - Effect of issuing demand notice and penalty show cause notice along with draft order - Non compliance with mandatory statutory procedure renders assessment void ab initio

Validity of draft assessment order under Section 144C - Effect of issuing demand notice and penalty show cause notice along with draft order - Non compliance with mandatory statutory procedure renders assessment void ab initio - Draft assessment order sent to the assessee but accompanied by demand notice and penalty notice, and thereby crystallizing the demand, is invalid for non compliance with Section 144C and is void ab initio. - HELD THAT: - The Tribunal examined whether the Assessing Officer's communication, though headed as a draft assessment order under section 143(3) r.w.s. 144C(1), had in substance finalized the assessment by issuing demand notice under section 156 and initiating penalty proceedings. Section 144C mandates that where the TPO proposes any variation prejudicial to the assessee, the Assessing Officer must forward a draft of the proposed assessment order to the eligible assessee, who then has thirty days to accept or to file objections before the DRP; only thereafter can the Assessing Officer complete the assessment in accordance with the statutory steps. Precedents of the Tribunal and higher courts (including decisions relied upon by the parties) establish that passing a final order or crystallizing demand/penalty without following these mandatory steps defeats the special rights of an eligible assessee and renders the proceedings without jurisdiction. Applying these authorities to the facts, the Tribunal held that although the order was labelled a draft, issuance of demand and show cause notice amounted to a final assessment in substance; therefore the procedure under section 144C was not followed and the order is invalid in law. [Paras 6]

The draft assessment order is held to be bad in law and void ab initio; the additional ground is allowed and the appeal is allowed for AY 2009 10.

Final Conclusion: Following binding and co ordinate precedents, the Tribunal held that where a purported draft assessment order is accompanied by crystallisation of demand and initiation of penalty proceedings, the mandatory procedure under Section 144C has not been complied with and the assessment is void ab initio; appeal for AY 2009 10 is allowed.

Penalty under section 271AAB of the Income-tax Act - undisclosed income - incriminating material found during search - search under section 132 of the Income-tax Act - remand for fresh adjudication

Penalty under section 271AAB of the Income-tax Act - undisclosed income - incriminating material found during search - search under section 132 of the Income-tax Act - remand for fresh adjudication - Whether penalty under section 271AAB was leviable on the incomes surrendered during search - HELD THAT: - The appeals concern levy of penalty under section 271AAB on incomes surrendered during search and seizure operations under section 132. The Explanation to section 271AAB defines "undisclosed income" by reference to money, bullion, jewellery or entries or documents found in the course of search which were not recorded or disclosed before the date of search. The assessee relied on earlier coordinate ITAT decisions in the group deleting penalty where no incriminating material was found to support the surrendered income; the Department relied on a statement recorded during search (of a family member) to contend that the surrendered amounts were supported by diary entries seized during search and thus constituted undisclosed income. As the statement relied upon by the Department was not available in original before the Tribunal and was material to determining whether the surrendered amounts were represented by incriminating material found during search, the Tribunal found it necessary to direct further factual verification. The matter was therefore not adjudicated on merits by this Bench; instead the Tribunal directed the appellate authority to obtain the original statement relied upon by the Department and to adjudicate the question afresh after considering all aspects and giving the assessee an opportunity of hearing. [Paras 14]

The issue is remitted to the Commissioner of Income Tax (Appeals) to obtain the original statement of Sh. Sukhdarshan Kumar, consider the question afresh in accordance with law and grant the assessee adequate opportunity of hearing.

Final Conclusion: All appeals are allowed for statistical purposes and the penalty issue under section 271AAB is remanded to the Commissioner of Income Tax (Appeals) for fresh adjudication after production and examination of the original statement and after affording opportunity of hearing.

Limitation for exercise of revisional jurisdiction under Section 263 - Error in an order being 'erroneous and prejudicial to the interests of the Revenue' for purposes of Section 263 - Scope and effect of intimation under Section 143(1) and order under Section 154 as orders amenable to revision under Section 263 - Doctrine of merger and its non-application where subject-matter of reassessment differs from subject-matter of original assessment - Scope of reassessment under Section 147 and effect of Explanation 3 to Section 147 on 'other income' assessable during reassessment

Limitation for exercise of revisional jurisdiction under Section 263 - Scope and effect of intimation under Section 143(1) and order under Section 154 as orders amenable to revision under Section 263 - Error in an order being 'erroneous and prejudicial to the interests of the Revenue' for purposes of Section 263 - Whether the show-cause notice dated 02.02.2018 issued under Section 263 in respect of allowance of deduction under Section 80-IC was barred by limitation - HELD THAT: - The Tribunal found that the Assessing Officer had considered and decided the appellant's claim for deduction under Section 80-IC in the intimation under Section 143(1) (disallowing the claim) and thereafter in the speaking rectification order under Section 154/143(1) (allowing the claim) dated 19.04.2010. On these facts the Tribunal held that any alleged error occurred in the order under Section 154/143(1) dated 09.04/19.04.2010 and not in the later reassessment order dated 09.02.2016 under Section 147/143(3). Applying the principle in CIT v. Alagendran Finance Ltd., the limitation for invoking Section 263 in respect of that subject-matter runs from the end of the financial year in which the order under Section 154/143(1) was passed (FY 2010-11), and therefore the revisional proceedings were required to be initiated within two years from that date. The Tribunal rejected the Revenue's contention that an intimation under Section 143(1) cannot be the basis for computing the limitation for Section 263, observing that Section 143 orders are appealable under Section 246A and that the AO had in fact applied his mind in passing the intimation and the rectification order. Consequently the Section 263 proceedings initiated by notice dated 02.02.2018 were held time barred. [Paras 9, 10, 11]

Proceedings under Section 263 in respect of the grant of deduction under Section 80-IC were barred by limitation and the revisional order dated 22.03.2018 is quashed.

Scope of reassessment under Section 147 and effect of Explanation 3 to Section 147 on 'other income' assessable during reassessment - Limits on Commissioner revising issues not legitimately within the scope of reassessment - Whether the Pr. CIT could in exercise of revisional jurisdiction under Section 263 set aside the assessment on matters unconnected with the reasons recorded for reopening under Section 147 - HELD THAT: - The Tribunal noted that the AO had reopened assessment under Section 147 on the basis of information relating to specified transactions with a third party, and after making enquiries found those reasons to be unsustainable and did not make additions on that basis in the reassessment. Relying on precedents including decisions interpreting Explanation 3 to Section 147, the Tribunal accepted the appellant's contention that where the AO, in reassessment proceedings, finds that the reasons to believe the income had escaped are factually unsustainable and accordingly does not make additions on those grounds, it is not open to the Commissioner to use Section 263 to revisit unrelated matters which the AO could not properly have assessed in the Section 147 proceedings. The Tribunal held that the Pr. CIT could not accomplish indirectly by revision what the AO could not do directly in the reassessment, and therefore the revisional exercise was unsustainable on this ground as well. [Paras 12, 13]

Pr. CIT could not validly invoke Section 263 to revise the assessment on issues unconnected with the reasons recorded for reopening under Section 147; the revisional order is unsustainable.

Final Conclusion: The appeal is allowed. The order of the Pr. CIT dated 22.03.2018 passed under Section 263 is quashed: (i) the revisional proceedings in respect of the allowance of deduction under Section 80-IC were barred by limitation; and (ii) the Commissioner could not, under Section 263, revisit unrelated issues which the Assessing Officer himself had not validly assessed in the Section 147 proceedings.

Addition on account of undisclosed sales of wastage - Adoption of market rate as basis for income computation - Requirement of cogent documentary evidence for benchmarking in unorganised sector - Voluntary disclosure made during search proceedings and its evidentiary value - Attribution of distributable surplus arising from shortages at contract bottler to principal - Onus of explanation for unexplained shortages in stock

Addition on account of undisclosed sales of wastage - Adoption of market rate as basis for income computation - Requirement of cogent documentary evidence for benchmarking in unorganised sector - Voluntary disclosure made during search proceedings and its evidentiary value - Whether the addition made by the Assessing Officer on account of alleged suppression of sale value of wastage can be sustained where the AO adopted a higher market rate based on general enquiries without documentary proof - HELD THAT: - The Tribunal examined the records and submissions and found that the assessee's books showed wastage valuation at 0.73 per kg whereas, on filing the return during proceedings under search, the assessee voluntarily disclosed an enhanced rate of 1.13 per kg. The Assessing Officer, however, adopted a higher rate of 1.22 per kg based on enquiries of a few distilleries in the region. The Tribunal held that adoption of a benchmark rate for an unorganised sector requires concrete and documentary support; mere mention of rates obtained from general enquiries, without logical or documentary corroboration, cannot sustain an addition. The voluntary enhancement in the return was treated as a commercial concession to avoid litigation and not conclusive proof of suppression at the rate alleged by the AO. Applying these conclusions to the appeals, the Tribunal set aside the addition for the assessment year 2009-10 and directed deletion of the addition, and held that the same ratio applies mutatis mutandis to assessment years 2008-09 and 2010-11 where identical grounds were raised. [Paras 9]

Addition on account of alleged higher sale price of wastage deleted for AY 2009-10; same ratio applied to AYs 2008-09 and 2010-11 and those appeals allowed.

