TaxTMI Updates e-Newsletter
Sep 04,2023

Service of show cause notice - opportunity of hearing - interim relief conditioned on deposit of disputed tax - fresh adjudication on merits - appealable order under Section 107 of the TNGST Act, 2017

Service of show cause notice - opportunity of hearing - Whether the impugned order could be quashed on the ground that the Show Cause Notice was not served and the petitioner was denied opportunity to be heard. - HELD THAT: - The Court found the petitioner's plea that the Show Cause Notice was not served to be improbable, noting that the Show Cause Notice would have accompanied the earlier Form GST DRC-01. The petitioner had neither replied nor participated in the proceedings despite notices and a personal hearing date. Rather than quashing the impugned order, the Court exercised judicial restraint and granted the petitioner a final opportunity to file a reply, subject to conditions. The Court required the petitioner to deposit 20% of the disputed tax as confirmed by the impugned order within thirty days of receipt of the order; on such compliance the respondent was directed to take up the proceedings and dispose of the matter afresh on merits within sixty days. The Court made clear that failure to comply would render the order automatically vacated sine die. [Paras 5, 6, 7, 8, 9]

Petitioner's challenge on non-service and denial of hearing not upheld; petitioner granted one final opportunity to reply subject to depositing 20% of disputed tax, and respondent directed to adjudicate afresh within sixty days; failure to comply will vacate the order.

Final Conclusion: Writ petition dismissed while granting the petitioner a final opportunity to respond on merits subject to depositing 20% of the disputed tax within thirty days; on compliance, proceedings to be reopened and decided afresh within sixty days, failing which the order stands vacated sine die.

Transitional input tax credit - indefeasibility of validly availed credit - rectification of clerical errors in FORM GST TRAN-1 - re-examination and regularisation of erroneously transited credit

Transitional input tax credit - indefeasibility of validly availed credit - Whether the transitional credit declared as unutilised in the last VAT return (June 2017) can be denied on account of mistakes in FORM GST TRAN-1 filed subsequently. - HELD THAT: - The Court found that the credit in question was shown as unutilised in the monthly return for June 2017, the last return under the TNVAT Act before GST. The respondents did not dispute the amount when the first TRAN-1 was filed on 24.08.2017. Relying on precedents cited in the judgment, the Court held that credit validly availed is indefeasible in law and that revenue ought not to deny a benefit legitimately available to an assessee. Although the petitioner committed errors in filling TRAN-1 (both initially and in the revised filing), those mistakes do not, by themselves, justify denial of a credit which was demonstrably available in the last VAT return. [Paras 19, 20, 21, 22]

The claim to transitional credit shown as unutilised in the June 2017 return cannot be denied solely because of clerical mistakes in TRAN-1; the credit is indefeasible if shown available in the last VAT return.

Rectification of clerical errors in FORM GST TRAN-1 - re-examination and regularisation of erroneously transited credit - Whether the matter should be remitted to respondents for fresh verification of records and, if appropriate, condonation/regularisation or recovery of the credit. - HELD THAT: - Although the Court accepted the legal principle that validly availed credit is indefeasible, it recognised factual uncertainty as to whether the credit was in fact available in the last VAT return or was wrongly transited. The Court therefore quashed the impugned order and directed the respondents to re-examine the petitioner's records afresh from the last VAT return for June 2017. If credit is found to have been available, discrepancies in TRAN-1 may be overlooked and the utilized credit can be condoned and regularised; if no credit is shown in the last VAT return and was wrongly transited, recovery shall follow in accordance with law. The exercise is to be completed within four weeks. [Paras 23]

Matter remitted to respondents to re-examine records from the June 2017 VAT return and, depending on whether the credit was originally available, either regularise the utilised credit or recover it in accordance with law.

Final Conclusion: Writ petition allowed; impugned communication quashed and the matter remitted to the respondents to verify the petitioner's last VAT return (June 2017) and, within four weeks, either regularise the transitional credit if it was legitimately available or recover it if it was wrongly transited.

Provisional release of seized goods - security under Section 67(6) of the CGST Act for provisional release - Rule 140 of the CGST Rules for release of seized goods - notice to furnish security to secure the interest of the revenue - failure to produce statutory records

Provisional release of seized goods - security under Section 67(6) of the CGST Act for provisional release - Rule 140 of the CGST Rules for release of seized goods - notice to furnish security to secure the interest of the revenue - failure to produce statutory records - Respondents directed to issue notice to petitioner to furnish security for provisional release of goods seized on 30.05.2023 and to release the goods upon compliance. - HELD THAT: - The Court found that the petitioner has not produced the statutory records required for adjudication and has not furnished any security sought by the respondents. In exercise of supervisory jurisdiction, the Court directed the respondents to issue an appropriate notice calling upon the petitioner to furnish such bond or security as may be required to secure the interest of the revenue in accordance with Section 67(6) of the CGST Act read with Rule 140 of the CGST Rules. The Court observed that provisional release may also be effected on payment of applicable tax, interest and penalty or on furnishing security as prescribed. The respondents were directed to complete the exercise within fifteen days of receipt of this order and, if the petitioner furnishes the security called for, to release the seized goods.

Within fifteen days of service of this order respondents shall issue notice to the petitioner to furnish security under Section 67(6) read with Rule 140; on furnishing the security (or payment as applicable) the seized goods shall be released.

Final Conclusion: Writ petition disposed directing issuance of notice to petitioner to furnish security in terms of Section 67(6) of the CGST Act read with Rule 140 of the CGST Rules within fifteen days; goods to be released on compliance. No costs.

Non-speaking order - personal hearing - right to be heard - speaking order - remand for fresh decision - ITC reversal and penalty under proviso of section 74 - levy of interest for wrong availment of input tax credit under section 50(3)

Non-speaking order - speaking order - right to be heard - Impugned order set aside as non-speaking and matter remitted for passing a speaking order after hearing the petitioner. - HELD THAT: - The Court found that the impugned order was passed without proper discussion and is non-speaking in nature despite the petitioner having participated in proceedings and produced documents and having been called for personal hearing. In consequence the Court set aside the impugned order and remitted the matter to the respondent to pass a reasoned (speaking) order on merits and in accordance with law within six weeks. The Court directed that the petitioner be heard before such order is passed and required the petitioner to file photocopies of the relevant documents within 15 days from receipt of this order. These directions ensure compliance with the principles of audi alteram partem and that the adjudicating authority records reasons while deciding on ITC reversal, interest and penalty claims. [Paras 6, 7, 8, 9]

Impugned order set aside; matter remitted for a speaking order after hearing the petitioner and on production of documents within specified time; speaking order to be passed within six weeks.

Final Conclusion: Writ petition disposed by setting aside the non-speaking impugned order and remitting the case to the respondent to pass a reasoned order on merits after hearing the petitioner and on production of documents within the timelines directed; no costs.

Supply as including sale, transfer, barter or exchange in the course or furtherance of business - Works contract as supply of service involving transfer of property in goods - Construction of a building intended for sale treated as supply of service under Schedule II - Distinct supplies arising in a JDA: developer to landowner and landowner to purchaser - Landowner-promoter entitlement to input tax credit subject to conditions in the proviso to the notification - Input tax credit eligibility restricted to registered person and subject to time-of-supply and tax paid by recipient - Tax rate for construction services to be determined under Notification No. 11/2017 as amended by Notification No. 3/2019

Supply as including sale, transfer, barter or exchange in the course or furtherance of business - Works contract as supply of service involving transfer of property in goods - Construction of a building intended for sale treated as supply of service under Schedule II - Distinct supplies arising in a JDA: developer to landowner and landowner to purchaser - Liability of the landowner to pay GST on agreements for sale of apartments (other than affordable) entered with customers before issuance of completion certificate where construction is executed by the developer under a JDA (area sharing model). - HELD THAT: - The construction activity in question falls within the definition of works contract and the entries in Schedule II treat construction of a building intended for sale as a supply of service. The developer's supply of construction services to the landowner and the landowner's subsequent agreements with purchasers are separate supplies: the developer supplies construction services to the landowner, and the landowner supplies works contract service to the purchasers. There is no direct supply by the developer to the purchasers; therefore the landowner, as supplier under Section 7(1), is liable to pay tax under Section 9(1) on agreements for sale entered before issuance of the completion certificate. [Paras 10]

The applicant (landowner) is a supplier of works contract service to prospective purchasers and is liable to pay GST on such agreements entered before issuance of the completion certificate.

Tax rate for construction services to be determined under Notification No. 11/2017 as amended by Notification No. 3/2019 - Classification of apartments (affordable, non-affordable, commercial) and project type (RREP/REP) determines applicable rate - One-time option for ongoing project exercisable only by registered person within prescribed dates - Applicable rate of tax on sale of apartments (other than affordable) before issuance of completion certificate, if the applicant is liable to pay tax. - HELD THAT: - The applicable rate is determined by the entries 3(i) to 3(id) of Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 3/2019, and depends on whether the apartment is residential (affordable or not) or commercial and whether the project is an RREP or REP. The applicant could not exercise the one-time option for ongoing projects because that option was available only to a registered person within the specified period and the applicant was not registered at that time; the developer's choice does not extend to the applicant, who is a distinct taxable person. [Paras 11]

The applicant shall pay tax at the rates specified in entries 3(i) to 3(id) of Notification No. 11/2017 as amended by Notification No. 3/2019, depending on the nature of the apartment and project; the applicant cannot claim the developer's chosen scheme as his own if he was not registered to exercise the option.

Landowner-promoter entitlement to input tax credit subject to conditions in the proviso to the notification - Input tax credit eligibility restricted to registered person and subject to time-of-supply and tax paid by recipient - Requirement that tax paid by landowner on onward supply is not less than tax charged by developer - Whether the applicant can claim credit of tax charged by the developer on the portion of apartments belonging to the applicant where the developer has opted for payment of tax under the old scheme (18%). - HELD THAT: - The proviso to the notification grants the landowner-promoter eligibility to claim credit of taxes charged by the developer provided the landowner further supplies the apartments before issuance of completion certificate and pays tax on such supplies which is not less than the amount charged by the developer. Additionally, Section 16(1) restricts input tax credit to a registered person and requires consideration of the time of supply/invoice date. Applying these conditions, the applicant is eligible to claim input tax credit on tax charged by the developer only if (a) the applicant is a registered person on the date the time of supply of the construction services falls, and (b) the tax payable by the applicant on his supply of apartments is not less than the tax charged by the developer. Where the applicant's tax liability is lower than the tax charged by the developer, the applicant cannot claim the credit. [Paras 12]

The applicant may claim input tax credit of tax charged by the developer subject to being registered at the relevant time and provided the tax payable by the applicant on his supply of apartments is at least equal to the tax charged by the developer; otherwise credit is not available.

Input tax credit eligibility restricted to registered person and subject to specified conditions in the notification - Proviso limiting availment of input tax credit to specified inputs and input services and requirement of payment of equivalent amount where applicable - Whether the applicant can claim input tax credit on expenses other than the tax charged by the developer (e.g., brokerage, marketing, furnishing) if the applicant is liable for tax. - HELD THAT: - The provisos to the relevant notification require that central tax payable under the specified scheme be paid in cash and that credit of input tax charged on goods and services used in supplying the service is restricted to the extent prescribed (Annexures). The notification and its provisos, together with the scheme conditions, indicate that input tax credit is not generally available on other expenses for the promoter under the new scheme except as explicitly allowed. The Authority concludes that input tax credit on expenses other than the tax charged by the developer for construction services is not eligible. [Paras 13]

Input tax credit on other expenses, other than the tax charged by the developer for supply of apartments, is not eligible to be claimed.

Final Conclusion: The Authority rules that the landowner is a supplier of works contract service and liable to pay GST on agreements for sale made before completion certificate; the applicable tax rate is to be determined under Notification No.11/2017 as amended by Notification No.3/2019 based on apartment and project classification; the landowner may claim input tax credit of tax charged by the developer only if registered at the relevant time and only to the extent his tax on onward supply is not less than the developer's charge; credit on other expenses is not allowable.

Goods disposed of by way of gift - restriction of Input Tax Credit under Section 17(5)(h) - eligibility of Input Tax Credit under Section 16 - permanent transfer or disposal of business assets where ITC has been availed - deemed supply under Schedule I SI. No. 1 - supply under Section 7 - consideration including inducement/non-monetary consideration

Goods disposed of by way of gift - restriction of Input Tax Credit under Section 17(5)(h) - eligibility of Input Tax Credit under Section 16 - Whether issuance of gold coins and white goods to dealers under the promotional schemes is 'goods disposed of by way of gift' so as to attract disallowance of input tax credit under Section 17(5)(h). - HELD THAT: - The Authority found that the promotional items are supplied pursuant to pre announced schemes with stipulated slabs, conditions and qualifying criteria and are not gratuitous transfers made without conditions. The items are issued subject to fulfilment of specified terms (quantity thresholds, clearance of outstanding, points slabs), and therefore cannot be characterised as gifts or free samples. Given that the supplies are effected in the course of business as incentives under contractual/ scheme terms, the restriction in Section 17(5)(h) (disallowing ITC on goods 'disposed of by way of gift or free samples') does not apply. Consequently the ITC claimed on procurement of such gold coins and white goods is not rendered inadmissible by Section 17(5)(h) and remains claimable subject to the general conditions of Section 16. [Paras 13, 14, 15, 16]

The distribution of gold coins and white goods under the schemes is not 'goods disposed of by way of gift' and ITC is not restricted by Section 17(5)(h).

Permanent transfer or disposal of business assets where ITC has been availed - deemed supply under Schedule I SI. No. 1 - assets as items of balance sheet - Whether the issuance of gold coins and white goods under the schemes amounts to 'permanent transfer or disposal of business assets where ITC has been availed on such assets' and therefore is a deemed supply under SI. No. 1 of Schedule I. - HELD THAT: - The Authority examined the scope of entry 1 of Schedule I and the concept of 'business assets', observing that goods procured in the course of business, including inventory, fall within the ambit of 'assets' for the purposes of Schedule I. The Authority held that where such procured goods are permanently transferred without consideration as part of a scheme, they constitute a permanent transfer or disposal of business assets on which ITC has been availed. Such transfers are captured by entry 1 of Schedule I and are to be treated as supplies even if made without consideration. The reasoning notes that Schedule I does not confine 'business assets' to capitalised items on the balance sheet and that including inventory within 'assets' avoids rendering Section 7 redundant. [Paras 12, 15, 16]

The issuance of gold coins and white goods pursuant to the schemes is a permanent transfer or disposal of business assets where ITC has been availed and is a deemed supply under SI. No. 1 of Schedule I.

Supply under Section 7 - consideration including inducement/non-monetary consideration - activities in Schedule I made without a consideration - Whether issuance of gold coins and white goods under the schemes constitutes a 'supply' under Section 7 of the CGST Act. - HELD THAT: - The Authority found that the supplies are made pursuant to pre announced incentive schemes where dealers achieve specified marketing targets and thereby render the inducement by way of increased purchases. The fulfillment of targets and consequential entitlement to incentives operates as non monetary consideration or inducement for the transfer of goods. As the inclusive definition of 'supply' in Section 7 covers activities in Schedule I made without consideration and also supplies made for consideration (including inducement), the permanent transfer of goods under the schemes falls within the definition of 'supply'. Even if not characterised as consideration under Section 2(31), such transfers are covered by Schedule I as deemed supplies. [Paras 12, 16]

The issuance of gold coins and white goods under the promotional schemes is a supply within the meaning of Section 7.

Final Conclusion: Advance rulings: (i) the promotional issuance of gold coins and white goods is not a gift and ITC is not barred by Section 17(5)(h); (ii) such issuance constitutes permanent transfer/disposal of business assets where ITC was availed and is a deemed supply under Schedule I SI. No.1; and (iii) the issuance is a supply under Section 7 of the CGST Act.

Medicament vs cosmetic distinction - Heading 3004 - Heading 3304 - common parlance test - twin test (common parlance and authoritative texts) - primary use versus subsidiary curative effect - use over composition in classification

Medicament vs cosmetic distinction - Heading 3004 - Heading 3304 - common parlance test - primary use versus subsidiary curative effect - Whether JAC OLIVOL BODY OIL is classifiable as a medicament under Heading 3004 or as a cosmetic under Heading 3304 of the Customs Tariff Act. - HELD THAT: - The Authority applied the established approach that classification under Chapter 30 (medicaments) versus Chapter 33 (cosmetics) depends on the use to which the product is put rather than merely on its composition. The twin tests-including the common parlance test and reference to authoritative texts-are relevant, but the decisive inquiry is whether the product's primary function is therapeutic/prophylactic (cure/prevention) or care/beautification. The product labels and marketing material declare the item for daily application to obtain "soft, smooth, glowing and healthy skin" and instruct users to "apply daily before or after bath", indicating routine skin care rather than treatment of particular ailments. Although the oil contains ingredients with recognized therapeutic properties, the Authority held that subsidiary or incidental curative effects do not convert a primarily care product into a medicament. On the material before it (product label, online descriptions and manner of marketing), the Authority found the primary use to be skin care and not the treatment or prevention of disease; accordingly the product falls within preparations for the care of the skin and not within medicaments. [Paras 3]

JAC OLIVOL BODY OIL is not a medicament under Heading 3004 but is a cosmetic falling under Heading 3304.

Final Conclusion: The Authority ruled that JAC OLIVOL BODY OIL is classifiable under Heading 3304 of the First Schedule to the Customs Tariff Act as a preparation for the care of the skin and shall be taxed accordingly under the GST Act.

Advance Ruling - Composite supply - Exemption under Notification No. 12/2017-Central Tax (Rate) - Goods transport agency - Opportunity of hearing and disposal for non-appearance

Advance Ruling - Opportunity of hearing and disposal for non-appearance - Disposition of the applicant's FORM GST ARA-01 seeking advance ruling without pronouncement of ruling. - HELD THAT: - The Authority recorded that the applicant had sought an adjournment and was subsequently given further dates for hearing but neither the applicant nor any authorised representative attended the scheduled hearings. The Authority also noted absence of relevant records necessary for adjudication. In view of repeated non-appearance despite opportunities to be heard and lack of requisite documents to enable examination of the substantive questions, the Authority held that the applicant was not interested in pursuing the advance ruling and that it was not in a position to pronounce any ruling on the substantive issues raised in the application. Consequently, the application was disposed without making any ruling on whether the additional consideration constituted a composite supply, or a separate transportation service, or whether any exemption under the said notification would be available. [Paras 1]

Application disposed of without pronouncement of any advance ruling as the applicant failed to appear and requisite records were not available.

Final Conclusion: The Authority dismissed the application for advance ruling by disposing it without pronouncement because the applicant repeatedly failed to attend the hearings and the Authority lacked the records necessary to decide the substantive questions raised.

Advance ruling - maintainability of application under section 97(2) - non-maintainability for questions outside specified categories - admissibility of input tax credit - pre-requisite fee for filing application - condonation of delay in filing FORM GST ITC-01 - opportunity of hearing and non-appearance

Advance ruling - maintainability of application under section 97(2) - non-maintainability for questions outside specified categories - Whether the questions raised by the applicant fall within the matters on which an advance ruling can be pronounced under sub-section (2) of section 97 of the GST Act, and whether the application is maintainable on that basis. - HELD THAT: - The Authority examined the scope of matters enumerated in sub-section (2) of section 97, which confines advance rulings to specific subjects such as classification, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, liability to pay tax, registration requirement and whether a transaction amounts to a supply. The questions actually raised by the applicant (relating to condonation of delay in filing FORM GST ITC-01 and procedure to avail ITC of closing stock) do not fall within any of the prescribed categories under section 97(2). The Authority therefore found that the application does not seek an advance ruling on a matter within the statutory mandate and is not maintainable for adjudication under the Advance Ruling provisions. [Paras 1]

Application is not maintainable because the questions raised are outside the matters enumerated in section 97(2) and hence cannot be the subject of an advance ruling.

Pre-requisite fee for filing application - opportunity of hearing and non-appearance - Whether the application could be accepted despite non-payment of the statutory fee and in light of the applicant's non-appearance before the Authority. - HELD THAT: - The Authority recorded that an application for an advance ruling is required to be accompanied by the prescribed fee payable on the common portal. The instant application was filed without payment of the required fee. The applicant was given multiple opportunities to appear before the Authority but failed to do so. Considering the statutory requirement of fee payment and the procedural non-compliance, the Authority concluded there was no reason to entertain or accept the application in the absence of the prescribed fee and in the circumstances of non-appearance. [Paras 1]

Application is liable to be rejected for non-payment of the required fee and on account of procedural non-compliance including repeated non-appearance.

Final Conclusion: The application for an advance ruling is rejected as not maintainable because the questions fall outside the matters specified in section 97(2) of the GST Act and because the application was filed without payment of the requisite fee; the application is accordingly disposed of.

Value of taxable supply - interest for delayed payment included in value of supply - works contract as supply of services - time of supply of services

Value of taxable supply - interest for delayed payment included in value of supply - Whether the interest payable on the deferred 60% of the project Capex forms part of the value of supply and is liable to GST. - HELD THAT: - The Authority examined the concession agreement under the Hybrid Annuity Model where 40% of Capex is paid during construction and the balance 60% is payable in 60 quarterly instalments over 15 years along with interest linked to SBI MCLR. Section 15(2)(d) of the GST Act provides that the value of supply shall include "interest or late fee or penalty for delayed payment of any consideration for any supply." On the facts, the interest paid by KMDA is compensation for delayed payment of consideration for the supply of services under the works contract. The applicant's authorised representative also accepted that GST would be payable on the interest quantum received. Applying the statutory provision, the Authority held that the agreed interest falls within the value of taxable supply and is therefore subject to GST. [Paras 4]

The interest on the deferred 60% Capex is part of the value of supply and shall be taxed under the GST Act.

