TaxTMI Updates e-Newsletter
Sep 10,2018

Transitional credit under Section 140 - Admissibility of input tax credit - Maintainability of advance ruling application - Proviso to Section 98(2) - bar where question is pending or decided

Transitional credit under Section 140 - Admissibility of input tax credit - Applicability of Advance Ruling to carry forward pre-GST Cenvat credit (TRAN-1) under Section 140 of the CGST Act, 2017 - HELD THAT: - The Authority found that Section 97(2)'s reference to admissibility of 'input tax credit' pertains to credit as defined under the GST regime and not to CENVAT credit carried forward in TRAN-1 from the pre GST regime. The question framed by the applicant related to transitional credit lying unutilised as per ER-1 for June, 2017 and therefore falls outside the matters enumerated in Section 97(2) which define the scope of questions admissible for advance ruling. Consequently, the application did not satisfy the statutory criteria for admission on this ground. [Paras 4]

The question regarding carry forward of CENVAT credit in TRAN-1 under Section 140 is outside the ambit of matters admissible for an advance ruling and cannot be entertained by the Authority.

Maintainability of advance ruling application - Proviso to Section 98(2) - bar where question is pending or decided - Whether the application is barred from admission because the same question was already pending before departmental authorities - HELD THAT: - The Authority applied the proviso to Section 98(2) which precludes admission where the question raised is already pending or decided in any proceedings in the case of the applicant under the Act. The record and submissions showed that the applicant had already claimed the disputed credit in TRAN-1 and that the jurisdictional department had been examining the claim, including conducting audits and raising objections. The applicant conceded that the issue was under departmental scrutiny. In these circumstances the Authority held that the application could not be admitted for adjudication. [Paras 4]

The application is not maintainable under the proviso to Section 98(2) because the same question was already pending before the departmental authorities; admission is therefore barred.

Final Conclusion: The Authority refused to admit the application: the subject matter (carry forward of pre GST CENVAT credit in TRAN 1) is outside the scope of advance ruling under Section 97(2) and, in any event, the question was already pending before departmental authorities, invoking the proviso to Section 98(2); accordingly the application is rejected.

Availability of alternative remedy - Writ jurisdiction and discretionary refusal where alternative statutory remedy exists - Appealability under Section 107 of the Punjab GST Act, 2017

Availability of alternative remedy - Writ jurisdiction and discretionary refusal where alternative statutory remedy exists - Appealability under Section 107 of the Punjab GST Act, 2017 - Whether the writ petition challenging cancellation of GST registration should be entertained when the order is appealable under the statute. - HELD THAT: - The petitioner challenged the order dated 23.05.2018 cancelling its registration under the Punjab GST Act. The Court noted that the order of the Excise and Taxation Officer is appealable under Section 107 of the Punjab GST Act. In view of the existence of the statutory appellate remedy, the High Court declined to exercise its writ jurisdiction to entertain the challenge and relegated the petitioner to avail the appropriate alternative remedy under the Act. No decision was rendered on the merits of the cancellation; the court's order is procedural and rests on the discretionary principle that writ jurisdiction should not ordinarily be exercised where an efficacious statutory appeal is available.

Writ petition dismissed by relegating the petitioner to pursue the statutory appeal under Section 107 of the Punjab GST Act, 2017.

Final Conclusion: The writ petition challenging the cancellation of registration was refused on the ground that the order is appealable under Section 107 of the Punjab GST Act, 2017; the petitioner was directed to avail the statutory appellate remedy.

No GST/service tax on fee for grant of licence for sale of liquor - quashing of notice rendered infructuous - disposal of petition on statement of State/Counsel

No GST/service tax on fee for grant of licence for sale of liquor - quashing of notice rendered infructuous - Whether the petition seeking quashing of the notice demanding information in relation to levy of service tax on fee for grant of licence for sale of liquor is maintainable in view of the GST Council's decision that no tax is leviable. - HELD THAT: - Learned counsel for respondents Nos.1 to 3 informed the Court that the 26th meeting of the GST Council held on 10.03.2018 decided that no GST/Service Tax is leviable on the fee paid for grant of licence for sale of liquor for human consumption. In view of that statement made on behalf of the State, the challenge to the notice dated 15.05.2017 concerning levy of service tax on such licence-fee has been rendered infructuous. Consequently, there is no subsisting controversy requiring adjudication on the merits of the tax demand raised in the notice.

Petition disposed of as infructuous and the impugned notice effectively quashed in view of the GST Council's decision and the statement made on behalf of the State.

Final Conclusion: The petition challenging the notice seeking information about levy of service tax on licence-fee for sale of liquor was disposed of as infructuous following the statement that the GST Council has decided no GST/Service Tax is leviable on such fee.

Grievance redressal mechanism - claim for CENVAT/VAT credit due to technical glitch - credit on stock-in-trade - speaking order requirement on rejection of claims - liberty to challenge final administrative determination - no adjudication on merits

Grievance redressal mechanism - claim for CENVAT/VAT credit due to technical glitch - credit on stock-in-trade - Existence and operation of a grievance mechanism to resolve claims where assessees could not upload data to avail of CENVAT/VAT credit or credit on stock-in-trade, and consideration of the petitioners' cases under that mechanism. - HELD THAT: - The Union of India informed the Court that a grievance redressal mechanism has been put in place and Circular No. 39/13/2018-GST dated 3 April 2018 governs the process. It was stated that of approximately 17,000 cases, about 13,000 have been resolved and settled, and that where an assessee could not upload data due to technical glitches the benefit has been given. The petitioners have been advised to pursue their representations under this mechanism and their matters are being considered thereunder.

Petitions disposed of recording that the petitioners' representations will be considered under the grievance mechanism.

Speaking order requirement on rejection of claims - Obligation to communicate reasons by way of a speaking order where any claim or representation under the grievance mechanism is rejected. - HELD THAT: - It was stated on instructions for the Union that in instances where a claim or representation is rejected under the grievance redressal process a speaking order giving reasons would be passed and communicated to the concerned petitioner. The Court recorded this assurance and directed that such procedure be followed.

Where a representation is rejected, a speaking order stating reasons shall be passed and communicated to the petitioner.

Liberty to challenge final administrative determination - no adjudication on merits - Whether petitioners retain the right to challenge any adverse final determination arising from the grievance mechanism and whether the Court has decided merits. - HELD THAT: - Petitioners stated they would pursue the grievance mechanism and reserved their right to challenge any final determination, including on constitutional grounds if necessary. The Court expressly recorded that petitioners shall have liberty to challenge the final determination and clarified that it was not expressing any view on the merits of the claims.

Petitioners are granted liberty to challenge any final determination; the Court has not commented on merits.

Final Conclusion: Writ petitions disposed of by recording the Union's statement about the grievance redressal mechanism and the undertaking to issue speaking orders when representations are rejected; petitioners to pursue the mechanism with liberty to challenge any adverse final determination, the Court expressing no opinion on the merits.

Summary order. Delay condoned; special leave petitions dismissed on the ground that the tax effect/liability is less than the prescribed limit mentioned in Circular No. 3/2018 dated 11th July, 2018 issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes; pending applications disposed of.

Revisional jurisdiction under section 263 of the Income Tax Act - Erroneous and prejudicial to the interest of the revenue test - Error in adopting comparative municipal-tax-to-rent mathematical projection - Allocation and apportionment of expenses between heads of income - Scope of inquiry by the Assessing Officer and finality of a plausible view

Error in adopting comparative municipal-tax-to-rent mathematical projection - Revisional jurisdiction under section 263 of the Income Tax Act - Validity of the Commissioner's conclusion that the assessment was erroneous and prejudicial because rental income declared by the petitioner was disproportionately low as shown by a mathematical projection using municipal taxes of a neighbouring property. - HELD THAT: - The Commissioner relied on a comparison of the petitioner's mall with a nearby mall owned by another company, using the ratio of municipal taxes to rental income in the other case to project an expected rental for the petitioner and thereby concluded the assessment was erroneous. The court held this comparison to be wholly erroneous: the Commissioner neither ascertained relative locations or the distance between properties nor took into account the many distinct variables that determine municipal taxes and rental potential (location, built-up area, age, nature of business, etc.). The court observed that such variables cannot be standardised or reduced to a mechanical mathematical formula and that using municipal-tax proportions as a starting point for revision was unsound. Consequently the Commissioner's basis for invoking revisional jurisdiction on this ground failed. [Paras 11, 12, 13]

The Commissioner's comparison and mathematical projection based on municipal taxes is erroneous; this ground for invoking revisional jurisdiction under section 263 fails.

Allocation and apportionment of expenses between heads of income - Scope of inquiry by the Assessing Officer and finality of a plausible view - Revisional jurisdiction under section 263 of the Income Tax Act - Whether the assessment was erroneous and prejudicial because expenses claimed under income from other sources should have been apportioned between that head and income from house property. - HELD THAT: - The record shows the Assessing Officer conducted detailed inquiries during assessment, sought and received specific breakups and supporting documents for property-tax, electricity, legal and professional, housekeeping, AMC and security expenses, and thereafter passed the assessment without making such apportionment. The court emphasised that where the Assessing Officer has made full and germane inquiries and taken a plausible view, the Commissioner may not exercise revisional powers merely because he entertains a different belief. Given the Assessing Officer's detailed scrutiny and the absence of a showing that no inquiry was made or that the view taken was unreasonable, the Commissioner's contention that expenses should be reallocated could not sustain revision under section 263. [Paras 6, 14]

The Assessing Officer had made sufficient inquiry and taken a plausible view; the Commissioner cannot invoke section 263 to reappraise matters already examined-this ground for revision fails.

Final Conclusion: Impugned notice issued under section 263 was set aside; petition allowed and proceedings under the revision notice quashed.

Provision for warranty - contingent liability - crystallised or ascertained liability - historical trend / past experience as basis for provision - burden to substantiate provision - remand for fresh consideration (inadmissibility at appellate stage)

Provision for warranty - contingent liability - crystallised or ascertained liability - historical trend / past experience as basis for provision - burden to substantiate provision - Whether the provision made by the assessee for warranty is an allowable deduction or is a contingent/unascertained liability rightly disallowed by the Assessing Officer and restored by the Tribunal. - HELD THAT: - The Assessing Officer found the provision for warranty to be an unascertained, contingent liability and disallowed it because the assessee did not place material before him showing that the estimate was based on previous experience. The CIT(A) reversed the AO without addressing whether the provision was crystallised, relying instead on the method of accounting. The Tribunal relied on precedent but the High Court examined whether the three conditions laid down by the Supreme Court in Rotork Controls (recognition of liability, basis on historical trend/scientific estimate, and ascertainment) were satisfied. The assessee later produced a working showing an estimate based on assumed man months and average charges, but there was no historical trend or past experience demonstrated to substantiate the estimate. Consequently the Court held that the assessee failed to demonstrate that the provision was based on any scientific or historical basis and that the provision was not crystallised or ascertained at the end of the year. The Court therefore upheld the AO's finding and held that the Tribunal and CIT(A) erred in interfering when the factual finding of non-substantiation stood unchallenged. [Paras 8, 9, 11, 13]

The disallowance of the provision for warranty as a contingent/unascertained liability is upheld; the assessee failed to substantiate the provision on the basis of historical trend or ascertainment.

Final Conclusion: The Tax Case Appeal is dismissed; the substantial question of law is answered against the assessee and in favour of the Revenue, upholding the Assessing Officer's disallowance of the warranty provision.

Reopening of assessment - reason to believe - change of opinion - application of mind - audit objection

Reopening of assessment - reason to believe - change of opinion - application of mind - audit objection - Validity of reopening the assessment for Assessment Year 2009-10 under Section 147/148 in the absence of tangible material and whether the AO acted on mere change of opinion influenced by audit objections - HELD THAT: - The Court examined whether the Assessing Officer had 'reason to believe' that income had escaped assessment or whether the reopening amounted to a mere 'change of opinion'. The record shows that the AO had received and replied to audit objections, initially considered the licence-fee/logo expenditure as revenue expenditure and rejected the audit objection. The reasons recorded for reopening were verbatim the audit objection and there was no independent tangible material demonstrably forming a live link to a belief of escapement of income. The assessment position in preceding and subsequent years, and a final Tribunal decision in favour of the assessee on the same subject, lent weight to the conclusion that the issue had been examined and that consistency in treatment was reasonable. Relying on the settled principles in Kelvinator and subsequent decisions, the Court held that reassessment under Section 147 requires tangible material establishing a live link to the belief of escapement; initiation of reassessment at the instance of audit objections without independent application of mind by the AO is impermissible. Although the Court noted that it should not shut out legitimate reassessments where fresh material is discovered, on the facts the AO failed to demonstrate independent reasons or tangible material beyond the audit objection to justify reopening. [Paras 18, 21, 22, 26, 28]

Reopening of the assessment under Section 147/148 was invalid as based on mere change of opinion influenced by audit objections without independent tangible material or application of mind; the notice dated 11.02.2014 and the order dated 01.07.2015 are quashed.

Final Conclusion: Writ petition allowed; the notice under Section 148 dated 11.02.2014 and the order rejecting objections dated 01.07.2015 are quashed for lack of jurisdiction to reopen the Assessment Year 2009-10.

Transfer pricing comparable selection and application of filters - inclusion of foreign exchange gains and forward contract premium in operating profit for Profit Level Indicator - deduction under section 10B and alternative claim under section 10A

Transfer pricing comparable selection and application of filters - Whether Informed Tech India Ltd. was correctly included as a comparable for transfer pricing purposes having regard to the filter adopted by the TPO. - HELD THAT: - The TPO had applied a filter requiring operating income from IT-related services to exceed 70% of total revenues but included Informed Tech India Ltd. whose financials show rental receipts forming a substantial portion such that IT-related revenue does not meet the 70% threshold. The assessee had not raised this precise filter-based objection before the TPO, having argued functional dissimilarity earlier, and before the DRP only broad contentions were raised. The Tribunal found that, prima facie, Informed Tech India Ltd. does not satisfy the TPO's own selection filter. In the interests of justice and equity the matter is to be re-examined by the TPO so that the assessee may place all relevant contentions and evidence before the TPO for fresh consideration of comparability. [Paras 4]

Remitted to the Transfer Pricing Officer for fresh examination of the comparability of Informed Tech India Ltd.; ground allowed for statistical purposes.

Deduction under section 10B and alternative claim under section 10A - Whether the assessee, denied deduction under section 10B, should have its alternative claim for deduction under section 10A considered and decided. - HELD THAT: - The Assessing Officer denied section 10B benefit on the ground that the unit lacked approval from the appropriate authority; the DRP's direction is silent on the assessee's alternative claim under section 10A. Tribunal referred to several precedents holding that where section 10B is denied for lack of approval, authorities are obliged to consider the alternative claim under section 10A and grant it if conditions are met. As the AO and DRP did not decide the alternative claim, the Tribunal remitted the issue to the Assessing Officer to consider and decide the claim under section 10A in accordance with the cited jurisprudence and the statutory conditions prescribed under section 10A. [Paras 5]

Remitted to the Assessing Officer to consider the alternative claim under section 10A; ground allowed for statistical purposes.