Attribution of distributable surplus arising from shortages at contract bottler to principal - Onus of explanation for unexplained shortages in stock - Whether distributable surplus computed on account of shortage of empty bottles at a contract bottler can be added to the assessee's income - HELD THAT: - The Tribunal considered the agreement between the assessee and the bottling unit and the findings of survey that revealed physical shortage of empty bottles of brands manufactured/bottled for the assessee. The assessee contended that the bottler alone should explain the shortage, but the Tribunal observed that the business relationship and the agreement envisaged appropriation of distributable surplus and inter related transactions between the parties. The assessee failed to furnish a satisfactory explanation or evidence to rebut the revenue's inference that unexplained shortages resulted in unaccounted sales whose share of distributable surplus accrues to the assessee. The CIT(A) had recorded reasoned findings applying the distributable surplus formula and the Tribunal found no infirmity warranting interference. [Paras 14]

Addition on account of distributable surplus attributable to shortage of empty bottles confirmed for AY 2011-12 and the ground of appeal dismissed.

Final Conclusion: The Tribunal allowed the appeals for Assessment Years 2008-09, 2009-10 and 2010-11 by deleting the addition made on account of alleged higher sale price of wastage for want of cogent evidence to support the market rate adopted by the Assessing Officer; for Assessment Year 2011-12 the Tribunal upheld the addition relating to distributable surplus computed on account of shortage of empty bottles at the bottling unit and dismissed that ground of appeal.

Fees for included services - make available test - ancillary and subsidiary test - reimbursement of expenses - royalty and fees for included services under the DTAA - credit for taxes deducted at source (TDS) - Interest under section 234B - penalty under section 271(1)(c)

Fees for included services - make available test - ancillary and subsidiary test - royalty and fees for included services under the DTAA - reimbursement of expenses - Characterisation of cost-reimbursements received by the assessee from Heinz India as taxable either as Fees for Included Services or as royalty - HELD THAT: - The Tribunal examined the Service Agreement (SA) and the Technology Transfer and License Agreement (TTLA) and applied the tests in Article 12(4) of the India-US DTAA, including whether services are ancillary and subsidiary to the application or enjoyment of rights under TTLA and whether technical knowledge, skill or know how was "made available". The Tribunal found that the services listed in the SA (general management, HR, finance, data processing, quality control, purchasing, business development, law etc.) are related to and facilitate the effective application or enjoyment of rights under the TTLA; quality control and ongoing technical assistance under TTLA in particular demonstrate the interlinkage. The Tribunal held that the facilitation test in the Memorandum of Understanding, and other relevant factors (relation of contracts, identity of parties, and purpose of payments), are satisfied and that the receipts cannot be treated as mere non taxable recoupment of costs. On the basis of these findings, the Tribunal rejected the assessee's contention that the payments were pure reimbursements and not taxable, and dismissed the assessee's challenge to the assessment holding the amounts taxable as fees/royalty under the DTAA and the Act. [Paras 21]

Assessee's challenge to taxation of reimbursements as FIS/royalty is dismissed; the assessment sustaining taxation of the receipts is upheld.

Credit for taxes deducted at source (TDS) - Claim for credit of TDS claimed by the assessee - HELD THAT: - The Tribunal observed that the question of granting credit for taxes allegedly deducted at source requires verification by the Assessing Officer. The Tribunal directed that the matter be remitted to the AO for proper verification and grant of credit, giving the assessee an opportunity of hearing and following principles of natural justice. [Paras 22]

Issue remanded to the Assessing Officer for verification and grant of TDS credit after providing the assessee an opportunity of hearing.

Interest under section 234B - Levy of interest under section 234B consequential to assessment - HELD THAT: - The Tribunal treated the issue of interest under section 234B as consequential to the outcome on assessment and the question of tax liability/credit, and accordingly did not adjudicate the levy of interest on merits in this order. [Paras 23]

Levy of interest under section 234B not adjudicated in this order (left consequential).

Penalty under section 271(1)(c) - Initiation of penalty proceedings under section 271(1)(c) consequential to assessment - HELD THAT: - The Tribunal recorded that initiation of penalty proceedings is consequential to the assessment outcome and did not decide the question of penalty in the present order. [Paras 24]

Penalty proceedings under section 271(1)(c) not adjudicated here (left consequential).

Final Conclusion: Appeals are partly allowed for statistical purposes. The Tribunal upheld the taxation of the reimbursements as fees/royalty under the DTAA and the Act, remanded the TDS credit claim to the Assessing Officer for verification and opportunity of hearing, and did not adjudicate interest under section 234B or penalty under section 271(1)(c) as those matters are consequential.

Penalty under section 271(1)(c) of the Income tax Act - residential status under section 6(1) of the Income tax Act - remand for fresh adjudication under section 275(1A) read with section 274 of the Income tax Act - judicial propriety and restraint where High Court has admitted a substantial question of law

Penalty under section 271(1)(c) of the Income tax Act - residential status under section 6(1) of the Income tax Act - remand for fresh adjudication under section 275(1A) read with section 274 of the Income tax Act - judicial propriety and restraint where High Court has admitted a substantial question of law - Whether the penalty imposed by the Assessing Officer under section 271(1)(c) should be finally adjudicated by the Tribunal or remitted for fresh adjudication in view of the admission of a substantial question of law by the High Court in respect of the assessee's residential status - HELD THAT: - The Tribunal recorded that the underlying substantive dispute in quantum - the assessee's residential status under section 6(1) and hence chargeability of overseas salary - has been admitted by the Hon'ble Bombay High Court (substantial question of law in ITA No. 657 of 2016). In view of that admission, and having regard to judicial propriety and hierarchical discipline, the Tribunal held it inappropriate to decide the penalty question on merits while the High Court is seized of the determinative legal issue. Relying on section 275(1A) of the Act (and directing action under sections 274 and 275(1A)), the Tribunal restored the penalty proceedings to the file of the Assessing Officer for de novo adjudication. The Tribunal directed that the AO shall give the assessee proper opportunity of hearing and consider the evidence and explanations already placed on record, and decide the penalty afresh in accordance with law. The Tribunal therefore did not pronounce on the correctness of the penalty levy itself or on the merits of the residential status determination, but remitted the matter for fresh consideration because the High Court's admitted question may be determinative of the penalty outcome. [Paras 10, 11]

Penalty proceedings under section 271(1)(c) are restored to the file of the Assessing Officer for fresh adjudication in accordance with law (including sections 274 and 275(1A)); Tribunal refrains from deciding the penalty on merits pending High Court adjudication.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal has neither upheld nor annulled the penalty on merits but has remitted the penalty proceedings to the Assessing Officer for fresh adjudication in accordance with sections 274 and 275(1A) of the Income tax Act, giving the assessee appropriate opportunity to be heard, because a substantial question of law on residential status has been admitted by the Hon'ble Bombay High Court.

Penalty under section 271AAB - definition of "undisclosed income" in Explanation to section 271AAB - documents maintained in the normal course (diary/other documents) - requirement to maintain books of account under section 44AA - discretionary nature of penalty (use of 'may' v. 'shall')

Definition of "undisclosed income" in Explanation to section 271AAB - documents maintained in the normal course (diary/other documents) - Whether amounts recorded in a diary (other documents maintained in the normal course) and subsequently surrendered constitute "undisclosed income" for levy of penalty under section 271AAB. - HELD THAT: - The Tribunal held that section 271AAB defines "undisclosed income" with reference to income represented by money, bullion, jewellery, entries in books of account or other documents found on search and subject to the condition that such income was not recorded on or before the date of search in books or other documents maintained in the normal course. Where an assessee is not required to maintain regular books under section 44AA, entries found in a diary or other documents maintained in the normal course recording investments/advances cannot be equated with undisclosed income. A diary containing notings of advances for land constituted records maintained in the normal course; such entries represented investment/outflow and, in the absence of additional corroborative material, do not ipso facto amount to undisclosed income as defined in section 271AAB. The Tribunal applied this reasoning to the facts-advances recorded in the diary were the basis of the surrender, the assessee was not required to keep books, and the surrendered amount was offered in return and accepted in assessment-therefore the recorded entries did not fall within the statutory definition of undisclosed income for imposition of penalty under section 271AAB.

Entries in the diary/other documents maintained in the normal course do not constitute "undisclosed income" as defined in section 271AAB; penalty under section 271AAB on that basis is not sustainable.

Requirement to maintain books of account under section 44AA - documents maintained in the normal course (diary/other documents) - Whether an assessee who is not mandatorily required to maintain books under section 44AA can be penalised under section 271AAB where entries are found in other documents. - HELD THAT: - The Tribunal emphasised that section 44AA imposes the duty to maintain books only on persons carrying on business or profession meeting specified thresholds. If the assessee is not under any statutory obligation to maintain regular books, entries in diaries or other documents kept in the normal course may constitute the relevant records. Where such entries are found and the surrendered amount is recorded therein and disclosed in the return (and accepted in assessment), the statutory condition for "undisclosed income" under section 271AAB is not satisfied. The Tribunal relied on coordinate bench precedents applying this principle and found the facts of the case pari materia with those decisions.

Because the assessee was not required to maintain books under section 44AA and the amount was recorded in other documents maintained in the normal course, the condition for undisclosed income under section 271AAB is not met and penalty cannot be sustained.