Final Conclusion: The Authority ruled that the interest payable on the 60% deferred Capex (at the SBI MCLR-linked rate) is includible in the value of the supply and is liable to GST.

Services relating to conduct of examination - educational institution (definition) - exemption under Notification No. 12/2017-Central (Rate) (Sl. No. 66(b)(iv)) - Central and State Educational Boards treated as educational institution for conduct of examination

Services relating to conduct of examination - exemption under Notification No. 12/2017-Central (Rate) (Sl. No. 66(b)(iv)) - educational institution (definition) - Whether the pre-examination, online examination management, and post-examination services supplied by the applicant to universities qualify as services to an educational institution relating to conduct of examination and are exempt under Sl. No. 66 of Notification No. 12/2017-Central (Rate). - HELD THAT: - The Authority examined the scope of services contracted by the applicant (pre-examination activities including printing and generation of admit cards, development and management of web-based examination applications, and post-examination activities including scanning, processing of results and printing of mark sheets/certificates) and the definition of 'educational institution' in Notification No. 12/2017. The Notification treats institutions providing education for qualifications recognised by law as educational institutions and, by explanation, treats Central and State Educational Boards as educational institutions for the limited purpose of conduct of examination. The Authority found that universities listed in the record are educational institutions and that the applicant's activities form integral parts of the process of conducting examinations (pre-exam, exam management, and post-exam processing). Applying the Notification and the clarificatory explanation/circular, the Authority concluded that such services are services relating to conduct of examination and fall within Sl. No. 66(b)(iv), thereby attracting the exemption provided by the Notification.

Services supplied by the applicant to universities in respect of pre-examination, online examination management, and post-examination activities are covered by Sl. No. 66 of Notification No. 12/2017 (as amended) and are exempt from GST.

Final Conclusion: The Authority ruled that the applicant's pre-examination, web-based examination management, and post-examination services supplied to universities constitute services relating to conduct of examination and are exempt from tax under Sl. No. 66 of Notification No. 12/2017-Central (Rate) (as amended) and the corresponding West Bengal notification.

Composite supply - value of supply where consideration is not wholly in money - Rule 27(b) of the GST Rules - non monetary consideration (net realizable value) - function entrusted to a Panchayat/municipality under the Eleventh Schedule - exemption under Entry 3A of Notification No. 12/2017 CT(Rate) - 25% goods component threshold in composite supply

Composite supply - The activity of milling of wheat into fortified atta with packing constitutes a composite supply with milling (service) as the principal supply. - HELD THAT: - The agreement required crushing of wheat, premixing of micro nutrients (fortification) and packing into labelled poly packs for delivery to nominated distributors. Those integrated activities satisfy the definition of composite supply where the supply of services by way of milling is the principal supply. The Authority so found after examining the contract terms and the nature of the activities undertaken by the applicant. [Paras 4]

The supply is a composite supply with milling as the principal supply.

Function entrusted to a Panchayat/municipality under the Eleventh Schedule - exemption under Entry 3A of Notification No. 12/2017 CT(Rate) - The composite supply is made in relation to a function entrusted to a Panchayat under Article 243G (public distribution) and thus falls within the scope of Entry 3A for potential exemption. - HELD THAT: - The empanelment and supply to the State Government were executed pursuant to government orders and the Public Distribution System. Circular No. 153/09/2021 GST recognises PDS as an activity listed in the Eleventh Schedule. On that basis the Authority concluded the composite supply was in relation to a function entrusted to a Panchayat and therefore eligible to be considered under Entry 3A of Notification No. 12/2017 CT(Rate). [Paras 4]

The composite supply relates to a function entrusted to a Panchayat and falls within Entry 3A's ambit.

Value of supply where consideration is not wholly in money - Rule 27(b) of the GST Rules - non monetary consideration (net realizable value) - Value of the composite supply includes both cash consideration and the known non monetary consideration (gunny bags and by products) in terms of Rule 27(b). - HELD THAT: - Price was not the sole consideration. Rule 27(b) prescribes that where consideration is not wholly in money the value shall be the sum of cash consideration and the monetary equivalent of non cash consideration if known at the time of supply. The Department's memo quantified the non cash elements (gunny bags and by products) as ascertainable net realizable values. Applying Rule 27(b) to those agreed notional values, the Authority treated Rs.136.48 as cash consideration and Rs.124 as non cash consideration, yielding the total value of supply relied upon in the ruling. [Paras 2, 4]

Value of supply comprises cash consideration plus the known monetary equivalent of non cash consideration under Rule 27(b).

25% goods component threshold in composite supply - exemption under Entry 3A of Notification No. 12/2017 CT(Rate) - The value of goods (fortification inputs and packing) is 23.03% of the total value of the composite supply and therefore does not exceed 25%; the supply is exempt under Entry 3A. - HELD THAT: - The applicant accepted, and the Authority accepted based on the contractual price breakup and the Department memo, that the value of goods involved (packing and fortification) amounted to Rs.60 and the aggregate supply value amounted to Rs.260.48 (cash plus non cash consideration). Calculating the ratio (60/260.48 x 100) produced 23.03%, which is below the 25% threshold specified in Entry 3A and Circular guidance. The Authority therefore concluded that the composite supply qualifies for exemption under Entry 3A of Notification No.12/2017 CT(Rate). [Paras 2, 4]

The goods component does not exceed 25% and the composite supply is exempt under Entry 3A.

Final Conclusion: The Authority ruled that the milling plus fortification and packing activity is a composite supply (milling being the principal supply), relates to a function entrusted under the Eleventh Schedule, and - treating cash and known non cash consideration under Rule 27(b) - the goods component is 23.03% of the total value; accordingly the supply is exempt under Entry 3A of Notification No. 12/2017 CT(Rate).

Computation of capital gains u/s 48 - value of the 1/12 undivided share of land that was agreed to be transferred as per the agreement - right conferred on the tranferee - possession as handed over in pursuance to the agreement for sale as contemplated under Section 53A of the TP Act - As decided by HC [2018 (12) TMI 213 - KERALA HIGH COURT] matter is remitted to the Assessing Officer for the sole purpose of computation of capital gains under section 48 of the Act, after taking into account the value of 1/12th share in the landed property that was agreed to be sold.

HELD THAT:- Since the petitioner has taken the benefit of the tax scheme (Vivad se Vishwas Scheme), he does not press his petition any longer.

Special leave petition stands dismissed.

Reopening of assessment - satisfaction under Section 148A(d) and issuance of notice under Section 148 - Sufficiency of reasons/information and pre issue inquiry under clause (a) and (b) of Section 148A - Reassessment based on investigation report and seized documents - admissibility of decoded records - Unexplained expenditure and deemed income arising from cash loans (including Section 69C concepts) - Cash transaction prohibitions and consequences - compliance with provisions relating to cash borrowings and repayments (including concepts under Sections 269SS/269T and penal provisions) - Principles of natural justice and non speaking order / application of mind in reassessment proceedings - Scope of writ jurisdiction - inadmissibility of probing disputed questions of fact in writ against reassessment initiation

Reopening of assessment - satisfaction under Section 148A(d) and issuance of notice under Section 148 - Scope of writ jurisdiction - inadmissibility of probing disputed questions of fact in writ against reassessment initiation - Validity of the order under clause (d) of Section 148A authorising issuance of notice under Section 148 and whether such order can be interfered with in writ proceedings - HELD THAT: - The Court held that the assessing officer's order dated 07.04.2023 under clause (d) of Section 148A records material consideration of information, seized documents and decoded entries which formed the basis for satisfaction that income had escaped assessment. The High Court correctly refused to entertain the writ petition because the impugned order is fact based and not a mere non speaking order; disputed questions of fact and the need for deeper probe into multiple stakeholders and seized material cannot be resolved in writ jurisdiction and must be agitated in the reassessment proceedings initiated by the notice under Section 148. The Court therefore declined to substitute its view for that of the assessing officer on the existence and weight of evidence supporting reopening. [Paras 11, 12]

Order under clause (d) of Section 148A sustaining issuance of notice under Section 148 is not amenable to interference in writ jurisdiction; appeal dismissed.

Sufficiency of reasons/information and pre issue inquiry under clause (a) and (b) of Section 148A - Reassessment based on investigation report and seized documents - admissibility of decoded records - Whether the assessing officer furnished adequate reasons/information and performed the requisite inquiry before issuing the notice under Section 148 - HELD THAT: - The Court noted that the show cause notice dated 14.03.2023 enclosed the details of the information relied upon (including Insight Portal data, SFT/TDS/TCS/CBIC data, and the DDIT investigation report) and sought explanation with specific queries and supporting documents. The assessing officer's later order records that verification of documents and seized material revealed credible evidence of actual borrowings (including decoded 'geometrical' entries and seized exercise book records) linking the assessee to alleged cash loans. On this record the Court held there was no failure to conduct the preliminary inquiry required by the statutory scheme which would invalidate issuance of the Section 148 notice. [Paras 5, 6, 8, 9, 10]

Pre issue inquiry and furnishing of reasons/information were sufficient; reopening proceedings were validly initiated.

Principles of natural justice and non speaking order / application of mind in reassessment proceedings - Whether the order under Section 148A(d) was a non speaking order or passed in violation of principles of natural justice - HELD THAT: - The Court examined the impugned order and the record of communications and replies. It found that the assessing officer considered the assessee's replies, set out the material relied upon (including seized documents and decoded entries), and gave reasons for satisfaction. Consequently the order cannot be characterised as non speaking nor as an outcome of non application of mind, and no breach of principles of natural justice or procedural irregularity was established which would warrant quashing at the writ stage. [Paras 1, 11]

No violation of natural justice and the order is not non speaking; no interference warranted.

Unexplained expenditure and deemed income arising from cash loans (including Section 69C concepts) - Cash transaction prohibitions and consequences - compliance with provisions relating to cash borrowings and repayments (including concepts under Sections 269SS/269T and penal provisions) - Whether the material relied upon justified the assessing officer's legal characterisation of the transactions as cash borrowings leading to deemed income and unexplained expenditure - HELD THAT: - The assessing officer's order records that seized documents and decoded entries identified the assessee as a borrower under 'rukka' entries and treated the cash borrowings and cash repayments as falling within the statutory scheme that can give rise to deemed income and unexplained expenditure. The High Court accepted that such characterisation was a factual and legal assessment open to the assessing officer on the materials and thus not susceptible to determination in writ proceedings; the assessee is at liberty to contest the factual findings and legal characterisation in the reassessment process. [Paras 8, 9, 10, 11]

Characterisation of the alleged cash loans as giving rise to deemed income and unexplained expenditure was a matter for reassessment and did not invalidate the initiation of proceedings.

Final Conclusion: The High Court upheld the order under Section 148A(d) authorising issuance of notice under Section 148 for assessment year 2016-2017, holding that the assessing officer recorded sufficient reasons and material (including investigation report and seized/decoded documents), there was no breach of natural justice or non application of mind, and disputed factual questions cannot be adjudicated in writ jurisdiction; the intra court appeal is dismissed.

Declaration under the Direct Tax Vivad Se Vishwas Act, 2020 - requirement of an appeal pending before appellate forum at the time of filing declaration - withdrawal of pending appeals or writ petitions on filing of declaration - scope of the expression "writ petition" in the definition of appellant

Requirement of an appeal pending before appellate forum at the time of filing declaration - declaration under the Direct Tax Vivad Se Vishwas Act, 2020 - Validity of rejection of the petitioner's declaration under the DTVSV Act on the ground that no appeal was pending when the declaration was filed - HELD THAT: - The Court recorded that the petitioner's declaration in Form No.1 was rejected because there was no appeal pending before any authority on the date the declaration was filed. The statutory scheme under Section 4(2) of the DTVSV Act deems an appeal to have been withdrawn upon filing a declaration only where an appeal is in fact pending before the Income Tax Appellate Tribunal or Commissioner (Appeals) or similar forum in respect of the disputed demand. The factual position established on the record was that the ITAT had earlier rejected the petitioner's application for condonation of delay, the High Court had dismissed the subsequent challenge, and no appeal or special leave petition was pending in the Supreme Court when the declaration was filed. In that factual and legal matrix, the absence of a pending appeal meant the statutory precondition for deeming withdrawal could not be satisfied, and the designated authority was therefore justified in rejecting the declaration. [Paras 4, 6, 8]

Rejection of the declaration upheld because no appeal was pending on the date of filing the declaration; writ petition dismissed.

Scope of the expression "writ petition" in the definition of appellant - withdrawal of pending appeals or writ petitions on filing of declaration - Whether the term "writ petition" in the definition of appellant must be read to include an "appeal" for the purposes of entitlement under the DTVSV Act - HELD THAT: - The Court considered the submission that the statutory expression "writ petition" should be read to include an "appeal". The Court noted the definitions in the Act and observed that, even if that construction were accepted for argument's sake, the undisputed factual position remained that no appeal was pending in the High Court or Supreme Court against the impugned order at the relevant time. Counsel for the petitioner candidly admitted that no special leave petition had been filed in the Supreme Court. Given the absence of any pending appellate remedy, the proposed expansive construction could not assist the petitioner in the present factual context, and the contention was rendered academic. [Paras 5, 6, 7]

Proposed reading of "writ petition" to include "appeal" was considered but found immaterial on the facts; no relief granted on that basis.

Final Conclusion: The petition is dismissed: the declaration under the DTVSV Act was correctly rejected because no appeal or writ petition was pending when the declaration was filed, and the petitioner has no available appellate remedy that would enliven the statutory precondition for acceptance of the declaration.

Notice under Section 148A(b) and order under Section 148A(d) - Minimum statutory timeframe for filing response to a notice - Right to adequate opportunity to file a comprehensive reply before reassessment - Reassessment proceedings triggered by allied GST adjudications as 'information' for income tax reassessment - Setting aside impugned order and remand for fresh consideration

Notice under Section 148A(b) and order under Section 148A(d) - Minimum statutory timeframe for filing response to a notice - Right to adequate opportunity to file a comprehensive reply before reassessment - Setting aside impugned order and remand for fresh consideration - Impugned order passed under Section 148A(d) was vitiated by failure to provide the minimum statutory timeframe to file a response and therefore required to be set aside with liberty to the AO to pass a fresh order after affording opportunity. - HELD THAT: - The Court observed that the statute prescribes a minimum period for filing a response to a notice issued under Section 148A(b) and recorded that in the present case the petitioner was given only two days to respond to the later notice dated 27.03.2023. The Court held that such abridgement of the minimum statutory timeframe could not be regarded as adequate opportunity, and that the statutory leeway must be granted to the assessee. Because the responses formed part of the material considered in the impugned order dated 31.03.2023, the appropriate course was to set aside that order and permit the AO to consider fresh replies and pass a speaking order after personal hearing. [Paras 11, 13, 14, 15]

Order dated 31.03.2023 under Section 148A(d) set aside; assessee granted two weeks to file comprehensive replies and the AO directed to give personal hearing and pass a fresh speaking order.

Reassessment proceedings triggered by allied GST adjudications as 'information' for income tax reassessment - Application of mind required before treating proceedings under allied statutes as information - Remand for fresh consideration - Whether initiation of reassessment on the basis of show cause notices under the CGST/SGST/IGST Acts could be treated as information for reopening under the Income tax Act was not finally adjudicated on merits but was remanded for fresh consideration by the AO. - HELD THAT: - The petitioner contended that proceedings under allied GST statutes were pending and that such proceedings, by themselves, could not be mechanically treated as information without the AO applying his mind. The Court did not resolve the question on merits; instead, having set aside the impugned order for procedural inadequacy, it granted the AO the opportunity to examine the matter afresh, including any reliance on GST adjudications as a source of information, after considering the petitioner's further reply and hearing. [Paras 9, 14]

Issue remanded to the AO for fresh consideration while taking into account the petitioner's comprehensive reply and after affording personal hearing.

Final Conclusion: Impugned order under Section 148A(d) set aside for failure to afford the minimum statutory timeframe; petitioner granted two weeks to file comprehensive replies and AO directed to afford personal hearing and pass a fresh speaking order, with the question of reliance on allied GST proceedings left open for fresh consideration by the AO.

Quashing of prosecution where penalty is set aside by appellate tribunal - mens rea requirement for prosecution under Section 276C(1) of the Income Tax Act - effect of appellate tribunal's finding on assessing officer's order and consequent criminal proceedings - simultaneous imposition of penalty under Section 271(1)(c) and prosecution under Section 276C(1) - prosecution involving intricate questions of interpretation of the Income Tax Act should not be initiated as a matter of course

Quashing of prosecution where penalty is set aside by appellate tribunal - mens rea requirement for prosecution under Section 276C(1) of the Income Tax Act - Criminal prosecution under Section 276C(1) for concealment of income quashed where the penalty under Section 271(1)(c) for the same assessment year was set aside by the Income Tax Appellate Tribunal. - HELD THAT: - The Court held that where the Appellate Tribunal has set aside the penalty order and thereby negated the finding of concealment, no offence survives to sustain a prosecution under Section 276C(1). The judgment relied on established precedent that a Tribunal's conclusive finding that there was no concealment supersedes the assessing officer's order and renders criminal proceedings unsustainable. The Court observed that mens rea is an essential ingredient of the offence under Section 276C(1) and, having regard to the appellate cancellation of the penalty, it must be presumed there is no concealment or wilful default to establish the necessary criminal intent. While recognising that penalty proceedings and prosecution can, in certain circumstances, proceed simultaneously, the Court found that where the penalty has already been set aside by the appellate authority for the relevant assessment year, continuation of the criminal trial would be impermissible and an abuse, and therefore quashed the proceedings. [Paras 15, 16, 17]

Criminal proceedings in C/2 Case No.684 of 2016 (including orders dated 30.05.2016 and 15.07.2017) pending before the Special Judge, Jamshedpur are quashed.

Final Conclusion: The petition is allowed; the criminal prosecution under Section 276C(1) for Assessment Year 2011-12 is quashed in view of the appellate tribunal's setting aside of the penalty, which negates concealment and the requisite mens rea, and renders the prosecution unsustainable.

Re-opening of assessment - Reason to believe - Failure to disclose fully and truly all material facts - Proviso to Section 147 - time-bar exception - Writ jurisdiction under Article 226 to challenge notice under Section 148 - Prima facie material for formation of belief - Cross-examination and principles of natural justice

Writ jurisdiction under Article 226 to challenge notice under Section 148 - Maintainability of the writ petition challenging the notice under Section 148 in presence of alternative statutory remedies and scope of judicial interference under Article 226. - HELD THAT: - The Court acknowledged that the Act provides efficacious alternative remedies (appeal to the Commissioner (Appeals) and Tribunal) against reassessment and that ordinarily those remedies should be availed. Nevertheless, the High Court retained jurisdiction under Article 226 to interdict a notice under Section 148 where the proceeding is clearly without jurisdiction, causes palpable injustice, or where disposal of objections involved breach of natural justice. The petition was therefore entertainable only if such jurisdictional defect, palpable injustice or breach of natural justice was shown. [Paras 7]

Writ jurisdiction exists in exceptional cases but exercise was contingent on showing jurisdictional defect, palpable injustice or breach of natural justice; no such defect was found here.

Reason to believe - Prima facie material for formation of belief - Failure to disclose fully and truly all material facts - Proviso to Section 147 - time-bar exception - Whether the assessing officer had sufficient material to form a reasonable belief that income chargeable to tax had escaped assessment and that the proviso to Section 147 (failure to disclose fully and truly) applied, thereby validating re-opening after four years. - HELD THAT: - The Court applied settled principles that at the re-opening stage the assessing officer need only have prima facie material on which a reasonable person could form the requisite belief and that sufficiency or conclusiveness of evidence is not to be tested at that stage. The assessment of M/s NSE produced subsequent specific information: the proprietor's statement that his firm did not carry on actual business and provided accommodation entries, the sales ledger showing entries in favour of the petitioner, and bank statements showing credits followed by immediate cash withdrawals supporting the accommodation-entries narrative. The petitioner did not dispute genuineness of the ledger and bank statements. Given that the proprietor of M/s NSE admitted providing accommodation entries and the documentary material corroborated transactional links with the petitioner, the assessing officer could reasonably infer that the petitioner's purchases were bogus and that the petitioner had not disclosed "true and full" facts for assessment. Consequently the proviso to Section 147 applied and issuance of notice under Section 148 after four years was not barred. [Paras 9, 10, 11, 12]

The re-opening was supported by prima facie material and the proviso to Section 147 applied; the notice under Section 148 was not time-barred or without jurisdiction.

Cross-examination and principles of natural justice - Whether principles of natural justice were violated by not allowing cross-examination of the proprietor of M/s NSE and whether such omission vitiated the re-opening. - HELD THAT: - The Court noted there was no record of any specific request by the petitioner to cross-examine the proprietor of M/s NSE during the objections proceedings. More importantly, the proprietor's statement was corroborated by bank account entries and the sales ledger showing transactions between M/s NSE and the petitioner; the petitioner did not dispute the genuineness of those documents. At the stage of issuance of notice, the assessing officer required only prima facie material to form a belief; therefore absence of cross-examination did not establish a breach of natural justice that would invalidate the re-opening. [Paras 11, 12]

No breach of natural justice was shown by non-production for cross-examination; non-allowance of cross-examination did not vitiate the re-opening.