Inclusion of foreign exchange gains and forward contract premium in operating profit for Profit Level Indicator - Whether premium on forward exchange contracts (and related foreign exchange gains) should be included in the assessee's operating profit margin for computing the Profit Level Indicator under transfer pricing. - HELD THAT: - The TPO excluded foreign exchange gains when computing the PLI. The DRP directed inclusion of foreign exchange gains but did not rule on the specific contention that premium on forward exchange contracts must be treated as part of operating profit. The Tribunal treated the additional ground as a pure question of law with facts on record and admitted it. Referring to authority that where such premiums arise by reason of proximity to export turnover they form part of operating profit, the Tribunal held that the TPO must reconsider the issue. The assessee is directed to place evidence before the TPO to show that premiums on forward contracts are earned in the normal course to hedge currency risk and therefore should be included in computing the PLI. [Paras 6]

Remitted to the Transfer Pricing Officer to examine and decide on inclusion of forward contract premium in operating profit for PLI; additional ground allowed for statistical purposes.

Final Conclusion: The Revenue's appeal is dismissed as withdrawn; the assessee's appeal is allowed for statistical purposes with directions to remand (i) comparability of Informed Tech India Ltd. to the TPO for fresh examination, (ii) the alternative claim under section 10A to the Assessing Officer for decision, and (iii) the question of inclusion of forward contract premium in operating profit to the TPO for consideration; the assessee's stay application is dismissed as infructuous.

Bank deposits treated as unexplained cash credits - reconciliation of drawings and bank deposits - reimbursement of expenses does not constitute income for TDS - application of section 40(a)(ia) where tax was not deducted - distinction between reimbursement and taxable income for deduction of tax at source - adhoc disallowance for lack of supporting vouchers

Bank deposits treated as unexplained cash credits - reconciliation of drawings and bank deposits - Addition on account of unexplained deposits in the assessee's personal savings bank account - HELD THAT: - The Assessing Officer had added credits of Rs. 9,01,844 recorded in the specified bank account as unexplained income. On remand the AO verified bank records and found total credits of Rs. 2,60,440 for the year and noted assessee's drawings of Rs. 3,00,000 from capital accounts but observed no reconciliation showing that the deposits originated from those drawings. The CIT(A) accepted the AO's verified quantum of bank credits but, in the absence of a reconciliation linking the drawings to the deposits and on the basis that the assessee would reasonably have household expenditure, restricted the addition to the verified credited amount. The Tribunal, after hearing the parties and noting absence of cogent material establishing that the deposits derived from earlier drawings, confirmed the CIT(A)'s order. [Paras 7]

Addition of Rs. 2,60,440 on account of unexplained bank credits is confirmed.

Reimbursement of expenses does not constitute income for TDS - application of section 40(a)(ia) - distinction between reimbursement and taxable income for deduction of tax at source - Disallowance under section 40(a)(ia) of payments made to M/s Sumasankar Sponge Iron Pvt. Ltd. by treating them as subject to TDS - HELD THAT: - The Assessing Officer disallowed wages of Rs. 3,05,26,985 paid through the company on the ground that TDS under section 194C/related provisions was not deducted. On remand the AO accepted documentary evidence (agreement, ledger, confirmation) showing payments routed through the company for labour engaged by the assessee and recorded that the company had been paid and the payments were made largely through banking channels. The CIT(A) concluded that the arrangement amounted to supply of labour and attracted section 194C and therefore disallowance under section 40(a)(ia) was warranted. The Tribunal considered authorities holding that pure reimbursements or payments which do not embed any income in the hands of the payee do not attract TDS, noted the assessee's further evidence (audited statements, wage register, ledger) showing no income accrued to the company, and, in view of the legal distinction between reimbursement and income, set aside the orders below and remanded the matter to the Assessing Officer to verify the true nature of the payments and re-adjudicate in accordance with law after giving the assessee opportunity of hearing. [Paras 19]

Matter set aside and remanded to the Assessing Officer for fresh verification and re-adjudication of whether the payments were reimbursements (not exigible to TDS) or payments attracting section 40(a)(ia).

Adhoc disallowance for lack of supporting vouchers - Ad hoc disallowance of business promotion expenses for want of supporting bills and vouchers - HELD THAT: - The Assessing Officer disallowed 50% of claimed business promotion expenditure as an adhoc measure because the assessee failed to produce supporting bills and payment vouchers despite being asked to do so. The assessee did not furnish the documents before the Tribunal. Having regard to the absence of supporting evidence, the Tribunal found no reason to interfere with the concurrent findings of the lower authorities. [Paras 22]

Ad hoc disallowance is confirmed.

Final Conclusion: The appeal is partly allowed in that the issue of payments to M/s. Sumasankar Sponge Iron Pvt. Ltd. is set aside and remanded to the Assessing Officer for fresh verification on whether the payments were reimbursements not attracting TDS; the addition of Rs. 2,60,440 for unexplained bank credits and the adhoc disallowance for lack of vouchers are confirmed and the appeal is otherwise dismissed.

Disallowance of expenditure attributable to exempt income under Section 14A - computation of disallowance under Rule 8D(2) - allocation of interest disallowance where investments funded from own funds - disallowance confined to investments which produced exempt dividend income - allowability of Portfolio Management Services fee as deduction in computing capital gains

Disallowance of expenditure attributable to exempt income under Section 14A - Provisions of Section 14A apply and a disallowance under Section 14A is permissible in the facts of the case. - HELD THAT: - The assessee contended that items such as long term capital gains and dividend income could not attract section 14A. The Tribunal noted that the assessee had computed total income under the normal provisions and the long term capital gain had been claimed exempt under normal provisions; the dividend income had not been taxed in the hands of the assessee (DDT was borne by the distributing company). On these facts the Tribunal rejected the contention that section 14A was inapplicable and held that section 14A could be invoked to make a disallowance for expenditure in relation to exempt income.

Section 14A applies; the preliminary plea of inapplicability is rejected.

Allocation of interest disallowance where investments funded from own funds - computation of disallowance under Rule 8D(2) - No disallowance under the second limb of Rule 8D(2)(ii) for interest is required where investments are made out of the assessee's own funds. - HELD THAT: - On examination of the balance sheet the Tribunal found the assessee had sufficient own funds (substantially higher than investments) indicating investments were funded from own resources. Placing reliance on the decision of the Hon'ble Bombay High Court in Reliance Utilities & Power Ltd., the Tribunal held that where investments are made out of own funds, disallowance under the second limb of Rule 8D(2)(ii) towards interest is not warranted and therefore no such disallowance was required in the present case.

Disallowance under Rule 8D(2)(ii) on account of interest is not sustained.

Disallowance confined to investments which produced exempt dividend income - computation of disallowance under Rule 8D(2) - Disallowance under Rule 8D(2)(iii) to be recomputed by the Assessing Officer limited to investments which resulted in dividend income; remand directed for recomputation. - HELD THAT: - The Tribunal relied on its Coordinate Bench decision in REI Agro Ltd. that for the purpose of computing disallowance under the relevant limb only those investments which actually yielded dividend income should be taken into account. The Tribunal directed the Assessing Officer to recompute the disallowance under Rule 8D(2)(iii) in light of that principle, allowing adjustment for the amount already suo motu disallowed by the assessee (Rs. 32,830). The direction was for recomputation and quantification by the AO consistent with the tribunal's guidance.

Issue remanded to the Assessing Officer to recompute disallowance under Rule 8D(2)(iii) limited to investments yielding dividend income, with adjustment for amount already disallowed by the assessee.

Allowability of Portfolio Management Services fee as deduction in computing capital gains - Portfolio Management Services (PMS) fees paid are allowable as deduction in computing short term capital gains. - HELD THAT: - The Tribunal noted that the Commissioner of Income Tax (Appeals) had held gains on sale of shares through PMS providers to be chargeable as capital gains and the revenue had not appealed against that finding. Relying on the Coordinate Bench decision of the Pune Tribunal in KRA Holding & Trading Pvt. Ltd., which attained finality on the point, the Tribunal held that PMS fees paid by the assessee are deductible for the purpose of computing short term capital gains under section 48.

PMS fees are allowable in computing capital gains; the disallowance upheld by the AO is set aside.

Final Conclusion: The appeal is partly allowed: section 14A is applicable but no interest disallowance is sustained under Rule 8D(2)(ii) as investments were from own funds; disallowance under Rule 8D(2)(iii) is remanded to the Assessing Officer for recomputation limited to investments that produced dividend income (with adjustment for amount already disallowed by the assessee); Portfolio Management Services fees are allowable in computing short term capital gains. The appeal is disposed of accordingly.

Sales promotion expenses - genuineness of invoices - disallowance of expenditure - burden of proof on assessee - evidence from VAT authorities - preponderance of probabilities - business promotion deduction - IRDA rules regarding gifts by LIC agents

Sales promotion expenses - genuineness of invoices - evidence from VAT authorities - preponderance of probabilities - burden of proof on assessee - disallowance of expenditure - Sustention of disallowance of part of the business promotion expenses claimed by the assessee on the basis of disputed supplier invoices. - HELD THAT: - The Tribunal upheld the finding of the authorities that the assessee's claim for distribution of 246 silver coins was inadequately supported. The Assessing Officer's enquiries with the VAT authority indicated that the supplier, M/s. Soumya Business, was reported to be issuing fake bills and was untraceable; only sales corresponding to two of the four invoices were reflected in the supplier's VAT returns and even those invoice numbers did not match the numbers produced by the assessee. The assessee could produce only 90 of the claimed 246 recipient names and summons to some recipients had returned with "not known". The CIT(A) limited the disallowance, allowing the amount appearing in the supplier's VAT return and disallowing the remainder. The Tribunal found these conclusions sustainable on the preponderance of probabilities: inconsistencies in invoice numbering and rates, adverse report from the Sales Tax Department, inability to verify the supplier, and incomplete recipient details justified sustaining the disallowance of the portion not corroborated by independent evidence. The Tribunal therefore declined to grant further relief to the assessee beyond that allowed by the CIT(A). [Paras 2, 3, 4, 6]

The disallowance of Rs. 6,06,000 out of the claimed sales promotion/business promotion expenses was upheld and the appeal is dismissed.

Final Conclusion: The Tribunal concurs with the authorities below that, on the material on record (including adverse information from the VAT authority, mismatching invoice particulars, and incomplete corroboration of recipients), the assessee failed to prove the entire claim for business promotion expenses; the CIT(A)'s allowance limited to the amount supported by the supplier's VAT return is reasonable and the appeal is dismissed.

Defective show cause notice under section 274 - penalty under section 271(1)(c) - specific charge for concealment or furnishing inaccurate particulars - recording of satisfaction by the Assessing Officer - where two judicial views exist the view favourable to the assessee is to be followed

Defective show cause notice under section 274 - penalty under section 271(1)(c) - specific charge for concealment or furnishing inaccurate particulars - where two judicial views exist the view favourable to the assessee is to be followed - Validity of penalty imposed under section 271(1)(c) for A.Y 2008-09 where the show cause notice dated 22-11-2013 under section 274 did not specify whether proceedings were for concealment of income or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal examined the show cause notice and found it did not specify the charge as to whether the assessee had concealed particulars of income or had furnished inaccurate particulars, nor were inappropriate portions struck out. Having noted conflicting lines of authority, the Tribunal applied the established principle that where two judicial views exist the view favourable to the assessee should be followed. The Tribunal accepted the reasoning of the Karnataka High Court in Manjunatha Cotton & Ginning Factory and the decision of the Jurisdictional High Court in Dr. Murali Mohan Koley that a specific charge is incumbent upon the Revenue in the notice initiating penalty proceedings under section 271(1)(c). Reliance was placed on the coordinate-bench reasoning in Jeetmal Choraria which preferred the Karnataka view in similar circumstances. The Tribunal also noted that a Special Leave Petition filed by the Revenue in a related matter was dismissed by the Supreme Court, and, respectfully following the cited precedents, held that initiation of penalty proceedings on a notice that does not specify the requisite charge is defective and cannot sustain levy of penalty.

Show cause notice dated 22-11-2013 held defective for not specifying the charge; penalty under section 271(1)(c) for A.Y 2008-09 cancelled.

Final Conclusion: The Tribunal allowed the appeal, set aside the order of the CIT(A), and cancelled the penalty imposed under section 271(1)(c) for A.Y 2008-09 on the ground that the show cause notice under section 274 did not specify the charge and was therefore defective.

Estimation of income based on statements recorded under search - Reliance on statement recorded under section 132(4) - Admissibility of third-party statements absent cross-examination - Deletion of additions where estimation lacks supporting material - Acceptance of voluntary surrender and assessed offer

Estimation of income based on statements recorded under search - Reliance on statement recorded under section 132(4) - Acceptance of voluntary surrender and assessed offer - Validity of addition by adopting commission at Re. 1 per kg for metal trading - HELD THAT: - The Tribunal examined the assessee's sworn statement recorded during search where the assessee initially mentioned commission of Re. 1 per kg but, within the same statement and later in assessment proceedings, explained profits margins by metal (0.22%, 0.30%, 0.47%) and furnished a weighted computation showing an average commission of 50 paise per kg which had been offered and assessed as surrendered income. The assessing officer's adoption of Re. 1 per kg was not supported by independent material; the statement must be appreciated as a whole and the assessee's explained basis for 50 paise per kg was not shown to be incorrect. In absence of supporting material justifying the higher rate, the addition based on Re. 1 per kg was held untenable and deleted. [Paras 5, 6]

Addition on account of commission from metal trading assessed at Re. 1 per kg is deleted and the assessee's estimation of 50 paise per kg is accepted for the purposes of the assessment.

Admissibility of third-party statements absent cross-examination - Deletion of additions where estimation lacks supporting material - Validity of addition based on third party statement (Gagan Arora) fixing commission on MCX dabba trading at a higher rate where no opportunity for cross examination was afforded - HELD THAT: - The Tribunal held that statements of third parties recorded during search cannot be used against the assessee where the assessee was not permitted to cross examine those witnesses. Reliance on such material without affording the assessee an opportunity of cross examination amounts to a breach of principles of natural justice and renders the addition unsustainable. Applying this principle and relevant precedents, the addition made by adopting the higher rate was deleted. [Paras 7, 9]

Addition on account of commission claimed at the higher rate for MCX dabba trading, based on third party statement not subjected to cross examination, is deleted.