Penalty under section 271AAB - discretionary nature of penalty (use of 'may' v. 'shall') - Whether imposition of penalty under section 271AAB is mandatory or discretionary. - HELD THAT: - The Tribunal observed that subsection (1) of section 271AAB uses the word "may" and not "shall", which confers discretion on the Assessing Officer to impose penalty. Penalty provisions being penal in nature must be strictly construed. The Tribunal accepted the view in earlier decisions that the AO must apply mind and follow principles of natural justice in deciding whether to impose penalty and, if so, its quantum, rather than there being an automatic or mandatory levy in every case of surrender on search.

Imposition of penalty under section 271AAB is discretionary and not mandatory.

Final Conclusion: Following application of the statutory definition of "undisclosed income" in section 271AAB, the absence of any obligation on the assessee to maintain books under section 44AA, the fact that the surrendered amount was recorded in diary/other documents maintained in the normal course and was offered in the return and accepted in assessment, and the discretionary character of section 271AAB, the Tribunal dismissed the revenue's appeal and upheld deletion of the penalty.

Reimbursement of Central Sales Tax (CST) to Export Oriented Units (EOUs) - hierarchy of Foreign Trade Policy (FTP) vis-a -vis Handbook of Procedures (HBP) / Appendix - interpretation of para 6.11(c)(i) of FTP 2004-09 - "goods manufactured in India" - prospective effect of administrative amendments (Public Notice No.81/RE2008) versus base policy - limitation on recovery after long delay / laches in revenue demands

Reimbursement of Central Sales Tax (CST) to Export Oriented Units (EOUs) - interpretation of para 6.11(c)(i) of FTP 2004-09 - "goods manufactured in India" - Entitlement of the EOU to CST reimbursement on inputs procured from other EOUs or otherwise, under FTP 2004-09 - HELD THAT: - The Court held that para 6.11(c)(i) of the Foreign Trade Policy 2004-09 contemplates reimbursement of CST on "goods manufactured in India" and is not expressly limited to procurements only from DTA units. Relying on this interpretation and the earlier decision in Asahi Songwon, the Court concluded that the FTP did not restrict CST reimbursement to purchases made solely from DTA suppliers; therefore reimbursement could extend to goods procured from other EOUs so long as they satisfied the condition of being manufactured in India. The Handbook of Procedures or its Appendix could not, by procedure, curtail a benefit conferred by the FTP itself.

The entitlement to CST reimbursement on inputs procured from other EOUs is upheld in favour of the petitioner.

Hierarchy of Foreign Trade Policy (FTP) vis-a -vis Handbook of Procedures (HBP) / Appendix - prospective effect of administrative amendments (Public Notice No.81/RE2008) versus base policy - Whether the condition in Appendix 14II of the HBP (as it stood until 16.09.2008) excluding reimbursement for supplies not "meant for export" could override or limit the FTP entitlement for CST reimbursement on inputs used for production of goods cleared into DTA - HELD THAT: - The Court found a conflict between the FTP (para 6.11(c)(i)) and the pre-16.09.2008 Appendix 14II condition. It held that the Handbook/Appendix, being subordinate and procedural, cannot override or restrict a substantive entitlement in the FTP. The Appendix's restriction - limiting reimbursement to purchases used for production of goods "meant for export" - runs counter to the policy language of FTP and could not be relied upon to deny reimbursement where FTP permits it. The Court also noted that the administrative amendment by Public Notice No.81/RE2008 was prospective and could not be used to justify retrospective denial where FTP's language governed.

The reliance on Appendix 14II to deny CST reimbursement for inputs used in production of goods cleared into DTA is rejected and the FTP entitlement prevails.

Limitation on recovery after long delay / laches in revenue demands - Permissibility of reopening and recovery of CST reimbursements after a prolonged delay (claims granted in 2007-08 and show cause issued in 2015) - HELD THAT: - Applying the reasoning in Asahi Songwon, the Court held that where reimbursements were granted at the relevant time and there is no allegation of misrepresentation or suppression by the claimant, recovery after an unduly long period (over seven/eight years in the present case) is impermissible. The Court observed the delay in issuing show cause and commencement of recovery proceedings, and accepted that such delayed action could not be allowed to disturb long-settled grants in absence of culpable conduct by the unit.

Recovery of the CST reimbursements after the prolonged delay is not permissible; the petitioner's challenge to the recovery succeeds on this ground.

Final Conclusion: The writ petition is allowed. The order dated 07.09.2018 of the Director General of Foreign Trade upholding the recovery and penalty is quashed and set aside: the petitioner is entitled to CST reimbursement in accordance with para 6.11(c)(i) of FTP 2004-09 (including procurements from other EOUs where goods are "manufactured in India"), the HBP Appendix cannot override the FTP, and recovery after the long delay is impermissible.

Confiscation for misdeclaration - Mens rea not required for confiscation or penalty - Customs Valuation Rules - re-determination of value - Penalty limited to duty on misdeclared goods - Redemption fine to be commensurate with extent of misdeclaration

Confiscation for misdeclaration - Mens rea not required for confiscation or penalty - Validity of confiscation and applicability of mens rea in proceedings for confiscation and penalty - HELD THAT: - The Tribunal found that 81 out of 229 bales were misdeclared (full pants declared as pajamas) and that the appellants had filed the bill of entry misdeclaring the goods. The fax relied upon by the appellants did not establish that pants were shipped in place of pajamas or that the importer lacked knowledge of the misdeclaration. The Tribunal affirmed the legal position that mens rea is not an essential ingredient for confiscation under the Customs Act nor for levy of penalty under the provision cited by the adjudicating authority, and therefore the presence or absence of intention or knowledge did not affect the validity of confiscation in the facts of the case. [Paras 5]

Confiscation upheld; lack of mens rea does not preclude confiscation or penalty.

Customs Valuation Rules - re-determination of value - Validity of the redetermined valuation of the imported goods - HELD THAT: - The Tribunal observed that the Commissioner revalued the entire consignment without recording reasons for rejecting the declared value in respect of 148 bales and without indicating application of the Valuation Rules or following the CVR, 2007 sequentially. Since misdeclaration related only to 81 bales, the wholesale re-determination of value for all 229 bales was held to be arbitrary and not sustainable. The declared value for the 148 uncontested bales was to be accepted, while the value of the 81 misdeclared bales required fresh determination in accordance with the Customs Valuation Rules by the adjudicating authority. [Paras 6]

Declared value accepted for 148 bales; valuation of 81 misdeclared bales remanded for re-determination following applicable Valuation Rules.

Penalty limited to duty on misdeclared goods - Redemption fine to be commensurate with extent of misdeclaration - Extent of penalty and redemption fine payable by the appellant - HELD THAT: - Because the Commissioner had imposed penalty on the basis of the revised value of the entire consignment, and that revision was set aside in part, the Tribunal held that such penalty had no legal basis. The Tribunal directed that the penalty payable by the appellant be reduced to an amount equivalent to the duty applicable on the redetermined value of the 81 misdeclared bales, subject to conditions of the statutory provision cited. Considering prolonged custody and loss of value of the goods, the Tribunal further exercised discretion to fix the redemption fine in lieu of confiscation at a nominal sum and directed the adjudicating authority to pass a suitable order within a specified time. [Paras 6]

Penalty reduced to duty equivalent on the 81 misdeclared bales (as per re-determination); redemption fine fixed at a nominal amount and adjudicating authority directed to pass fresh order.

Final Conclusion: Confiscation of misdeclared goods upheld; declared value accepted for uncontested 148 bales; valuation of 81 misdeclared bales remanded for determination under the Customs Valuation Rules; penalty curtailed to duty on those 81 bales and redemption fine limited, with directions to the adjudicating authority to pass a consequential order within the stipulated time.

Penalty for alleged involvement in import diversion - knowledge of transporter / absence of mens rea - confession and corroboration in adjudication proceedings - addendum to show cause notice and adding of parties post-investigation - remand for fresh adjudication on role and contributory liability - temporal delay and limitation in confiscation and penalty proceedings

Knowledge of transporter / absence of mens rea - penalty for alleged involvement in import diversion - Penalty imposed on transporters Gulbir Singh Anand and Naresh D Bhanushali set aside. - HELD THAT: - The adjudicating authority's findings as to the role of the transport undertakings were sketchy and lacked facts linking transportation activity to knowledge of the illicit nature of the goods. A transporter, in the ordinary commercial sense, is required only to deliver goods to the consigned address and is not professionally obliged to establish provenance or be conversant with import schemes or statutory provisions; nor are transporters under a duty to act as customs watchdogs under section 151 of the Customs Act. In the absence of evidence that the transporters were aware that the goods should legally have been delivered to the address specified in the advance licences, imposition of penalty against them was unjustified. The impugned order did not demonstrate awareness or deliberate involvement on their part, and therefore the penalties imposed on them were set aside. [Paras 6]

Penalties imposed on Shri Gulbir Singh Anand and Shri Naresh D Bhanushali are set aside.