Final Conclusion: The petition was dismissed: the Court held that the assessing officer had prima facie material to form belief that income had escaped assessment and that the proviso to Section 147 applied, the re-opening was not time-barred, and no breach of natural justice or jurisdictional defect was made out to warrant interference under Article 226.

Service of notice by email - non-receipt of notice and failure of compliance due to COVID-19 - quash of assessment order - quash of demand under Section 221(1) - remand for fresh adjudication - treating quashed order as show cause notice

Service of notice by email - non-receipt of notice and failure of compliance due to COVID-19 - quash of assessment order - remand for fresh adjudication - treating quashed order as show cause notice - Validity of the Assessment Order where notices were sent to the petitioner's registered e-mail operated by its Chartered Accountant during the COVID-19 pandemic and the petitioner remained unaware - HELD THAT: - The Court accepted the petitioner's explanation that notices under Section 142(1) were sent to the registered e-mail which was operated solely by the Chartered Accountant and that these communications fell during the peak periods of the first and second COVID-19 waves. The petitioner asserted it was unaware of the assessment order dated 26.04.2021 and only learned of it upon receipt of a demand notice under Section 221(1) on 04.02.2022. Having regard to the exceptional circumstances created by the pandemic and the explanation furnished, the Court found the petitioner's contention reasonable. In consequence, the Court concluded that the impugned Assessment Order and the consequential demand notice could not be allowed to stand without giving the petitioner an opportunity to be heard. The Court therefore quashed the impugned Assessment Order and the demand notice and remanded the matter to the respondents to pass a fresh order on merits and in accordance with law within eight weeks, directing that the quashed order shall be treated as a Show Cause Notice and that the petitioner shall cooperate by furnishing all information and replies called for. [Paras 9, 10, 11, 12]

Impugned Assessment Order dated 26.04.2021 and the Demand Notice under Section 221(1) quashed; matter remanded for fresh decision on merits within eight weeks, the quashed order to serve as a Show Cause Notice and petitioner directed to cooperate.

Final Conclusion: Writ petition allowed; the assessment order dated 26.04.2021 and the demand notice under Section 221(1) are quashed and the matter is remitted for fresh adjudication within eight weeks, with the petitioner to furnish information and the quashed order to be treated as a Show Cause Notice.

Unexplained expenditure as chargeable under Section 69C - failure to explain payments and production of books of account - jurisdictional challenge to assessment order - challenge under Article 226 of the Constitution - statutory appeal and appellate disposal uninfluenced by observations

Unexplained expenditure as chargeable under Section 69C - failure to explain payments and production of books of account - challenge under Article 226 of the Constitution - statutory appeal and appellate disposal uninfluenced by observations - Validity of the assessment order for Assessment Year 2012-2013 treating a payment as unexplained expenditure under Section 69C and the maintainability of a writ under Article 226 challenging that disallowance - HELD THAT: - The Court examined the impugned assessment order which treated a payment of the sum earlier allowed in the assessment for Assessment Year 2011-2012 as unexplained expenditure for Assessment Year 2012-2013 under Section 69C. The petitioner was issued a show-cause notice and, despite opportunities, failed to file any reply or produce books of account to explain the payment. The books of account filed did not demonstrate that the payment was out of profits earned by the petitioner. On this material, the Court found that the petitioner had not discharged the burden of explanation and that the challenge by way of writ petition under Article 226 was without merit. The Court therefore declined to interfere with the assessment order. The Court, however, granted liberty to the petitioner to file the statutory appeal within 30 days and directed that any such appeal be numbered by the Appellate Commissioner and disposed of uninfluenced by the observations made in the order.

Writ petition dismissed; petitioner granted liberty to file statutory appeal within 30 days; Appellate Commissioner to number and dispose of the appeal uninfluenced by this order.

Final Conclusion: The writ petition challenging the assessment order for Assessment Year 2012-2013 was dismissed as without merit for failure to explain the impugned payment; liberty was granted to file the statutory appeal within 30 days and the Appellate Commissioner was directed to dispose of it uninfluenced by the court's observations.

Reasonable period for statutory action - Limitation in proceedings under Section 201 of the Income-tax Act - Liability for failure to deduct tax at source under Section 195 - Deemed assessee in default under Section 201(1) - Interest liability under Section 201(1A) - Applicability of prescribed limitation for residents as a guide for non-residents - Maintainability of writ petition where jurisdictional question of limitation is raised

Limitation in proceedings under Section 201 of the Income-tax Act - Reasonable period for statutory action - Applicability of prescribed limitation for residents as a guide for non-residents - Whether the order dated 14.12.2018 under Section 201(1) read with Section 201(1A) was barred by limitation in relation to payments made in financial year 2015-2016 (AY 2016-2017). - HELD THAT: - The Court examined the statutory scheme of Section 201 as originally enacted and subsequent amendments introducing time limits for persons resident in India. Parliament deliberately refrained from prescribing any fixed time limit for orders under Section 201(1) where the recipient is a non-resident, on administrative grounds. Notwithstanding the absence of a statutory period for non-residents, the Court held that authorities must complete proceedings within a reasonable period. What constitutes a reasonable period depends on facts and circumstances of each case; there can be no rigid rule shorter than the statutory seven-year period prescribed for residents. The limitation of seven years for residents is a useful guide in assessing reasonableness for non-residents, but the Court will not judicially legislate a shorter fixed period for non-residents. Applying these principles to the present facts - survey on 30.12.2015, show-cause notice on 20.01.2016 and order on 14.12.2018 - the Court found the proceedings were concluded within a reasonable period and therefore not barred by limitation. [Paras 27, 28, 29, 30, 31]

The order under Section 201(1)/(1A) dated 14.12.2018 is not barred by limitation; it was passed within a reasonable period.

Maintainability of writ petition where jurisdictional question of limitation is raised - Deemed assessee in default under Section 201(1) - Whether the writ petition was maintainable notwithstanding the availability of statutory appellate remedies, by reason of the petitioner raising a jurisdictional challenge on limitation. - HELD THAT: - The petitioner contended that a challenge to limitation goes to jurisdiction and therefore can be entertained by the High Court under Article 226 despite alternative statutory remedies. The Court noted the objection by the revenue but observed that a jurisdictional challenge on limitation may warrant judicial review. However, after considering the limitation issue on merits, the Court concluded there was no infirmity in the impugned order on limitation. Having done so, the Court declined to entertain further adjudication on merits in the writ petition and directed the petitioner to pursue remedies available under the Act. The Court therefore proceeded to decide the limitation issue itself and dismissed the writ petition, without expressing any opinion on the substantive merits of taxability. [Paras 12, 31, 32, 33, 34]

Writ petition could be entertained on the jurisdictional (limitation) challenge, but since the Court found the order not barred by limitation, the petition is dismissed and the petitioner is left to statutory remedies for merits.

Final Conclusion: The writ petition is dismissed: the order dated 14.12.2018 under Section 201(1)/(1A) (relating to payments in FY 2015-2016, AY 2016-2017) is not barred by limitation as it was completed within a reasonable period; the Court refrained from adjudicating the merits and directed the petitioner to pursue available remedies under the statute.

Validity of notice under Section 148 of the Income Tax Act, 1961 - Assessment order addressed to deceased assessee - Notice and assessment on legal representatives / heirs - Right to opportunity of hearing and to file written responses - Requirement of a speaking order on reassessment

Assessment order addressed to deceased assessee - Notice and assessment on legal representatives / heirs - Validity of notice under Section 148 of the Income Tax Act, 1961 - Right to opportunity of hearing and to file written responses - Requirement of a speaking order on reassessment - Impugned notice and assessment could not stand where the notice was addressed to the deceased assessee and the assessment was directed only against one legal heir while others existed; reassessment proceedings must be set aside and fresh notice/decision issued to all legal heirs with opportunity to be heard. - HELD THAT: - The record showed that the Revenue was aware of the death of the assessee and that proceedings in the related assessment had been attended by petitioner no.1 as legal representative. The impugned notice dated 06.04.2021 was addressed to the deceased, and the subsequent assessment adverted only to one legal heir despite existence of multiple legal heirs. On these facts the assessment could not properly be sustained. The appropriate course is to set aside the assessment order and direct the Assessing Officer to issue fresh notice to the petitioners (legal heirs), grant them an opportunity to present their defence including filing written responses if sought, and thereafter pass a speaking order. The court therefore disposed of the writ petition by directing fresh adjudication in conformity with the above directions. [Paras 18, 19, 21, 22, 23]

Assessment order set aside; AO to issue notice to the petitioners (legal heirs), afford opportunity of hearing and to file written responses, and thereafter pass a speaking order.

Final Conclusion: Writ petition allowed; impugned assessment order set aside and matter remitted to the Assessing Officer to issue fresh notice to the petitioners (legal heirs), afford them opportunity to be heard (including to file written responses if sought) and to pass and supply a speaking order.

Requirement of opportunity of hearing before reopening assessment - Compliance with Section 144B(6)(vii) of the Income Tax Act, 1961 - Validity of order passed under Section 147 of the Income Tax Act, 1961 without hearing - Remand for fresh decision after statutory compliance

Requirement of opportunity of hearing before reopening assessment - Compliance with Section 144B(6)(vii) of the Income Tax Act, 1961 - Validity of order passed under Section 147 of the Income Tax Act, 1961 without hearing - Impugned order dated 10th March, 2023 passed under Section 147 in respect of Assessment Year 2018-19 was passed without providing opportunity of hearing as required by Section 144B(6)(vii) and is consequently set aside. - HELD THAT: - The respondent-Department, on verification of record pursuant to the Court's earlier direction, conceded that the impugned order under Section 147 was passed without compliance with the statutory requirement to afford an opportunity of hearing under Section 144B(6)(vii). Although the Court noted its general reluctance to interfere with appealable orders under Section 143(3) or Section 147, the admitted non-compliance with the statutory procedural safeguard rendered the impugned order liable to be set aside. The matter was therefore remitted to the assessing officer for reconsideration and fresh decision after affording the requisite opportunity of hearing mandated by Section 144B(6)(vii), with a direction to complete the exercise within three months from the date of this order.

Impugned order of 10th March, 2023 under Section 147 is set aside and the matter is remanded to the assessing officer to pass fresh order after compliance with Section 144B(6)(vii) within three months.

Final Conclusion: Writ petition allowed in part; impugned reopening order under Section 147 (dated 10.03.2023) for Assessment Year 2018-19 set aside for non-compliance with Section 144B(6)(vii) and remitted to the assessing officer to pass a fresh order after giving the statutory opportunity of hearing within three months.

Disallowance under section 14A - Computation under Rule 8D(2)(iii) - Only investments yielding exempt income to be considered - Prospective application of explanation inserted by Finance Act, 2022

Disallowance under section 14A - Computation under Rule 8D(2)(iii) - Only investments yielding exempt income to be considered - Validity of the addition under section 14A computed by adopting total investments instead of only those investments which yielded exempt income. - HELD THAT: - The Tribunal accepted the assessee's contention and the binding judicial authority of the Hon'ble Delhi High Court in ACB India Ltd. v. ACIT that for the purpose of section 14A and Rule 8D(2)(iii) the average value of investments to be adopted must be limited to investments which generated exempt income (dividend) and not the total investments. The AO and CIT(A) erred in taking total investments as the base (Rs. 11,98,11,000) instead of the investment attributable to dividend income (Rs. 2,60,00,000). The Tribunal noted consistent judicial pronouncements including the decision in PCIT v. Indiabulls Capital Services Ltd. and the Apex Court's dismissal of SLP against the Delhi High Court, and observed that the explanation introduced by Finance Act, 2022 has prospective effect as held by the Delhi High Court in PCIT v. Era Infrastructure (India) Ltd. Applying these precedents, the Tribunal concluded that only dividend-earning investments are to be considered in computing disallowance under section 14A and therefore the addition was not sustainable. [Paras 7, 8, 9]

The disallowance of Rs. 4,69,055 under section 14A is deleted as the AO/CIT(A) wrongly included total investments instead of only investments yielding exempt income.

Final Conclusion: Appeal allowed; the addition under section 14A for Assessment Year 2014-15 is deleted and the assessment order modified accordingly.

Fees for technical services taxable where services are used in India despite physical performance abroad - Article 12(5) of India-Finland DTAA - deeming rule where services are performed or used - permanent establishment - absence of PE does not preclude taxation under Article 12(5) where use arises in India - income from corporate guarantee taxable as 'other income' where not a business activity of the guarantor - Article 21(3) of India-Finland DTAA - taxation of items of income arising in the other Contracting State - remand for re adjudication of interest on refund under Article 11 of DTAA - remand for verification of claimed TDS credit

Fees for technical services taxable where services are used in India despite physical performance abroad - Article 12(5) of India-Finland DTAA - deeming rule where services are performed or used - permanent establishment - absence of PE does not preclude taxation under Article 12(5) where use arises in India - Taxability of receipts characterised as fees for IT/technical services under Article 12(5) of the India-Finland DTAA for the assessment years under appeal. - HELD THAT: - The Tribunal upheld the Assessing Officer and the Dispute Resolution Panel that income received for IT services is taxable in India notwithstanding that the services were physically performed in Finland. The Panel applied Article 12(5) which deems fees for technical services to arise in the State where the services are performed or where the services are used; where the payer is resident in India the receipts are prima facie deemed to arise in India, and, importantly, where the beneficiary uses the results in India the income is taxable in India. The Tribunal relied on the assessee's earlier ITAT decision in the assessee's own case and the DRP's reasoning that the services, though rendered abroad, produced results used in India for the business of the Indian entity; performance is therefore treated as made when the beneficiary is able to use the service for its purpose. The absence of a permanent establishment in India was found not to be decisive in this factual matrix because taxation under Article 12(5) attaches to use/arising in India. [Paras 6, 7, 8, 9]

The receipts for IT services were held taxable in India as fees for technical services under Article 12(5) of the India-Finland DTAA; the AO/DRP action taxing the receipts is upheld.

Income from corporate guarantee taxable as 'other income' where not a business activity of the guarantor - Article 21(3) of India-Finland DTAA - taxation of items of income arising in the other Contracting State - Whether guarantee fees received by the assessee are taxable in India and the proper head of income. - HELD THAT: - The Tribunal agreed with the DRP that providing corporate guarantee in the present facts was not a general business activity of the assessee but an obligation/ancillary service to its subsidiary; therefore the income is not business income attributable to a PE in India and properly falls under 'other income'. The DRP had examined the Articles of Association and the invoicing/usage nexus and concluded that the utilization of the corporate guarantee fee was in India; accordingly Article 21(3) was invoked to tax the income as arising in India. The Tribunal found no error in the DRP's characterization that guarantees were given in furtherance of the subsidiary relationship rather than as a standalone business of the guarantor and upheld the taxation under Article 21. [Paras 9, 10, 11, 12]

The corporate guarantee fees were treated as income from other sources arising in India and taxable under Article 21; the AO/DRP finding is upheld.

Remand for re adjudication of interest on refund under Article 11 of DTAA - Consideration of taxability and rate applicable to interest on refund claimed by the assessee under Article 11 of the DTAA for A.Y. 2020-21. - HELD THAT: - The Tribunal observed that neither the Assessing Officer nor the DRP had dealt with the issue in the assessment record. The assessee contended that interest on refund should be assessed as interest under Article 11 and taxed at the treaty rate (10%) as per the assessee's earlier favourable ITAT orders in related years. Given the absence of adjudication on record, the Tribunal remitted the matter to the Assessing Officer for fresh consideration, directing the AO to take into account the ITAT's orders in ITA Nos. 350 & 351/KOL/2022 and to afford the assessee an opportunity of hearing. [Paras 13, 14, 15]

Issue remitted to the Assessing Officer for re adjudication in accordance with directions, including consideration of the assessee's earlier ITAT orders.

Remand for verification of claimed TDS credit - Claimed TDS credit reconciliation and grant of credit for A.Y. 2018-19. - HELD THAT: - The Tribunal found no discussion in the assessment or DRP orders regarding the discrepancy between TDS credit claimed by the assessee and that allowed by the AO. In view of the absence of decision on record the Tribunal directed remand to the Assessing Officer for re verification and adjudication; if the higher credit is established, the AO must record specific reasons if a reduced credit is to be allowed. [Paras 16]

The matter of TDS credit is remitted to the Assessing Officer for re verification and fresh adjudication with opportunity to the assessee.

Penalty and interest consequences are incidental and remediable after re computation - Miscellaneous consequential grounds including levy of interest under sections 234A/234B and initiation of penalty under section 270A. - HELD THAT: - The Tribunal treated interest demands as consequential to the primary adjustments and noted that penalty proceedings are premature at this stage. The assessee was to be given fresh opportunity to explain why penalty should not be levied; the Tribunal did not decide penalty on merits but left the matter for separate consideration in penalty proceedings after giving opportunity. [Paras 17]

Consequential interest demands remain subject to recomputation; penalty proceedings to be carried out after giving assessee opportunity - no final adjudication on penalty was made.

Final Conclusion: The appeals were partly allowed: the Tribunal upheld taxation of the IT service receipts as fees for technical services under Article 12(5) and upheld taxation of corporate guarantee fees as 'other income' under Article 21; issues relating to interest on refund and disputed TDS credit were remitted to the Assessing Officer for fresh adjudication with directions to afford opportunity to the assessee; consequential interest and penalty matters were left for separate determination.

Fee for Included Services - make available condition - consultancy services versus technical services - reimbursement as cost to cost not constituting FIS - Article 12(4)(b) of India-USA DTAA

Fee for Included Services - make available condition - consultancy services versus technical services - Article 12(4)(b) of India-USA DTAA - Whether the amount of Rs. 5,24,00,942 received from Bain India for consultancy services is taxable in India as Fee for Included Services under Article 12(4)(b) of the India-USA DTAA - HELD THAT: - The Tribunal analysed the Consulting Services Agreement and the definition of FIS in Article 12(4) read with the Memorandum of Understanding. Article 12(4)(b) requires (i) that the services be technical or consultancy services and (ii) that rendering such services make available technical knowledge, skill, knowhow or processes to the recipient so that the recipient can apply them independently. The services described (market research, strategic research and planning, data collection, client engagement) do not amount to technical services; at best they are advisory/consultancy services. Crucially, the Department produced no material establishing that technical knowledge or knowhow was made available to Bain India to enable independent application. The Tribunal relied on the Memorandum of Understanding (including Example 7) which recognises that use of technical skill by the provider in delivering consultancy does not by itself mean technical expertise has been made available to the recipient. Continued dependence of Bain India on the assessee over years was held to be indicative that no transfer/making available occurred. On these foundations and having regard to the cited precedents, the Tribunal held that the receipts do not satisfy the make available requirement and therefore are not FIS under Article 12(4)(b). [Paras 16, 17, 18]

Receipts of Rs. 5,24,00,942 are not Fee for Included Services under Article 12(4)(b) of the India-USA DTAA; addition set aside.

Reimbursement as cost to cost not constituting FIS - Fee for Included Services - Article 12(4)(b) of India-USA DTAA - Whether the amount of Rs. 10,98,97,261 received as reimbursement of client related expenses under a cost reimbursement agreement is taxable as Fee for Included Services under Article 12(4)(b) of the India-USA DTAA - HELD THAT: - The Tribunal noted that the payments in dispute are reimbursements of third party costs incurred by the assessee for procuring market/industry research and related client expenses on behalf of Bain India, made on a cost to cost basis without mark up. The Tribunal observed that an earlier Tribunal decision in proceedings involving the payer (Bain India) held identical receipts were neither FIS under Article 12(4)(b) nor royalty, and therefore not subject to withholding. Applying that decision, the present controversy was held to be resolved in favour of the assessee and the receipts were not taxable as FIS. [Paras 24, 25]

Receipts of Rs. 10,98,97,261 as cost reimbursements are not Fee for Included Services under Article 12(4)(b) of the India-USA DTAA; addition set aside.

Final Conclusion: The appeal is allowed: the Tribunal held that (i) the contested consultancy receipts of Rs. 5,24,00,942 do not satisfy the make available requirement and are not Fee for Included Services under Article 12(4)(b) of the India-USA DTAA, and (ii) the contested reimbursements of Rs. 10,98,97,261 are cost to cost reimbursements and likewise do not constitute FIS; consequential grounds were not adjudicated.

Estimation of income on ex parte basis under section 144 - Assessment on basis of failure to comply with notices - Principles of natural justice - Levy of interest under section 234B

Estimation of income on ex parte basis under section 144 - Assessment on basis of failure to comply with notices - Principles of natural justice - Whether the income estimated by the Assessing Officer and upheld by the CIT(A) at 8% of gross receipts should be modified in view of the assessee's non receipt of notices and closure of business. - HELD THAT: - Notices were issued but remained unanswered and the case was dealt with ex parte by the lower authorities. The assessee contended non receipt of notices due to vacating business premises and closure of business, and pleaded for a lower estimation of profit. The Tribunal, after considering the facts and the assessee's business model and in the interest of justice, found it appropriate to reduce the estimate rather than uphold the 8% profit rate adopted by the AO and affirmed by the CIT(A). Having weighed the circumstances including inadvertent non compliance and absence of comparable case references relied on by the AO, the Tribunal directed a revised estimate of profit at 6% on gross turnover. [Paras 8]

Grounds relating to estimation of income are partly allowed and the AO is directed to estimate profit at 6% of gross turnover.