Deletion of additions where estimation lacks supporting material - Estimation of income based on statements recorded under search - Sustainedness of a separate addition of unexplained receipt (Rs. 10 lakhs) in AY 2014 15 where the same documents were already used in estimating MCX commission - HELD THAT: - The Tribunal noted that the documents and statements relied upon to estimate the MCX commission were the same materials on which the additional specific addition was founded. Once the commission from MCX trading had been estimated and assessed, there was no independent material showing that the Rs. 10 lakhs was received over and above the estimated commission. Consequently, a separate addition was unjustified and was deleted. [Paras 12, 14]

Addition of Rs. 10 lakhs in AY 2014 15 is deleted as it was not shown to be over and above the commission already estimated and assessed.

Final Conclusion: All additions challenged in the appeals for assessment years 2013 14, 2014 15 and 2015 16 were found unsustainable - the metal trading commission addition (Re. 1 per kg) and MCX dabba trading addition (higher rates and third party based) were deleted, the specific unexplained receipt for AY 2014 15 was also deleted, and consequently all three appeals are allowed.

Penalty under section 271(1)(c) read with section 274 - defective show cause notice - failure to strike off irrelevant portions - requirement to specify whether charge is concealment of particulars of income or furnishing of inaccurate particulars - curative effect of assessment order insufficient to validate a defective notice - preference for the view favourable to the assessee where conflicting judicial precedents exist

Penalty under section 271(1)(c) read with section 274 - defective show cause notice - failure to strike off irrelevant portions - requirement to specify whether charge is concealment of particulars of income or furnishing of inaccurate particulars - Validity of penalty proceedings for AY 2012-13 where the show cause notice did not strike off irrelevant portions and did not clearly specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Assessing Officer issued a standard proforma notice under section 274 read with section 271(1)(c) marking multiple, unstruck paragraphs so that it was not clear whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars. The Commissioner (Appeals) set aside the penalty relying on the line of decisions following the view of the Hon'ble Karnataka High Court in Manjunatha Cotton & Ginning Factory that a notice which fails to strike out irrelevant portions and thus does not specify the limb of section 271(1)(c) is defective. The Tribunal noted earlier coordinate-bench authority (Jeetmal Choraria) applying the same ratio, observed the existence of conflicting views in other jurisdictions, and applied the settled editorial principle that where two judicial views exist the one favourable to the assessee is to be followed. The Tribunal found that subsequent decisions relied upon by Revenue did not overturn the Karnataka view relied upon by the CIT(A) and that the Assessing Officer's marking of multiple paragraphs without striking the irrelevant parts amounted to a patent non-application of mind rendering the notice vague. The Tribunal also rejected the contention that defects in the notice were cured by the assessment order, and upheld the cancellation of the penalty on that ground.

Penalty imposed under section 271(1)(c) for AY 2012-13 quashed as the show cause notice was defective for failing to strike off irrelevant portions and failing to specify the charge; CIT(A)'s deletion of the penalty is sustained.

Final Conclusion: Revenue's appeal is dismissed and the order of the Commissioner (Appeals) deleting the penalty for assessment year 2012-13 is upheld.

Assessment under section 153A in respect of concluded (unabated) proceedings - requirement of incriminating material to disturb a completed assessment - power to assess or reassess total income following search and seizure - application of section 68 to share application money

Assessment under section 153A in respect of concluded (unabated) proceedings - requirement of incriminating material to disturb a completed assessment - application of section 68 to share application money - Whether additions made under section 68 in proceedings initiated under section 153A could be sustained in respect of an assessment already concluded under section 143(1) in the absence of any incriminating material found in the course of search - HELD THAT: - The Tribunal examined the scheme of section 153A and the statutory distinction between abated (pending) and unabated (concluded) assessments as on the date of search. For abated assessments the Assessing Officer is required to determine total income afresh under section 153A and may assess both disclosed and undisclosed income; in respect of concluded assessments (for example, those completed under section 143(1) where the time for issuing a notice under section 143(2) has expired) the statute permits interference with the completed assessment only if incriminating material relatable to that assessment year is found in the course of the search. Applying this principle to the facts, the Tribunal found no incriminating material was unearthed in respect of share capital, share application money or share premium; the addition of share application money under section 68 was therefore not permissible in the section 153A exercise. Because the decision was founded on the preliminary absence of incriminating material, the Tribunal declined to adjudicate the merits of the section 68 question and directed deletion of the addition. [Paras 8, 9]

Addition of share application money made under section 68 in assessment framed under section 153A for Assessment Year 2010-11 deleted; appeal allowed.

Final Conclusion: The Tribunal held that a concluded assessment under section 143(1) cannot be disturbed under section 153A in the absence of incriminating material relatable to that assessment year; accordingly the addition towards share application money was deleted and the assessee's appeal allowed.

Addition as unexplained cash credit under section 68 - genuineness of share transactions supported by contract notes, demat records and bank transfers - violation of principles of natural justice by relying on statements recorded behind assessee's back without disclosure or opportunity to cross-examine - disallowance as undisclosed expenditure under section 69C - suspicions and surmises cannot substitute legal evidence

Addition as unexplained cash credit under section 68 - genuineness of share transactions supported by contract notes, demat records and bank transfers - suspicions and surmises cannot substitute legal evidence - Addition of sale proceeds of shares as unexplained cash credit under section 68 was not justified and was deleted. - HELD THAT: - The Tribunal found that the assessee's purchases and sales of 25,000 shares were effected through a recognized broker on BSE, were reflected in the assessee's demat account, were supported by contract notes and bank statements and the sale attracted STT; the AO did not establish that the trades were not executed at the traded prices or that the assessee or broker participated in manipulation. The AO relied on generalized investigation reports, comparisons with other scrips and statements allegedly recorded by investigators, but did not produce those materials or any direct evidence linking the assessee to rigging. Mere abnormal price movement and generalized modus operandi, without material admissible against the assessee, cannot meet the revenue's burden to prove that the consideration is unexplained or that the transactions were bogus. Accordingly, on the facts and documents on record the Tribunal held that addition under section 68 could not be sustained and directed deletion. [Paras 31, 33, 34, 35, 36]

Addition under section 68 deleted; appeal allowed on this ground.

Violation of principles of natural justice by relying on statements recorded behind assessee's back without disclosure or opportunity to cross-examine - use of third-party statements and investigation reports to draw adverse inference - AO's and Commissioner (Appeals)'s reliance on statements and investigation material not supplied to the assessee and without opportunity to cross-examine vitiated the assessment. - HELD THAT: - The Tribunal observed that the AO referred to statements of certain persons and to material said to be collected by the Investigation Wing but did not furnish copies to the assessee nor afford opportunity to test or cross-examine those sources. Reference to such undisclosed statements and irrelevant material to draw adverse inference against the assessee is impermissible; reliance on such materials without giving the assessee a chance to rebut misleads and creates suspicion but cannot substitute admissible evidence. That failure contributed to the infirmity in sustaining the addition. [Paras 31, 33, 34, 36]

Assessment and appellate reliance on undisclosed investigation statements and reports held to be vitiating; such materials could not form basis for addition.

Disallowance as undisclosed expenditure under section 69C - consequential relief where primary transactions held genuine - Addition under section 69C (5% of sale proceeds) in respect of alleged payments to brokers/entry operators was deleted. - HELD THAT: - Having held that the purchase and sale transactions were genuine and not shown to be bogus by the revenue, the Tribunal found no basis to sustain the consequential addition under section 69C. The section 69C addition was dependent on the primary finding of sham transactions; once that finding failed, the s.69C addition could not stand. [Paras 37]

Addition under section 69C deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2014-15, deleted the addition under section 68 of the Act and the consequential addition under section 69C, holding that the transactions were supported by contract notes, demat records and bank transfers and that reliance on undisclosed investigation material without giving the assessee an opportunity to rebut vitiated the orders below.

Recognition of interest income on non-performing assets on receipt basis - conflict between RBI prudential norms for income recognition and Income-tax Rules/Act - disallowance under section 40(a)(ia) and operation of proviso where payee has included receipt in its income - deduction under section 37 for payments to employees (substance over nomenclature) - allowability of write-off of unutilised CENVAT credit as revenue expenditure - computation of total income for deduction under section 36(1)(viia)(b) before setting off brought forward losses - inapplicability of section 115JB to banks not preparing accounts as a company - grant of refund/credit of tax deducted at source where recipient income is not taxable in India

Recognition of interest income on non-performing assets on receipt basis - conflict between RBI prudential norms for income recognition and Income-tax Rules/Act - Interest income in respect of advances classified as NPA is not to be assessed on accrual (mercantile) basis but only on receipt basis in the facts of the case. - HELD THAT: - The Tribunal found the loan accounts to be sticky and doubtful of recovery and observed that recognition of interest income only on receipt basis is in consonance with RBI prudential norms and the theory of real income. The decision of the Hon'ble Supreme Court in Southern Technologies and the Delhi High Court in CIT vs Vasisth Chay Vyapar Ltd were followed. The Tribunal treated the issue as already decided in the assessee's favour in the assessee's own preceding years and held that interest on NPA should not be taxed on accrual; Rule 6EA/IT Rules do not override the settled position favouring real income recognition where accounts are NPA under RBI norms.

Grounds 2(a) to 2(d) of the assessee appeal allowed; addition on account of interest on NPA deleted.

Disallowance under section 40(a)(ia) and operation of proviso where payee has included receipt in its income - No disallowance under section 40(a)(ia) is permissible where the payer furnishes the prescribed CA certificate showing the payee has offered the receipts to tax. - HELD THAT: - The assessee produced the Chartered Accountant certificate in the prescribed form under the proviso to section 201(1) proving that the payee had included the lease rent in its income and paid tax. Relying on the retrospective operation of the second proviso to section 40(a)(ia) (as held by the jurisdictional High Court in the cited Tirupati Construction decision) the Tribunal held that disallowance could not be made and directed that the disallowance be deleted.

Grounds 3(a) to 3(d) of the assessee appeal allowed; Revenue ground dismissed.

Deduction under section 37 for payments to employees (substance over nomenclature) - Payments described as 'unfunded pension' but actually paid directly to employees and subjected to TDS are allowable as business expenditure under section 37. - HELD THAT: - The Tribunal examined records showing direct payments to employees, approval by competent authority, TDS compliance and Form 16 evidence. It held that substance controls over nomenclature: these payments were welfare/ remuneration payments made under employer-employee relationship, irretrievably paid to employees and not contributions to any fund. The Brooke Bond authority relied upon by the AO concerned contributions to a fund and was distinguishable. Accordingly the disallowance was reversed.

Grounds 4(a) to 4(c) of the assessee appeal allowed; expenditure of Rs. 4.09 crores to be allowed.

Allowability of write-off of unutilised CENVAT credit as revenue expenditure - Write-off of unutilised CENVAT credit, made where there is reasonable certainty it will not be utilised in the normal course of business, is an allowable deduction. - HELD THAT: - The Tribunal accepted the assessee's commercial decision to downsize the relevant business division and the rationale that future output service tax liabilities would be insufficient to utilise the input credit. Applying accounting principles and the ICAI guidance, and noting that the CENVAT component originally arose from revenue expenditure, the Tribunal held that a bona fide write-off undertaken on commercial expediency meets the test of being revenue expenditure under section 37 and directed allowance of the write-off. Alternative grounds need not be considered.

Grounds 5(a) and 5(d) of the assessee appeal allowed; deduction for the CENVAT write-off to be granted.

Computation of total income for deduction under section 36(1)(viia)(b) before setting off brought forward losses - For computing deduction under section 36(1)(viia)(b) the 'total income' is to be taken without setting off brought forward business losses; brought forward losses under Chapter VI are not to be deducted while computing the business income for this purpose. - HELD THAT: - Following precedents of coordinate Benches and the reasoning that total income for the clause must be computed for business income as per sections 30 to 43D, the Tribunal accepted the DRP direction upholding the assessee's position. The set off of brought forward losses (chapters 70-80) is distinct and does not form part of computation under sections 30 to 43D; any consequential timing difference may be addressed in the subsequent year.

Revenue ground (ii) dismissed; DRP direction in favour of the assessee upheld.

Inapplicability of section 115JB to banks not preparing accounts as a company - Provisions of section 115JB are not applicable to the assessee bank for the year under appeal. - HELD THAT: - The Tribunal followed earlier co-ordinate bench decisions holding section 115JB inapplicable unless the assessee is a company registered under the Companies Act and prepares accounts under Section 211 and Schedule VI; the Finance Act 2012 amendment applies from AY 2013-14 onwards. On these bases the Tribunal rejected the Revenue's contention.

Revenue ground (iii) dismissed.

Grant of refund/credit of tax deducted at source where recipient income is not taxable in India - Refund/credit of TDS deducted on interest paid to head office/overseas branches must be granted where the payment is not chargeable to tax in India. - HELD THAT: - The Tribunal noted the issue had been consistently decided in the assessee's favour in earlier years and that the assessee is entitled to refund of TDS deducted on amounts not chargeable to tax in India. The AO was directed to grant the refund; the Tribunal rejected the Revenue's submission that refund must be sought from the TDS officer rather than the assessing officer.

Revenue grounds (iv) to (vi) dismissed; AO directed to grant refund of TDS.

Verification and grant of credit for advance tax challans - Credit for advance tax paid is to be verified and granted by the assessing officer. - HELD THAT: - The Tribunal treated short credit of advance tax as a matter of verification of challans and directed the AO to verify the payment evidence and grant credit accordingly; the relief was allowed for statistical purposes subject to verification.

Grounds 6(a) and 6(b) of the assessee appeal allowed for statistical purposes; AO to verify and grant advance tax credit.

Final Conclusion: The assessee's appeal is partly allowed insofar as the principal substantive reliefs sought (deletion of addition for interest on NPA, deletion of disallowance under section 40(a)(ia) on furnished CA certificate, allowance of unfunded pension payments as business expenditure, allowance of CENVAT write-off, grant of advance tax credit) are granted; several revenue grounds are dismissed (including TDS refund and applicability of section 115JB), and the assessing officer is directed to give consequential reliefs including verification of advance tax challans and grant of refunds/credits where due.