Confession and corroboration in adjudication proceedings - addendum to show cause notice and adding of parties post-investigation - remand for fresh adjudication on role and contributory liability - temporal delay and limitation in confiscation and penalty proceedings - Findings against principal alleged conspirator Shri Sajjan Kumar Goel and consequential liability of other noticees set aside and remanded for fresh adjudication. - HELD THAT: - The impugned finding that Shri Sajjan Kumar Goel was the prime conspirator rests principally on a confession attributed to him and purported corroboration from other noticees. The show cause notice as originally issued did not name him, and the corroborative statements are inconsistent with earlier statements recorded before Goel's confession. The impugned order fails to reconcile these inconsistencies or to address the retraction of the confession; it thus does not afford a satisfactory foundation for isolating Goel as the mastermind. Although no statutory limitation bars imposition of penalties or confiscation, delay alone did not render the proceedings invalid. Given the questionable foundation and the direct effect that Goel's correct characterization of role would have on the contributory liability of Surender Agarwal, Bhagwan Tulsiyan and Suresh Khandelwal, the matter requires the adjudicating authority to apply fresh mind to the submissions and evidence and to decide afresh the nature of Goel's role and the contributory aspects. [Paras 11, 12, 13, 14]

Impugned order set aside insofar as it adjudicates the role of Shri Sajjan Kumar Goel and the related contributory liability of the other noticees; matter remanded to the adjudicating authority for fresh decision on those issues.

Final Conclusion: Penalties imposed on the two transporters are quashed; the adjudication against the remaining appellants (including Shri Sajjan Kumar Goel, Surender Agarwal, Bhagwan Tulsiyan and Suresh Khandelwal) is set aside and remanded to the adjudicating authority for fresh consideration of their roles and contributory liability in accordance with the observations made.

Condonation of delay - confiscation under Section 111(d) of the Customs Act, 1962 - redemption fine - personal penalty - precedential application of Three Member Bench ratio - enhancement of assessable value by importer's concurrence - deterrent principle in imposing penalty

Condonation of delay - Delay of 97 days in filing the appeal was condoned. - HELD THAT: - The Miscellaneous Application filed by the Revenue seeking condonation of delay was considered on the reasons stated therein. The Tribunal found the explanation satisfactory and allowed the application, thereby condoning the delay of 97 days and admitting the appeal for hearing. [Paras 2]

The delay of 97 days in filing the appeal is condoned and the Miscellaneous Application is allowed.

Redemption fine - personal penalty - precedential application of Three Member Bench ratio - confiscation under Section 111(d) of the Customs Act, 1962 - enhancement of assessable value by importer's concurrence - deterrent principle in imposing penalty - Whether the Commissioner (Appeals) erred in reducing the redemption fine and personal penalty and whether the Tribunal should interfere with that reduction. - HELD THAT: - The Tribunal noted that confiscation under Section 111(d) and enhancement of value had been upheld, and that the enhancement was accorded on the importer's concurrence. The Revenue contested only the quantum of redemption fine and personal penalty reduced by the Commissioner (Appeals). The Commissioner (Appeals) relied on the ratio of a Three Member Bench which endorsed redemption fine at 10% and penalty at 5% in cases of import violating Exim Policy provisions. The Tribunal found no reason to interfere with the appellate authority's reduction, observing that the reduction was in conformity with the cited three member Bench ratio and that the factors relied upon did not warrant a higher quantum. [Paras 7, 8, 9]

The impugned order reducing the redemption fine and personal penalty is upheld and the Revenue's appeal is rejected.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, upheld the Commissioner (Appeals) order which reduced the redemption fine and personal penalty (applying the Three Member Bench ratio); the Revenue's appeal is dismissed.

Provisional release of imported goods - infructuousness of appeal - effect of subsequent adjudication on interim relief

Provisional release of imported goods - infructuousness of appeal - adjudication - Whether the appeal seeking provisional release of VRLA batteries is maintainable after the goods have been released and adjudication in respect of the import has been completed. - HELD THAT: - The Bench recorded that show cause proceedings in respect of the imported goods were initiated by the Department and the matter has been adjudicated by order dated 5.9.2018. Given that the competent authority has already released the imported goods and the subject import has been adjudicated, the appellant's plea for provisional release has lost its practical efficacy. The appeal seeking provisional relief therefore cannot be effectively adjudicated and is rendered infructuous. [Paras 2, 3]

Appeal seeking provisional release is dismissed as infructuous because the goods have already been released and the matter adjudicated.

Final Conclusion: The appeal against the communication relating to provisional release of imported VRLA batteries is dismissed as infructuous since the goods have been released by the competent authority and the matter has been adjudicated.

Time-bar for issuance of show cause notice - limitation under Section 28 of the Customs Act, 1962 - confiscation proceedings - invocation of tribunal precedents

Time-bar for issuance of show cause notice - limitation under Section 28 of the Customs Act, 1962 - confiscation proceedings - Whether the show cause notice dated 27.08.2008 issued in respect of import dated 24.04.2003 was time barred and unsustainable - HELD THAT: - The Tribunal accepted the Revenue's own admission of the date of import as recorded in the show cause notice, namely 24.04.2003, and noted that the impugned show cause notice was issued on 27.08.2008, which is beyond a period of five years from the date of import. Reliance was placed on the decision of this Tribunal in Usha Stud & Agricultural Farms (P) Ltd , which applied the principle in T.V.S. Whirlpool Ltd as affirmed by the Supreme Court, and held that although no specific time limit is prescribed for issuance of show cause notices in confiscation matters, the limitation period under Section 28 can be invoked and a five year outer limit applies. Applying that principle, the Tribunal concluded that the show cause notice in the present case was issued after the statutory five year period and therefore was time barred; adjudication on such a time barred notice could not be sustained. The Tribunal decided the case on limitation without considering the merits of the confiscation and penalties imposed.

The show cause notice dated 27.08.2008 was time barred being issued beyond five years from the date of import and therefore the adjudication could not be sustained; the impugned order was set aside and the appeal allowed.

Final Conclusion: The appeal was allowed on the ground of limitation: the show cause notice issued after the five year period from the admitted date of import was held time barred and the adjudicating order of confiscation and penalties was set aside.

Summary order. Appeals withdrawn by appellants with liberty to place this order before the Adjudicating Authority; all interim orders vacated and appeals with applications and interlocutory applications disposed of; matter to be listed 'for orders' before NCLT, Mumbai Bench on 7th May, 2019.

Interim injunction against invocation of guarantees and transfer of assets - stay of action by third parties pursuant to interim appellate order - impleading of necessary parties for adjudication - direction to consider compliance with appellate interim order

Impleading of necessary parties for adjudication - Impleading of the Secretary, Department of Telecommunications (Wireless Planning and Finance Wing), Government of India and Axis Bank Limited as respondents. - HELD THAT: - The Tribunal directed that the Secretary, Department of Telecommunications (Wireless Planning and Finance Wing), Government of India, be impleaded as a party respondent to enable the Tribunal to hear and decide whether the actions taken by that Department are in conflict with the interim order dated 4th February, 2019. The application to implead Axis Bank Limited was allowed since the letter dated 20th March, 2019 had been addressed to Axis Bank. The appellant was directed to correct the cause title and file requisite process for service by speed post (and e-mail if available). [Paras 9, 10, 11]

Secretary, Department of Telecommunications and Axis Bank Limited are impleaded as respondents; directions given for service and correction of cause title.

Direction to consider compliance with appellate interim order - Whether the show-cause notices dated 14th and 15th March, 2019 and the letter dated 20th March, 2019 are in violation of the interim order dated 4th February, 2019. - HELD THAT: - On perusal of records the Tribunal observed that the show-cause notices and the letter appear to be contrary to the interim order of 4th February, 2019 which prohibited sale, transfer or alienation of the corporate debtor's assets and invocation of guarantees without prior permission of the Tribunal or the Supreme Court. To decide that question, the Tribunal expressed its intention to hear the Secretary, Department of Telecommunications and accordingly directed impleadment so that the Department may be heard before a final determination is made. [Paras 8]

The question is directed to be determined after hearing the Secretary, Department of Telecommunications; the matter is listed for further orders.

Stay of action by third parties pursuant to interim appellate order - interim injunction against invocation of guarantees and transfer of assets - Interim restraint on taking steps pursuant to the show-cause notices and on the letter seeking invocation of guarantee. - HELD THAT: - Pending further orders and until the Tribunal decides after impleading and hearing the Secretary and Axis Bank, the Tribunal restrained the respondents from taking any steps pursuant to the show-cause notices dated 14th and 15th March, 2019. The letter dated 20th March, 2019 was also stayed. This order preserves the status quo in relation to the interim order of 4th February, 2019 and prevents third parties from acting until the Tribunal adjudicates the conformity of such actions with its earlier direction. [Paras 11]

Respondents are restrained from taking any step pursuant to the show-cause notices; the letter dated 20th March, 2019 is stayed until further orders.

Final Conclusion: The application to implead the Secretary, Department of Telecommunications and Axis Bank Limited is allowed; the Tribunal has stayed steps pursuant to the show-cause notices and the letter dated 20th March, 2019 and has directed that the question whether those actions violate the interim order of 4th February, 2019 be decided after hearing the newly impleaded parties.