Levy of interest under section 234B - Whether the interest charged under section 234B should be deleted or modified. - HELD THAT: - The assessee sought deletion of interest levied under section 234B. The Department relied on the mandatory nature of interest. The Tribunal recalled binding decisions of the Supreme Court that interest under section 234B is mandatory and consequential. Accordingly, the Tribunal did not delete the interest but confined the quantum of interest to the tax computed after applying the revised estimate of profit at 6% of gross turnover, thereby restricting the charging of interest consequentially. [Paras 11]

Ground relating to interest is partly allowed; interest under section 234B is upheld as mandatory but shall be charged only on the tax computed after applying the revised profit estimate of 6%.

Final Conclusion: The appeal is partly allowed: the assessment is modified by directing the AO to estimate profit at 6% on gross turnover for A.Y. 2017-18, and interest under section 234B is to be restricted to the tax computed after applying that revised estimate.

Procedure for claim of preferential rate of duty under Section 28DA of the Customs Act, 1962 - suspension of preferential tariff treatment - provisional assessment and requirement of security for clearance - re-assessment by Proper Officer in accordance with Section 28DA and rules

Procedure for claim of preferential rate of duty under Section 28DA of the Customs Act, 1962 - suspension of preferential tariff treatment - provisional assessment and requirement of security for clearance - Whether the respondents could call for a bank guarantee and require security for provisional clearance without first invoking the suspension of preferential tariff treatment under Section 28DA and without calling for information from the importer. - HELD THAT: - The Court found that there were no records showing that the petitioner had been called upon to furnish any information which it failed to provide, and there was no formal suspension of preferential tariff treatment under Section 28DA(4). Section 28DA contemplates a specific procedure for claiming preferential rates and empowers the Proper Officer to temporarily suspend preferential treatment if the importer fails to provide information called for. In the absence of any such call for information or suspension, the respondents were not entitled to insist on the bank guarantee as a precondition to provisional clearance without following the procedure prescribed under Section 28DA and the rules thereunder. The Court observed that the impugned Bill of Entry had been provisionally assessed and that the respondents must reassess in accordance with the statutory procedure rather than unilaterally demanding security where statutory preconditions for suspension had not been satisfied. [Paras 6, 7, 11]

Demand for the bank guarantee cannot properly be enforced where no information was called for and no suspension under Section 28DA has been recorded; respondents must follow the procedure under Section 28DA before withholding preferential treatment or mandating such security.

Re-assessment by Proper Officer in accordance with Section 28DA and rules - consideration of contemporaneous Bills of Entry - provisional assessment and release of imported goods - Direction to the respondents to re-assess the subject Bill of Entry provisionally and to consider other related Bills of Entry before allowing clearance. - HELD THAT: - The Court directed that the Bill of Entry dated 15.06.2023 be re-assessed provisionally in accordance with the procedure prescribed under Section 28DA and the rules made thereunder. While carrying out the re-assessment, the respondents are to take into account the decisions made in respect of the other Bills of Entry of the petitioner dated 20.06.2023 and 02.07.2023 (as reflected in the order). The re-assessment is to be completed as a fresh exercise by the Proper Officer, applying the statutory procedure for preferential treatment claims and provisional assessments, and thereafter the clearance of the consignment is to be allowed if appropriate under that reassessment. [Paras 11, 12]

Respondents directed to re-assess the Bill of Entry dated 15.06.2023 provisionally under Section 28DA and the rules, considering the contemporaneous Bills of Entry, and thereafter allow clearance; the exercise to be completed within fifteen days of receipt of the order.

Final Conclusion: Writ petition disposed of: respondents directed to re-assess the impugned Bill of Entry dated 15.06.2023 provisionally in accordance with Section 28DA and the rules, taking into account the other specified Bills of Entry, and thereafter permit clearance; exercise to be completed within fifteen days; no costs.

Liability of a Customs House Agent for negligence and facilitation of unlawful export - duty of a Customs House Agent to verify exporter, documents and cargo before clearance - penalty under Section 114(1) of the Customs Act, 1962

Liability of a Customs House Agent for negligence and facilitation of unlawful export - duty of a Customs House Agent to verify exporter, documents and cargo before clearance - penalty under Section 114(1) of the Customs Act, 1962 - Whether the appellant CHA was liable for penal consequences for omissions and negligence in respect of the consignments containing Red Sanders Wood and, if so, the appropriate quantum of penalty under Section 114(1) of the Customs Act, 1962. - HELD THAT: - The Tribunal found on the facts that the consignments exported under ARE-1 were in reality Red Sanders Wood and that the CHA had multiple lapses in due diligence. The CHA admitted lack of personal knowledge of the exporter's responsible persons, absence of prior engagement with the exporter, failure to verify antecedents by visiting premises or contacting responsible persons, lack of information about the truck driver and absence at stuffing, and handing over blank signed requisition/permit forms via an employee. The Tribunal noted the time-lag and other circumstances that ought to have caused concern and that key CHA personnel accepted they had not verified the exporter. While the Show Cause Notice did not establish express active collusion by the CHA in the attempt to export Red Sanders Wood, the Tribunal concluded that the CHA's omissions and commissions constituted culpable carelessness and negligence which facilitated the entry of the offending goods into the port area for export. Applying these findings, the Tribunal held the appellant liable under the relevant penal provision but reduced the penalty to an amount it considered proportionate to the negligence found. [Paras 3, 5, 7, 8, 9]

Appellant held liable for negligence facilitating unlawful export; penalty reduced and imposed at Rs. 50,000 under Section 114(1) of the Customs Act, 1962.

Final Conclusion: Appeal disposed by upholding liability of the CHA for negligence in facilitating the export of Red Sanders Wood and imposing a reduced penalty of Rs. 50,000 under Section 114(1) of the Customs Act, 1962.

Inclusion of royalty/technical knowhow fees in transaction value - condition of sale - Rule 9(1)(c) of Customs Valuation Rules - addability of royalty - transaction value under SVB procedure / arm's length pricing - finality of earlier valuation order and estoppel by acceptance - precedential application of earlier Tribunal and Supreme Court decisions

Inclusion of royalty/technical knowhow fees in transaction value - condition of sale - Rule 9(1)(c) of Customs Valuation Rules - addability of royalty - transaction value under SVB procedure / arm's length pricing - Whether royalty and lumpsum technical knowhow fee paid to the foreign collaborator are includable in the assessable value of imported components. - HELD THAT: - The Tribunal examined the licence and technical knowhow agreement and the facts found on SVB inquiry. The agreement provided for royalty calculated on net sale price of the licensed articles and a lumpsum fee for technical knowhow; the importer was free to procure components from other suppliers and there was no obligation to buy only from the foreign collaborator. The Tribunal applied the governing test under the Customs Valuation Rules and found that the payments did not satisfy the twin conditions required for addability under Rule 9(1)(c): they were not a condition of sale of the imported goods and were related to post import/manufacturing activity linked to the finished product. The transaction value had earlier been accepted after SVB verification and the Department had not successfully appealed that acceptance; the prior valuation order was continued and relied upon. Having regard to these factual findings and to the Tribunal's and Apex Court's earlier authorities relied upon by the Commissioner (Appeals), the Tribunal concluded that the royalty/technical knowhow fee is not includable in the assessable value.

Royalty and lumpsum technical knowhow fee are not includable in the assessable value; the departmental appeal is dismissed.

Final Conclusion: The departmental appeal is dismissed: on the facts and the licence terms the royalty/technical knowhow payments do not qualify as a condition of sale and hence are not addable to the transaction value; earlier acceptance of invoice value after SVB enquiry and absence of a successful earlier appeal further confirm that no interference is warranted.

Confiscation under Section 111(d) - redemption fine - penalty - import licence requirement under Foreign Trade Policy - market survey for valuation - remand and disclosure of margin of profit

Confiscation under Section 111(d) - import licence requirement under Foreign Trade Policy - Validity of confiscation of imported old and used clothing for want of a specific import licence - HELD THAT: - The Tribunal upheld confiscation under confiscation under Section 111(d) because import of the goods classified under the relevant tariff item was restricted and the importers did not possess the required specific licence under the Foreign Trade Policy. The decision follows the reasoning in Venus Traders where want of licence justified confiscation; consequently, the confiscation in the impugned order cannot be faulted. The Tribunal noted that proceedings and findings on the restricted nature of the goods and absence of licence support upholding confiscation. [Paras 6]

Confiscation upheld.

Redemption fine - penalty - market survey for valuation - remand and disclosure of margin of profit - Whether the redemption fine and penalty as imposed are excessive and require enhancement or reduction - HELD THAT: - Relying on the Tribunal's earlier reasoning in Venus Traders regarding ascertainment of value, market survey and disclosure of margin of profit, the Tribunal considered the circumstances of these proceedings and the fact that the respondent did not challenge the confirmed duties and penalties by appeal. Applying that precedent, the Tribunal found the redemption fine and penalty imposed by the adjudicating authority to be sufficient to meet the ends of justice and therefore declined to enhance them. The Tribunal expressly followed the approach in Venus Traders which acknowledged limitations of late surveys and emphasized disclosure of margin of profit; however, on the facts before it, the existing redemption fine and penalty were upheld. [Paras 4, 6, 7]

Redemption fine and penalty upheld; no enhancement granted.

Final Conclusion: The appeals by the Revenue are dismissed; the impugned order confirming confiscation and the redemption fine and penalty is upheld.

Project Import Regulations, 1986 - benefit of project import - registration of contract - clearance of goods before registration - sponsoring authority's recommendation - concessional assessment as Project Import

Project Import Regulations, 1986 - benefit of project import - registration of contract - clearance of goods before registration - sponsoring authority's recommendation - Eligibility for duty exemption under the Project Import Regulations where application for registration and sponsoring authority's recommendation were submitted before import but formal registration was completed after clearance of goods. - HELD THAT: - The Tribunal examined whether goods cleared at Chennai before formal registration of the contract at Visakhapatnam were entitled to the concessional treatment under the Project Import Regulations when the appellant had filed an application for registration prior to import and the sponsoring authority had issued its recommendation dated 25.08.2010 which was dispatched to Chennai and a copy received by the Visakhapatnam office. The Bench relied on earlier Tribunal decisions which hold that clearance of goods before registration does not automatically disentitle an importer to project-import concessions where the application and essential documents were submitted in time and delay in registration was attributable to administrative processes. The records showed the sponsoring authority's letter of 25.08.2010 and that the Deputy Commissioner at Visakhapatnam received the copy; thereafter registration followed on 06.12.2010. Applying these principles, the Tribunal concluded that where the applicant had complied with requisite formalities prior to import and the sponsoring authority's recommendation predated import, the concession under the Project Import Regulations could not be denied merely because formal registration was completed later. [Paras 6, 7, 8, 9, 10]

Impugned order set aside; appellant held eligible for exemption under the Project Import Regulations and appeal allowed with consequential relief.

Final Conclusion: Where an application for registration under the Project Import Regulations together with the sponsoring authority's recommendation was submitted prior to import and any delay in formal registration was administrative, the importer is entitled to concessional assessment under the Project Import Regulations; the order denying such benefit is set aside and the appeal is allowed.

Principles of natural justice - appealability of administrative communication - extension of time for re-export under Notification No.158/1995-Customs - interpretation of conditions of exemption notification regarding re-importation and re-exportation - discretion of the Commissioner to allow further extension of time

Appealability of administrative communication - principles of natural justice - Impugned communication rejecting the application for extension of time is an appealable order and was issued in violation of principles of natural justice. - HELD THAT: - The Tribunal treated the letter of the Additional Commissioner (with approval of the Commissioner) rejecting the request for extension as an order against which appeal lies. The communication was issued in a perfunctory manner without issuance of a show cause notice or affording the appellant an opportunity of hearing in respect of the request for extension. Reliance was placed on precedents holding that administrative communications of this nature can constitute appealable orders. For these reasons the communication was found to be contrary to the requirements of natural justice. [Paras 4]

The impugned communication is appealable and is set aside for having been issued in violation of principles of natural justice.

Extension of time for re-export under Notification No.158/1995-Customs - interpretation of conditions of exemption notification regarding re-importation and re-exportation - discretion of the Commissioner to allow further extension of time - Appellant was entitled to the benefit of the notification; the Commissioner's refusal to allow extension for re-export was without justification and unsustainable. - HELD THAT: - The notification permits re-export within six months of re-importation or such further period not exceeding six months as the Commissioner may allow. The goods were given out of charge on 10.02.2022, and the appellant produced a shipping bill on 28.01.2023 and applied for extension on 03.02.2023. The appellant explained delay by reference to disrupted trade and sanctions arising from the war involving Russia, and procuring a GR waiver from the bank which was obtained on 25.01.2023. The Tribunal found that these circumstances furnished sufficient justification for seeking the Commissioner's discretionary extension and that the Commissioner's order refusing the contention lacked reasoned justification. The Tribunal also relied on a prior decision considering similar facts which held that benefit of the notification cannot be denied merely because extension application was not filed within six months where the principal condition of the notification (re-importation within three years of export) was satisfied and an extension application had in fact been filed. [Paras 4]

The refusal to grant extension was unjustified; the impugned communication is unsustainable and is set aside, allowing the appeal.

Final Conclusion: The appeal is allowed: the impugned communication rejecting the request for extension of time for re-export under Notification No.158/1995-Customs is set aside for being issued in violation of natural justice and lacking justification, and the appellant's entitlement to relief under the notification is affirmed.

Certificate of Origin - Direct consignment - Verification request to the issuing authority under the Origin Rules - Non-discardability of a certificate issued by the designated authority unless cancelled by that authority - Prohibition on departmental reassessment of origin without following prescribed verification procedure - Preferential tariff benefit under notification based on authenticated origin

Certificate of Origin - Verification request to the issuing authority under the Origin Rules - Prohibition on departmental reassessment of origin without following prescribed verification procedure - Validity of the Certificate of Origin issued by the Malay Chamber of Commerce and whether it could be rejected on the basis of the bill of lading without invoking the verification procedure under the Origin Rules. - HELD THAT: - The Tribunal found that the Certificate of Origin was issued by the designated authority (Malay Chamber of Commerce) and there was no evidence the certificate was shown to be fake or cancelled by the issuing authority. Rule 9 of the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Government of the Republic of India and Malaysia) Rules, 2011 prescribes the conditions for direct consignment and contemplates that where there is doubt about origin the Customs Authority of the importing country must request the issuing authority to check authenticity. The department did not follow that prescribed procedure and relied instead on bills of lading to infer origin. Relying on consistent precedents and the operational certification procedures under comparable preferential arrangements, the Tribunal held that the customs officer cannot act as an adjudicator to overturn a certificate of origin on the basis of indigenous enquiries or assumptions without returning the certificate to and obtaining verification from the issuing authority, or without evidence of cancellation by that authority. Consequently, the certificate could not be discarded merely on the basis of the bill of lading or departmental suspicion. [Paras 4, 5]

The certificate of origin could not be rejected and the denial of preferential benefit based on the bill of lading without following the verification procedure under the Origin Rules was unsustainable.

Certificate of Origin - Preferential tariff benefit under notification based on authenticated origin - Non-discardability of a certificate issued by the designated authority unless cancelled by that authority - Sustainability of the departmental allegation treating all five consignments as of Chinese origin when discrepancy in bills of lading was shown only for two consignments. - HELD THAT: - The Tribunal noted that discrepancy in bills of lading was established only in respect of two of the five bills of entry; there was no evidence to impugn the remaining three certificates of origin. Under the same legal principles that protect a valid certificate issued by a designated authority, the department cannot extend the adverse finding to consignments for which no discrepancy or supporting evidence exists. The impugned order treated all five bills as being of Chinese origin while failing to challenge or verify three certificates; such a blanket approach lacks basis in the record and in law. [Paras 4]

The allegation in respect of the other three certificates of origin was without basis and could not sustain denial of preferential treatment for those consignments.

Final Conclusion: The impugned order rejecting preferential treatment was set aside. The Tribunal held that the Certificates of Origin issued by the Malay Chamber of Commerce could not be discarded without following the mandatory verification procedure under the Origin Rules, and there was no basis to impugn the three consignments for which no discrepancy was shown; appeal allowed.

Performance Bank Guarantee - encashment of bank guarantee on adverse progress - exclusion of contract of guarantee / surety from moratorium - moratorium under the Insolvency and Bankruptcy Code and its limited ambit to assets of the corporate debtor - validity of invocation of bank guarantees under a Transmission Agreement

Performance Bank Guarantee - encashment of bank guarantee on adverse progress - validity of invocation of bank guarantees under a Transmission Agreement - Invocation of the bank guarantees furnished by the corporate debtor to Power Grid pursuant to the Transmission Agreement was valid and legally tenable. - HELD THAT: - The Tribunal held that the Transmission Agreement expressly provided for encashment of the bank guarantee in case of 'adverse progress' of work assessed during Joint Co-ordination Meetings and that, on the material before it, adverse progress in construction by the corporate debtor was recorded in such meetings. The bank guarantees were in the nature of performance bank guarantees under the Transmission Agreement and, having regard to the contractual mandate, encashment upon adverse progress was compulsory. The Tribunal found no sufficient cause to interfere with the invocation letters issued by Power Grid and upheld the NCLT's conclusion that the invocations were valid and tenable. [Paras 40, 41, 42]

Invocation of the performance bank guarantees by respondent no.1 is valid and the impugned letters seeking encashment cannot be set aside.

Moratorium under the Insolvency and Bankruptcy Code and its limited ambit to assets of the corporate debtor - exclusion of contract of guarantee / surety from moratorium - The moratorium under the I&B Code does not prohibit invocation of performance bank guarantees given by the corporate debtor; contracts of guarantee/surety are excluded from the moratorium's prohibition. - HELD THAT: - The Tribunal observed that Section 14's moratorium is confined to the assets of the corporate debtor and does not extend to actions against guarantors or performance bank guarantees. The Tribunal relied on the statutory exclusion of a contract of guarantee from the moratorium's operation and held that performance bank guarantees do not fall within the moratorium; accordingly, invocation of such guarantees is not barred by the Code's moratorium. [Paras 36, 38, 39]

Moratorium under the Code does not prevent invocation of the performance bank guarantees; contracts of guarantee/surety are outside the moratorium's prohibition.

Validity of invocation of bank guarantees under a Transmission Agreement - maximisation of value of assets / balancing stakeholder interests - The contention that invocation was arbitrary because the ISTS licensee had not undertaken capital investment or construction obligations was rejected. - HELD THAT: - The Tribunal considered the appellant's submissions that Power Grid had not made capital investment or commenced construction and therefore could not invoke the guarantees. The Tribunal found on the record of Joint Co-ordination Meetings and the terms of the Transmission Agreement that invocation was triggered by adverse progress attributable to the corporate debtor and was not rendered arbitrary by the licencee's alleged non-investment. The NCLT's conclusion that the invocation letters were justified was affirmed. [Paras 34, 35, 42]

The plea that invocation was arbitrary due to lack of capital investment by respondent no.1 is rejected and does not invalidate the encashment.

Final Conclusion: The appeal is dismissed; the NCLT order refusing to quash the letters of invocation of eleven performance bank guarantees is upheld as legally tenable and the encashments are not barred by the Code's moratorium. No costs.

Debt and default - admission of Section 7 application - acknowledgement of liability in balance sheet - limitation and acknowledgment - malafide and fraudulent initiation of insolvency proceedings

Debt and default - admission of Section 7 application - acknowledgement of liability in balance sheet - limitation and acknowledgment - Whether the Section 7 petitions filed by the Financial Creditor should be admitted on the ground of debt and default and whether the petitions are barred by limitation. - HELD THAT: - The Tribunal held that debt and default stood established and the Section 7 applications were rightly admitted. The Tribunal relied on consistent acknowledgements of liability in the corporate debtor's balance sheets and restructuring communications, treating the date of NPA as not determinative of the date of default. For these reasons the contention that the petitions were barred by limitation was rejected, the facts being covered by the precedential approach referred to in the impugned reasoning, and the Supreme Court later refused to disturb the related conclusions regarding payment obligations under the restructuring package. [Paras 8, 9]

Section 7 applications were correctly admitted as debt and default were proved and the petitions were not barred by limitation.

Malafide and fraudulent initiation of insolvency proceedings - admission of Section 7 application - Whether the initiation of the insolvency proceedings by the Financial Creditor was malafide/fraudulent and required dismissal under the pleaded doctrine. - HELD THAT: - The Adjudicating Authority considered and rejected the corporate debtor's allegations that the Financial Creditor acted maliciously or fraudulently in instituting proceedings. The Tribunal agreed, noting that the Financial Creditor's prior involvement in negotiations and the fact that it held equity did not render the petition malafide; on the contrary, the Financial Creditor had an economic interest and acted to protect that interest. The impugned order specifically found the malafide/fraud contentions to be unfounded, frivolous and devoid of material particulars. [Paras 11, 30, 31]

Allegations of mala fide or fraudulent initiation were rejected and did not vitiate the admission of the Section 7 petitions.

Final Conclusion: Both appeals were dismissed; the adjudicating authority's admissions of the Section 7 petitions were upheld as debt and default were established and the pleaded charges of mala fides/fraud were rejected.