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness of share subscribers - onus shifting between assessee and Assessing Officer in proceedings under section 68 - scope of inquiry into source and source of source under section 68 read with Section 106 of Evidence Act - requirement of independent verification by Assessing Officer of subscriber's credentials - disallowance under section 14A and Rule 8D - applicability in absence of exempt income

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness of share subscribers - onus shifting between assessee and Assessing Officer in proceedings under section 68 - requirement of independent verification by Assessing Officer of subscriber's credentials - Validity of addition of share capital and share premium of Rs.1,80,00,000 as unexplained cash credit under section 68 - HELD THAT: - The Tribunal upheld the conclusion of the ld CITA that the assessee had discharged its primary onus under section 68 by furnishing identity, corroborative bank evidence, share allotment documents, audited financials and ITRs of six of the seven subscribing companies, and that payments were by account payee cheques from bank accounts of the subscribers. The Tribunal applied settled authorities emphasising that once the assessee establishes identity, genuineness and creditworthiness vis a vis the assessee, the burden shifts to the Assessing Officer to disprove the materials or to make further enquiries from the AOs of the subscribers. The Tribunal observed that the Assessing Officer merely drew adverse inference for non production of subscriber directors without conducting independent enquiries (such as invoking section 131 or seeking verification from the AOs of the subscribers) and therefore additions based on suspicion and surmise were not sustainable. Reliance was placed on precedents holding that source of source need not be proved by the assessee and that bank entries and scrutiny assessments of the subscribers support their genuineness. Applying these principles to the material on record, the Tribunal found no cogent material to treat the receipts as assessee's undisclosed income and confirmed deletion of the addition. [Paras 5]

Addition made by the Assessing Officer treating share capital and premium as unexplained u/s 68 is deleted; the ld CITA's order is confirmed and the ground of Revenue is dismissed.

Disallowance under section 14A and Rule 8D - applicability in absence of exempt income - Sustainability of disallowance under section 14A invoked by application of Rule 8D(2) where assessee claimed no exempt income - HELD THAT: - The Tribunal accepted the ld CITA's conclusion that section 14A and Rule 8D cannot be applied in the facts of the case because the assessee did not claim any exempt income. The Tribunal relied upon binding and persuasive authorities (including a Madras High Court decision with the SLP dismissed by the Supreme Court) holding that section 14A disallowance is not leviable in the absence of any exempt income claimed by the assessee. In view of that settled position, the Tribunal found no infirmity in deletion of the disallowance computed under Rule 8D(2). [Paras 6]

Disallowance under section 14A/Rule 8D is deleted; the ld CITA's order is confirmed and the ground of Revenue is dismissed.

Final Conclusion: Both impugned deletions granted by the Commissioner of Income tax (Appeals) - (i) deletion of addition under section 68 in respect of share capital and premium, and (ii) deletion of disallowance under section 14A/Rule 8D - are upheld; the Revenue's appeal is dismissed.

Summary order. Notice issued on the special leave petition and on the prayer for interim relief; matter tagged with SLP (C) No. 1507/2017.

Penalty under Section 114 of the Customs Act, 1962 - Connivance and abetment in attempted export - Misuse of CHA licence and lending of licence - Reliance on factual findings to attract penal liability

Penalty under Section 114 of the Customs Act, 1962 - Reliance on factual findings to attract penal liability - Whether penalty under Section 114 could be imposed on the appellants in the absence of evidence linking them to the smuggling activity - HELD THAT: - The Court examined the materials placed before the Original Authority and the Tribunal and found that there was abundant evidence connecting the appellants to the attempted export. The show cause notice and subsequent inquiry recorded that the CHA licence of M/s.T. Shanmugasundaram was used, statements and factual inquiries revealed involvement of the appellants' clerks at the CHA office, tampering of the container and replacement of declared cargo with red sanders, and the purported exporter disowned the consignment. The Commissioner conducted a factual inquiry and the Tribunal affirmed those findings. On that basis the Court held that the imposition of penalty under Section 114 was supportable by the factual findings and consequently validly imposed. [Paras 11, 12, 13, 17, 19]

Penalty under Section 114 was validly imposed on the appellants having regard to the factual findings linking them to the attempted smuggling.

Connivance and abetment in attempted export - Misuse of CHA licence and lending of licence - Whether the appellants could be held as abettors or members of the smuggling racket - HELD THAT: - The Court accepted the Commissioner and Tribunal's findings that the appellants were intimately connected with the offence: the modus operandi involved use of another CHA's licence, contact and conspiracy between named persons, failure of the appellants to disown or disclose the illegal acts of the person identified as the mastermind, and affirmative indicia such as presence of clerks and the manner of filing/clearing. The Tribunal's conclusion that the appellants acted in connivance, lent their CHA licence and participated in the scheme was endorsed, rejecting appellants' plea of ignorance in the absence of supporting evidence. [Paras 13, 14, 15, 16, 17]

The appellants were correctly held to have abetted the attempted export and to have acted in connivance with the smuggling racket.

Penalty on proprietor and proprietary firm - Consolidated liability for misuse of licence - Whether penalty could be upheld on both the proprietor and the proprietary firm (M/s.Transquare Clearing and Forwarding) on the same grounds - HELD THAT: - The Court noted the Tribunal's finding that the proprietor and the proprietary firm were part of the common modus operandi, that the CHA licence was used despite suspension and that the firm arranged containers and freight forwarding as part of the scheme. Given the factual findings of joint participation and lending of licence, the Court found no error in upholding penalty on both the proprietor and the proprietary firm on the same factual grounds. [Paras 15, 16, 17]

Penalty on both the proprietor and the proprietary firm was correctly upheld by the Tribunal.

Final Conclusion: The High Court upheld the Tribunal's dismissal of the appeals, answering the substantial questions of law against the appellants and in favour of the Revenue, and dismissed the appeals and connected applications.

Refund of terminal excise duty - deemed export - prospective effect of policy amendment - clarificatory versus substantive amendment - DGFT circular and policy interpretation

Refund of terminal excise duty - deemed export - clarificatory versus substantive amendment - Entitlement to refund of terminal excise duty for supplies made to EOU during June, 2009 to October, 2009 under FTP 2009-14. - HELD THAT: - The Court held that for supplies to EOUs made in the period June, 2009 to October, 2009 the entitlement is governed by paras 8.2 to 8.5 of the FTP as they stood at the relevant time. Where the policy then provided for refund of terminal excise duty for deemed exports, a subsequent amendment or clarification which exempts such supplies ab initio cannot be applied retrospectively to deny a refund already payable under the earlier policy. The Court relied on Division Bench precedents holding that supplies falling within deemed export attracted refund under the 2009 Policy and expressly disagreed with the view that the DGFT circular of 15-3-2013 and subsequent interpretation could be given retrospective effect insofar as it nullifies refunds payable under the earlier policy. Consequently the communication of 31-3-2016 denying refund on the basis of ab initio exemption was quashed. [Paras 7, 8, 9, 10]

Petitioner entitled to have refund claim considered under the 2009 Policy; communication dated 31-3-2016 quashed.

DGFT circular and policy interpretation - prospective effect of policy amendment - Whether the authorities must reconsider the petitioner's refund claim in accordance with the 2009 Policy. - HELD THAT: - The Court directed that the respondent shall consider the petitioner's refund application in accordance with the 2009 FTP and pass appropriate orders in law. The court treated the amendment as prospective and therefore ordered that the existing administrative communications denying refund be set aside and the claim be processed under the provisions as they stood for the relevant period. The consideration is to be completed expeditiously within the time directed by the Court. [Paras 10, 11]

Respondent directed to consider and decide the refund claim in accordance with the 2009 Policy, preferably within two months.

Final Conclusion: The communication dated 31-3-2016 denying refund of terminal excise duty is quashed; the respondent is directed to reconsider and decide the petitioner's refund claim for supplies made June, 2009 to October, 2009 in accordance with the FTP 2009-14 as it stood for that period, within the time ordered.

Admissibility of retracted statement - Corroboration of co-accused statement - Material collected under section 108 of Customs Act, 1962 - Reliability of documentary corroboration (invoices and travel agent letter) - Scope of evidence to link an individual with alleged smuggling

Admissibility of retracted statement - Corroboration of co-accused statement - Scope of evidence to link an individual with alleged smuggling - Whether the retracted voluntary statement of a co-accused (Jitendra Sharma) could alone or in conjunction with other material implicate the appellant. - HELD THAT: - The Tribunal noted that the statement of Jitendra Sharma was retracted and that a plausible motive to falsely implicate the appellant was suggested. However, the Court applied the principle that a retracted or co-accused statement, although requiring caution, may be used in conjunction with independent corroborative material to connect an individual with the contravention. Relying on the approach in Naresh J Sukhawani, the retracted statement need not stand alone: where independent evidence exists which links the accused to the offence, the contents of such statements can form part of the evidentiary matrix. The Tribunal found that even if the retracted statement is discounted as sole proof, it did not preclude drawing a conclusion when read together with corroborative material showing facilitation of travel and related transactions. [Paras 6, 9]

The retracted statement, though not conclusive by itself, could be considered together with independent corroborative material to implicate the appellant; the conclusion drawn by the original authority in this regard was sustainable.

Material collected under section 108 of Customs Act, 1962 - Reliability of documentary corroboration (invoices and travel agent letter) - Whether the letter from the travel agent and the invoices - produced in exercise of powers under section 108 - were admissible and reliable corroborative evidence to link the appellant to the passengers and their travel arrangements. - HELD THAT: - The Tribunal examined the travel agent's letter dated 20th August 2007 and the invoices which referred to the appellant. It rejected the contention that such material could not be relied upon because it was not a statement recorded under section 108; the statutory power includes calling for records and documents as well as recording statements, and the two are distinct but complementary modes of collecting material. The travel agent had been issued a requisition for production of documents by a gazetted officer, and the covering letter documenting the agent's response did not fail the reliability test. The invoices were not controverted and, together with the agent's letter, supplied independent corroboration of the appellant's role in facilitating the travels. [Paras 7, 8]

The travel agent letter and invoices, obtained under powers exercised pursuant to section 108, were admissible and constituted reliable corroborative material supporting the finding against the appellant.

Final Conclusion: The Tribunal upheld the original authority's conclusion that the appellant was implicated by the combined effect of the co-accused statement and independent documentary material; the appeal was dismissed and the penalty confirmed.

Claim for refund of duty - period of limitation / limitation of one year - payment under protest - computation of limitation from date of appellate order - saving clause: "Save as otherwise provided in this section" - interpretation of proviso versus sub-section (1B)

Payment under protest - period of limitation / limitation of one year - interpretation of proviso versus sub-section (1B) - Whether the second proviso to Section 27(1) (that the one year limitation shall not apply where duty was paid under protest) excludes the operation of the one year limitation in the petitioner's case despite sub section (1B) which computes the one year from the date of an appellate order. - HELD THAT: - The Court found that the second proviso to sub section (1) of Section 27 expressly provides that the one year limitation shall not apply where duty or interest has been paid under protest. Sub section (1B) begins with the words "Save as otherwise provided in this section", and therefore is subject to express contrary provisions within the section. Clause (b) of sub section (1B) only fixes the terminus a quo for computing the one year where it applies; it does not override or negate the proviso. Sub section (1B) must be read with sub section (1), and the phrase "period of limitation of one year" in sub section (1B) refers to the one year mentioned in sub section (1). To hold otherwise would render the proviso otiose. The proviso therefore applies to the petitioner who paid duty under protest and the one year limitation does not operate to bar the refund claim in this case. [Paras 7, 8, 9, 10, 11]

The second proviso to Section 27(1) applies and the one year limitation does not bar the petitioner's refund claim despite sub section (1B).

Claim for refund of duty - computation of limitation from date of appellate order - precedential applicability - Whether the Supreme Court's decision in Dena Snuff (interpreting Section 11B of the Central Excise Act) governs the present case under Section 27 of the Customs Act. - HELD THAT: - The Court held that Dena Snuff is not applicable because it construed Section 11B of the Central Excise Act, which requires computing limitation from the "relevant date" and does not contain a provision analogous to sub section (1B) that is expressly prefaced by words making it subject to other provisions of the section. Section 11B's Explanation defines the relevant date and operates independently of a proviso like that in Section 27(1). Thus the reasoning in Dena Snuff cannot be transplanted to Section 27 of the Customs Act, and reliance on that decision does not support rejecting the operation of the proviso in the present case. [Paras 12]

Dena Snuff (interpreting Section 11B) is distinguishable and does not control the interpretation of Section 27 of the Customs Act in this case.

Claim for refund of duty - reasonableness and temporal limitation - Whether acceptance of the petitioner's contention would leave refund claims time barred at any indefinite time and thereby defeat limitation entirely. - HELD THAT: - The Court rejected the respondents' apprehension that accepting the proviso would permit refund applications at any time. It observed that an application for refund must still be made within a reasonable period, which is fact sensitive and determined case by case. This pragmatic limitation does not justify denying a statutory exception expressly provided for payments made under protest. [Paras 13]

Accepting the proviso does not eliminate temporal restraint; refund claims remain subject to the obligation to be made within a reasonable time, but the statutory one year bar does not apply where duty was paid under protest.

Claim for refund of duty - remedy granted - Final disposition of the petitioner's challenged refund claim. - HELD THAT: - On the construction of Section 27 and application of the proviso, the impugned order rejecting the refund on limitation grounds was set aside. The Court directed computation and payment of the refund to the petitioner by a specified date. [Paras 14]

Impugned order set aside; petitioner's claim for refund allowed and directed to be computed and paid.

Final Conclusion: The Court held that where duty was paid under protest the second proviso to Section 27(1) excludes operation of the one year limitation prescribed in Section 27 read with sub section (1B); the appellate order dating rule in sub section (1B) does not override that proviso, Dena Snuff (construing Section 11B) is distinguishable, and the refund claim is allowed with the impugned order set aside.

Contempt of court - forfeiture of deposited amount - deduction of TDS and other applicable taxes - permitted revenue-generating activities subject to furnishing of account and fixation of royalty - discharge of Receiver and Official Liquidator subject to furnishing of accounts - SEBI to replenish expenses and pay Receiver's and Liquidator's expenses - filing of affidavit explaining sale and utilisation of sale proceeds

Forfeiture of deposited amount - contempt of court - Validity and consequences of the negotiated payment schedule for purchase of Aamby Valley City properties and enforcement measures for non-compliance - HELD THAT: - The Court recorded that purchasers (M/s. Sai Rydam Realtors Pvt. Ltd. and M/s. Prime Downtown Estates Pvt. Ltd.) have agreed a payment arrangement towards the agreed sale consideration. The Court approved the staged deposits: an initial Demand Draft already handed over, Rs. 200 crores to be deposited by 24.07.2018, a further Rs. 200 crores by 16.08.2018, and the balance by 12.09.2018. The Court authorised deduction of TDS and other applicable taxes as per law. The Court directed that failure to comply with the stipulated time-limits shall render the companies liable to contempt proceedings and may lead to forfeiture of the amounts deposited; the Court warned of possible imprisonment of directors in case of contempt. The Court further prohibited any obstruction once the transaction has been directed to take place.

Payment schedule approved; TDS/taxes may be deducted; non-compliance attracts contempt proceedings and forfeiture of amounts deposited, and no obstruction to the transaction is permitted.