Voluntary liquidation - declaration of solvency - public announcement of liquidation - compliance with Insolvency and Bankruptcy Code, 2016 and IBBI (Voluntary Liquidation Process) Regulations - dissolution of corporate person - transfer of unclaimed liquidation funds to Companies Liquidation Account

Compliance with Insolvency and Bankruptcy Code, 2016 and IBBI (Voluntary Liquidation Process) Regulations - declaration of solvency - public announcement of liquidation - The liquidator complied with the requirements of Section 59 of the Insolvency and Bankruptcy Code, 2016 and the IBBI (Voluntary Liquidation Process) Regulations prior to seeking dissolution. - HELD THAT: - The Adjudicating Authority examined whether the voluntary liquidator fulfilled statutory prerequisites under Section 59 read with the Regulations. The record shows the board resolution for voluntary winding up, affidavits constituting declarations of solvency by the directors, filing of the declaration and audited financial statements with the Registrar of Companies, issuance of notices to shareholders, passing of the special resolution in the EGM, filing of MGT-14, publication of the public announcement in Form A in two newspapers and its submission to the IBBI, opening of a liquidation bank account, filing of the preliminary and final reports, and obtaining of a tax authority clearance. On these facts the Authority concluded that the liquidator had complied with the statutory and regulatory requirements and was entitled to invoke Section 59(7) for dissolution. [Paras 6, 7, 8, 10, 11]

Compliance established; petition properly filed under Section 59(7) of the Code.

Dissolution of corporate person - M/s. Guntur Tobacco Limited is ordered to be dissolved under Section 59 of the Insolvency and Bankruptcy Code, 2016 with effect from the date of the Order. - HELD THAT: - Having found that the liquidator had complied with the statutory prerequisites and on consideration of the Registrar of Companies' report and the liquidation records, the Adjudicating Authority exercised its power under Section 59 to dissolve the corporate person. The dissolution is recorded to take effect from the date of the Order. [Paras 12]

Company dissolved with effect from the date of this Order.

Transfer of unclaimed liquidation funds to Companies Liquidation Account - The unclaimed amount standing in the liquidation bank account is to be transferred to the Companies Liquidation Account in the Public Account of India, and the liquidator must file the copy of the dissolution order with the Registrar of Companies within 14 days. - HELD THAT: - The Authority directed disposition of remaining unclaimed funds by transfer to the Central public account designated for company liquidation and imposed the administrative obligation on the voluntary liquidator to file the dissolution order with the concerned RoC within the stipulated period, thereby closing out post-liquidation formalities. [Paras 12, 13]

Unclaimed funds to be transferred to the Companies Liquidation Account; liquidator to file the order with ROC within 14 days.

Final Conclusion: The Tribunal found statutory compliance by the voluntary liquidator, ordered dissolution of M/s. Guntur Tobacco Limited with effect from the date of the order, directed transfer of unclaimed liquidation funds to the Companies Liquidation Account in the Public Account of India and required filing of the order with the Registrar of Companies within 14 days.

Summary order. Delay condoned; notice issued; matter tagged with Civil Appeal Nos. 6084-6085/2017.

Summary order. Issue notice on the application for condonation of delay and on the Civil Appeal, returnable in the second week of August, 2019; Dasti permitted.

Summary order. Delay condoned; application for exemption from filing certified copy of the impugned order allowed; appeal admitted.

Summary order. Issue notice on the applications for condonation of delay and in the appeal; matter listed returnable in four weeks.

Summary order. Delay condoned; appeal admitted; tagged with Civil Appeal D. No. 5887 of 2016.

Summary order. Notice issued on the application for condonation of delay and on the appeal.

Writ of mandamus for recovery of security deposits - arbitration clause and arbitration as exclusive remedy - judicial review under Article 226 of the Constitution of India - leviability of service tax on garbage removal services

Writ of mandamus for recovery of security deposits - arbitration clause and arbitration as exclusive remedy - judicial review under Article 226 of the Constitution of India - Whether the High Court should order return of FDRs withheld as security pending adjudication of Service Tax liability or require the petitioner to invoke the arbitration clause in the contract. - HELD THAT: - The Court held that the writ petitions were not the appropriate forum to adjudicate the dispute as to leviability of Service Tax or who would ultimately bear it where the contract contains an arbitration clause. The earlier Division Bench order had directed that disputes as to who is to bear Service Tax would be resolved by arbitration and permitted interim measures in arbitration; petitioners were to keep FDRs renewed pending outcome. The High Court agreed with the Single Judge that the remedy lies in invoking the arbitration clause rather than seeking writ relief under Article 226. The Court noted that the appellant had been afforded opportunity to participate in the appellate proceedings before the CESTAT but chose not to participate; a portion of the matter (quantification) was remanded by the CESTAT to the Commissioner, and the adjudicatory process remained pending. Consequently, there was no error in concluding that writ relief to compel return of the security deposits could not be granted while the contractual arbitration remedy and statutory adjudication avenues were available and pending. [Paras 5, 13, 14, 15]

Writ relief for return of the FDRs refused; appellant must invoke arbitration (and pursue statutory appeals/proceedings) for resolution of Service Tax liability; impugned order upheld.

Leviability of service tax on garbage removal services - Whether the decision in Airport Retail Pvt. Ltd. conclusively settled the question of Service Tax leviability in the present disputes so as to entitle the appellant to immediate return of the security deposits. - HELD THAT: - The Court examined the Airport Retail (P) Ltd. decision and found the factual and legal questions there to be different. That decision addressed whether certain transactions constituted 'airport services' under a specific sub-clause and the effect of the 2010 amendment; it did not determinatively resolve the appellant's dispute. The Court observed that the CESTAT had in any event considered aspects of levy and remanded quantification to the Commissioner, so the question of quantification of any tax demand remained pending. Thus Airport Retail could not be treated as preclusive of further adjudication or a basis for immediate release of the FDRs in the present proceedings. [Paras 11, 12, 13]

Airport Retail (P) Ltd. does not conclusively decide the appellant's Service Tax liability here; it is not a basis for immediate refund of the security deposits.

Final Conclusion: The impugned order refusing writ relief and directing that contractual/arbitral and statutory remedies be pursued is upheld; the appeals are dismissed as meritless, parties to bear their own costs.

Scientific and technical consultancy service - technical testing and inspection services - composite service - classification by essential character - definition of scientific and technical consultancy service in Section 65(92) - classification rule for composite services in Section 65A - State under Article 12 not determinative for taxation/statutory-function immunity

State under Article 12 not determinative for taxation/statutory-function immunity - Whether the appellant, being a society supported by the State, performs a statutory function or is to be treated as 'State' so as to be immune from service tax liability. - HELD THAT: - The appellant is a society registered under the Societies Registration Act supported by the State but functioning as an autonomous organisation providing training and consultancy in environmental matters. The court held that the Ajay Hasia decision, which construed the term 'State' for the purposes of Part III of the Constitution, does not automatically render such societies immune from taxation or convert their activities into statutory functions for all purposes. The statute creating or supporting the society did not impose on it any statutory responsibility that would make its consultancy and training work a governmental or statutory function exempt from tax. Accordingly, the appellant cannot claim exemption from service tax merely because of its registration and support by the State. [Paras 6]

The appellant is not a 'State' or performing a statutory function for the purpose of avoiding service tax liability.

Scientific and technical consultancy service - technical testing and inspection services - composite service - classification by essential character - definition of scientific and technical consultancy service in Section 65(92) - classification rule for composite services in Section 65A - Whether the appellant's activities are taxable as scientific and technical consultancy service and whether the composite engagements can be vivisected into separate taxable/exempt components. - HELD THAT: - The court examined the nature of services rendered and applied the statutory definition of scientific and technical consultancy (as explained in the judgment) to find that the appellant renders scientific and technical consultancy and is therefore liable to service tax under that head. On the question of vivisection, the court applied the rule governing composite services (as set out in Section 65A) that a composite service must be classified according to the service which gives it its essential character. The testing, inspection and report-preparation activities were held to be integral parts of a comprehensive consultancy engagement and not separable for the purpose of classification and levy. The Assistant Commissioner's attempt to bifurcate the consideration into 'technical testing' (claimed as exempt) and 'report preparation' was held to be incorrect; the Commissioner of Customs correctly classified the entire composite service by its essential character as scientific and technical consultancy and levied service tax accordingly. [Paras 7, 8]

The appellant's services are taxable as scientific and technical consultancy and the composite engagements cannot be vivisected; the entire value is chargeable as consultancy service.

Final Conclusion: The appeal is dismissed. The appellant is not exempt as a 'State' or by reason of performing a statutory function, and the Commissioner's revision holding the appellant liable to service tax on the composite scientific and technical consultancy services (for the period 16.07.2001 to 31.03.2004) by classifying the service according to its essential character is upheld.

Summary order. Delay of four days in filing the appeal is condoned; the Miscellaneous Application is allowed. The connected appeal ST/42715/2018 filed by the assessee is directed to be linked with the present appeal and both appeals shall be listed in due course.

Reversal of Cenvat credit on common input services - Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - Demand unsustainable where proportionate credit reversed - Validity of penalty imposed despite reversal of Cenvat credit

Reversal of Cenvat credit on common input services - Application of Rule 6(3) of the Cenvat Credit Rules, 2004 - Demand unsustainable where proportionate credit reversed - Whether a demand under Rule 6(3) for payment of a percentage of the value of traded goods can be sustained where the assessee's head office has already reversed the proportionate Cenvat credit attributable to trading of goods. - HELD THAT: - The Tribunal noted and accepted the undisputed fact that the appellant's head office had reversed the proportionate Cenvat credit availed on common input services and had paid interest on such reversal. The legal effect of that reversal, the Tribunal held, is that no credit remained available to the appellant in respect of the common services used for trading. In that factual and legal position, the requirement to make a separate payment calculated under Rule 6(3) is inconsistent with the scheme of the Cenvat Credit Rules and with established judicial and quasi judicial authority which holds that where proportionate credit attributable to exempted goods/services is reversed, a fresh demand under Rule 6(3) is not sustainable. The Tribunal therefore concluded that the Adjudicating Authority's confirmation of demand under Rule 6(3) was not maintainable.