Ex-parte proceedings - service of process / affidavit of service - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - effect of full payment of claimed debt on maintainability - leave for intervening creditor to pursue separate remedy

Ex-parte proceedings - service of process / affidavit of service - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Validity of the Adjudicating Authority's admission under Section 7 in view of alleged defective service and purported multiple absences of the Corporate Debtor resulting in ex parte proceedings. - HELD THAT: - The Tribunal examined the record of notices and orders. The Adjudicating Authority issued notice on 11.10.2022 for hearing on 07.11.2022, granted time on 07.11.2022 to the Financial Creditor to file an affidavit of service (to be filed within one week) and thereafter listed the matter on 21.11.2022. The affidavit of service was filed on 18.11.2022. The Adjudicating Authority's recital that the Corporate Debtor failed to appear on multiple occasions is not borne out by the record and was held to be a patently erroneous recording of facts; the bench should have, if proceeding ex parte, listed the matter for ex parte hearing rather than hearing arguments on the same day. Notwithstanding these procedural infirmities, the Tribunal observed that the Corporate Debtor has during the pendency of the appeal paid the entire amount claimed in Part IV of Form 1. Consequently, there remained nothing for adjudication on the Section 7 petition as to the claimed debt, and the appeal was allowed on that basis. [Paras 16, 19, 20, 21]

The Adjudicating Authority's finding of repeated non appearance is erroneous; however, since the Corporate Debtor has paid the claimed debt during the appeal, nothing survives for adjudication and the admission order is set aside.

Effect of full payment of claimed debt on maintainability - leave for intervening creditor to pursue separate remedy - Consequences of the Corporate Debtor having paid the amount claimed in the Section 7 application and the position of the intervening creditor. - HELD THAT: - The Tribunal recorded that the Appellant paid the entire amount claimed in the Section 7 petition while the appeal was pending. In these circumstances the core purpose of the Section 7 proceeding - recovery and resolution of the claimed debt in default - stood satisfied as between the parties to that petition, leaving no substantive dispute for adjudication before the Adjudicating Authority or this Tribunal. The Tribunal therefore set aside the admission order. As to the intervenor (Union Bank of India) and other legal proceedings (including proceedings relating to a KCC account), those claims were left open: the intervenor may pursue its separate Section 7 application before the Adjudicating Authority and other courts may decide pending proceedings uninfluenced by observations in this appeal. [Paras 20, 21, 22]

Because the claimed debt in the Section 7 petition was paid in full during the appeal, the admission order was set aside as nothing survives to be recovered; intervening or other creditors remain free to pursue their independent remedies.

Final Conclusion: The appeal is allowed. The admission order dated 16.12.2022 under Section 7 is set aside because the Corporate Debtor paid the amount claimed in the petition during the pendency of the appeal; claims of other creditors remain open for independent adjudication.

Maintainability of claims during liquidation - rejection of claim by liquidator - rights to execute arbitral award - condonation of delay - time-bound liquidation process

Condonation of delay - Condonation of 12 days' delay in filing the Company Appeal (AT) (CH) (Ins) No.274 of 2023. - HELD THAT: - The Tribunal considered the appellant's explanation that the learned counsel was incapacitated by fever during the relevant period and that registry/tribunal timings (summer holidays) contributed to the delay. Having regard to the mode of filing (e filing), the explanation furnished and taking a lenient and liberal approach, the Tribunal exercised its discretion in favour of the appellant and condoned the delay of 12 days in filing the appeal. The IA for condonation was allowed without costs. [Paras 5]

IA No.846 of 2023 is allowed and the delay of 12 days in preferring the appeal is condoned.

Maintainability of claims during liquidation - rejection of claim by liquidator - rights to execute arbitral award - time-bound liquidation process - Whether the Adjudicating Authority was correct in upholding the liquidator's rejection of the appellant's claim and in concluding that the claim could not be allowed as part of the liquidation process. - HELD THAT: - The Tribunal examined the impugned order of the Adjudicating Authority which had upheld the Official Liquidator's rejection of the appellant's claim, noting the pendency of arbitration proceedings. The Tribunal observed the earlier pronouncement in Company Appeal (AT)(Ins) No.28 of 2022 that, if arbitration proceedings result in an award in favour of the appellant, the appellant remains free to pursue remedies available in law and the impugned order would not obstruct execution of any arbitral award. Applying that precedent and considering the facts, the Tribunal found that the Adjudicating Authority, mindful of the time-bound liquidation process, was justified in endorsing the liquidator's decision. The Tribunal concluded that the liquidation proceedings did not operate to extinguish the appellant's rights to pursue and execute any future arbitral award, but on the facts before it the rejection of the claim in the liquidation was sustainable and the appeal lacked merit. [Paras 17, 18, 19, 20]

The impugned order dated 25.05.2023 upholding the liquidator's rejection of the appellant's claim is affirmed; the Company Appeal is dismissed.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on the merits, affirmed the Adjudicating Authority's upholding of the liquidator's rejection of the appellant's claim while observing that the appellant remains free to pursue and execute any future arbitral award; the appeal is dismissed and connected IAs are closed.

Summary order. Civil Appeal dismissed; delay condoned and the impugned order dated 09-05-2023 of the CESTAT, Principal Bench, New Delhi is affirmed.

Exemption from service tax under Notification No. 18/2009-S.T. - strict interpretation of exemption notification - requirement to file EXP-2 within the prescribed period - production of original documents evidencing payment of commission and contract with foreign agents

Exemption from service tax under Notification No. 18/2009-S.T. - production of original documents evidencing payment of commission and contract with foreign agents - Claim for exemption was not established for the shipments in question for non-production of required documents and non-compliance with conditions of the Notification. - HELD THAT: - The Tribunal examined whether the appellant had fulfilled the documentary and procedural conditions prescribed under the exemption Notification. The adjudicating authority found that, except for one shipping bill, the appellant did not produce shipping bills, agreements/contracts with the foreign agents, or original documents showing actual payment of commission for the relevant half-year. The appellate authority recorded that the EXP-2 return itself contained a declaration that failure to file within the stipulated period would debar the exporter from availing the exemption. The appellant did not, in pleadings or grounds of appeal, effectively dislodge these factual findings showing non-compliance with the specified conditions. Applying the principle that exemption notifications are to be strictly construed and that the burden of proving entitlement lies on the claimant, the Tribunal held that the appellant had not substantiated its claim and therefore could not be allowed the exemption except insofar as the one shipping bill accepted by the original authority. [Paras 11, 12]

Exemption claim denied for lack of required documents and non-fulfilment of Notification conditions; one shipping bill allowed as accepted by original authority.

Requirement to file EXP-2 within the prescribed period - strict interpretation of exemption notification - Delay in filing EXP-2 and the appellant's contention that exemption accrues only on payment to foreign agents does not cure non-compliance with the Notification's time and documentary conditions. - HELD THAT: - The appellant argued that commission became payable only after realization of sale proceeds and therefore full details could not be furnished within the EXP-2 time-limit, characterising the deficiency as merely procedural. The Tribunal noted the proviso requiring filing of EXP-2 within fifteen days of the completion of each half-year and relied on the declaration in the EXP-2 form that late filing would debar exemption. Citing the settled principle that exemption notifications are to be construed strictly and ambiguities resolved in favour of revenue, the Tribunal rejected the contention that post-payment filing sufficed to meet the Notification's conditions when the prescribed returns and supporting original documents were not filed in accordance with the Notification. [Paras 6, 10, 13]

Delay and the appellant's procedural explanation held insufficient; entitlement denied on grounds of non-compliance with filing and documentary requirements.

Final Conclusion: The appeal is dismissed: the appellant failed to comply with the documentary and filing conditions of Notification No. 18/2009-S.T., and exemption claimed for the shipments was not allowable except as admitted for one shipping bill.

Valuation of works contract service under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - exclusion of value of parts or goods from taxable service under Section 67 - payment of VAT under State law as determinative of goods and service component in works contracts - requirement of adequate and satisfactory proof for exclusion of goods component - prohibition on double taxation where VAT paid on goods component

Valuation of works contract service under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 - payment of VAT under State law as determinative of goods and service component in works contracts - exclusion of value of parts or goods from taxable service under Section 67 - Whether the Revenue was justified in demanding Service Tax on the ground that the appellant's valuation was not in accordance with Rule 2A for the periods April 2012 to March 2013 and April 2013 to March 2014. - HELD THAT: - The Tribunal found as an admitted fact that the appellant rendered works contract services and had discharged VAT as per the respective State VAT laws while paying service tax on the service component (15% in most States and 30% in Andhra Pradesh). The record included cost-accountant reports setting out State-wise bifurcation of material and service portions, and earlier adjudications in the appellant's cases for other periods in which the value of the service portion was accepted. Applying the principle laid down by the Hon'ble Supreme Court in M/s. Safety Retreading Co. (P) Ltd., the Tribunal held that Section 67 and related notifications permit exclusion of the value of parts or materials sold (deemed sale) from the taxable service component, subject to adequate proof. Where the goods component has already been determined under State law and VAT has been paid on that component, service tax cannot be levied again on the same portion by invoking Rule 2A. The Tribunal followed its consistent earlier decisions (including the appellant's own precedents and the Touchstone decision) and concluded that the impugned differential demands, and consequential interest and penalties, were unsustainable on the facts of this case. [Paras 7, 8, 9, 10]

Impugned demands of service tax (and consequential interest and penalties) for April 2012 to March 2013 and April 2013 to March 2014 set aside; appeals allowed.

Final Conclusion: The Tribunal, applying the Supreme Court's ratio in Safety Retreading and consistent Tribunal precedents, allowed the appeals and set aside the differential service-tax demands (and related interest and penalties) where the goods component of works contracts had been determined under State law and VAT paid thereon.

Tour operator service - trading in air tickets not taxable as tour operator service - mark-up/margin on air ticket trading not exigible to Service Tax

Tour operator service - trading in air tickets not taxable as tour operator service - mark-up/margin on air ticket trading not exigible to Service Tax - Whether the consideration for booking/domestic air tickets traded by the appellant attracts Service Tax as part of tour operator service or is outside the scope of the service. - HELD THAT: - The definition of tour operator service requires engagement in cumulative activities such as planning, scheduling, organising or arranging tours, which may include accommodation or sightseeing (paragraphs 6.1-6.2). The appellant's activity in relation to the disputed receipts was trading in air tickets purchased from travel agents and resold to customers, sometimes at profit and sometimes at loss, without acting as an airline agent or IATA member, and without undertaking the gamut of activities that constitute tour operator service (paragraph 7). The tribunal found nothing in the statutory definition to include mere trading in air tickets within the taxable ambit of tour operator service. Consequently, the demand of Service Tax on the consideration for booking/domestic tickets - including mark-up or margin earned from such trading - is not a taxable event under the provision cited (paragraphs 6.2, 7). Applying this legal construction to the facts, the part of the appellate order that confirmed liability for domestic ticket booking to the extent of mark-up cannot be sustained (paragraph 8). [Paras 6, 7, 8]

Demand of Service Tax on consideration for booking/domestic air tickets traded by the appellant, including the mark-up/margin earned, is not exigible under tour operator service; that portion of the order is set aside.

Final Conclusion: The appeal is allowed; the appellant is not liable to pay Service Tax on the mark-up or margin earned from trading/domestic booking of air tickets for the period October 2010 to March 2011, with consequential relief as permissible by law.

Validity of show cause notice - Non-application of mind - Contradiction in allegations within show cause notice - Best judgment assessment - Presumption of value addition - Requirement to examine books of account before raising demand

Validity of show cause notice - Contradiction in allegations within show cause notice - Non-application of mind - Best judgment assessment - Requirement to examine books of account before raising demand - Presumption of value addition - Show cause notice dated 27.04.2021 and the consequent adjudication confirming demand were unsustainable and liable to be set aside. - HELD THAT: - The Tribunal found internal contradictions in the show cause notice - it simultaneously alleged a mismatch between values declared in ST-3 returns and Form 26AS for financial years 2015-16 and 2016-17 and, elsewhere in the same notice, stated that service tax returns were not filed for that period. This contradiction, together with the Revenue's resort to a best judgment computation (including a presumed 25% value addition for April-June 2017 based on earlier quarters) without examination of the appellant's books or records, demonstrated non application of mind in issuing the notice. The Tribunal relied on its precedent that charges framed must rest upon examination of books of account and admissible evidence, not merely upon draft audit reports, Form 26AS or ledger statement mismatches. In the absence of any enquiry into whether the differences related to provision of taxable service, the formation of the demand was not sustainable in law. [Paras 4, 5]

Show cause notice dated 27.04.2021 held unsustainable; impugned order in original set aside and the appeal allowed.

Final Conclusion: The Tribunal set aside the adjudicating authority's order and allowed the appeal, holding that the show cause notice and consequent demand could not be sustained due to internal contradictions, non application of mind and failure to examine the assessee's books before making a best judgment demand.

Club or Association Service - constituted under statute - taxability dependent on provision of services to members - burden of proof on revenue to demonstrate collection for taxable services - service tax liability of societies registered under the Society Registration Act

Club or Association Service - constituted under statute - service tax liability of societies registered under the Society Registration Act - taxability dependent on provision of services to members - burden of proof on revenue to demonstrate collection for taxable services - Whether M/s Punjab Cricket Association is liable to service tax as a 'club or association' for amounts received from members - HELD THAT: - The Tribunal applied the principle in Calcutta Club (supra) that entities which are incorporated or constituted under a statute fall outside the service tax net as 'club or association' insofar as incorporation or constitution under law excludes them from that definition. The Bench further examined the evidence and found that the Revenue did not demonstrate that the appellants rendered any particular taxable service to members; only certain 'associate members' were charged and there was no evidence that charges were for provision of taxable services. On these facts, and given that PCA is registered under the Society Registration Act, the Tribunal held that the appellants are not liable to pay service tax under the heading 'Club or Association Service'. [Paras 5, 6, 7]

The demand and penalties confirmed by the lower authorities are set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the Punjab Cricket Association, being registered under the Society Registration Act and not shown to have rendered taxable services to members, is not liable to service tax as a 'club or association'; the impugned order is set aside.

Governmental authority - Functions entrusted to a Municipality under Article 243W - Exemption under Notification No. 25/2012-ST - Extended period of limitation under proviso to section 78

Governmental authority - Notification No. 2/2014-S.T. (substitution to clause 2(s)) - SBPDCL falls within the definition of 'Government Authority' as per clause 2(s) of Notification No.25/2012-ST as substituted by Notification No.2/2014-S.T. w.e.f. 30-1-2014. - HELD THAT: - The Tribunal examined the company status and ownership of South Bihar Power Distribution Company Limited and the holding structure showing 100% shareholding by Bihar State Power (Holding) Company Limited which is wholly owned by the State Government. Applying the substituted clause 2(s), which treats an authority, board or body set up by a State Legislature or established by Government with 90% or more participation by way of equity or control as a 'Governmental authority' for the purpose of carrying out functions entrusted to municipalities under Article 243W, the Tribunal concluded that SBPDCL falls within the statutory definition. The conclusion follows from the corporate formation, vesting of distribution undertakings by the State and complete government ownership/control as recorded in the material before the Tribunal. [Paras 10, 12]

SBPDCL is a 'Government Authority' within clause 2(s) of the Notification.

Functions entrusted to a Municipality under Article 243W - Twelfth Schedule - planning for economic and social development - Exemption under Notification No. 25/2012-ST (entries 12A(a) and 25) - The works undertaken by the appellant for SBPDCL fall within the functions entrusted to a Municipality under Article 243W (Twelfth Schedule) and are therefore eligible for exemption under Notification No.25/2012-ST. - HELD THAT: - The Tribunal compared the scope of the appellant's work order - supply of materials and equipment, erection, testing and commissioning of electric lines and providing service connections to state tube wells under a special state plan (BRGF) - with the entries in the Twelfth Schedule to Article 243W. It held that the tube well energization and associated works qualify as 'planning for economic and social development', an entry in the Twelfth Schedule. Since Notification No.25/2012-ST exempts specified services rendered to Governmental authorities when they pertain to functions entrusted to municipalities, the Tribunal found the appellant's services to be covered by the exemption entries reproduced in the order. [Paras 17, 18]

The works are functions entrusted to a Municipality under Article 243W and the appellant is eligible for the Notification exemption.

Extended period of limitation under proviso to section 78 - Extended period of limitation cannot be invoked as there was no evidence of deliberate suppression, collusion or wilful misstatement by the appellant to evade payment of duty. - HELD THAT: - The Tribunal noted that invocation of the extended limitation period requires proof of deliberate default such as suppression or wilful mis-statement with intent to evade duty. The authorities below had applied the extended period on the basis that the appellant claimed exemption; however, the Tribunal found no material establishing intentional concealment or collusion. Mere non-payment or non-levy does not ipso facto amount to suppression or deliberate evasion. In absence of evidence of deliberate default, the extended period under the proviso could not be sustained. [Paras 19, 20]

Demands are unsustainable on the ground of limitation; extended period is not invocable.

Final Conclusion: The appeal is allowed. The Tribunal set aside the impugned order, holding that SBPDCL is a 'Government Authority', the works performed by the appellant fall within functions entrusted to a Municipality under Article 243W and are exempt under Notification No.25/2012-ST, and the demands are also unsustainable on limitation grounds; consequential interest and penalty do not arise.

Business Auxiliary Service - air travel agent services - CRS commission / incentive - classification of services for levy of service tax - service tax liability under Section 65(19) of the Finance Act, 1994 - consideration for levy of service tax

CRS commission / incentive - Business Auxiliary Service - air travel agent services - consideration for levy of service tax - Incentive/commission received by the appellant from a CRS provider for using the CRS is not taxable as Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. - HELD THAT: - Relying on the Larger Bench decision in Kafila Hospitality & Travels Pvt. Ltd. and its subsequent follow-up in Asveen Air Travels (P) Ltd., the Tribunal held that incentives paid to travel agents for achieving booking targets through a CRS are not 'consideration' liable to service tax. The Larger Bench concluded that a travel agent, by selling airline tickets, promotes its own business and not the business of the airlines or CRS companies; consequently the service falls within the ambit of 'air travel agent' services and not Business Auxiliary Service. Applying that ratio, the appellants' receipt of commission/incentive from Amadeus for use of its CRS does not attract service tax under the BAS classification and therefore the demand cannot be sustained. [Paras 6, 7, 8]

Demand of service tax on the incentive/commission from the CRS provider is set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the commission/incentive received by the appellant from the CRS provider is not leviable to service tax as Business Auxiliary Service under Section 65(19) of the Finance Act, 1994, and set aside the impugned orders with consequential relief.

Exemption from service tax for services provided to units in a Special Economic Zone under Section 26(1) of the SEZ Act, 2005 - conditions for grant of exemptions under Section 26(2) of the SEZ Act, 2005 - scope and applicability of service-tax exemption notifications to SEZ developers and units

Exemption from service tax for services provided to units in a Special Economic Zone under Section 26(1) of the SEZ Act, 2005 - scope and applicability of service-tax exemption notifications to SEZ developers and units - conditions for grant of exemptions under Section 26(2) of the SEZ Act, 2005 - Whether services provided by the SEZ developer to units located in the SEZ during October 2007 to March 2012 were exempt from service tax under Section 26(1) of the SEZ Act, 2005 and whether Revenue demonstrated any conditions under Section 26(2) that would defeat that exemption. - HELD THAT: - Clause (e) of sub-section (1) of Section 26 of the SEZ Act, 2005 grants entitlement to exemption from service tax on taxable services provided to a developer or units to carry on authorized operations in a special economic zone. That entitlement is subject to sub-section (2), which permits the Central Government to prescribe terms and conditions for granting such exemptions. The show cause notice and impugned order relied upon Notifications No. 04/2004-ST, No. 09/2009-ST and No. 17/2011-ST, which provide exemptions to units in an SEZ. Revenue contended that conditions of those notifications were violated and therefore the developer was not entitled to exemption. The Tribunal examined the record and found that Revenue did not place on record any conditions prescribed under sub-section (2) of Section 26; the cited notifications are not issued under sub-section (2). The statutory scheme shows that sub-section (1) exempts services provided to units in an SEZ, subject only to conditions lawfully prescribed under sub-section (2). In absence of any showing of such prescribed conditions applicable to the developer's supplies, the services provided by the appellant (an SEZ developer) to SEZ units fall within the exemption of Section 26(1). Consequently, the revenue lacked legal authority to collect service tax on those services. [Paras 5, 6]

The impugned order confirming demand of service tax is set aside and the appeal is allowed; the services provided by the SEZ developer to units in the SEZ for the period October 2007 to March 2012 are held to be exempt under Section 26(1) of the SEZ Act, 2005 in the absence of conditions prescribed under Section 26(2) shown by Revenue.

Final Conclusion: The Tribunal set aside the Order-in-Original and allowed the appeal: services supplied by the appellant (SEZ developer) to units in the SEZ for October 2007 to March 2012 are exempt under Section 26(1) of the SEZ Act, 2005, as Revenue failed to establish any conditions under Section 26(2) negating that exemption.

Reliance on Trial Balance for scrutiny and compliance verification - shifting of onus where statutory returns are discrepant - self-assessment regime and duty to explain discrepancies in statutory returns - receipt basis of taxation prior to introduction of Point of Taxation Rules, 2011 - value of taxable service is gross amount charged - remand for de novo adjudication with opportunity to explain and produce evidence

Reliance on Trial Balance for scrutiny and compliance verification - self-assessment regime and duty to explain discrepancies in statutory returns - Admissibility and evidentiary value of the appellant's Trial Balance and the consequence of the appellant's failure to reconcile it with statutory ST-3 returns. - HELD THAT: - The Tribunal held that a Trial Balance prepared by the assessee is a company document which contains ledger information (including debtors) relevant for departmental scrutiny and compliance verification. While not equivalent to a final audited balance sheet, the Trial Balance is not valueless and may be relied upon after affording the assessee opportunity to explain entries or by independent authentication. Under the self-assessment regime the assessee must furnish a truthful return and, if statutory returns and company documents disclose discrepancies, the initial burden to rebut or explain such discrepancies lies on the assessee. Failure to produce factual evidence or reconcile the figures permits an adverse inference and justifies departmental action based on the Trial Balance. [Paras 7]

The Trial Balance could be used by the department for scrutiny; the assessee's failure to reconcile or explain discrepancies shifted the initial burden onto the assessee and justified further departmental proceedings.