Permitted revenue-generating activities subject to furnishing of account and fixation of royalty - Permissibility and conditions for continuing revenue-generating activities at the properties pending sale - HELD THAT: - The Court permitted revenue-generating activities to continue at the properties, subject to conditions: accounts of such activities must be furnished to the Receiver within two weeks and royalty to the Receiver must be fixed. The Official Liquidator and Court Receiver raised no objection to allowing such activities, but continuation was conditional upon transparent accounting and royalty arrangements to the Receiver.

Revenue-generating activities allowed on condition of furnishing accounts within two weeks and fixation of royalty payable to the Receiver.

Filing of affidavit explaining sale and utilisation of sale proceeds - Requirement for explanation regarding sale of Plaza Hotel in New York and utilisation of its sale proceeds - HELD THAT: - The Court noted that the Plaza Hotel in New York has been sold and directed the respondent-contemnor to file an affidavit explaining the basis of that sale and detailing how the sale proceeds have been utilised. This direction is aimed at accounting for assets and realisations relevant to the matters before the Court.

Respondent-contemnor directed to file an affidavit explaining the sale and utilisation of proceeds of the Plaza Hotel.

Discharge of Receiver and Official Liquidator subject to furnishing of accounts - SEBI to replenish expenses and pay Receiver's and Liquidator's expenses - Discharge of the Receiver and Official Liquidator and payment/reimbursement of expenses - HELD THAT: - Having considered the Report of the Court Receiver and Official Liquidator, the Court ordered their discharge but made the discharge contingent upon furnishing of the required accounts. The Court permitted SEBI to replenish expenses incurred by it and directed SEBI to pay the expenses incurred by the Receiver and the Liquidator. The accounts of such expenses are to be furnished to the contemnor.

Receiver and Official Liquidator discharged after furnishing accounts; SEBI authorised to replenish its expenses and directed to pay Receiver's and Liquidator's expenses, with accounts to be furnished to the contemnor.

Final Conclusion: The Court approved the negotiated sale-payment schedule with specified deadlines and tax deductions, imposed contempt and forfeiture consequences for non-compliance, allowed conditioned continuation of revenue-generating activities, directed an affidavit about the Plaza Hotel sale, discharged the Receiver and Official Liquidator subject to accounts being furnished, and directed SEBI to meet and replenish specified expenses; matter listed for further hearing on 14.09.2018.

Voluntary revision of financial statements under Section 131 - requirement to give notice to the Central Government and the Income tax authorities - power of Tribunal to permit replacement of financial statements - improper forfeiture of right to file objections - impleadment of the Central Government as party respondent - rule making power of the Central Government under Section 131(3)

Voluntary revision of financial statements under Section 131 - requirement to give notice to the Central Government and the Income tax authorities - power of Tribunal to permit replacement of financial statements - improper forfeiture of right to file objections - impleadment of the Central Government as party respondent - Validity of the Tribunal's order under Section 131 in permitting replacement of the financial statements without impleading the Central Government and after purportedly forfeiting the appellant's right to file objections - HELD THAT: - Section 131(1)-(3) permits a company to seek Tribunal approval to replace earlier financial statements, but the proviso requires the Tribunal to give notice to the Central Government and the Income tax authorities and consider any representations. Clause (3) empowers the Central Government to frame rules governing procedure and related matters. In the present case the Tribunal granted approval for replacement of the 2015 16 financial statements but did so without impleading the Central Government and on the basis that the appellant's right to file objections was forfeited. The appellate court found that the Tribunal failed to observe the statutory requirement to give notice to the Central Government and Income tax authorities and wrongly presumed forfeiture of the appellant's right to file objections. Because no rule has been shown to delegate the Central Government's role to the Regional Director, the Regional Director could not be treated as empowered to represent the Central Government for purposes of Section 131. The impugned order dated 27 March 2018 was therefore set aside and the respondent was permitted to apply to implead the Central Government; the Tribunal was directed to allow impleadment and thereafter to pass appropriate orders after notice and consideration in accordance with law. [Paras 5, 6, 7]

Impugned order under Section 131 set aside; respondent permitted to implead the Central Government and, upon impleadment and notice, the Tribunal to reconsider and pass appropriate orders in accordance with law.

Power of Tribunal to permit replacement of financial statements - rule making power of the Central Government under Section 131(3) - Whether merits of the petition granting revised financial statements were adjudicated - HELD THAT: - The appellate court expressly refrained from deciding the merits of the underlying petition. The order sets aside the Tribunal's grant of approval for replacement of the financial statements for procedural infirmity (failure to implead/notify Central Government and wrongful forfeiture of objection rights) and directs fresh consideration after proper impleadment and notice. Consequently, the merits remain open for the Tribunal to decide on re hearing. [Paras 8]

Merits not adjudicated; Tribunal to decide merits afresh after impleadment and notice.

Final Conclusion: The appeal is allowed: the Tribunal's order of 27 March 2018 approving replacement of the financial statements is set aside for failure to comply with Section 131's proviso requiring notice to the Central Government and Income tax authorities and for wrongly treating the appellant's right to object as forfeited; the respondent may apply to implead the Central Government, and thereafter the Tribunal shall, after notice and consideration, pass appropriate orders in accordance with law; merits of the petition remain undecided.

Mandatory pre filing requirements under Section 7(3)(a) of the Insolvency and Bankruptcy Code - maintainability of insolvency petition filed by a foreign financial creditor - representation by advocate in insolvency petition - application of precedent in Macquarie Bank Limited Vs. Shilpi Cable Technologies Limited - admission of petition by National Company Law Tribunal on evidence of default

Mandatory pre filing requirements under Section 7(3)(a) of the Insolvency and Bankruptcy Code - maintainability of insolvency petition filed by a foreign financial creditor - application of precedent in Macquarie Bank Limited Vs. Shilpi Cable Technologies Limited - Whether non compliance with the procedural requirements of Section 7(3)(a) barred admission of the petition filed by a foreign financial creditor and whether the ratio in Macquarie Bank applies to financial creditors. - HELD THAT: - The Court held that the strict procedural prerequisites of Section 7(3)(a) cannot be allowed to defeat a petition where compliance is impossible or impracticable for a foreign creditor. Relying on the reasoning in Macquarie Bank Limited Vs. Shilpi Cable Technologies Limited , which relaxed impossible pre filing formalities in the context of foreign operational creditors, the Court extended that approach to financial creditors. Accordingly, failure to lodge the particular statutory form or to obtain an Indian institutional certificate - if impossible of compliance by a foreign creditor - did not justify setting aside an admission that was otherwise supported by evidence of default.

NCLAT erred in setting aside the NCLT admission solely on the basis of non compliance with Section 7(3)(a); the Macquarie Bank principle applies to foreign financial creditors.

Representation by advocate in insolvency petition - admission of petition by National Company Law Tribunal on evidence of default - Whether a petition filed through an advocate is maintainable and whether the NCLT was justified in admitting the petition on evidence of default. - HELD THAT: - The Court accepted that a petition lodged by an advocate on behalf of a foreign creditor is maintainable and that the NCLT, having found ample evidence of default in the debt owed, was entitled to admit the petition. The appellate interference by the NCLAT was therefore misplaced where the tribunal had recorded facts establishing default and proceeded to admit the petition.

A petition filed by an advocate is maintainable and the NCLT's admission based on recorded evidence of default was rightly restored.

Final Conclusion: The appeals are allowed; the judgment of the NCLAT setting aside the NCLT's admission is set aside and the NCLT order admitting the petition is restored, applying the Macquarie Bank principle to foreign financial creditors and holding petitions filed by advocates maintainable.

Approval of resolution plan under Section 31 - compliance with Section 30(2) - certificate under Regulation 39(4)(a) - committee of creditors' right to approve or reject plans - confidentiality obligations of the resolution professional - investigation under Section 217 and IBBI Inspection and Investigation Regulations, 2017 - fixation of insolvency resolution process costs and resolution professional fees - binding nature of an approved resolution plan

Approval of resolution plan under Section 31 - compliance with Section 30(2) - certificate under Regulation 39(4)(a) - binding nature of an approved resolution plan - Whether the resolution plan submitted by CP Ispat Private Limited meets the requirements of Section 30(2) and is to be approved under Section 31. - HELD THAT: - The Resolution Professional submitted the plan and certified compliance with the requirements of Sub section (2) of Section 30 and Regulation 39(4)(a). The Committee of Creditors approved CP Ispat Private Limited's plan with 100% voting share after deliberations. The adjudicating authority examined the RP's report, the plan and supporting documents and was satisfied that the requirements of Section 30(2) and related regulations were met. The plan contains terms, implementation schedule, and provisions for management and supervision during its term. Consequently, under Sub section (1) of Section 31 the authority is obliged to approve a plan that satisfies Section 30(2). [Paras 18, 19, 20, 21, 28]

The resolution plan of CP Ispat Private Limited is approved under Section 31 and is binding on the corporate debtor and other stakeholders.

Committee of creditors' right to approve or reject plans - Whether this Bench may reopen or re examine the CoC's reasons for rejecting other resolution plans. - HELD THAT: - The record shows that the CoC considered the competing plans in meetings, conducted interactive sessions and rejected certain plans (including promoters' plans and belated submissions) for reasons recorded by the CoC. Where a plan has been rejected or approved by the CoC, the adjudicating authority's scrutiny is limited to whether the approved plan meets the statutory requirements under Section 30(2). The Bench therefore will not re open or adjudicate upon the commercial or evaluative reasons recorded by the CoC for rejecting competing plans. [Paras 11, 12, 14, 15]

The CoC's decision to approve or reject plans will not be re opened by this Bench; only compliance with Section 30(2) is examinable here.

Confidentiality obligations of the resolution professional - investigation under Section 217 and IBBI Inspection and Investigation Regulations, 2017 - Allegation that the Resolution Professional breached confidentiality by disclosing a rival bid and whether an investigation should be ordered by this Bench. - HELD THAT: - The complaint alleged disclosure of the complainant's bid to another applicant and a resulting higher counter bid. The adjudicating authority reviewed the RP's reports and the CoC proceedings and found no material to show that the RP disclosed the complainant's bid amount to the successful applicant. Given the absence of supporting evidence, the Bench declined to order an investigation itself. The Bench observed that aggrieved parties have statutory recourse to approach the IBBI under Section 217 read with the IBBI (Inspection and Investigation) Regulations, 2017 for investigation. [Paras 16, 17]

Allegations of breach of confidentiality are not proved before this Bench; no investigation is ordered here and the complainant may seek investigation through the IBBI under Section 217.

Fixation of insolvency resolution process costs and resolution professional fees - committee of creditors' right to approve or reject plans - Observations on the fixation of insolvency resolution costs and lump sum fees payable to the resolution professional. - HELD THAT: - The Bench noted instances of fixation of insolvency resolution costs and lump sum fees by the CoC without evident consideration of the volume, nature or complexity of the CIRP and observed an absence of statutory guidance on fee fixation for resolution professionals. The adjudicating authority took judicial notice of the practice and urged that IBBI consider framing regulations or guidelines to ensure that fees and costs are not unreasonable and do not impede the prospects of revival of a corporate debtor. [Paras 22, 23, 24, 25]

The observations on fee fixation are recorded and the Bench urged IBBI to consider suitable regulations or guidelines concerning insolvency resolution costs and professional fees.

Final Conclusion: The resolution plan of CP Ispat Private Limited is approved and is binding on the corporate debtor and its stakeholders; the moratorium ceases and the RP is directed to forward all CIRP records to the IBBI. Objections to the plan based on CoC rejections or alleged confidentiality breaches are not sustained before this Bench; parties dissatisfied may approach the IBBI for investigation under Section 217.

Freezing of bank account - pre-deposit for filing appeal before CESTAT - right to file statutory appeal - mandamus to de-freeze bank account - interim relief by Appellate Tribunal - limited operation of bank account for pre-deposit

Freezing of bank account - pre-deposit for filing appeal before CESTAT - right to file statutory appeal - limited operation of bank account for pre-deposit - interim relief by Appellate Tribunal - Petitioner's entitlement to operate its frozen bank account to the extent necessary to make the pre-deposit required for instituting the statutory appeal before the CESTAT. - HELD THAT: - The petitioner suffered an assessment order dated 05.03.2018 against which an appeal lies to the CESTAT and such appeal requires making a statutory pre-deposit. The freezing of the petitioner's bank account has paralysed its day-to-day activities and would prevent the petitioner from making the pre-deposit and instituting the appeal. Balancing the enforcement interest of the respondents with the petitioner's right of appeal, the Court directed that the respondents permit operation of the subject bank account only to the extent of the amount required to be pre-deposited when preferring the appeal. The Court observed that the petitioner remains free to seek interim relief before the Appellate Tribunal, including orders concerning operation of the account for any balance amounts. The third respondent bank is to ensure operation is permitted only if there is no other due payable by the petitioner to the bank and to monitor withdrawals so as not to exceed the pre-deposit amount permitted by this order. [Paras 7, 8, 9]

Respondents 1 and 2 to permit operation of the frozen account only to the extent of the pre-deposit required for filing the appeal; the third respondent bank to monitor and ensure withdrawals do not exceed that amount and that no other bank liabilities exist.

Final Conclusion: Writ petition disposed by directing respondents to permit operation of the frozen bank account solely for effecting the pre-deposit necessary to file the appeal before the CESTAT; petitioner may seek further interim relief before the Appellate Tribunal; no costs.

Refund claim - un-billed revenue - provisional valuation in accounts - re-negotiation of consideration - corresponding entries in counterparty ledger - re-adjudication on facts

Refund claim - provisional valuation in accounts - un-billed revenue - Whether the appellant received less consideration than provisionally recorded in its 2010-11 accounts so as to entitle it to refund of service tax on the differential amount. - HELD THAT: - The Tribunal found that the appellant had recorded a provisional amount in its March 2011 balance sheet and later paid tax on that figure, while claiming the final invoiced amount for the same services was lower after re-negotiation. However, the appellant's ledger entries showed multiple payments with identical document and posting dates, and the totals did not conclusively demonstrate that the appellant actually received an amount materially less than the provisional figure. The record before the Tribunal did not establish, on the material available, that the realized consideration was lower than the figure appearing as un-billed revenue in the 2010-11 accounts. Consequently, the factual question of whether a refund is due could not be finally determined on the existing record and requires verification of corresponding entries and transactional completion. [Paras 3, 4, 5]

Remanded for verification of factual aspects underlying the refund claim; not decided on merits.