Demand confirmed under Rule 6(3) set aside and appeal allowed; consequential relief granted to the appellant.

Validity of penalty imposed despite reversal of Cenvat credit - Whether the penalty and interest confirmed by the Adjudicating Authority can be sustained when the proportionate credit has been reversed by the head office. - HELD THAT: - The Tribunal observed that the Adjudicating Authority did not dispute the fact or correctness of the reversal and interest paid by the head office. Given that the reversal effectively negated the availment of credit for the common services in question, the foundation for confirming demand and imposing penalty under the Cenvat Credit Rules and Central Excise Act was undermined. Consequently, the Tribunal found no reason to uphold the confirmation of demand, interest and penalty made by the Adjudicating Authority.

Confirmation of interest and penalty set aside along with the demand; appeal allowed.

Final Conclusion: Impugned order of the Commissioner confirming demand, interest and penalty set aside; appeal allowed and consequential relief granted to the appellant.

Invocation of extended period of limitation under proviso to Section 11A(1) - suppression of facts versus knowledge of department from earlier show cause notices - doctrine that earlier show cause notice on same subject precludes later SCN invoking extended limitation

Invocation of extended period of limitation under proviso to Section 11A(1) - suppression of facts versus knowledge of department from earlier show cause notices - doctrine that earlier show cause notice on same subject precludes later SCN invoking extended limitation - Whether the Tribunal was justified in upholding invocation of the extended period of limitation in respect of the show cause notices dated 22.10.2007 and 14.11.2007 when earlier show cause notices on the same subject had been issued and adjudicated in favour of the assessee. - HELD THAT: - The Court applied settled principles that extended limitation under the proviso to Section 11A(1) is available only where the Revenue proves fraud, collusion, willful misstatement or suppression of facts with intent to evade duty. Following the Supreme Court's decision in Nizam Sugar Factory and this Court's decision in Gujarat Ambuja Exports Ltd., the Court held that where an earlier show cause notice on the same set of facts was issued and the Department was thereby aware of the relevant material, the same or similar facts cannot later be treated as suppression to invoke the extended period. On a conjoint reading of the earlier SCNs and the impugned SCNs, the facts and allegations were substantially similar and the asserted new material (reference to intelligence and a statement) did not materially differ from facts already available to the authorities. The Tribunal's distinction-that prior SCNs related to a subsequent period while the impugned SCNs covered an earlier period-was rejected as inconsistent with the principle that knowledge of the department from prior proceedings precludes treating identical facts as suppression. Accordingly, invocation of extended limitation in the impugned notices was held impermissible and time-barred. [Paras 6, 7]

Impugned show cause notices dated 22.10.2007 and 14.11.2007 and the Tribunal's order upholding them are quashed; the demands under those notices are held barred by limitation.

Final Conclusion: Appeal allowed. The Court set aside the impugned show cause notices dated 22.10.2007 and 14.11.2007 and the Tribunal's order, holding that the extended period of limitation could not be invoked since the Department had the relevant facts from earlier show cause proceedings; consequential benefits to the assessee directed.

Classification of micronutrient fertilisers - Plant Growth Regulators - Classification of cultures of micro-organisms - HSN Explanatory Notes - Most specific heading rule in tariff interpretation - Extended period - bona fide belief and limitation - Penalty relief where dispute is classification/interpretation

Classification of micronutrient fertilisers - Plant Growth Regulators - HSN Explanatory Notes - Extended period - bona fide belief and limitation - Penalty relief where dispute is classification/interpretation - Multi and single micronutrient fertilisers are not classifiable as Plant Growth Regulators under chapter heading 3808 and are classifiable under chapter heading 3105; demands, interest and penalties based on classification under 3808 are set aside and the departmental appeal against dropping demand for single micronutrients is dismissed. - HELD THAT: - The Tribunal examined the scope of 'Plant Growth Regulators' as elucidated in the HSN Explanatory Notes and the chemical analysis indicating negligible N/P/K content. The Board's circular clarifying that micronutrient mixtures are not plant growth regulators was taken into account. Earlier Tribunal precedents on identical facts were followed to hold that micronutrients (single and multi) fall under heading 3105 and not under 3808. Accordingly, the demand, interest and penalties confirmed by classifying multi-micronutrients under 3808 were set aside. The Commissioner's dropping of demand for single micronutrients was held to be consistent with the Board clarification and applicable precedent; the department's appeal against that dropping was dismissed. Where extended period was invoked, the Tribunal accepted that a bona fide belief as to classification/replicing could negate extended-period invocation, and penalties were not warranted given the interpretative nature of the dispute. [Paras 6]

Classification of single and multi micronutrient fertilisers under 3105 is upheld; demands, interest and penalties confirmed under 3808 are set aside; department appeal dismissed.

Classification of cultures of micro-organisms - HSN Explanatory Notes - Most specific heading rule in tariff interpretation - Penalty relief where dispute is classification/interpretation - Products comprising cultures of micro-organisms (bio-fertilisers/bio-pesticides of microbial origin) are classifiable under chapter heading 3002 (cultures of micro-organisms) and not under chapters 3105 or 3808; the duty demands based on classification under 3105/3808 are set aside and such products attract nil rate of duty. - HELD THAT: - Following earlier Tribunal analysis, the Tribunal noted that 'cultures of micro-organisms' expressly figure in chapter 3002 and HSN notes include cultures for technical purposes (for aiding plant growth). The biological character and mode of action of the microbes led to the conclusion that they fall within chapter 3002 rather than headings for chemically defined plant growth regulators or fertilisers. On that basis, the demand confirmed by classifying these products under 3105/3808 was set aside and the nil rate under 3002 applied. [Paras 6]

Bio-fertilisers and bio-pesticides of microbial origin classifiable under 3002; demand set aside and nil rate applies.

Most specific heading rule in tariff interpretation - Classification of bio-fertilisers and bio-pesticides of plant/animal origin - Penalty relief where dispute is classification/interpretation - Bio-fertilisers and bio-pesticides of plant/animal origin, as classified by the department for the normal period, attract duty and interest which are upheld for the normal period; however, penalties imposed in respect of these products are set aside because the controversy was one of classification and interpretation. - HELD THAT: - The Tribunal accepted that classification for these products as proposed by the department leads to liability for duty and interest for the normal period and that the original authority correctly set aside demands beyond the normal period. Given that the dispute primarily concerned tariff classification and interpretative questions, the Tribunal concluded that imposing penalties was unwarranted and therefore set aside the penalties while leaving the duty liability for the normal period intact. [Paras 6]

Duty and interest for the normal period upheld; penalties in respect of bio-fertilisers and bio-pesticides of plant/animal origin set aside.

Final Conclusion: The appeals result in allowance of the appeal against penalties (E/22786/2014), partial allowance of the assessee's appeal (E/22787/2014) by setting aside demands and penalties where products were incorrectly classified under 3808 or 3105, and dismissal of the department's appeal (E/23051/2014); classification is affirmed as 3105 for micronutrients, 3002 for microbial products, and departmental classification for plant/animal origin products is upheld for the normal period but without penalties.

Eligibility for exemption under notification - certificate as condition precedent for grant of exemption - non-discriminatory treatment for goods in projects awarded through international competitive bidding - remand for fresh verification and decision - setting aside demand where binding precedent favours assessee

Eligibility for exemption under notification - setting aside demand where binding precedent favours assessee - Eligibility of supplies made to M/s Bharat Earth Movers Ltd for exemption under notification no. 63/1995 CE and the resultant demand. - HELD THAT: - The Tribunal found that the impugned order denied exemption on the ground that the assessee's name was not specifically enumerated, but subsequent judicial developments have rendered that approach untenable. The decision relied upon by the lower authority has been overtaken by other High Court pronouncements, and the question of eligibility for supplies to Bharat Earth Movers Ltd (which are intended for the Ministry of Defence) is no longer res integra. On this basis the Tribunal set aside the portion of the demand relating to those supplies. [Paras 4]

Demand relating to supplies made to M/s Bharat Earth Movers Ltd under notification no. 63/1995 CE set aside.

Certificate as condition precedent for grant of exemption - remand for fresh verification and decision - Entitlement to exemption under the notification for goods used in setting up water supply plants where the lower authority discarded the claim for want of a district head's certificate said to be misplaced. - HELD THAT: - The Tribunal noted conflicting factual assertions: the lower authorities recorded that the requisite certificate was deficient or misplaced, whereas the assessee's case is that the certificates had been submitted but could not be traced by the central excise office. Given this factual dispute and the relevance of the original certification to eligibility, the Tribunal concluded that the appropriate course is to require the original authority to endeavour to recover or verify the original documents and then render a fresh finding on eligibility rather than sustain the denial on the record before it. [Paras 5]

Matter remitted to the original authority to recover/verify the certificates and to decide afresh on entitlement to the exemption for water supply plant supplies.