SCN validity where discrepancies exist between statutory returns and company records - Whether the Show Cause Notice was legally valid and barred by any legal infirmity. - HELD THAT: - Having examined the record, the Tribunal found that the SCN was properly issued on account of the material discrepancy between the Trial Balance and ST-3 returns and was not hit by any legal bar. The Tribunal agreed with the view that when public/statutory documents disclose discrepancy the onus is on the assessee to come forward with a clear explanation; absence of such explanation sustains issuance of the SCN. [Paras 7]

The SCN was justified and not vitiated by any legal defect.

Receipt basis of taxation prior to introduction of Point of Taxation Rules, 2011 - value of taxable service is gross amount charged - Applicability of receipt (cash) basis for service tax prior to 01/04/2011 and relevance to valuation of taxable services vis-a -vis Trial Balance figures. - HELD THAT: - The Tribunal noted that Point of Taxation Rules, 2011 (notified by Budget Notification No.18/2011) changed the accounting basis; prior to 01/04/2011 service tax liability arose on receipt (cash system). Section 67 requires gross amount charged to be the value of taxable service. Given these principles, the Tribunal held that factual determination (whether Trial Balance figures reflected accrual accounting and whether receipts matched ST-3 returns) was critical; because the assessee did not satisfactorily reconcile the figures, the department was entitled to proceed on the material before it. [Paras 7, 9]

Receipt basis applied for the relevant period and, in absence of satisfactory reconciliation by the assessee, the department's reliance on discrepant figures and consequent demand could not be faulted on that ground alone.

Remand for de novo adjudication with opportunity to explain and produce evidence - Whether the remaining contested issues should be finally adjudicated in the present appeal or left for fresh consideration by the Original Authority. - HELD THAT: - The Tribunal declined to decide a range of specific disputed factual and mixed questions (including taxability of international inbound roaming services, interconnection/out roamer charges, activation deposits, treatment of interest on delayed payments, limitation/extended limitation and imposition of interest and penalties) because material factual details, break-ups and documentary proof necessary for just adjudication had not been fully examined or were not placed before the Tribunal in the appeal. Emphasising principles of natural justice and the appellant's duty to cooperate in the self-assessment regime, the Tribunal directed remand for de novo adjudication so that all contentions may be examined with opportunity for oral and written submissions and factual verification. [Paras 12, 13, 14, 15, 16]

Matter remanded to the Original Authority for de novo adjudication on the listed issues with directions to afford the appellant a reasonable and time bound opportunity to present evidence; adjudication to be completed within ninety days of receipt of the order.

Final Conclusion: The Tribunal upheld the validity of the SCN and affirmed that the Trial Balance is a relevant company document that, absent satisfactory reconciliation by the assessee, may support departmental proceedings under the self assessment regime; factual determinations on multiple specific heads of demand were left open and the matter is remitted to the Original Authority for de novo adjudication after affording the appellant a reasonable and time bound opportunity to present evidence, with completion directed within ninety days.

Business Auxiliary Service - Support Services of Business or Commerce - valuation - reimbursable expenses (Rule 5(1) / Rule 5(2)) - pure agent - requirement to specify applicable sub-clause of Section 65(19) - taxability of ocean/air freight and profit/mark up - limitation - extended period and absence of suppression - Intercontinental principle - Rule 5 held ultra vires Section 67

Valuation - reimbursable expenses (Rule 5(1) / Rule 5(2)) - pure agent - Intercontinental principle - Rule 5 held ultra vires Section 67 - Whether reimbursable expenses recovered by the service provider are includible in taxable value under Rule 5 of the Valuation Rules and whether Rule 5 can be applied against the assessee - HELD THAT: - Revenue argued that Rule 5(1) required inclusion of all expenditure or costs and that exclusion was permissible only if the service provider acted as a 'pure agent' satisfying Rule 5(2). The Tribunal accepted that Rule 5 provides for inclusion of reimbursable expenses unless the 'pure agent' conditions are fulfilled, but held that the legal position has been settled by the Hon'ble Supreme Court in Intercontinental Consultants & Technocrats Pvt. Ltd., which declared Rule 5 to be ultra vires Section 67 so far as it seeks to include reimbursable expenses within taxable value. Applying that precedent, the Tribunal found no merit in Revenue's appeal against the adjudicating authority's dropping of demands predicated on Rule 5. [Paras 4]

Revenue's appeal on inclusion of reimbursable expenses under Rule 5 is dismissed in view of Intercontinental decision; Rule 5 cannot be applied to include reimbursable expenses in valuation for the periods in dispute.

Business Auxiliary Service - requirement to specify applicable sub-clause of Section 65(19) - Whether incentive amounts received by the appellant are taxable as 'Business Auxiliary Service' and whether the show cause notice/order validly specified the sub clause of Section 65(19) - HELD THAT: - The Tribunal reproduced the seven sub clauses of the definition of Business Auxiliary Service and considered precedents holding that a notice must specify which sub clause is invoked so that the assessee knows the precise legal basis. On the facts the appellant was not shown to have performed any of the specified activities under sub clauses (i) to (vi) or an identifiable service incidental thereto; the show cause notice and order did not indicate the specific sub clause of Section 65(19) relied upon. Following Tribunal precedents, the Tribunal held that in absence of specification of the particular clause of Section 65(19) the demand could not be sustained and the confirmed tax on incentive/profit share could not be levied as BAS. [Paras 4]

Service tax confirmed on incentive charges as Business Auxiliary Service is set aside for failure to specify the applicable sub clause of Section 65(19) and for absence of any shown activity falling within those clauses.

Support Services of Business or Commerce - reimbursable expenses - Whether amounts recovered as reimbursement of various charges (ocean freight, air freight, customs clearance, fumigation, insurance, palletization, transportation, documentation, administrative charges etc.) are taxable as 'Support Services of Business or Commerce' and whether profit on such reimbursements is exigible - HELD THAT: - The Tribunal examined the inclusive definition of Business Support Services and found that only specified activities falling within that definition are exigible. The appellant's transactions mainly comprised payments made to third party service providers which were reimbursed by clients; the adjudicating authority did not classify which specific BSS activity, if any, was performed. Having held the reimbursable part not taxable (applying Intercontinental), the Tribunal further held there was no legal basis to tax the differential amount as BSS in the absence of evidence that the difference represented consideration for a taxable support service rendered by the appellant. Reliance was placed on precedents that profit on non taxable business activities cannot be converted into consideration for service tax. [Paras 4]

Service tax confirmed on differential/mark up of reimbursable expenses under BSS is set aside for lack of classification of the activity within BSS and absence of evidence that the differential constituted consideration for a taxable service.

Taxability of ocean/air freight and profit/mark up - Whether ocean freight and air freight margins/differentials collected by the appellant are subject to service tax - HELD THAT: - The Tribunal noted established line of decisions holding that the business of buying and selling freight space (paying ocean/air freight to carriers and reselling to customers) is a trading activity and the margin constitutes profit from that business rather than consideration for a taxable service. The Tribunal followed recent Tribunal decisions to hold that such differentials are not exigible to service tax. Given the nature of the appellant's transactions and the precedents, the demand insofar as it related to freight margins could not be sustained. [Paras 4]

Service tax on ocean and air freight differentials/mark ups is not sustainable and is set aside.

Limitation - extended period and absence of suppression - Whether the extended period of limitation is invokable against the appellant for the periods in dispute - HELD THAT: - The Tribunal observed that the issues raised were of pure legal interpretation and that the appellant had furnished documents and cooperated with departmental inquiries. Citing authority, the Tribunal held that in such circumstances suppression or mala fide intention cannot be inferred and the extended period of limitation is not invocable. Consequently demands for periods beyond the normal limitation were not sustainable. [Paras 4]

Extended period of limitation cannot be invoked; demands for the extended period are set aside.

Final Conclusion: Assessee's appeal is allowed and the impugned demands confirmed by the adjudicating authority are set aside (including demands on incentive charges, reimbursable expenses and freight differentials); Revenue's appeal is dismissed; extended period of limitation cannot be invoked for the disputed periods.

Issue of show cause notice after payment of tax and interest - penalty for delayed payment of service tax - appropriation of payment towards tax and interest - larger period of limitation for suppression - Section 73(3) and Explanation 2 application - reverse charge liability for manpower supply

Issue of show cause notice after payment of tax and interest - Section 73(3) and Explanation 2 application - penalty for delayed payment of service tax - appropriation of payment towards tax and interest - Validity of issuing show cause notice and imposing penalty where the assessee had paid the service tax and interest before issuance of the show cause notice - HELD THAT: - The Tribunal found on record that the assessee had discharged the Service Tax liability and the appropriate interest before issuance of the show cause notice (recorded by the Tribunal). In that factual matrix, issuance of the show cause notice was held to be motivated solely to levy penalty for alleged suppression. The Tribunal applied the legal principle embodied in sub section (3) of Section 73 (as interpreted in the reported decisions relied upon by the authorities), which precludes issuance of a notice calling for payment where tax and interest have already been paid and communicated, and thereby negates the basis for imposing penalty. The Tribunal followed the consistent line of authority exemplified by Commissioner of Central Excise and Service Tax, LTU, Bangalore v. M/s. Adecco Flexione Workforce Solutions Ltd. and the subsequent decisions referred to in the order, which hold that where tax and interest are paid before issuance of the show cause notice no penalty can be imposed and issuance of such notice is unwarranted. Applying that principle to the admitted facts, the Tribunal concluded that penalty could not be sustained. [Paras 9, 11]

Show cause notice insofar as issued to impose penalty was not sustainable and penalty could not be imposed where tax and interest had been paid prior to issuance of the notice.

Larger period of limitation for suppression - reverse charge liability for manpower supply - Whether the larger period of limitation could be invoked for alleged suppression and whether demand beyond the normal period was sustainable - HELD THAT: - The Tribunal examined the record and noted that, apart from mere allegations of suppression, no documentary evidence was produced to justify invocation of the extended period. The show cause notice, found to be directed principally towards levying penalty, did not establish the documentary basis required for invoking the larger period for assessment or demand. In consequence, the Tribunal declined to sustain any demand framed on the basis of the larger (extended) limitation period and confined the demand to the normal period. The Tribunal therefore left intact the demand only to the extent it related to the normal limitation period. [Paras 11, 12]

Invocation of the larger period of limitation was not justified on the material on record; the demand is sustained only for the normal period.

Final Conclusion: The appeal is disposed by upholding the demand limited to the normal period and by setting aside the show cause notice insofar as it sought to impose penalty where the assessee had paid the service tax and interest prior to issuance of the notice.

Service Tax liability on international inbound roaming services - Export of services - Place of Provision of Services Rules, 2012 - location of recipient determines place of provision - Intermediary v. service recipient - Master Circular superseding earlier circulars - Education Guide explanation of Place of Provision of Services Rules, 2012

Service Tax liability on international inbound roaming services - Export of services - Place of Provision of Services Rules, 2012 - location of recipient determines place of provision - Whether international inbound roaming charges received by the appellant for the period July 2012 to September 2013 are exigible to Service Tax or constitute export of services - HELD THAT: - The Tribunal, applying its earlier decision in the appellant's own case, concluded that the demand of Service Tax could not be sustained for the period July 2012 to September 2013. The majority relied on the reasoning in M/s. Vodafone Cellular Ltd. v. Commissioner (reported at 2019 (25) G.S.T.L. 557 (Tribunal - Chennai)) which analysed identical transactions and held the activity to be export of services and not exigible to Service Tax. Having considered the facts and evidence before it, the Tribunal found no reason to depart from that conclusion and set aside the impugned order. The order therefore allows the appeal and grants consequential relief as per law. [Paras 11, 12, 13]

Demand of Service Tax on international inbound roaming charges for July 2012 to September 2013 set aside; appeal allowed.

Intermediary v. service recipient - Education Guide explanation of Place of Provision of Services Rules, 2012 - Master Circular superseding earlier circulars - Whether the Tribunal's earlier decision in the appellant's own case (covering periods both prior to and after 01.07.2012) is binding and applicable to the present period - HELD THAT: - The Tribunal considered competing views: the Member (Technical) had treated the inbound roamer as the service recipient under the POPS Rules, 2012 and Education Guide (thus supporting taxability), whereas the Member (Judicial) followed the earlier Tribunal decision which treated the foreign telecom operator (FTO) as the service recipient and the transaction as export of services. The majority concluded that the earlier Tribunal decision in the appellant's own case is applicable to the present dispute and should be followed. The Tribunal therefore applied that precedent and allowed the appeal. The result reflects the majority view that the earlier decision governs the disputed period and that the demand cannot be sustained. [Paras 10]

Earlier Tribunal decision in the appellant's own case is applied to the period July 2012 to September 2013; the appeal is allowed on that basis.

Final Conclusion: The Tribunal (by majority) applied its earlier decision in the appellant's own case and held that international inbound roaming charges for July 2012 to September 2013 are not exigible to Service Tax; the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.

Taxability of Clearing and Forwarding Agent (CFA) services - valuation - inclusion of reimbursable expenses in taxable value - treatment of consolidated charges for determining taxable component - GTA abatement and validity of transporter declarations - reliance on auditors' reports and corroborative documentary evidence - availability and denial of Cenvat credit where invoices or supporting documents absent - application of judicial precedent on valuation (Intercontinental Consultants)

Taxability of Clearing and Forwarding Agent (CFA) services - treatment of amounts received for transportation and handling vis-a -vis CFA commission - Whether amounts received by the assessee for handling, loading, unloading, transportation and related charges could be included in the taxable value of CFA services or only the commission/service charge formed the taxable value. - HELD THAT: - The Tribunal examined job assignment letters and rate structures showing separate rates for transportation and for CFA services. It accepted the adjudicating authority's finding that amounts specifically attributable to transportation and other components were not legally part of the taxable value of CFA service; only the commission/service charge earned for rendering C&F activities constituted the taxable value. The department did not furnish evidence to show which part of the receipts had been excluded from taxable value by the respondent, and the consolidated-rate basis relied upon by revenue could not be artificially bifurcated to demand tax on components not chargeable as CFA service.

Demand based on inclusion of such amounts in CFA taxable value is not sustainable and was correctly dropped.

Treatment of consolidated charges for determining taxable component - valuation - inability to bifurcate consolidated rates - Whether application of a consolidated rate for supply of cement permitted the department to apportion and tax components (handling, local delivery, secondary freight) as part of CFA taxable value. - HELD THAT: - The Tribunal accepted that consolidated rates covered multiple components including service charge, handling, local delivery and secondary freight, and that the respondent had shown that certain components (e.g. secondary freight) were separately payable or not chargeable as CFA service. The adjudicating authority's conclusion that a consolidated charge cannot be artificially bifurcated by the department to create a taxable component was upheld. Similar reasoning applied to demands based on consolidated rates for multiple years.

Demands premised on bifurcating consolidated charges to tax non-CFA components were unsustainable and rightly dropped.

GTA abatement and validity of transporter declarations - reliance on transporter certificates for abatement under Notification No. 32/2004-ST - Whether the respondent was entitled to GTA abatement by virtue of declarations/certificates produced by transporters and whether those documents required further verification by revenue. - HELD THAT: - The respondent produced copies of certificates/declarations purportedly given by various GTAs. The department did not produce any contrary evidence to discredit those documents. The adjudicating authority found the declarations to be valid documents for claiming abatement, and the Tribunal observed that absent any contradictory material placed on record by the department the documents had to be admitted.

Claims to GTA abatement supported by the submitted transporter declarations were held valid and the related demand was correctly dropped; however, specific instances where no declarations or evidence were produced remained confirmed.

Reliance on auditors' reports and corroborative documentary evidence - requirement of documentary corroboration for taxing assumed commission/profit - Whether a demand based on alleged profit of sale (treated as commission) could be confirmed on the basis of a declaration in Form 3CD or auditors' reports absent corroborative documents. - HELD THAT: - The Tribunal noted that the revenue sought to base a demand on the respondent's declaration in Form 3CD characterising the business as a commission agent and on the department's assumptions. The adjudicating authority and the Tribunal found no documentary corroboration produced by the department to substantiate the assumed charge; reliance on assumption and presumption was inadequate for confirmation of demand.

The demand based on trading profit treated as commission could not be confirmed in absence of corroborative documentary evidence and was rightly dropped.

Availability and denial of Cenvat credit where invoices or supporting documents absent - Whether alleged irregular Cenvat credits could be sustained where the show-cause notice did not specify particulars and invoices for certain payments (e.g., GTA payments) were not available. - HELD THAT: - The Tribunal observed the show-cause notice lacked particulars of the disputed credit amounts and that the respondent had shown payments of service tax under TR-6 challans for GTA services for which no invoice was issued, making it impossible to locate invoices to match credits. For other small credit items the notice contained only vague references without substantive basis to deny credit. In view of inadequate particularisation and absence of contrary material, the charge of wrong availment could not be sustained.

Allegations of irregular Cenvat credit were liable to be dropped for want of specification and supporting evidence.

Application of judicial precedent on valuation (Intercontinental Consultants) - temporal scope of inclusion of reimbursable expenditure in taxable value - Whether reimbursable expenditure or costs form part of valuation of taxable services for charging service tax for the periods in question. - HELD THAT: - The Tribunal relied on the Supreme Court decision in Intercontinental Consultants and Technocrats Pvt. Ltd (07.03.2018) which held that reimbursable expenditure would form part of valuation for service tax only with effect from 14 May 2015. The demands in the present case related to earlier periods and thus the precedent precluded inclusion of reimbursable expenses into taxable value for those periods.

Demands based on valuing reimbursable expenses as part of taxable service value for the periods before the stated date were unsustainable and properly rejected.

Interest, penalty and confirmation of small admitted shortfalls - Whether certain small amounts of confirmed tax, interest and penalty (short payments as per ST-3 returns and non-payment on specified GTA charges) were rightly upheld. - HELD THAT: - The adjudicating authority confirmed specific small demands where no contest or supporting declarations were produced by the respondent (for example short payment for April-September 2006 and non-submission of required declarations for some GTA charges in 2004-05). The Tribunal noted these confirmations and that some amounts remained payable along with interest and penalties as recorded.

Confirmed shortfall demands, interest and penalties in respect of specific uncontested items were upheld.

Final Conclusion: The Tribunal held that, on the evidence and reasoning before it, the adjudicating authority correctly dropped the bulk of the demands while confirming only limited amounts (tax, interest and penalty) where supported by record; the revenue's appeal was rejected.

Business Auxiliary Service - commission agent - classification of taxable service dependent on transactional documents - rent for the provision of space and associated amenities - penalty under Section 76 of the Finance Act, 1994

Commission agent - Business Auxiliary Service - Whether consideration received for providing space to finance companies amounted to a taxable service as a "commission agent" or as Business Auxiliary Service. - HELD THAT: - The Tribunal found that the appellant only provided space to representatives of financial institutions and did not perform any of the activities encompassed by the definition of "commission agent". There was no service agreement obliging the dealer to promote or market the finance companies' products and the dealers did not undertake activities such as dealing with goods or services, collecting payment, guaranteeing collection, or otherwise undertaking activities that would constitute commission agent functions. Applying the principle that classification as BAS requires a careful analysis of transactional documents, the Tribunal held that mere provision of space (with associated amenities) is at most a rent-like arrangement and does not, without more, fall within BAS. On these findings the demand under the BAS head was unsustainable. [Paras 11, 12]

Consideration for providing space to finance companies is not taxable as a "commission agent" service nor as Business Auxiliary Service; the demand under BAS is set aside.

Classification of taxable service dependent on transactional documents - rent for the provision of space and associated amenities - Whether the Larger Bench decision in Pagaria Auto Centre and its principles apply to the facts of the case. - HELD THAT: - The Tribunal applied the Larger Bench's holding that determination of BAS requires scrutiny of transactional documents and that where mere space (with furniture/amenities) is provided, the consideration may constitute rent and not BAS. Noting identical facts, the Tribunal adopted that ratio and concluded the appellant's transactions fell within the rent-like category rather than BAS. [Paras 12]

The Larger Bench precedent is applicable; the appellant's provision of space is not BAS and the ratio was applied to set aside the demand.

Penalty under Section 76 of the Finance Act, 1994 - Whether interest and penalties (including the Department's appeal for imposition of penalty under Section 76) survive once the demand is held unsustainable, and whether extended period/penalty was invocable. - HELD THAT: - Since the principal demand for service tax under BAS was held unsustainable, the Tribunal held that interest and penalty claimed in consequence of that demand could not survive. The Department's appeal seeking imposition of penalty under Section 76 was found to be untenable. The Tribunal also noted that the appellants had bona fide doubt (in light of conflicting decisions) and that extended period/penalty could not be invoked, reinforcing that penal consequences could not be sustained where the substantive demand failed. [Paras 13]

Interest and penalties consequential to the unsustainable demand do not survive; the Department's appeal for penalty under Section 76 is rejected.

Final Conclusion: The appellant's appeal is allowed and the departmental appeal is rejected: the demands for service tax (for 2003-04 to 2007-08), and the consequential interest and penalties, are set aside because provision of space to finance companies did not constitute "commission agent" or Business Auxiliary Service under the facts and applicable precedent.