Corresponding entries in counterparty ledger - re-negotiation of consideration - Whether the entries in the ledger of M/s Vodafone India Ltd correspond to the provisional amount recorded by the appellant, thereby indicating an earlier fixation of price subsequently revised. - HELD THAT: - The Tribunal observed that if Vodafone India Ltd's ledger contains an entry corresponding to the appellant's provisional figure, it would indicate that the price had been earlier negotiated at that higher amount and later revised, which is material to the refund claim. Conversely, absence of such corresponding entry would suggest the lower amount was the first agreed price. The available material did not establish which of these factual alternatives obtained; hence the point must be verified by examining the counterparty's ledger to ascertain whether the higher provisional figure was reflected there. [Paras 4, 5]

Remanded for adjudicating authority to verify corresponding entries in Vodafone India Ltd's books.

Service completion period - re-adjudication on facts - Whether the service was completed in 2010-11 or continued into 2011-12 and the temporal allocation of the four payment entries in the appellant's ledger. - HELD THAT: - The Tribunal noted ambiguity in the ledger as to whether the services were completed in 2010-11 or continued into 2011-12, and that four payment entries in the appellant's ledger required classification as to the period to which they relate. This temporal determination is material to entitlement to refund and to correct tax periods for assessment and refund. The Tribunal directed that the original adjudicating authority ascertain the period of completion and the periods to which the four ledger entries relate, permitting the appellant to produce necessary evidence. [Paras 5, 6]

Remanded for fresh examination and determination of the period in which the service was completed and the period relatable to each ledger entry.

Final Conclusion: Appeal allowed by way of remand: matter is restored to the original adjudicating authority for factual verification and re-adjudication on the specified points (completion period of service, correspondence in Vodafone India Ltd's ledger, and period-relation of the four ledger entries); the authority is directed to decide the matter within three months from receipt of this order and the appellant is free to produce supporting evidence.

Revisionary power of the Commissioner - imposition of penalty under Sections 76, 77 and 78 - discretion under Section 80 to remit or drop penalty - revisional authority cannot substitute assessing authority's discretion - suppression of facts / evasion as requisite for penalty under Section 78 - invocation of extended period of limitation in revision proceedings

Revisionary power of the Commissioner - discretion under Section 80 to remit or drop penalty - revisional authority cannot substitute assessing authority's discretion - imposition of penalty under Sections 76, 77 and 78 - Whether the Commissioner in exercise of revisionary jurisdiction under Section 84 can impose penalties which the original adjudicating authority, in the exercise of its discretion under Section 80, had declined or reduced. - HELD THAT: - The Tribunal examined the record and earlier authorities and noted that the original adjudicating authority had found absence of intention to evade tax, recorded that service tax was paid with interest before issuance of the original show cause notice, and in exercise of the discretion under Section 80 had dropped penalties under Sections 76 and 77 and imposed a nominal penalty under Section 78. Relying on judicial precedent, the Tribunal held that when the assessing authority has exercised its statutory discretion under Section 80 to refrain from imposing penalty, the revisional authority cannot, by invoking Section 84, reinstate or impose penalty for the first time nor substitute its own discretion for that of the original authority. The Tribunal referred to authorities establishing that the ingredients for penalty must be shown and that Section 78 (penalty for evasion/suppression) requires specific findings of suppression/fraud; absent such findings in the original proceedings and where the assessing authority has exercised discretion to not impose penalty, revision cannot be used to impose or enhance penalty. Applying those principles to the facts, the Tribunal concluded that the imposition of penalties by the Commissioner in revision was not sustainable.

The imposition of penalties by the Commissioner in revision was unsustainable; the impugned revisionary order imposing penalties under Sections 76, 77 and Section 78 is set aside.

Final Conclusion: The appeal is allowed; the revisionary order imposing penalties is quashed and the penalty imposed by the Commissioner under Sections 76, 77 and 78 is set aside.

Revised return under Rule 7B - supersession of original return - clerical mistake and bona fide revision - availment and reversal of Cenvat Credit - penalty under Section 78 and setting aside under Section 80

Revised return under Rule 7B - supersession of original return - availment and reversal of Cenvat Credit - clerical mistake and bona fide revision - Effect of filing a revised service tax return under Rule 7B within the prescribed period on an earlier return which erroneously availed and utilised Cenvat credit - HELD THAT: - The Tribunal found that the appellant availed and utilised Cenvat credit only for the month of January 2007 while no credit was availed for the other months covered by the service tax return. The inadvertent availment for January 2007 was promptly rectified by filing a revised return on 08.05.2007, within the period contemplated by Rule 7B of the Service Tax Rules, 1994. The Court held that Rule 7B is intended to cater for such contingencies and that a timely filed revised return supersedes the original return. Consequently, the initial return which showed availment and utilisation of credit stands displaced by the corrected return and no cognizance need be taken of the earlier erroneous entry. [Paras 4, 5]

The appeal by M/s Amardeep Construction is allowed: the revised return filed under Rule 7B supersedes the original return and the incidental availment and utilisation of Cenvat credit in the original return is not to be given effect.

Penalty under Section 78 and setting aside under Section 80 - Survival of penalty imposed under Section 78 where the underlying demand for duty does not survive - HELD THAT: - Revenue challenged the Commissioner (Appeals) invocation of Section 80 to set aside the penalty under Section 78. The Tribunal noted that since the substantive demand for duty was not sustained (the demand did not survive in view of the superseding revised return), the penalty imposed consequentially could not survive. Therefore there was no basis to sustain the penalty in the absence of a subsisting duty demand. [Paras 6]

Revenue's appeal is dismissed: the penalty under Section 78 does not survive where the demand for duty has been set aside.

Final Conclusion: The Tribunal allowed the appellant's appeal by holding that a timely revised return filed under Rule 7B supersedes the original return and negates the effect of an inadvertent availment of Cenvat credit, and dismissed the Revenue's appeal against setting aside the penalty since the underlying duty demand did not survive.

Taxability of services provided from outside India and received in India - Extended period of limitation under service tax - Interpretation of Taxation of Services (Provided from outside India and received in India) Rules, 2006 - Rule 3(iii) - Service tax leviable on the service provided and not on the person - Simultaneous imposition of penalties under Section 76 and Section 78

Taxability of services provided from outside India and received in India - Interpretation of Taxation of Services (Provided from outside India and received in India) Rules, 2006 - Rule 3(iii) - Extended period of limitation under service tax - Demand of service tax for the period 18.04.2006 to 30.09.2007 confirmed on merits and held not to be barred by limitation. - HELD THAT: - The Tribunal held that where the recipient of service is located in India, services provided from abroad for use in relation to business or commerce fall within Rule 3(iii) of the Taxation of Services (Provided from outside India and received in India) Rules, 2006 and are taxable as services received in India. Relying on the clarification in the decisions upholding Section 66A (as noted) and on the reasoning that a commission agent abroad procuring orders for an Indian manufacturer constitutes taxable business activity, the demand was sustained on merits. On limitation, the Tribunal applied precedent which found that mere nondisclosure in ST-3 returns does not automatically bar extended period invocation where details were not placed on record and agreements/payments were furnished only after investigation commenced; having regard to those facts and authorities, the extended period could be invoked and the demand was held sustainable on limitation grounds as well.

Demand of service tax for 18.04.2006 to 30.09.2007 upheld both on merits and as not barred by limitation.

Simultaneous imposition of penalties under Section 76 and Section 78 - Penalties: penalty under Section 76 set aside and penalty under Section 78 sustained with conditional concession to pay 25%. - HELD THAT: - Applying the principle that simultaneous penalties under Sections 76 and 78 cannot be sustained, the Tribunal set aside the penalty under Section 76 and upheld the penalty under Section 78. In view of the Supreme Court guidance restricting the grant of the 25% concession unless conditions are met, the Tribunal extended the benefit that the appellant may pay the entire tax and interest and 25% of the penalty within one month of receipt of the order to avail the concessional settlement.

Penalty under Section 76 is set aside; penalty under Section 78 is upheld, with the appellant permitted to pay tax, interest and 25% of the penalty within one month to avail the concession.

Final Conclusion: The appeal confirming service-tax demand for the period 18.04.2006 to 30.09.2007 is dismissed; the tax demand is sustained on merits and limitation, penalty under Section 76 is set aside, and penalty under Section 78 is upheld subject to the conditional 25% concession on payment of tax and interest within one month.

De novo adjudication on quantum of service tax liability - classification as manufacture versus Business Auxiliary Service - exemption under Notification No.08/2005 ST - appropriation of amounts paid during investigation - penalty for suppression, fraud or misdeclaration under the Finance Act

De novo adjudication on quantum of service tax liability - classification as manufacture versus Business Auxiliary Service - exemption under Notification No.08/2005 ST - appropriation of amounts paid during investigation - Whether the demand for service tax as framed in the show cause notice requires fresh adjudication on quantum and related contentions including classification and claim of exemption. - HELD THAT: - The Tribunal found that the appellants contested the departmental valuation (Rs. 15,76,81,173) and maintained an alternative computation (Rs. 12,30,97,874), and further sought benefit of Notification No.08/2005 ST and advanced the plea that the activity constituted manufacture. The adjudicating authority did not address or analyse these submissions in its impugned order. In the interests of justice the matter of quantum of tax liability (and attendant interest) must be reconsidered afresh by the adjudicating authority so that the appellants' contentions, documentary evidence and claim of exemption are examined and determined de novo. The remand is limited to consideration of the appellant's arguments and submissions with regard to quantum and applicable interest; the adjudicator shall give the appellants an opportunity to place additional documents and be heard. [Paras 5]

Matter remanded for de novo adjudication limited to quantum of service tax liability and interest, with opportunity to consider the appellants' classification and exemption contentions and documents.

Penalty for suppression, fraud or misdeclaration under the Finance Act - Whether penalties under the Finance Act (Sections 77 and 78) are justified in the facts of the case. - HELD THAT: - The Tribunal accepted the appellants' submission that non discharge of tax arose from a bona fide interpretational dispute as to whether the activity was manufacture or a taxable service, and noted that the processing was carried out only for Public Sector Undertakings. On these findings the elements of suppression, fraud or deliberate concealment necessary to sustain penalties under the cited provisions are absent. Accordingly, the imposition of penalties under the Finance Act was held to be unjustified. [Paras 5]

Penalties under Sections 77 and 78 of the Finance Act are set aside.

Final Conclusion: The appeal is partly allowed: penalties imposed under the Finance Act are set aside; the demand as to quantum of service tax and interest for October 2004 to March 2009 is remanded for de novo adjudication limited to consideration of the appellants' classification, exemption claim and supporting documents, with opportunity to be heard.

Management, Maintenance or Repair Service - Notification No 12/2003-ST - exemption of value of goods and materials sold - documentary proof requirement for exemption - valuation - abatement for value of goods sold used in provision of service - composition scheme for Works Contract Services - appropriation/adjustment of tax paid

Management, Maintenance or Repair Service - Classification of the services rendered by the respondent - HELD THAT: - The Tribunal accepted the Commissioner (Appeal)'s conclusion that the services provided to the client fall within the category of "Management, Maintenance or Repair Service" as defined in the Finance Act, 1994 and recorded that classification under that category during the period of demand. This classification was applied in determining the applicable valuation and entitlement to exemptions under Notification No 12/2003-ST. [Paras 2, 4]

Services classified as Management, Maintenance or Repair Service.

Notification No 12/2003-ST - exemption of value of goods and materials sold - documentary proof requirement for exemption - valuation - abatement for value of goods sold used in provision of service - Admissibility of benefit under Notification No 12/2003-ST for computing service tax liability - HELD THAT: - The Tribunal examined the documentary record relied upon by the Commissioner (Appeal) - including work orders, VAT returns, VAT challans, a chartered accountant's certificate and ledger entries - and found that the respondent had substantially complied with the requirement of Notification No 12/2003-ST to demonstrate the value of goods and materials sold. Applying the established principle that value of goods on which sales tax has been paid is to be excluded from service tax valuation, the Tribunal held that benefit of Notification No 12/2003-ST could not be denied and should be allowed while computing the service tax payable. [Paras 7, 8]

Benefit under Notification No 12/2003-ST admissible as respondents substantially complied with documentary requirements; value of goods to be excluded in valuation.

Composition scheme for Works Contract Services - appropriation/adjustment of tax paid - appropriation/adjustment of tax paid under composite scheme against demand - Adjustment of service tax already paid under the composite/works-contract scheme against the demand computed after allowing Notification No 12/2003-ST - HELD THAT: - The Commissioner (Appeal) directed that service tax already paid at the composite rate be appropriated against the liability computed under the Management, Maintenance or Repair Service classification after allowing the benefit of Notification No 12/2003-ST. The Tribunal noted that the correctness of the Commissioner (Appeal)'s calculation (including the Commissioner (Appeal)'s working assumption about the percentage of value attributable to materials) requires verification from the records and that the demand must be worked out accordingly. The Tribunal concluded that revenue should perform the computation and recover any balance, rather than litigate the point without undertaking the prescribed adjustment and calculation. [Paras 2, 9]

Already paid composite tax to be appropriated against liability after allowing Notification No 12/2003-ST; revenue to compute and recover any balance.

Penalty for wrong classification - Validity of penalty imposed under the Finance Act for wrong classification - HELD THAT: - The Commissioner (Appeal) had upheld penalty of Rs. 10,000 under the Finance Act for wrong classification. The Tribunal, while dismissing the revenue appeal against the Commissioner (Appeal)'s order in respect of differential duty, did not disturb the Commissioner (Appeal)'s conclusion upholding the penalty for wrong classification and disposed of the cross-objection. [Paras 2, 10]

Penalty under the Finance Act for wrong classification upheld by Commissioner (Appeal) and not disturbed by the Tribunal.

Valuation - verification and computation remanded - Remand for verification and computation of the material-value percentage and final demand - HELD THAT: - Although the Commissioner (Appeal) proposed a percentage (stating materials deemed to be 67% of gross value) for computing value attributable to materials, the Tribunal observed that the correctness of that percentage requires verification from documents. The Tribunal therefore directed that the exact value of materials sold during the provision of services be worked out from records, and the service tax demand recalculated and adjusted with amounts already paid. This direction requires fresh computation/verification by the revenue, rather than an adjudication on merits of the percentage itself by the Tribunal. [Paras 9]

Computation of value of materials and resultant demand remitted to revenue for verification and working out; Tribunal dismissed substantive appeal but directed recalculation and recovery if any balance remains.

Final Conclusion: Revenue's appeal is dismissed. The Tribunal upheld classification as Management, Maintenance or Repair Service and held that benefit of Notification No 12/2003 ST is available on the documentary record; service tax already paid under the composite scheme is to be appropriated against the liability after allowing the notification, and revenue is directed to verify the material value computation, work out the demand accordingly and recover any unpaid balance. Cross objection disposed of.