Non-discriminatory treatment for goods in projects awarded through international competitive bidding - certificate as condition precedent for grant of exemption - remand for fresh verification and decision - Claim to exemption under notification no. 06/2006 CE (contingent on notification no. 21/2002 CE) for supplies in connection with projects executed after international competitive bidding and the adequacy of the certification relied upon. - HELD THAT: - The Tribunal observed that the contest was limited to conformity with the conditions prescribed in the notifications and whether the certification insisted upon by lower authorities was mandated or whether the certificate furnished sufficed. Finding that the lower authorities had not applied the conditions with the required attention and that the furnished certificate may contain sufficient details to establish eligibility, the Tribunal directed that the matter be reconsidered by the original authority in the light of the notifications' conditions and the materials on record. [Paras 6]

Matter remitted to the original authority for fresh consideration of eligibility under notification no. 06/2006 CE (read with notification no. 21/2002 CE) and the adequacy of the certification.

Final Conclusion: The Tribunal set aside the demand relating to supplies to M/s Bharat Earth Movers Ltd; on the remaining points-entitlement under the water supply exemption and under notification no. 06/2006 CE related to international competitive bidding-the matter is remanded to the original authority for recovery/verification of certificates and fresh decision in accordance with the observations made.

Valuation of physician samples - transaction value - acceptance of invoice price under section 4(1)(a) - retail selling price under section 4A - application of rule 4 of Central Excise Valuation Rules - dictated price by principal manufacturer - distinction between manufacturer-supplied free samples and sales to principal

Valuation of physician samples - transaction value - acceptance of invoice price under section 4(1)(a) - retail selling price under section 4A - dictated price by principal manufacturer - application of rule 4 of Central Excise Valuation Rules - Whether physician samples cleared to the principal manufacturer during January 2005 to November 2006 were required to be valued at retail selling price under the commandeering provision or could be accepted at transaction value declared by the assessee. - HELD THAT: - The Tribunal held that physician samples are not prima facie covered by the prescription in section 4A and therefore fall under the default valuation scheme of section 4; where the characteristics of the transaction conform to the enumerated conditions in section 4(1)(a), acceptance of the invoice/transaction price is permissible. The Court observed that the appellant discharged duty on the transaction value at which goods were cleared to the principal on a principal-to-principal basis and there was no evidence that the purported sale was not a genuine sale or that the price was dictated by the principal in the present case. The Board's circulars had been misconstrued by authorities insofar as they relate to clearances of samples by manufacturers themselves, and decisions relied upon by Revenue were distinguishable: Goa Antibiotics involved a factual finding of dictation of value by the principal and was therefore dealt with differently; Themis Laboratories and the Supreme Court in Sun Pharmaceuticals support acceptance of transaction value when s.4(1)(a) conditions are met. In the absence of evidence to show that the agreed price was influenced by the obligation of free distribution or that there was no real sale, the transaction value could not be rejected and the first appellate authority's view was upheld. [Paras 4, 5, 6]

The transaction value declared by the respondent for physician samples sold to the principal manufacturer was acceptable; the challenge by Revenue was dismissed and the order of the first appellate authority was upheld.

Final Conclusion: Appeal dismissed; the Tribunal affirmed that physician samples cleared to the principal on a genuine principal-to-principal transaction may be valued at the transaction price where the conditions of section 4(1)(a) are satisfied, and found no basis to apply retail selling price under section 4A in the facts of this case.

Excisable value - transportation expenses recovered from customer - precedent binding on tribunal

Excisable value - transportation expenses recovered from customer - Transportation cost incurred for movement of goods from factory gate to depots, which is recovered from the customer, is not includible in the excisable value of the final product. - HELD THAT: - The Appellate Tribunal examined whether transportation charges incurred by the assessee for moving goods from the factory gate to depots, and subsequently recovered from the customer, form part of the excisable value of the finished product. The Tribunal held that this issue is covered by the assessee's earlier decision reported as 2018-TIOL-1679-Allahabad-Central Excise, which establishes that such transportation expenses cannot be included in the excisable value. Applying that precedent, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant.

Impugned order set aside; appeal allowed by applying the earlier decision that transportation expenses recovered from the customer are not includible in excisable value.

Final Conclusion: The appeal is allowed: the Tribunal, following the assessee's earlier decision 2018-TIOL-1679-Allahabad-Central Excise, held that transportation costs recovered from the customer for movement from factory gate to depots do not form part of the excisable value and granted consequential relief.

Penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation as precondition for imposition of penalty - issue of excise duty invoice without delivery of goods

Penalty under Rule 26 of the Central Excise Rules, 2002 - confiscation as precondition for imposition of penalty - Whether penalty under Rule 26 can be imposed when the excisable goods were not held liable to confiscation. - HELD THAT: - The Tribunal analysed Rule 26 and held that the provision contemplates imposition of penalty only where the goods are liable for confiscation under the Act or the rules. The text of Rule 26 makes confiscation a precondition to attracting the penalty for dealing with excisable goods which are liable to confiscation. In the present case the goods were not held liable to confiscation. Consequently the statutory requirement for invoking Rule 26 was not satisfied and the provision could not be invoked to impose penalty on the appellants. Having found the precondition absent, the penalties imposed under Rule 26 by the authorities below could not stand. [Paras 4]

Penalty under Rule 26 set aside and appeals allowed with consequential relief.

Final Conclusion: The appeals are allowed; penalties imposed under Rule 26 were set aside because the goods were not held liable to confiscation, a precondition for invoking Rule 26.

Condonation of delay - effect of corrigendum on limitation - time barred appeal - admission of appeal and decision on merits

Condonation of delay - effect of corrigendum on limitation - time barred appeal - The appeal was not time barred as filed within the condonable period and within 60 days from the corrigendum. - HELD THAT: - The Tribunal found that the appeal, though filed 26 days beyond the normal 60 day period, fell within the 30 day condonable period so that the total 90 days was not exceeded. Further, the Tribunal held that once a corrigendum was issued the effective date of the order for limitation purposes is the date of the corrigendum and not the date of the original order; consequently the appeal was filed within 60 days from the corrigendum. On these bases the appeal should have been admitted and not dismissed as time barred. [Paras 4]

Appeal held not time barred and should have been admitted.

Admission of appeal and decision on merits - Matter remanded to the Commissioner (Appeals) for fresh adjudication on merits without being influenced by the earlier dismissal for delay. - HELD THAT: - The Tribunal concluded that because the Commissioner (Appeals) dismissed the appeal on the ground of time bar, he did not examine the merits. A non maintainable appeal cannot be considered on merits; therefore, having set aside the impugned order on the jurisdictional ground, the Tribunal directed remand so that the Commissioner (Appeals) may decide the appeal on its merits afresh, expressly prohibiting consideration of the earlier finding on delay or being influenced by the impugned order. [Paras 4]

Impugned order set aside; matter remanded to Commissioner (Appeals) to decide merits afresh without regard to previous delay finding.

Final Conclusion: The appeal is allowed to the extent that the order dismissing it as time barred is set aside; the case is remanded to the Commissioner (Appeals) for fresh adjudication on merits, the Commissioner (Appeals) being directed not to consider or be influenced by the earlier finding on delay.

Statutory deposit of 12.5% of the disputed amount of tax - condonation of delay in compliance with deposit requirement - appeal filed within limitation but delayed compliance to be condoned - appeal to be decided on merits - direction to dispose of restored appeals within thirty days

Statutory deposit of 12.5% of the disputed amount of tax - condonation of delay in compliance with deposit requirement - appeal filed within limitation but delayed compliance to be condoned - appeal to be decided on merits - Appellate authority erred in dismissing appeals for delayed payment of the statutory 12.5% deposit when the appeals were filed within the limitation period. - HELD THAT: - The appellate orders rejecting the petitioner's appeals solely on the ground that the statutory deposit of 12.5% was not paid within time were held incorrect in law. The High Court relied on the Supreme Court's decision in M/s. S.E. Graphites Private Limited, which clarified that the earlier Andhra Pradesh decision had been impliedly overruled by the Supreme Court in M/s. Innovatives Systems and that where an appeal is filed within the limitation period, delay in making the prescribed deposit may be condoned so that the appeal can be decided on merits. Applying that legal position, the Court concluded that the Appellate Deputy Commissioner should not have summarily dismissed the appeals for delayed deposit and that the appeals must be restored for adjudication on merits.

Appellate orders rejecting the appeals on the ground of delayed deposit are set aside; the appeals are restored for hearing on merits.

Final Conclusion: Writ petitions allowed to the extent that the appellate orders dated 30.03.2019 are set aside and the appeals for tax periods 2013-14, 2014-15 and 2016-17 are restored to the Appellate Deputy Commissioner for disposal on merits in accordance with the Supreme Court precedent; the appellate authority shall dispose of the appeals within thirty days of receipt of this order.

Deemed to have been allowed under Section 74(8) and Section 74(9) of the DVAT Act - mandatory nature of the notice under Section 74(8) - OHA functus officio upon expiry of the 15 day period under Section 74(8) - prospective operation of Section 9(2)(g) of the DVAT Act - refund with interest in terms of Section 42 of the DVAT Act

Deemed to have been allowed under Section 74(8) and Section 74(9) of the DVAT Act - OHA functus officio upon expiry of the 15 day period under Section 74(8) - mandatory nature of the notice under Section 74(8) - Objections filed by the petitioner before the OHA are to be deemed allowed because no decision was communicated within fifteen days of service of the notice in Form DVAT-41. - HELD THAT: - The Court relied on the statutory scheme of Section 74(7)-(9) and its prior precedents to hold that the deeming fiction in Section 74(9) is triggered only when (i) the objector serves the written notice specified in Section 74(8) and (ii) the Commissioner/OHA fails to make a decision within the ensuing fifteen days. The petitioner served the DVAT-41 notices and the 15-day period expired without any decision; subsequent requests by the department for re-submission of attested copies long after the statutory timeline could not defeat the statutory deeming provision. The Court therefore held that the OHA became functus officio and the objections stood deemed allowed. [Paras 30, 32, 34]

Objections are declared deemed to have been allowed under Section 74(8) read with Section 74(9) of the DVAT Act.