Input service - rent-a-cab service - services for personal use or consumption of employees - Rule 2(l)(B) of Cenvat Credit Rules, 2004 - Cenvat credit admissibility

Input service - rent-a-cab service - Rule 2(l)(B) of Cenvat Credit Rules, 2004 - Cenvat credit admissibility - services for personal use or consumption of employees - Whether service tax credit on contracted/rented bus transportation of employees is admissible as "input service" under the amended Rule 2(l) (in particular Clause (B)) of the Cenvat Credit Rules, 2004 for the period April, 2015 to December, 2016. - HELD THAT: - The Tribunal examined the amendment to the definition of "input service" w.e.f. 1-4-2011, specifically Clause (B) to Rule 2(1), which excludes renting of motor vehicles (where the vehicle is not capital goods) from the scope of input service. Applying that amended definition, and following the reasoning of the High Court in Solar Industries (which held that transportation of employees to factory premises is for the personal convenience/consumption of employees and not part of the manufacturing activity), the Tribunal concluded that hiring buses to transport employees does not constitute an input service post-amendment. The Tribunal held the High Court decision binding on the present facts and rejected the appellant's reliance on earlier Tribunal decisions to the contrary, observing that those decisions were distinguishable or concerned periods prior to the amendment. Accordingly the appellant's claim to Cenvat credit for bus transportation charges for the period in issue was held to be inadmissible. [Paras 4, 7, 8]

Cenvat credit on contracted/rented bus transport of employees is not admissible as "input service" under amended Rule 2(l) (Clause (B)); appeal dismissed.

Final Conclusion: Following the amended definition of "input service" (Rule 2(l)) and the binding High Court precedent, the Tribunal upheld the disallowance of Cenvat credit on hired bus transportation of employees for April, 2015 to December, 2016 and dismissed the appeal.

Demand for duty and penalty based on alleged non-manufacture and bogus invoices - reliance on third party investigation without independent inquiry of the assessee - admissibility and weight of statements in absence of cross examination - evidentiary value of toll barrier entries and departmental verifications - finality and consistency of appellate decisions - issue no more res integra

Demand for duty and penalty based on alleged non-manufacture and bogus invoices - reliance on third party investigation without independent inquiry of the assessee - Sustainability of the demand and penalty confirmed on the basis that the appellants did not manufacture goods and issued bogus invoices. - HELD THAT: - The Tribunal held that the impugned demand and penalty were not sustainable because they rested primarily on the investigation conducted by the Merrut Commissionerate without any independent investigation at the end of the appellants. The adjudicating authority confirmed the demand on the basis of generalized conclusions about suppliers being non existent and absence of manufacturing, but no concrete evidence was produced to show non manufacture by the appellants. In view of the record, and following consistent appellate decisions arising from the same investigation, the Tribunal found the show cause proceedings to be based on assumption and presumption rather than admissible evidence and therefore set aside the demand and penalties. [Paras 8, 9, 13]

Impugned demand and penalties set aside as unsustainable in law.

Admissibility and weight of statements in absence of cross examination - Validity of reliance on statements recorded during investigation where the appellants were not afforded opportunity for cross examination. - HELD THAT: - The Tribunal found that the adjudicating authority passed the impugned order without granting the appellants the opportunity to cross examine witnesses whose statements were relied upon. In the absence of cross examination, those statements could not be treated as reliable evidence. The Tribunal observed that reliance on such untested statements is impermissible and cited authority supporting the proposition that statements not subjected to cross examination cannot sustain adverse findings. [Paras 11, 12]

Statements relied upon in the adjudication could not be acted upon in absence of cross examination; findings based thereon are unsustainable.

Evidentiary value of toll barrier entries and departmental verifications - Whether toll post entries and verifications by other departments support the appellants' case of actual receipt of inputs and manufacture. - HELD THAT: - The Tribunal accepted that the appellants produced evidence of toll barrier entries (Lakhanpur) and noted reports that officers of District Industry Centre, range staff and other departments had verified consignments and found nothing adverse. The Jurisdictional Commissioner's report also recorded that most consignments were entered at toll barriers and periodic inspections did not negate manufacture. On this material, the Tribunal concluded there was corroborative evidence supporting the appellants' claim of receipt of inputs and manufacture, undermining the departmental allegations of non manufacture. [Paras 10, 11]

Toll entries and departmental verifications constitute corroborative evidence supporting the appellants' case; adverse conclusion on non manufacture cannot be sustained.

Finality and consistency of appellate decisions - issue no more res integra - Effect of prior appellate decisions arising from the same investigation and absence of any appellate decision upholding the departmental demand. - HELD THAT: - The Tribunal noted numerous earlier decisions of this Tribunal and the Allahabad Bench setting aside similar demands arising from the same Merrut investigation, and observed that the issue had been consistently decided in favour of taxpayers-so that the question was no longer res integra. The Revenue had not produced any instance where an appellate authority, arising from the same investigation, had sustained a demand. The Tribunal also recorded that one departmental appeal to the High Court had been dismissed, reinforcing the view that demands based on the same investigative material had been repeatedly set aside. [Paras 8, 9, 11, 13]

Given consistent appellate precedent arising from the same investigation and absence of contrary appellate authority, the demand could not be sustained.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned order confirming demand and penalties, and granted consequential relief, holding that the departmental case-based on the Merrut investigation, untested statements and without independent inquiry of the appellants-was unsustainable in law.

Imposition of penalty under Section 11A(5) - requirement of fraud, collusion, wilful misstatement or suppression for invoking Section 11A(5) - voluntary reversal/payment under Section 11A(2B) barring issuance of notice - audit observation not amounting to suppression or mala fide

Imposition of penalty under Section 11A(5) - requirement of fraud, collusion, wilful misstatement or suppression for invoking Section 11A(5) - audit observation not amounting to suppression or mala fide - Validity of imposing penalty under Section 11A(5) read with Section 11AC where irregular CENVAT credit was detected in audit but reversed by the assessee before issuance of show-cause notice. - HELD THAT: - The Tribunal held that invocation of Section 11A(5) requires proof of one of the specific ingredients in Section 11A(4) - fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade duty. The adjudicating orders and notices contained no evidence or findings establishing any of these ingredients; they proceeded only on the fact that irregular credit was pointed out by audit. The appellate record showed that the appellant immediately reversed the credit on 30.01.2014 and the audit report expressly noted that interest and penalty were not to be charged because sufficient CENVAT balance existed and the credit was not utilised. The Tribunal relied on precedent reasoning that mere detection by audit, without further evidence of suppression or mala fide intention, cannot sustain a penalty under Section 11A(5). On these facts the imposition of penalty was unsustainable. [Paras 5]

Penalty imposed under Section 11A(5) set aside for lack of evidence of fraud, collusion, wilful misstatement, suppression or intent to evade duty.

Voluntary reversal/payment under Section 11A(2B) barring issuance of notice - audit observation not amounting to suppression or mala fide - Applicability of Section 11A(2B) (voluntary payment/reversal) to bar issuance of show-cause notice in the facts of the case. - HELD THAT: - The Tribunal observed that Section 11A(2B) precludes issuance of a notice under subsection (1) where the person liable has paid the duty (or, by parity, reversed credit) on his own ascertainment before service of notice and informed the Central Excise Officer. In the present case there was no allegation of suppression or misstatement; the appellant reversed the irregular credit promptly upon audit detection and the audit record acknowledged payment/reversal and recorded that interest and penalty were not charged. Given the absence of the culpatory ingredients enumerated in Section 11A(4) and the voluntary reversal/payment prior to notice, Section 11A(2B) was held to be applicable and to preclude the impugned penalty proceedings. [Paras 6]

Proceedings and penalty were vitiated because the voluntary reversal/payment and absence of culpatory ingredients brought the matter within the protection of Section 11A(2B).

Final Conclusion: The impugned orders imposing penalty are set aside and the appeal is allowed: penalties under Section 11A(5) read with Section 11AC cannot be sustained where the irregular credit was promptly reversed before issuance of notice and there is no evidence of fraud, collusion, wilful misstatement, suppression or intent to evade duty; Section 11A(2B) operates to bar notice in such circumstances.

Invocation of extended period for suppression of facts under proviso to Section 11A - suppression of facts must be a deliberate, positive act (fraud, collusion or wilful default) - cum-duty valuation / cum-duty price - burden on claimant to show invoice price includes duty element - availability of exemption benefit under Notification No.50/2003 - entitlement to CENVAT credit on inputs and input services

Invocation of extended period for suppression of facts under proviso to Section 11A - suppression of facts must be a deliberate, positive act (fraud, collusion or wilful default) - Whether the extended period for assessment/re-opening is invokable on the ground of suppression of facts by the respondent - HELD THAT: - The Tribunal found that the respondents had informed the Department of their intention to change classification as early as 28.03.2003 and had thereafter continuously corresponded with the Department. The proviso to Section 11A contemplates a deliberate omission or positive act of suppression, akin to fraud, collusion or wilful default; mere knowledge of the Department or procedural delays in verification (such as testing) cannot be equated with suppression. The Department produced no evidence of a deliberate non-disclosure or other positive act to evade duty. Applying the test in Pushpam Pharmaceuticals, the Tribunal concluded that the requisites for invoking the extended period were not satisfied and the extended period was therefore not invokable. [Paras 6, 7]

Extended period is not invokable; the learned Commissioner correctly held that Section 11A's extended period could not be invoked on the facts.

Cum-duty valuation / cum-duty price - burden on claimant to show invoice price includes duty element - availability of exemption benefit under Notification No.50/2003 - entitlement to CENVAT credit on inputs and input services - Whether the respondents are entitled to adopt cum-duty value for assessable value and to claim associated benefits (including SSI exemption and CENVAT credit) in view of their invoicing and the applicable notifications/precedents - HELD THAT: - The Tribunal observed that the principle in Amrit Agros requires the claimant to demonstrate that the invoice price includes the duty element. Examining sample invoices, the Tribunal noted that assessable value shown at a lower level was supplemented in the invoice by CST/GST and freight such that the total invoice price subsumed the excise duty element which was not recovered separately. On this factual basis the Tribunal held that the value adopted by the Commissioner amounts to a cum-duty price. The Tribunal also treated the matter as fact-sensitive and declined to apply Amrit Agros and Bata India as absolutes where the invoice structure and documentary evidence indicate that duty was subsumed in the invoice price. Consequently, cum-duty benefit was available and entitlement to related benefits (including CENVAT credit on inputs and input services as allowed by the Commissioner) was upheld. [Paras 9, 10]

Cum-duty benefit is available to the respondents; the Commissioner correctly allowed cum-duty valuation and related benefits including CENVAT credit as supported by the invoice evidence.

Final Conclusion: The appeal is allowed insofar as the Tribunal upholds the Commissioner's findings that the extended period under the proviso to Section 11A is not invokable on the facts, and that the respondents are entitled to cum-duty valuation and attendant benefits (including SSI exemption and CENVAT credit) based on the invoice evidence.

Clandestine removal - burden of proof on Revenue to establish manufacture before levying Central Excise duty - requirement of departmental investigation and corroborative evidence to prove clandestine removals - requirement to modify Central Excise registration on change of activity - invocation of extended period under proviso to Section 11A of the Central Excise Act, 1944

Clandestine removal - burden of proof on Revenue to establish manufacture before levying Central Excise duty - requirement of departmental investigation and corroborative evidence to prove clandestine removals - Demand of Central Excise duty on scrap alleged to have been clandestinely removed from the factory premises was not sustainable in the absence of any investigation or corroborative evidence proving manufacture and clandestine clearance from the factory. - HELD THAT: - The Tribunal found that the department alleged large-scale removals of scrap from the factory but produced no material to demonstrate that the scrap was manufactured in the factory or clandestinely removed. No examination was made of purchase of raw materials, production inputs, power consumption, transport records, stocktaking or other corroborative indicators of excess manufacture. The Tribunal applied the principle that clandestine removal is a serious charge which the Revenue must discharge by tangible evidence and not by mere presumptions; in the absence of such investigation or clinching evidence the demand cannot be sustained. Reliance was placed on the reasoning of the Allahabad High Court that demands of this nature require detailed verification of production, purchases, dispatches, power consumption and realization, which was not carried out here. For these reasons the show-cause notice and the order based on it could not be upheld. [Paras 6, 7]

Demand for Central Excise duty on the ground of alleged clandestine removal of scrap set aside for want of investigation and proof.

Requirement to modify Central Excise registration on change of activity - invocation of extended period under proviso to Section 11A of the Central Excise Act, 1944 - Imposition of penalty and invocation of the extended period under the proviso to Section 11A for not obtaining/modifying registration in respect of trading activity could not be sustained where the foundational demand itself was unsupported by evidence. - HELD THAT: - The show-cause notice alleged violation of registration requirements but did so without an evidentiary foundation for the primary charge of clandestine manufacture and removal. Because the demand was not substantiated by investigation or proof, the Tribunal held that imposition of penalty or invocation of the extended limitation provision could not be maintained at this stage. The show-cause notice was therefore declared legally unsustainable insofar as it sought duty, interest and penalty on that basis. [Paras 7]

Penalty and invocation of extended period under the proviso to Section 11A, being predicated on an unsubstantiated demand, could not be sustained and the show-cause notice was set aside.

Final Conclusion: The Tribunal set aside the Order in Original and allowed the appeal, holding that the Revenue failed to prove manufacture or clandestine removal of scrap and that a demand and penalties founded on that unproven allegation were unsustainable.

Conditions for allowing CENVAT credit under Rule 4 - no outer time-limit for availing CENVAT credit / meaning of "immediately" - refund mechanism under Notification No.56/2002 - refund of duty paid in cash after CENVAT credit exhaustion - revenue neutrality of delayed availment of CENVAT credit - inclusion of packing supplied by buyer in assessable value - doctrine of consistency/estoppel where Department accepted earlier methodology

Conditions for allowing CENVAT credit under Rule 4 - no outer time-limit for availing CENVAT credit / meaning of "immediately" - Whether availing CENVAT credit is subject to a strict outer time-limit and whether delayed availment can be denied - HELD THAT: - The Tribunal examined Rule 4 of the CENVAT Credit Rules and CBEC Circular No. 345/2/2000-TRU (para 10) and held that while Rule 4 uses the word "immediately" to permit taking credit on receipt of inputs, no outer time-limit is prescribed for availing CENVAT credit. The Board's circular clarifies that the manufacturer's option to take credit at the earliest opportunity does not mean that delayed availment will be denied; the word "may" cannot be read as "shall" so as to create a mandatory time bar. The Tribunal relied on earlier pronouncements of the Tribunal reaching the same conclusion to uphold that delayed availment per se is not a ground to deny credit. [Paras 5, 6]

No outer time-limit exists for availing CENVAT credit and delayed availment alone does not justify denial of credit.

Refund mechanism under Notification No.56/2002 - refund of duty paid in cash after CENVAT credit exhaustion - revenue neutrality of delayed availment of CENVAT credit - Whether payment of duty from PLA without fully utilising available CENVAT credit disentitles an assesse to cash refund under Notification No.56/2002 - HELD THAT: - The Tribunal analysed Notification No.56/2002 which entitles refund of duty paid in cash after adjusting CENVAT credit. It accepted the appellants' submission that unutilised credit of a month can be utilised subsequently and that where duty paid in cash is duly self-credited/refunded under the notification the position is revenue neutral. The Tribunal also relied on the view in Shreenath Industries that excess amount paid (where duty was not actually payable) is a deposit and not recoverable under provisions for recovery of duty, and therefore mere non-utilisation of available credit in a month, resulting in cash payment within the notification's limits, does not warrant denial of refund or a demand. [Paras 7]

Payment of duty from PLA without fully utilising available CENVAT credit does not, by itself, disentitle the assessee to refund under Notification No.56/2002 where the position remains revenue neutral.

Inclusion of packing supplied by buyer in assessable value - Whether the value of corrugated boxes supplied free by customers must be included in the assessable value of the tin containers - HELD THAT: - The Tribunal followed the ratio of the Supreme Court in Jauss Polymers (and earlier authorities) holding that where the customer supplies the container and the manufacturer does not supply or charge for it, the cost of such packing cannot be notionally added to the price of the goods. The distinction drawn in precedent is that addition arises only where the manufacturer supplies or charges for the packing; if the buyer provides the container free, its cost is not includible in the manufacturer's assessable value. [Paras 9]

Value of corrugated boxes supplied free by the customer is not includible in the assessable value of the tin containers.

Doctrine of consistency/estoppel where Department accepted earlier methodology - Whether the Department can take a contrary stand after having accepted the appellants' refund methodology earlier - HELD THAT: - The Tribunal noted that revenue previously sanctioned the appellants' refund claims following the same methodology and invoked settled principles that the Department, having accepted a principle in earlier matters, cannot be permitted to adopt a contradictory position in subsequent proceedings. Reliance was placed on the Supreme Court's approach in Novapan and other authorities establishing that a settled position accepted by the Department attains finality and estops the Department from reversing course in later assessments. [Paras 8]

Department's earlier acceptance of the appellants' methodology precludes taking a contrary stand in the subsequent show-cause proceedings.

Final Conclusion: The Tribunal allowed the appeals, set aside the impugned order and held that (i) no outer time-limit bars availing CENVAT credit and delayed availment alone cannot be a ground to deny credit or refund, (ii) payment of duty from PLA without fully utilising available CENVAT credit does not disentitle the assessee to refund under Notification No.56/2002 where the situation is revenue neutral, (iii) value of packing supplied free by the buyer is not includible in assessable value, and (iv) the Department cannot adopt a contrary position after having earlier sanctioned the same methodology.

Prospective effect of statutory amendment - clarificatory versus substantive amendment - CENVAT Credit Rules, 2004 - exclusion under Rule 6(6) - treatment of supplies to SEZ developers for cenvat credit - whether supplies to SEZ developers constitute export for Rule 6(6)(v) - statutory interpretation by plain words and date of publication - retrospective amendment by legislative enactment (Finance Act, 2012 - Section 144)

Prospective effect of statutory amendment - clarificatory versus substantive amendment - statutory interpretation by plain words and date of publication - Notification No. 50/2008-CE(NT) amending Rule 6(6) of the CENVAT Credit Rules, 2004 is not clarificatory and does not have retrospective effect; its benefit in respect of SEZ developers applies only from 31.12.2008. - HELD THAT: - The Tribunal examined the amendment made by Notification No.50/2008-CE(NT) and its language, noting the notification came into force on publication (31.12.2008). Unlike cases where an omitted provision was clarified to reflect an existing policy, here SEZ developers were not previously within the exclusion and the amending notification explicitly specified its date of effect. The Tribunal relied on settled principles that substantive statutory amendments have prospective effect unless a contrary legislative intent is manifest, and distinguished precedents cited by the appellant as factually different. The subsequent existence of a circular (03/04/2008) and later legislative retrospective amendment limited to service tax credit (Section 144, Finance Act, 2012) reinforced that Notification No.50/2008-CE(NT) was intended to operate prospectively for input (cenvat) credit. [Paras 10, 11, 12, 13, 14]

Notification No.50/2008-CE(NT) is a substantive amendment applicable from 31.12.2008 and cannot be given retrospective effect for CENVAT input credit.

CENVAT Credit Rules, 2004 - exclusion under Rule 6(6) - treatment of supplies to SEZ developers for cenvat credit - Cenvat credit claimed in respect of supplies made to SEZ developers prior to 31.12.2008 is not allowable under Rule 6(6) and the demand is sustainable. - HELD THAT: - Applying the finding that Notification No.50/2008-CE(NT) had prospective effect, the Tribunal held that supplies to SEZ developers before 31.12.2008 were not within the exclusion from the operation of sub rules (1)-(4) of Rule 6. The rule makers had intentionally extended the exclusion to SEZ developers only by the 2008 amendment; absent that amendment no statutory entitlement to deny reversal existed in favour of suppliers to developers prior to that date. The Tribunal therefore upheld the demand and the Commissioner (Appeals) order refusing credit for such supplies made before 31.12.2008. [Paras 11, 14]

Denial of cenvat credit for supplies to SEZ developers before 31.12.2008 is legally maintainable; the impugned demand is upheld.

Whether supplies to SEZ developers constitute export for Rule 6(6)(v) - definition of export and statutory context - Supplies to SEZ developers do not qualify as 'export' under Rule 6(6)(v) for the purpose of CENVAT Credit Rules, 2004, and therefore cannot be treated as export under bond to attract the exclusion under clause (v). - HELD THAT: - The Tribunal applied authorities holding that the SEZ Act's fictional treatment of DTA-SEZ transfers as 'export' is confined to the SEZ Act and cannot be imported to alter meanings under the Customs or CENVAT regimes. The CENVAT Credit Rules must be interpreted in their own statutory context; the rule separately lists clearances to SEZ units/EOUs and exports under bond, indicating different categories. Absent express incorporation of the SEZ Act definition into the CENVAT Rules, supplies to SEZ developers cannot be equated with physical export under bond for Rule 6(6)(v). Consequently, the appellant's alternative contention that the supplies fell under clause (v) was rejected. [Paras 15, 16, 17, 18]

The contention that supplies to SEZ developers are exports under bond for purposes of Rule 6(6)(v) is rejected; such supplies do not qualify as physical export under the CENVAT Credit Rules.

Final Conclusion: The Tribunal dismissed the appeal: Notification No.50/2008-CE(NT) is prospective (effective from 31.12.2008), cenvat credit claimed for supplies to SEZ developers prior to that date is not allowable and the alternative plea treating such supplies as export under bond is rejected.