Locus standi to claim refund - claim for refund under Section 11B of the Central Excise Act - reverse charge mechanism - refund of tax unlawfully collected - disclaimer certificate - remand for fresh consideration

Locus standi to claim refund - claim for refund under Section 11B of the Central Excise Act - Appellant's entitlement to maintain refund claim despite service tax having been deducted by the Housing Board - HELD THAT: - The Tribunal applied the principle laid down by the Hon'ble Supreme Court in Oswal Chemicals & Fertilizers Ltd. that Section 11B uses the expression 'any person' and permits a person who has borne the incidence of duty (even if not the formal payer) to claim refund, provided the incidence was not passed on. The Tribunal held that this reasoning establishes that the appellant has locus standi to file the refund claim, and noted that the Department had entertained a similar claim by another contractor, rendering the Commissioner (Appeals)'s rejection on locus-standi grounds untenable. [Paras 6, 7]

Appellants have locus standi to file the refund claim; rejection by Commissioner (Appeals) on this ground is untenable.

Disclaimer certificate - refund of tax unlawfully collected - remand for fresh consideration - Whether the refund claim should be adjudicated in light of the disclaimer certificate issued by the Housing Board Haryana - HELD THAT: - The Tribunal observed that the Housing Board Haryana issued a disclaimer certificate dated 30.01.2018 which was not before the Commissioner (Appeals) when the impugned order dated 31.01.2018 was passed. Given the materiality of that certificate to the question whether the appellants borne the incidence and are entitled to refund, the Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeals) to examine the claim afresh, taking the disclaimer certificate into account and providing the appellants a fair opportunity to be heard. [Paras 8, 9]

Impugned order set aside; matter remanded to Commissioner (Appeals) to decide refund claim afresh after considering the disclaimer certificate dated 30.01.2018.

Final Conclusion: The Tribunal held that the appellant has locus standi to seek refund under Section 11B and remitted the matter to the first appellate authority for fresh adjudication in light of the disclaimer certificate of Housing Board Haryana, directing that the appellant be given a fair opportunity to present their case.

Manpower recruitment or supply agency service - service tax liability - employer-employee relationship - facilitation versus supply of manpower - deduction from sale proceeds for payment of labour

Manpower recruitment or supply agency service - employer-employee relationship - facilitation versus supply of manpower - Whether the appellants rendered manpower recruitment or supply agency service and thus attracted service tax for the periods in question. - HELD THAT: - The appellants merely identified availability of harvest labourers and maintained records, while the growers negotiated and remained liable to pay cutting charges. There was no employer-employee relationship between the mill and the cutting labourers, the mill did not fix cutting rates and the labourers could refuse work for any grower. Amounts recovered by way of cane-cutting charges were deducted from the price payable to growers and paid as wages to cutters on a weekly basis. On the identical facts the Tribunal and the Commissioner (Appeals) have held that such arrangements amount to facilitation and not to supply of manpower attracting service tax. Applying that reasoning to the facts before it, the Tribunal concluded the demand under the category of manpower recruitment/supply agency service was unsustainable.

Demand of service tax, interest and penalties as raised on the ground of manpower recruitment or supply agency service set aside; appeals allowed.

Final Conclusion: The Tribunal set aside the adjudicated demands and penalties for the specified periods, allowing the appeals and granting consequential relief.

Condonation of delay - Inordinate delay - Bona fide explanation - Discretion of Tribunal in condoning delay - Substantial interest of justice - Costs as condition for condonation

Condonation of delay - Inordinate delay - Bona fide explanation - Discretion of Tribunal in condoning delay - Costs as condition for condonation - Application for condonation of delay in filing appeal of 1380 days was considered and allowed subject to conditions. - HELD THAT: - The Tribunal noted the delay of 1380 days and observed that such delay was inordinate, placing on the appellant the burden of furnishing a convincing explanation free from negligence or nonchalance. The Tribunal accepted that the appellant's explanation in the condonation application was sketchy and that the assessee had in fact responded to statutory notices and appeared before the lower appellate authority, facts which were not controverted. Balancing the procedural lapse against the asserted merits and the interest of substantial justice, and exercising its discretion, the Tribunal condoned the delay. Because the explanation was not foolproof, the Tribunal imposed a condition in the exercise of that discretion: a cost of Rs. 10,000/- for both years to be deposited in favour of the Army Central Welfare Fund payable at New Delhi, with compliance to be reported by the stated date, failing which the condonation would be subject to the Registry's listing rules.

Delay of 1380 days condoned in the interest of justice, subject to deposit of the prescribed cost and compliance by the specified date; appeals to be listed for final disposal thereafter.

Final Conclusion: The Tribunal exercised its discretion to condone the inordinate delay of 1380 days in filing the appeals, conditioning relief on payment of costs to the Army Central Welfare Fund and compliance by the date directed, and directed registry to list the appeals for final disposal on merit.

Dominant service test - principal/ancillary service distinction - security service - cash van service - service tax liability on composite contract

Dominant service test - security service - cash van service - principal/ancillary service distinction - service tax liability on composite contract - Whether amounts treated as receipts for 'security service' and taxed as such where the appellant provided cash van services with security guards are exigible to service tax as 'security services' or as 'cash van' (transportation) services. - HELD THAT: - The Tribunal examined the agreements between the appellants and the banks and found that the appellants contracted separately for provision of security guards and for provision of cash vans to transport cash. Although cash vans were accompanied by security guards, the dominant or principal service in the composite arrangement was the transportation of cash by cash van. Applying the dominant service test and the principal/ancillary service distinction, the Tribunal held that where transportation of cash by cash van is the principal service, attendant security is ancillary and the receipts for the cash-van activity cannot be recharacterised as 'security service'. The Tribunal relied on its earlier decision in Kingfisher Airlines Ltd. v. Commissioner of Service Tax (as affirmed by the Supreme Court in Commissioner v. Jet Airways ) where the dominant service was held determinative and excess-baggage charges were not taxable as carriage of goods when passenger carriage was the principal service. Applying that principle, the Tribunal concluded that the differential amounts assessed as 'security service' were not exigible to service tax as such and attendant penalties were not imposable. [Paras 6, 7]

Impugned demands and penalties under the category of 'security service' set aside; appeals allowed with consequential relief.

Final Conclusion: The Tribunal held that the transportation of cash by cash vans was the dominant/principal service and the presence of security guards was ancillary; therefore the differential receipts could not be taxed as 'security service' for the period 01.04.2005 to 31.05.2010 and the impugned orders and penalties were set aside.

Erection, Commissioning or Installation Services - Works Contract Service - Classification of Service for Service Tax - Abatement towards supply of material

Erection, Commissioning or Installation Services - Works Contract Service - Abatement towards supply of material - Whether the activity of supplying and erecting the Fire Hydrant System is taxable as Erection, Commissioning or Installation Services and whether abatement for supply of material was correctly allowed. - HELD THAT: - The Tribunal found that the appellant carried out both supply of the Fire Hydrant System and its erection/installation at the premises of Krishi Upaj Mandi. The nature of the activity-supply combined with erection and installation-falls squarely within the category of Erection, Commissioning or Installation Services. The alternative classification under Works Contract Service was not pressed before the authorities below and thus was not accepted as a basis to displace the concurrent findings. The Tribunal also noted that while determining liability the authorities had correctly granted the prescribed abatement towards the supply of materials under the relevant notification, and there was no basis recorded to interfere with that concession. [Paras 6]

Demand for service tax sustained under Erection, Commissioning or Installation Services with abatement allowed; appeal rejected.

Final Conclusion: The Tribunal upheld the tax demand treating the activity as Erection, Commissioning or Installation Services, affirmed grant of abatement towards supply of material, and dismissed the appeal.

Withdrawal of writ petition with liberty to approach appellate forum - continuation of bank guarantee pending appeal - appellate tribunal to examine interim security before admitting appeal - adjudication on merits to proceed unhindered by limitation contentions - time bound filing of appeal

Withdrawal of writ petition with liberty to approach appellate forum - The writ petition was permitted to be withdrawn with liberty to file an appeal before the CESTAT within a stipulated time. - HELD THAT: - The High Court granted the petitioner liberty to withdraw the writ petition and permitted filing of the statutory appeal before the Customs Excise and Service Tax Appellate Tribunal if instituted within two weeks. Consequential orders include dismissal of the writ as withdrawn and cancellation of the next date of hearing. No substantive adjudication on the merits of the underlying tax dispute was undertaken by this Court.

Writ petition dismissed as withdrawn with liberty to file the appeal within two weeks.

Continuation of bank guarantee pending appeal - appellate tribunal to examine interim security before admitting appeal - adjudication on merits to proceed unhindered by limitation contentions - The CESTAT was directed to consider, if an appeal is filed within two weeks, whether the initial bank guarantee (to the extent of 10% of the determined liability) should continue during the pendency of the appeal, and to decide the merits without being influenced by any limitation issue. - HELD THAT: - The Court left to the Tribunal the question of interim protection in the form of continuation of the initial bank guarantee to the extent sought by the petitioner, directing that this aspect be considered and appropriate interim orders be passed before the Tribunal proceeds to hear the main appeal on merits. Further, the Court expressly recorded that the Tribunal should decide the merits of the contentions urged by the parties free from any restraint arising from a limitation plea, thereby ensuring that limitation, if raised, does not preclude adjudication on merits at the appellate stage.

CESTAT to decide the continuance of the initial bank guarantee and thereafter decide the appeal on merits, uninfluenced by limitation contentions, if the appeal is filed within the stipulated period.

Final Conclusion: The High Court dismissed the writ petition as withdrawn while granting liberty to file an appeal before the CESTAT within two weeks; the Tribunal is directed to consider continuation of the initial bank guarantee to the extent indicated and to decide the appeal on merits without being precluded by limitation issues.

Summary order. Appeals disposed of in terms of SRD Nutrients Private Limited v. Commissioner of Central Excise, Guwahati .

Summary order. Appeals disposed of with liberty to the appellants to seek rectification from the Tribunal in relation to the finding that the blinds are movable and the consequential penalty; liberty to approach this Court again if necessary; no opinion expressed on the merits.

Principles of natural justice - service of show cause notice - jurisdiction under Article 226 - maintainability of writ despite alternative statutory remedy - vitiation of proceedings for lack of jurisdiction - appellate hearing cannot cure lack of adjudicatory hearing

Jurisdiction under Article 226 - maintainability of writ despite alternative statutory remedy - Whether the High Court may entertain the writ petition challenging orders passed by an adjudicating authority and its appellate authority situated outside the State - HELD THAT: - The petitioners carry on business within the territorial limits of this High Court and the effect of the impugned orders will be felt within its territorial jurisdiction. A substantial part of the cause of action arose within this High Court's jurisdiction so as to enable it to assume jurisdiction under Article 226. The existence of a statutory appellate remedy does not automatically oust writ jurisdiction where the challenge alleges lack of jurisdiction or breach of the principles of natural justice. The respondents' contention that only the jurisdictional High Court (where the appellate office is located) can entertain the petition was not accepted in the facts of this case, particularly having regard to the long pendency of the petition and the respondents' failure to challenge the interim order or seek vacation on jurisdictional grounds.

The writ petition is maintainable before this High Court and the Court may exercise jurisdiction under Article 226 despite the availability of statutory alternative remedies.

Principles of natural justice - service of show cause notice - appellate hearing cannot cure lack of adjudicatory hearing - vitiation of proceedings for lack of jurisdiction - Whether the adjudication and the appellate order are vitiated by non-service of the show cause notice and breach of the principles of natural justice - HELD THAT: - The petitioners averred that they were not served with the show cause notice and were not heard at the adjudication stage. The Appellate Authority's order contains only conjectural findings that the notice and original order were served; the material before the Appellate Authority did not justify drawing such an inference. Respondents failed, despite opportunities, to place affidavits or records before the Court to substantiate service. The Court reiterated that granting a hearing at the appellate stage does not cure an initial denial of the right to be heard at the adjudicatory stage; denial of the right of hearing at the adjudication stage vitiates the entire proceeding. On this basis the proceedings were held to be vitiated and liable to be quashed, while leaving open the right of the appropriate authority to initiate fresh proceedings in accordance with law.

The adjudication and consequential appellate order are quashed for breach of the principles of natural justice due to non-service and non-hearing; the authorities remain free to initiate fresh proceedings in accordance with law.

Final Conclusion: The writ petition was allowed: the impugned adjudicatory proceedings and the appellate order were quashed for want of service and breach of natural justice; the High Court entertained the petition under Article 226 notwithstanding the availability of statutory remedies, and the appropriate authority may, if entitled, initiate fresh proceedings in accordance with law.

Confiscation - clandestine removal - burden of proof in excise confiscation - corroboration of statements - identification marks and duty paid invoices - penalty on director for confiscation

Confiscation - identification marks and duty paid invoices - burden of proof in excise confiscation - Confiscation of goods seized from M/s Rahul Transport Sales Co. Pvt. Ltd. set aside - HELD THAT: - Tribunal found that 301 cartons seized were not traced as transported directly from ZTPL's factory and that identification numbers of a large proportion of cartons matched duty paid invoices shown by ZTPL. The adjudicating authority had recorded that no parallel identification marks were proven and the Department did not rebut that specific finding. There was no independent tangible evidence establishing clandestine removal of the 45 cartons in question or any other cartons; affidavits and invoices produced by the assessee supported lawful clearance. In these circumstances the confiscation was unsustainable. [Paras 10]

Confiscation of goods valued at Rs. 26,90,205/- from M/s Rahul Transport Sales Co. Pvt. Ltd. set aside.

Confiscation - burden of proof in excise confiscation - corroboration of statements - Confiscation of goods seized from Shivam Agency, Nagpur set aside - HELD THAT: - Record showed the 21 cartons were purchased by Shivam Agency from Geeta Trading Company and sold under a commercial invoice with a lorry receipt; there was no evidence that ZTPL cleared these goods without payment of duty. In absence of proof of clandestine clearance by ZTPL, confiscation could not be sustained. [Paras 10]

Confiscation of goods valued at Rs. 1,08,517/- from Shivam Agency, Nagpur set aside.

Confiscation - identification marks and duty paid invoices - burden of proof in excise confiscation - Confiscation of goods seized from Mustafa Sales Agency, Ahmedabad set aside - HELD THAT: - Ten cartons detained at Mustafa Sales Agency were shown to have been sold under ZTPL's Invoice No.329 dated 19.05.2005, a document part of the seized material; revenue did not contend that the seized goods were different from those covered by the invoice. No proprietor's statement or other evidence established clandestine removal by ZTPL. The Commissioner (Appeals) erred in relying on batch numbers without correlating with invoices. [Paras 10]

Confiscation of goods valued at Rs. 36,000/- from Mustafa Sales Agency set aside.