Prospective operation of Section 9(2)(g) of the DVAT Act - Default assessment denying input tax credit by invoking Section 9(2)(g) for the period ending 30 April 2009 was erroneous in law. - HELD THAT: - The VATO's default assessment relied on a provision which was inserted with effect from 1 April 2010. The Court held that Section 9(2)(g), being prospective, could not be retroactively applied to deny ITC for purchases made prior to its effective date; consequently, the basis for the default assessment for the period ending 30 April 2009 was legally unsustainable and liable to be set aside. [Paras 35, 36]

The default assessment orders of 19 May 2011 (to the extent they invoke Section 9(2)(g) for periods prior to 1 April 2010) are erroneous and are set aside.

Refund with interest in terms of Section 42 of the DVAT Act - Petitioner entitled to refund of the claimed amounts for the specified periods together with interest, and compensation if payment is not made by the stipulated date. - HELD THAT: - Having declared the objections deemed allowed and set aside the default assessment orders, the Court directed issuance of the refund for the periods specified in the petition. Interest on the refund is to be paid in accordance with Section 42 and the Court's prior exposition of when interest runs on refunds. The refund together with interest was ordered to be credited within a fixed time; a specified compensation was directed in the event of non-compliance with the deadline. [Paras 37, 38, 39]

Respondents directed to refund the claimed amount for the listed periods with interest under Section 42, and to pay compensation if the refund is not credited by the date specified by the Court.

Final Conclusion: The Court declared the petitioner's objections deemed allowed under Section 74(8)-(9), set aside the default assessment orders that erroneously relied on Section 9(2)(g) for pre 1 April 2010 periods, and directed the respondents to grant the refund for the stated periods with interest under Section 42, failing which compensation is payable.

Limitation under Section 29(6) of the Act - service of notice under Rule 72 of the U.P. VAT Rules - affixation of notice - quashing of ex-parte assessment - principle of natural justice

Limitation under Section 29(6) of the Act - quashing of ex-parte assessment - Validity of the assessment orders dated 31.03.2017 for assessment year 2012-13 under the U.P. VAT Act and the CST Act in view of the period of limitation prescribed by Section 29(6). - HELD THAT: - The Court found that the limitation period prescribed under Section 29(6) for assessment year 2012-13 had expired (ending on 13.09.2016) and the impugned assessment orders were passed on 31.03.2017, well beyond the statutory limitation. The respondents were unable to justify passing the orders after expiry of limitation. Because the orders were time barred, they were quashed. The Court relied on the admitted dates and the statutory limitation computed under Section 29(6) and did not remit the matter for fresh consideration on this point.

Impugned assessment orders for assessment year 2012-13 under the U.P. VAT Act and the CST Act dated 31.03.2017 are quashed as barred by limitation.

Service of notice under Rule 72 of the U.P. VAT Rules - affixation of notice - principle of natural justice - quashing of ex-parte assessment - Validity of the assessment orders dated 31.03.2017 for assessment year 2013-14 under the U.P. VAT Act and the CST Act in view of defective service of notice and non-compliance with Rule 72. - HELD THAT: - The Court recorded that respondents knowingly served notice by affixation at the petitioner's earlier address despite being aware of the change of business address and failed to comply with the modes of service mandated by Rule 72 (including simultaneous service by registered post with acknowledgment). Earlier benches had criticised and set aside similar departmental practices and had imposed costs. The record showed no compliance with the conditions for valid affixation and no proper reporting as required by the Rules. In view of the gross violation of Rule 72 and the breach of audi alteram partem, the impugned orders for 2013-14 were set aside. The Court permitted respondents to initiate proceedings afresh by issuing notice at the petitioner's current address in accordance with law.

Impugned assessment orders for assessment year 2013-14 under the U.P. VAT Act and the CST Act dated 31.03.2017 are set aside for defective service; respondents may re issue notice at the petitioner's current address in accordance with Rule 72.

Final Conclusion: Writ petition allowed: orders dated 31.03.2017 for assessment year 2012-13 quashed as barred by limitation; orders dated 31.03.2017 for assessment year 2013-14 set aside for failure to comply with Rule 72 and breach of natural justice, with liberty to the respondents to proceed lawfully by serving notice at the petitioner's current address.

Statutory appeal - interim stay of recovery - deference to appellate authority - exercise of writ jurisdiction - consideration of prima facie merits - direction for expeditious disposal

Statutory appeal - exercise of writ jurisdiction - Whether the learned Single Judge erred in refusing to decide the merits of the penalty order instead of directing the Appellate Authority to consider the pending statutory appeal and interim application for stay. - HELD THAT: - The Court held that the appellant had chosen the statutory remedy of appeal against the Intelligence Officer's penalty order and had also filed an application for interim stay of recovery before the appellate authority. In those circumstances, the Single Judge was not obliged to adjudicate the legality or merits of the impugned penalty order in writ proceedings and did not commit any illegality or impropriety in directing the Appellate Authority to consider the pending stay petition expeditiously. The limited relief granted by the Single Judge - an order for early consideration of the interim application and temporary stay of recovery for three months to facilitate that consideration - was an appropriate exercise of writ jurisdiction without addressing the merits of the appeal itself. [Paras 4]

The impugned order refusing to decide the merits and directing the Appellate Authority to consider the interim application was not erroneous or liable to interference.

Interim stay of recovery - deference to appellate authority - consideration of prima facie merits - direction for expeditious disposal - Whether the appellant should be permitted to press the merits before the Appellate Authority and whether the Appellate Authority should consider prima facie merits and relevant precedent while deciding the stay application or appeal. - HELD THAT: - The Court clarified that the appellant is at liberty to persuade the Appellate Authority on the merits of the appeal and to seek hearing of the appeal itself, including by relying on the earlier judgment in WP(C) No. 40400/2017. The Appellate Authority was expected not to refrain from examining the prima facie merits of the impugned order when deciding the interim application or the appeal, and to take note of the cited precedent while exercising its jurisdiction. This guidance does not constitute a determination on the merits but directs the appellate forum to consider the contentions and precedent during expeditious disposal. [Paras 5]

Appellant may urge the merits and precedent before the Appellate Authority; the Appellate Authority should consider prima facie merits and the cited judgment while disposing of the stay petition or appeal.

Final Conclusion: Writ appeal dismissed; impugned judgment upheld while permitting the appellant to press the merits and requiring the Appellate Authority to expeditiously consider the interim application and relevant precedent.

Special enactment - exclusive power to appoint arbitrator - application under Section 11 of the Arbitration and Conciliation Act, 1996 not maintainable - provisions of a general law apply only where the special statute is silent - remedy by writ under Article 226 or civil suit where statutory authority fails to act - reasonableness in performance of statutory duty

Special enactment - exclusive power to appoint arbitrator - application under Section 11 of the Arbitration and Conciliation Act, 1996 not maintainable - provisions of a general law apply only where the special statute is silent - remedy by writ under Article 226 or civil suit where statutory authority fails to act - reasonableness in performance of statutory duty - Whether an application under Section 11 of the Arbitration and Conciliation Act, 1996 was maintainable for appointment of an arbitrator in view of the specific appointment mechanism in Section 3G(5) of the National Highways Act, 1956. - HELD THAT: - The Court held that the National Highways Act, 1956 is a special, self-contained code enacted under Entry 23 of the Union List and contains an inbuilt mechanism for determining compensation and for appointment of an arbitrator by the Central Government under Section 3G(5). Subsection (6) of Section 3G makes the Arbitration and Conciliation Act, 1996 applicable only "subject to the provisions" of the 1956 Act, meaning the general law applies only where the special statute is silent. Consequently, Section 11 of the Act, 1996 does not have application to the appointment of an arbitrator where Section 3G(5) confers exclusive appointment power on the Central Government. If the Central Government fails to perform the statutory duty within a reasonable time, the affected party's remedies are by writ under Article 226 or by civil suit, not by invoking Section 11. The High Court erred in treating its invocation of Section 11 as competent and thereby precluding the Central Government's statutory power. In view of the delay already caused, the Court directed the Central Government to appoint an arbitrator under Section 3G(5) within 30 days with prior intimation to the respondents, and that the arbitrator should decide the dispute within a reasonable time, in any event within six months after the respondent appears in the proceedings. [Paras 21, 23, 24, 25, 26]

Application under Section 11 of the Act, 1996 was not maintainable; the High Court orders appointing an arbitrator under Section 11 are set aside; the Central Government to appoint an arbitrator under Section 3G(5) within 30 days and the arbitrator to decide within six months after respondent's appearance.

Final Conclusion: Appeals allowed; the High Court orders dated 6 July 2007 and 27 August 2007 are set aside. The Central Government shall appoint an arbitrator under Section 3G(5) of the National Highways Act, 1956 within 30 days with prior intimation to the respondents, and the arbitrator shall conclude the adjudication within six months after the respondent records its presence.