Utilisation of Cenvat credit of Basic Excise Duty for payment of Education Cess and Secondary & Higher Education Cess - area based exemption - Rule 3(7)(b) of the Cenvat Credit Rules, 2004 - Education Cess and Secondary & Higher Education Cess as duties of excise - precedential effect of High Court decision

Utilisation of Cenvat credit of Basic Excise Duty for payment of Education Cess and Secondary & Higher Education Cess - area based exemption - Rule 3(7)(b) of the Cenvat Credit Rules, 2004 - Education Cess and Secondary & Higher Education Cess as duties of excise - precedential effect of High Court decision - Appellants entitled to utilise Cenvat credit of Basic Excise Duty for payment of Education Cess and Secondary & Higher Education Cess while availing area-based exemption. - HELD THAT: - The Tribunal examined whether credit of Basic Excise Duty (BED) could be applied to discharge Education Cess (EC) and Secondary & Higher Education Cess (SHEC) in the context of units availing area-based exemption. The Revenue relied on earlier tribunal authority (Tawi Chemical Industries) and the Apex Court's treatment in Hitachi Home, but the Tribunal found that the Apex Court in Hitachi Home did not decide the specific question of utilisation of BED for payment of EC and SHEC. The Tribunal noted that the jurisdictional High Court in Kamakhya Cosmetics held that EC is a duty of excise and there was no bar to utilising Cenvat credit of BED for payment of EC, a view upheld by the Tribunal in earlier decisions relied upon by the appellants. Applying that precedent, and observing that the Apex Court decisions relied upon by the Revenue did not address the precise issue on merits, the Tribunal followed the High Court's reasoning and concluded that Rule 3(7)(b) does not preclude utilisation of BED credit for payment of EC and SHEC in the facts of these appeals. Consequently, the impugned orders of recovery were set aside. [Paras 7, 12, 13, 14]

Impugned orders of recovery set aside; appellants entitled to utilise BED credit for payment of EC and SHEC and appeals allowed with consequential relief.

Final Conclusion: Following the High Court precedent relied upon, the Tribunal held that units availing area-based exemption may utilise Cenvat credit of Basic Excise Duty for payment of Education Cess and Secondary & Higher Education Cess; the impugned recovery orders were set aside and the appeals allowed.

Manufacture under Section 2(f) of the Central Excise Act, 1944 - liability of job worker when supplier unregistered and Notification 214/86 not complied with - tariff classification of finished goods as parts of motor vehicles - invocation of extended period of limitation requires willful suppression or deliberate default - penalty under Rule 26(1) of the Central Excise Rules, 2002

Manufacture under Section 2(f) of the Central Excise Act, 1944 - Processes carried out by the appellant on raw materials amounted to "manufacture" within the meaning of Section 2(f). - HELD THAT: - The Tribunal examined the documentary record, including challans showing receipt of MS rounds and bright bars and return of finished items (sockets, bends) after processing. The transformation of the supplied raw materials into finished products as a result of the processes undertaken at the appellant's premises satisfies the statutory concept of manufacture. On the basis of these records the Tribunal held that the operations performed by M/s Jamuna Enterprise resulted in dutiable goods and therefore constituted manufacture under Section 2(f). [Paras 10]

Processes undertaken by the appellant amount to manufacture.

Liability of job worker when supplier unregistered and Notification 214/86 not complied with - Whether duty liability lay on the raw-material supplier or on the job worker. - HELD THAT: - Notification 214/86 and the procedure under Rule 4(5)(a) permit the raw-material supplier to retain duty liability when the supplier is registered and follows the prescribed undertaking/procedure. In the present case the supplier, M/s Bidisha Enterprise, was not registered during the relevant period and did not comply with the notification's procedure. Under those circumstances, and given that the appellant carried out the manufacturing processes and finished goods emerged from its premises, the Tribunal held that the liability to pay duty rests on the job worker rather than on the unregistered supplier. [Paras 8]

Duty liability lies on the job worker because the raw-material supplier was unregistered and did not follow Notification 214/86.

Tariff classification of finished goods as parts of motor vehicles - Sustainability of classification of the finished goods under CETH 87089900 as 'parts of motor vehicles'. - HELD THAT: - Though challans established conversion of raw materials into finished items, there was no evidence on record to support the adjudicating authority's classification of those finished goods as motor-vehicle parts under the cited chapter heading. The authority did not explain the basis for arriving at that classification nor was any investigation or material produced to substantiate it. Consequently the Tribunal found the classification to be unsupported by evidence and not sustainable. [Paras 18]

Classification of the goods as 'parts of motor vehicles' under the impugned chapter heading is not sustained.

Invocation of extended period of limitation requires willful suppression or deliberate default - Whether the extended period of limitation could be invoked against the appellant. - HELD THAT: - Invocation of the extended five year limitation period under the proviso requires positive evidence of willful suppression or deliberate intent to evade duty. The Tribunal observed that the appellant acted throughout on a bona fide belief-supported by contemporaneous contrary decisions-that its activities were job work and not manufacture attracting duty, collected only job charges, and did not collect excise from customers. No material was produced to show deliberate concealment or misstatement. Relying on the principles that mere non payment is insufficient and that the department must plead and prove willful suppression, the Tribunal held that extended limitation was not invocable and set aside the demand on limitation grounds. [Paras 22]

Extended period of limitation not invocable; demand set aside on limitation.

Penalty under Rule 26(1) of the Central Excise Rules, 2002 - Sustainability of penalty imposed on the supplier under Rule 26(1). - HELD THAT: - The penalty was imposed on Shri Biswajit Saha on the premise of abetment. The record, however, shows that he had sent raw materials for job work and received finished goods under challans; there is no material demonstrating that he abetted the job worker to clear goods without payment of duty. In absence of evidence of abetment or complicity, the Tribunal held that the statutory requirement for imposing penalty under Rule 26(1) was not made out. [Paras 23]

Penalty imposed on Shri Biswajit Saha under Rule 26(1) is not sustainable.

Final Conclusion: The appeals are allowed: the processes by the appellant amount to manufacture but the department's tariff classification as motor vehicle parts is unsupported; duty liability falls on the job worker because the raw material supplier was unregistered and did not comply with Notification 214/86; invocation of the extended period of limitation is unjustified for want of willful suppression and the demand is set aside on limitation; and the penalty under Rule 26(1) is quashed.

Transaction value - valuation under Section 4(1)(a) - valuation under Section 4A - physician samples valuation - Central Excise Valuation Rules, 2000 not applicable to valuation under Section 4A - price charged to distributor decisive for valuation

Valuation under Section 4(1)(a) - transaction value - physician samples valuation - price charged to distributor decisive for valuation - Physician sample (P & P medicaments) removals are assessable under Section 4(1)(a) (transaction value) where the assessee charged a price to distributors, notwithstanding that the distributors later distributed the samples free to physicians. - HELD THAT: - The Tribunal followed the reasoning of the Hon'ble Apex Court in Commissioner Central Excise and Customs, Surat v. Sun Pharmaceuticals Ltd. and subsequent authority, holding that the relevant transaction for valuation is the sale between the assessee and the distributor. The show cause notice's premise-that absence of sale by the distributor to physicians excludes application of Section 4(1)(a)-was found to be legally incorrect because the assessee had charged price from the distributors and that price was neither doubted nor shown to be not the sole consideration. Consequently, when price is charged by the assessee to the distributor, the transaction value under Section 4(1)(a) governs valuation and the Central Excise Rules (invoked to compute value under Section 4A or other provisions) do not apply to alter that transaction value. Applying those precedents to the facts before it, the Tribunal concluded that the departmental demand based on treating physician samples as assessable under Section 4A was unsustainable. [Paras 5, 6]

Impugned orders confirming demand and penalties are set aside; appeal allowed.

Final Conclusion: Following Supreme Court precedents, the Tribunal held that physician samples for which the assessee charged a price to distributors are valu-able on transaction value basis under Section 4(1)(a); the departmental demand treating such clearances under Section 4A is unsustainable and the impugned orders are set aside.

Definition of "input service" under the CENVAT Credit Rules, 2004 - services used by a manufacturer in or in relation to the manufacture of final products - main (means) clause versus inclusive and exclusive clauses of a statutory definition - eligibility of CENVAT credit for services used in setting up of a factory - coverage of activities "directly or indirectly" in relation to manufacture - demand, interest and penalty under the excise/CENVAT regime

Definition of "input service" under the CENVAT Credit Rules, 2004 - services used by a manufacturer in or in relation to the manufacture of final products - eligibility of CENVAT credit for services used in setting up of a factory - main (means) clause versus inclusive and exclusive clauses of a statutory definition - Whether input services used for setting up of the factory during April 2011 to September 2013 qualify as "input service" under Rule 2(I) of the CENVAT Credit Rules, 2004 and thereby entitle the appellant to CENVAT credit. - HELD THAT: - The Tribunal examined the post-1.4.2011 definition of "input service", noting it comprises a main (means) clause, an includes clause and an excludes clause. The services in dispute, used for setting up the factory, are not specifically listed in the inclusive part nor specifically excluded. The main clause-services "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products"-is sufficiently wide to cover activities that are incidental, ancillary or directly/indirectly in relation to manufacture. Setting up a factory, though not manufacture per se, is an activity directly in relation to manufacture because without it manufacture cannot take place; therefore services used for setting up the factory fall within the main clause. Following and applying the reasoning in precedents such as Pepsico India Holdings and other Benches which reached the same conclusion, the Tribunal held that omission of the specific phrase "setting up of a factory" from the inclusive part w.e.f. 01.04.2011 does not negate coverage where the service otherwise falls within the main clause. Consequently, the appellant was held entitled to CENVAT credit on services used in setting up the factory for the period in question. [Paras 6, 8, 11]

Input services used for setting up the factory during April 2011 to September 2013 qualify as "input service" under Rule 2(I) and the appellant is entitled to CENVAT credit.

Demand, interest and penalty under the excise/CENVAT regime - consequential relief on allowance of CENVAT credit - Whether the demand of CENVAT credit, interest and penalty confirmed by the Commissioner should be sustained where the disputed credit is found admissible. - HELD THAT: - Having held that the services used for setting up the factory qualify as input services under the main clause of Rule 2(I), the Tribunal found the impugned order sustaining recovery of CENVAT credit together with interest and imposing penalty unsustainable. Since the foundational premise for the demand was reversed, the demand, interest and penalty confirmed by the Commissioner were set aside and consequential reliefs granted to the appellant. [Paras 11, 12]

The demand, interest and penalty confirmed in the impugned order are set aside consequential to allowing the CENVAT credit.

Final Conclusion: The appeal is allowed: the Tribunal held that services used in setting up the factory for April 2011 to September 2013 fall within the main clause of the definition of "input service" and that the confirmed demand, interest and penalty are set aside accordingly.

Transfer of the right to use goods - deemed sale - taxability of royalty for use of intangible goods - exclusive transfer not required for transfer of right to use - VAT and service tax mutual exclusivity - limitation/assessment time bar

Transfer of the right to use goods - deemed sale - taxability of royalty for use of intangible goods - exclusive transfer not required for transfer of right to use - Receipts by the assessee as royalty for ringtones constitute transfer of the right to use goods and are exigible to tax under the KVAT Act for the assessment years in question (except 2005-2006 which is separately remitted). - HELD THAT: - The Court applied the settled principles for transactions constituting transfer of the right to use goods (as summarised in Quick Heal Technologies), emphasising that the taxable event is the transfer of the right to use the property in goods rather than transfer of property in goods. Delivery of goods is not a condition precedent; effective control and legal right to use during the contractual period are the determinative elements. It is not necessary that the transfer be exclusive to the transferee or exclude the transferor for the transaction to qualify as a deemed sale. The Tribunal erred by treating the question as one of transfer of property in goods and by relying on the Division Bench decision in Malabar Gold; that approach is inconsistent with the principles laid down in the cited Supreme Court authorities and the ratio in Quick Heal. Consequently, where the transferee obtained a legal right to use the goods for the contract period, the activity is exigible to sales tax under the KVAT Act, and the Tribunal's order dismissing the State's appeals was set aside. [Paras 10, 11, 12]

Questions of law on taxability are answered in favour of the State; the Tribunal's order is set aside and, except for 2005-2006, the assessing authority's orders are restored.

Limitation/assessment time bar - VAT and service tax mutual exclusivity - The plea of limitation raised by the assessee for assessment year 2005-2006 is not finally decided on merits and is remitted for fresh consideration by the assessing officer; the contention that VAT is barred because the receipts attracted service tax is noted but the overarching questions of law have been answered for the State. - HELD THAT: - With respect to assessment year 2005-2006 the Court observed that the assessee's limitation plea requires fresh consideration. Accordingly that specific revision (OTR 23/2019) is remitted to the assessing officer to consider limitation and to pass a speaking order dealing with the assessee's contentions. While the Court rejected the Tribunal's approach on taxability and answered the legal questions in favour of the State, it did not adjudicate the time bar point for 2005-2006 and directed fresh consideration. The broader contention about mutual exclusivity of VAT and service tax was considered in the factual and legal matrix, but the final taxability questions were decided for the State subject to the remand on limitation for 2005-2006. [Paras 13]

OTR 23/2019 (assessment year 2005-2006) is remitted to the assessing officer for fresh consideration on limitation; all other revisions are allowed and the Tribunal's orders set aside.

Final Conclusion: The Court allowed the State's revisions, holding that royalty/consideration for transfer of the right to use ringtones constituted a taxable transfer of the right to use goods under the KVAT Act (affirming that exclusive transfer is not a prerequisite), set aside the Tribunal's orders and restored the assessing authority's orders except that the assessment for 2005-2006 is remitted to the assessing officer to decide the limitation plea afresh.

Pre-deposit under Section 51 of the TNVAT Act - adjustment of input tax credit - refund of excess tax on assessment or appeal - numbering of appeal upon compliance with pre-deposit requirement - maintainability of writ for mandamus where no refundable amount exists

Adjustment of input tax credit - pre-deposit under Section 51 of the TNVAT Act - Whether the petitioner could claim adjustment of available input tax credit towards the prescribed 25% pre-deposit and thereby seek numbering of the appeal without making fresh payment - HELD THAT: - The Court examined the respondent's record and counter-affidavit which stated that the credit of Rs. 59,44,262/- related to consolidated carry forward for the year and had already been adjusted in succeeding years, leaving no unadjusted credit available for claiming as a re-deposit in respect of Assessment Year 2015-2016. The Court noted the statutory mechanism for adjustment and refund as set out in the departmental filings and observed that where no refundable or unadjusted credit remains, there is no basis to direct adjustment of such credit towards the pre-deposit required under Section 51. On that factual and legal foundation the writ petition seeking mandamus to direct numbering of the appeal without complying with the pre-deposit requirement could not succeed. Nonetheless, the Court granted the petitioner liberty to make the 25% pre-deposit contemplated by Section 51 within thirty days, upon which the appellate authority was directed to number and decide the appeal on merits in accordance with law. [Paras 9, 10, 11]

Writ petition dismissed as no unadjusted credit remained for pre-deposit; petitioner given thirty days to pay 25% pre-deposit and, on such compliance, the appeal shall be numbered and decided on merits.

Maintainability of writ for mandamus where no refundable amount exists - numbering of appeal upon compliance with pre-deposit requirement - Whether issuance of a writ of mandamus directing numbering of the appeal was maintainable when the departmental position was that credits had been adjusted and no refund order was shown - HELD THAT: - The Court accepted the respondents' contention that the Assessing Officer had issued Form 'O' after making adjustments and that the petitioner had not produced any refund order or proof of an available unadjusted credit. In those circumstances, there was no entitlement to a mandamus directing adjustment or numbering of the appeal without satisfying the pre-deposit condition. The Court therefore dismissed the petition but provided conditional relief by permitting the statutory pre-deposit payment within a specified time, after which the appellate authority must proceed to number and dispose of the appeal. [Paras 5, 9, 11]

Petition for mandamus not maintainable on the material before the Court; conditional liberty granted to make statutory pre-deposit within thirty days, failing which no direction to number the appeal arises.

Final Conclusion: The Writ Petition is dismissed because no unadjusted input tax credit remained to be applied towards the 25% pre-deposit; petitioner granted thirty days' liberty to make the 25% pre-deposit under Section 51, upon which the first respondent shall number the appeal and decide it on merits. No costs.

Proceeding with suit despite adjudication of insolvency - necessity of official assignee as party where suit does not "relate to" insolvent's property - Order XXXVII Rule 6(a) CPC - refusal of leave to defend and entitlement to judgment forthwith - ex parte decree where defendants deemed to have admitted plaint

Proceeding with suit despite adjudication of insolvency - necessity of official assignee as party where suit does not "relate to" insolvent's property - Whether the commercial suit could proceed and judgment be pronounced though the defendants were adjudged insolvent during the pendency and whether the official assignee was a necessary party - HELD THAT: - The court held that adjudication of the defendants as insolvents during the pendency did not bar continuation of the suit because the plaintiff's claim was a money decree and did not "relate to" the property of the insolvent. Relying on the principle endorsed by the Division Bench in Om Prakash Nihalani (concurring with the Madras High Court), the term "relating to the property of the insolvent" under the relevant provision must be read narrowly and does not extend to all claims that may affect the insolvent. Consequently, section 68(1)(d) (as interpreted in the cited authorities) did not mandate addition of the official assignee as a necessary party where the suit seeks recovery of money from guarantors and does not seek adjudication of rights in the insolvent's property. [Paras 21, 22]

The suit could proceed and be decreed despite the defendants having been adjudged insolvent; the official assignee was not a necessary party as the suit did not "relate to" the insolvent's property.

Order XXXVII Rule 6(a) CPC - refusal of leave to defend and entitlement to judgment forthwith - ex parte decree where defendants deemed to have admitted plaint - Whether leave to defend the summons under Order XXXVII should be granted and whether the plaintiff was entitled to judgment forthwith - HELD THAT: - The court found the defence pleaded in the reply to the summons for judgment to be frivolous and without substantive merit. The defendants had been duly served, filed a reply but did not appear despite opportunities; the material on record was treated as admitted by the defendants. In these circumstances, and applying Order XXXVII Rule 6(a) CPC, the court concluded that leave to defend should be refused and the plaintiff was entitled to immediate judgment. [Paras 20, 21, 23]

Leave to defend was refused and, under Order XXXVII Rule 6(a), the plaintiff was entitled to judgment forthwith; an ex parte decree was granted against the defendants.

Costs and consequential directions upon decree - Reliefs and consequential orders to follow upon granting the decree - HELD THAT: - The court recorded that the suit stands decreed in terms of the plaint; directed payment of costs to the plaintiff in a specified sum (in addition to any deficit of court fees refunded); ordered refund of court fees in accordance with High Court rules; directed that the decree be drawn up and sealed expeditiously and granted leave to proceed in execution without awaiting sealing of the decree. [Paras 25]

Decree granted in terms of the plaint; costs awarded to plaintiff; directions given for court fee refund, drawing and sealing of the decree, and leave to proceed to execution forthwith.

Final Conclusion: The commercial suit founded upon the deeds of guarantee was decreed against the defendants despite their subsequent adjudication as insolvents; the official assignee was not required to be made a party as the claim did not "relate to" the insolvent's property; leave to defend was refused under Order XXXVII Rule 6(a) CPC and an ex parte judgment was granted with costs and ancillary directions for sealing and execution.

Dishonour of cheque under Section 138 - Presumption under Section 139 as to existence of legally enforceable debt or liability - Presumption under Section 118 as to consideration and date of negotiable instrument - Requirement of notice and statutory timelines under Section 138 proviso - Onus on drawer to rebut statutory presumptions - Cognizance and territorial jurisdiction under Section 142

Dishonour of cheque under Section 138 - Presumption under Section 139 as to existence of legally enforceable debt or liability - Presumption under Section 118 as to consideration and date of negotiable instrument - Onus on drawer to rebut statutory presumptions - Requirement of notice and statutory timelines under Section 138 proviso - Both cheques were issued for a legally recoverable debt or other liability and the accused failed to rebut the statutory presumptions, warranting conviction under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The complainant proved presentation of the two cheques by producing original deposit slips (Exts.1-2), the cheques signed by the accused (Exts.3-4) and the bank return memos showing dishonour for insufficient funds (Exts.5-6). The statutory demand notice was sent and received within the relevant timelines and the complaint was lodged within the period prescribed by Section 142. In view of Section 118 the court drew the presumption as to date and consideration, and in view of Section 139 the presumption arose that the cheques were issued for discharge of a legally enforceable debt or liability. Once those foundational facts were established and the accused admitted the signatures and did not dispute the amounts, the burden shifted to the accused to rebut the presumptions. The accused's defence (that the cheques were handed over as security to a third person and misused) was not supported by evidence in defence; the sole defence witness did not address the existence of the debt or the issuance of the cheques. Given the absence of any credible evidence to dislodge the presumptions under Sections 118 and 139, and the compliance with the notice and limitation requirements under Section 138 proviso and Section 142, the trial and appellate courts' conclusions that the offence under Section 138 was proved beyond reasonable doubt were upheld. [Paras 24, 25, 26, 29, 30]

The conviction and sentence under Section 138 N.I. Act were affirmed; the accused failed to rebut statutory presumptions and the revision is dismissed.

Final Conclusion: The High Court dismissed the criminal revision, affirmed the findings of the trial and appellate courts that the cheques were issued for a legally recoverable debt and that the accused failed to rebut the presumptions under Sections 118 and 139 of the Negotiable Instruments Act; conviction under Section 138 is upheld and the revision is dismissed.