Confiscation - corroboration of statements - burden of proof in excise confiscation - Confiscation of goods seized from M/s Balaji Pan Centre, Chennai set aside - HELD THAT: - Although some identification numbers tallied and certain cartons were released by the adjudicating authority, the remainder of seized bags relied solely on an uncorroborated statement of Santosh Kumar Dubey which was retracted on cross examination. There was no documentary evidence of transportation from ZTPL's factory to Chennai, no corroboration from independent witnesses or transporters, and the Commissioner (Appeals) failed to demonstrate clandestine clearance by ZTPL. Sole reliance on an unsupported statement was held insufficient. [Paras 10]

Confiscation of goods valued at Rs. 4,09,080/- from M/s Balaji Pan Centre, Chennai set aside.

Confiscation - corroboration of statements - burden of proof in excise confiscation - Confiscation of goods seized from Nobel Joseph, Chennai set aside - HELD THAT: - The Commissioner (Appeals) had itself dropped the demand because allegations stemmed only from the party's statement and private records without independent corroboration. Nobel Joseph's statements and replies indicated legitimate purchases and sales on payment of duty; no material established movement of goods from ZTPL's premises to his Chennai outlet. Absent corroborative evidence, confiscation could not be sustained. [Paras 10]

Confiscation of goods valued at Rs. 26,800/- from Nobel Joseph, Chennai set aside.

Clandestine removal - burden of proof in excise confiscation - corroboration of statements - Charge of clandestine manufacture and removal and the consequential duty demand and penalties not established against M/s ZTPL and others - HELD THAT: - The Tribunal examined the broader demand (including the demand reduced to Rs. 30,54,404/-) and concluded that no unaccounted goods were found at ZTPL's factory, stocks of raw materials and finished goods tallied with records, and there was no confessional statement from any ZTPL employee nor statements from transporters proving clandestine transport. Letters relied on by the Department (e.g., Gopal Sales reconciliation letter) did not constitute independent evidence of clandestine supplies; identification marks produced by DGCEI were matched by duty paid invoices shown by ZTPL. Established authorities require independent, tangible and corroborative evidence for clandestine removal; mere probability or uncorroborated statements are insufficient. Accordingly the charge of clandestine manufacture and removal was not proved and attendant duty demands and penalties could not stand. [Paras 16, 17, 18, 19, 20]

The demand based on clandestine manufacture and removal and penalties imposed on ZTPL, its director and others are unsustainable; the appeals are allowed with consequential reliefs.

Penalty on director for confiscation - natural justice and scope of show cause notice - Penalties imposed on the Director and others set aside for lack of jurisdiction and absence of notice or material - HELD THAT: - The Tribunal held that penalty could not be imposed on persons who were not made the subject of the show cause notice and where there was no material to show personal culpability, knowledge or personal gain. Imposition of enhanced penalty by Commissioner (Appeals) in absence of any notice or departmental appeal for enhancement was beyond jurisdiction. In view of the failure to prove clandestine removal, penalties on ZTPL, its director and others could not be sustained. [Paras 13, 19]

Penalties imposed on the Director and others set aside.

Final Conclusion: The Tribunal held that the Department failed to prove clandestine manufacture or removal by M/s Zen Tobacco Pvt. Ltd. with independent, tangible and corroborative evidence; confiscations from the five premises and the consequential duty demands and penalties were unsustainable. The appeals of M/s ZTPL and others are allowed and confiscations and penalties are set aside, with consequential reliefs as per law.

Valuation under Rule 10A (manufacture by or on behalf of another) - transaction value under Section 4(1)(a) read with Rule 6 (sale of body fitted on chassis) - deduction of taxes (Excise Duty/VAT/CST) for quantification of duty - setting aside of penalties in view of interpretative uncertainty

Valuation under Rule 10A (manufacture by or on behalf of another) - transaction value under Section 4(1)(a) read with Rule 6 (sale of body fitted on chassis) - deduction of taxes (Excise Duty/VAT/CST) for quantification of duty - Whether the value of bodies built on chassis is to be re-determined under Rule 10A or on the basis of transaction value under Section 4(1)(a) read with Rule 6, and whether duty quantification must allow deductions for taxes paid by the principal manufacturer and the body-builder. - HELD THAT: - The appellants conceded that the broader legal issue is covered by earlier decisions of the Tribunal and the Bombay High Court in the assessee's own case, which support application of Rule 10A. Notwithstanding that concession, the Tribunal found the appellants' contention about quantification - that the department excluded only excise duty and failed to deduct Sales Tax/VAT paid by the principal manufacturer and CST paid by the appellants - to be a valid point of calculation. The Tribunal distinguished the facts from Grob Tea (relied upon by Revenue) because, unlike Grob Tea, the appellants did advance data and a specific methodology for deduction. Consequently the Tribunal did not finally reopen the rule-applicability question on merits but remanded the matter to the Original Authority to quantify duty afresh, directing that reasonable and applicable deductions on account of Excise Duty, VAT and CST paid by M/s. TML and by the appellants be considered while arriving at duty liability. [Paras 3, 5, 6]

Matter remanded to the Original Authority for re-quantification of duty allowing applicable deductions (Excise Duty/VAT/CST) while upholding the legal position covered by earlier decisions.

Setting aside of penalties in view of interpretative uncertainty - Whether penalties imposed in respect of the demands should be sustained. - HELD THAT: - Having regard to the interpretative nature of the valuation issue and the Tribunal's and High Court's earlier treatment of similar questions in the assessee's own decisions, the Tribunal held that penalties are not sustainable. The appellants had relied upon precedent where penalties were set aside in similar circumstances, and the Tribunal accepted that approach here, observing that the dispute concerned interpretation of Rule 10A and related valuation principles. [Paras 3, 5, 6]

Penalties are set aside.

Final Conclusion: Appeals allowed in part: valuation/quantification remanded to the Original Authority to recompute duty after allowing reasonable deductions for Excise Duty/VAT/CST paid by the principal manufacturer and the appellants; penalties set aside.

Extended period of limitation - suppression of facts - abatement under Notification No. 01/2006-ST - CENVAT credit - ST-3 return disclosure

Extended period of limitation - suppression of facts - ST-3 return disclosure - Whether the extended period of limitation could be invoked in view of the disclosure made in the ST-3 returns. - HELD THAT: - The Tribunal found that the appellants had disclosed in their ST-3 returns that they were availing the abatement under Notification No. 01/2006 and had also recorded details of CENVAT credit in Column 5B. Because those details were placed on record and thus brought to the Department's notice, there was no concealment or suppression of facts with the requisite intention to evade service tax. In the absence of such suppression, the legal foundation for invoking the extended period is missing. Applying this determinative reasoning to the facts of the case, the invocation of the extended period by issuance of the Show Cause Notice dated 17.03.2011 was held to be unjustified and the demand thereby raised is time-barred. [Paras 6, 7]

Extended period of limitation cannot be invoked; demand set aside as barred by limitation.

Abatement under Notification No. 01/2006-ST - CENVAT credit - ST-3 return disclosure - Whether availing CENVAT credit disentitles the assessee to claim the abatement under Notification No. 01/2006-ST and the evidentiary consequence of such availing when disclosed in returns. - HELD THAT: - The Tribunal accepted the legal principle in the Notification that abatement is not available to an assessee who avails CENVAT credit on inputs or input services. However, the Tribunal emphasised that the appellants had in fact disclosed the CENVAT credit particulars in their ST-3 returns. That disclosure means the Department was informed of the credit availed; consequently, even though the abatement would be prima facie unavailable if credit was taken, the factual disclosure precluded treating the matter as suppression warranting extended limitation. The Tribunal therefore did not proceed to quantify or sustain the substantive demand on merits because the proceedings were set aside on limitation grounds. [Paras 6]

Acknowledgement that abatement is not claimable if CENVAT credit is availed, but because credit was disclosed in ST-3 returns, the matter could not be treated as suppression and the demand was barred by limitation.

Final Conclusion: The Tribunal allowed the appeal, holding that the extended period could not be invoked since the assessee had disclosed the abatement claim and details of CENVAT credit in ST-3 returns; accordingly the demand was set aside as time-barred and the impugned order quashed with consequential reliefs.

Input service - Cenvat Credit - brokerage/commission as input service - retrospective application - declaratory notification - beneficial circular applied retrospectively

Input service - Cenvat Credit - brokerage/commission as input service - Brokerage/commission paid for sale of constructed residential units is an input service eligible for Cenvat Credit. - HELD THAT: - The Tribunal examined the definition of input service in Rule 2(1) of the Cenvat Credit Rules, 2004 and the nature of brokerage/commission obtained in selling constructed residential units. Applying the definition and the reasoning of the Commissioner (Appeals), the Tribunal held that such brokerage/commission falls within services used in relation to sales promotion and is therefore an input service for the appellant. On that basis the availment of Cenvat credit on brokerage/commission was held to be permissible and the order-in-original confirming demand was set aside to the extent challenged by the Department. [Paras 6, 10]

The amount of brokerage/commission is eligible as an input service and the Commissioner (Appeals) order upholding Cenvat credit is affirmed; Revenue's appeal dismissed on this ground.

Retrospective application - declaratory notification - beneficial circular applied retrospectively - Explanation inserted by Notification No.2/2016-CE(NT) (adding sales promotion by way of sale on commission basis) is declaratory and has retrospective effect. - HELD THAT: - The Tribunal noted the Explanation to Rule 2(1) introduced by the Second Amendment Rules, 2016, which states that sales promotion includes sale of dutiable goods on commission basis. The Tribunal found that the Explanation merely confirms and gives effect to an earlier Board circular and extends the benefit to assessees; consequently it should be treated as declaratory and retrospective. The Tribunal relied on the principle that beneficial circulars or clarificatory notifications are to be applied retrospectively and cited authority of the Apex Court and Tribunal decisions to support retrospective application. [Paras 7, 8, 9]

The Explanation in Rule 2(1) is declaratory and retrospective, supporting the assessee's entitlement to Cenvat credit for the period in question.

Final Conclusion: The Tribunal dismissed the Revenue appeal, holding that brokerage/commission for sale of constructed residential units is an input service eligible for Cenvat credit and that the Explanation introduced by the 2016 amendment is declaratory and retrospective; the assessee's claim for the period July 2012 to March 2015 is upheld.

Clubbing of clearances - SSI exemption - Independent identity of units - Financial flow back - Common funding and mutuality of interest - Assessment of duty liability individually

Clubbing of clearances - SSI exemption - Independent identity of units - Financial flow back - Common funding and mutuality of interest - Whether clearances of the several manufacturing units could be clubbed to deny benefit of the SSI exemption to the appellants - HELD THAT: - The Tribunal examined the material relied on by the Original Authority and found no evidence of common books of account, common bank accounts, common registrations (Income Tax/Sales Tax), common funding, mutuality of interest or financial flow back among the units. The Original Authority's conclusion that the other units were 'dummy' units of M/s Associated Engineering Projects was based mainly on family connection and a common accountant. Reliance was placed by the appellants on Tribunal precedent that mere presence of common family partners or a common accountant, without demonstrable financial interlinking or shared registrations/connections, is insufficient to warrant clubbing of clearances. In the absence of proof of financial flow back or other indicia of a single economic enterprise, the manufacturing units retain independent identities and their clearances cannot be aggregated to disallow the SSI exemption. [Paras 5]

Denial of SSI exemption on the ground of clubbing of clearances is unsustainable; the units are independent and their clearances cannot be clubbed.

Final Conclusion: Impugned order set aside; demands confirmed by the Original Authority are quashed and all appeals are allowed with consequential relief as per law.

Prosecution under Section 138 of the Negotiable Instruments Act - Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act - Admissibility and probative value of Form DIR-12 in Section 482 Cr.P.C. proceedings - Quashing of criminal prosecution under Section 482 Cr.P.C. - Dispensation of personal attendance under Section 88 Cr.P.C.

Prosecution under Section 138 of the Negotiable Instruments Act - Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act - Quashing of criminal prosecution under Section 482 Cr.P.C. - Maintainability of the complaint and propriety of quashing the prosecution against the petitioner, an independent director, in the complaint under Section 138 NI Act. - HELD THAT: - The Court examined the complaint allegations and held that the averments against the petitioner are prima facie and not so conspicuously feeble or contrived as to warrant exercise of extraordinary jurisdiction under Section 482 Cr.P.C. The Court noted that while SMS Pharmaceuticals and other decisions require specific allegations to fasten vicarious liability under Section 141, those cases do not mandate quashing where the complaint contains relevant averments showing involvement in the transactions; here the complaint contains paragraphs alleging the petitioner's involvement. The burden to disprove those averments lies in the trial and, absent manifest infirmity in the complaint, it is beyond the scope of a Section 482 petition to declare the averments unworthy of credence. Accordingly, the petition for quashment was dismissed and the trial permitted to proceed. [Paras 8, 9, 11]

Petition to quash prosecution dismissed; prima facie averments against the petitioner sustained and prosecution not quashed.

Admissibility and probative value of Form DIR-12 in Section 482 Cr.P.C. proceedings - Quashing of criminal prosecution under Section 482 Cr.P.C. - Whether the Form DIR-12 filed by the petitioner establishing resignation dated 17.05.2013 could be treated as unimpeachable evidence to quash the prosecution. - HELD THAT: - The Court observed that Form DIR-12 can be an unimpeachable document in appropriate cases, but held that its probative value depends on the facts. In this case, although DIR-12 records resignation on 17.05.2013, the form also shows acceptance by the Board on 10.03.2016 and filing with the Registrar on 10.06.2016. On that basis the Court concluded that the DIR-12 is not of such sterling, unimpeachable quality as would permit quashing of the complaint at the threshold; factual controversy over the effective date of resignation and acceptance must be visited at trial. [Paras 5]

Form DIR-12 not treated as unimpeachable to quash proceedings; issue of resignation's effect left for trial.

Dispensation of personal attendance under Section 88 Cr.P.C. - Quashing of criminal prosecution under Section 482 Cr.P.C. - Whether the petitioner's personal attendance before the trial court can be dispensed with and on what conditions. - HELD THAT: - Although the petition to quash was dismissed, the Court exercised its supervisory power to relieve the petitioner from day-to-day personal attendance subject to specified conditions: the petitioner must appear within two weeks, execute a bond without sureties under Section 88 Cr.P.C., engage counsel on special vakalat, be present at questioning under Sections 251 and 313 Cr.P.C. and at judgment, and ensure counsel cross-examines prosecution witnesses on the day of their evidence. The Court warned that dilatory tactics would invite strict action including notice to counsel and that absconding could lead to FIR under Section 229-A IPC. The trial Court was directed to complete the trial within six months if no legal impediment exists. [Paras 12]

Personal attendance dispensed with subject to conditions and directions to trial court to proceed and conclude trial within six months.

Final Conclusion: The High Court dismissed the petition to quash the prosecution under Section 138 NI Act against the petitioner, holding that prima facie averments and the contested nature of the DIR-12 prevent summary quashing; the petitioner's personal attendance was dispensed with on specified conditions and the trial Court was directed to proceed expeditiously.