TaxTMI Updates e-Newsletter
Sep 15,2018

Writ of mandamus - extension of time for filing GST TRAN-1 - reopening of electronic portal for statutory filing - manual acceptance of application in case of portal failure - verification of claimed input tax credit - interim relief

Writ of mandamus - reopening of electronic portal for statutory filing - interim relief - Grant of interim direction to respondents to reopen the GST portal or, failing that, to entertain the petitioner's TRAN 1 application manually - HELD THAT: - The petitioner sought mandamus to direct the GST Council/respondents to extend the time for filing TRAN 1 on account of inability to file on the last date due to non responsiveness of the electronic system. Having considered the petition and the respondents' non committal stance, the Court directed the respondents to reopen the portal within two weeks. If the portal is not reopened within that period, the respondents were directed to accept the petitioner's TRAN 1 application manually and decide it after due verification of the claimed credits. The direction is interim and intended to prevent prejudice to the petitioner arising from inability to access the electronic filing facility.

Respondents to reopen the portal within two weeks or, if not done, to entertain the TRAN 1 application manually and decide it after verification.

Manual acceptance of application in case of portal failure - verification of claimed input tax credit - reopening of electronic portal for statutory filing - Obligation of respondents to permit electronic tax payment and ensure credited input tax can be utilised pending consideration of TRAN 1 - HELD THAT: - The Court additionally directed that the petitioner must be allowed to pay its taxes through the regular electronic system so that any credit which may be considered in the petitioner's favour can be utilised. The respondents are to ensure the petitioner is not deprived of the facility to make electronic payments while its claim for transitional credit is being processed, subject to verification when the TRAN 1 is decided.

Respondents to ensure the petitioner is permitted to make electronic tax payments and to facilitate use of any credit that may be allowed, pending verification and final decision on the TRAN 1 application.

Final Conclusion: Interim directions issued: respondents to reopen the portal within two weeks or else entertain the petitioner's TRAN 1 application manually and decide it after verification; meanwhile the petitioner to be permitted to use the electronic payment system so any allowable credit can be availed.

Reopening assessment - Reason to believe - Change of opinion - Pre notice enquiries and disclosure - Quashing of reopening notice for lack of valid reasons

Reopening assessment - Reason to believe - Change of opinion - Pre notice enquiries and disclosure - Quashing of reopening notice for lack of valid reasons - Validity of the reasons recorded for reopening the assessment under section 147 in respect of assessment year 2015-16 where the return was accepted under section 143(1) - HELD THAT: - The court examined whether the Assessing Officer had valid reasons to form a belief that income chargeable to tax had escaped assessment, having regard to the material available to him before issuing the reopening notice. The return for AY 2015-16 had been accepted without scrutiny, so the doctrine of change of opinion did not apply; nonetheless the statutory test of 'reason to believe' remained. The Assessing Officer had issued pre notice queries pointing out cash deposits of Rs.17.86 lakhs and the assessee responded with detailed reports showing withdrawals from her disclosed bank accounts which corresponded to the deposits. The reasons recorded by the Assessing Officer simply stated that the deposits were not justified by the declared income and concluded there was undisclosed regular income, but did not address or discredit the specific disclosures and documentary explanations furnished by the assessee in response to the pre notice enquiries. By overlooking and not dealing with the explanatory material available to him, the Assessing Officer proceeded on an erroneous premise and the reasons therefore lacked validity. The court confined itself to testing the reasonableness of the reasons on the material before the Assessing Officer and did not undertake an assessment on merits. [Paras 7, 8, 10, 11]

The reasons recorded for reopening were invalid as they ignored the assessee's disclosed explanations in response to pre notice queries; the reopening notice was therefore quashed.

Final Conclusion: The petition is allowed; the notice reopening assessment for assessment year 2015-16 is quashed for want of valid reasons.

Addition under Section 68 for unexplained cash credits - voluntary disclosure during survey - addition already assessed in an earlier year cannot be added again - appellate tribunal's factual findings and scope of judicial review

Addition under Section 68 for unexplained cash credits - appellate tribunal's factual findings and scope of judicial review - Deletion of additions made under Section 68 on account of alleged unexplained cash credits was upheld. - HELD THAT: - The Tribunal and the Commissioner (Appeals) examined the materials, including the assessee's explanation that she earned commission from booking air tickets as an IATA member, received commissions through banking channels, maintained audited books, and employed staff whose internal jottings of receivables did not constitute cash transactions. On these factual findings the Tribunal deleted the additions. The High Court held that these conclusions are based on appraisal of evidence and materials on record and that no substantial question of law arises warranting interference with the concurrent factual findings of the CIT(A) and the Tribunal.

Deletion of the addition under Section 68 was sustained and the Revenue's challenge on this ground rejected.

Voluntary disclosure during survey - addition already assessed in an earlier year cannot be added again - Deletion of the addition of Rs. 36,50,978 alleged to have been voluntarily disclosed during survey was upheld. - HELD THAT: - CIT(A) found that the amount in question had already been subjected to addition in the earlier year. On that basis the CIT(A) declined to sustain a second addition for the same amount. The Tribunal endorsed that conclusion and deleted the addition. The High Court accepted the conclusion that the amount could not be added again, treating the matter as one of fact and record, and found no legal infirmity requiring interference.

Deletion of the addition relating to the survey disclosure was affirmed and the Revenue's challenge on this ground dismissed.

Final Conclusion: Tax Appeals by the Revenue are dismissed; the Tribunal's deletions of the additions (including the survey-related amount) are sustained, the High Court finding no question of law arising from the concurrent factual conclusions.

Disallowance under Section 40(a)(ia) for failure to deduct tax at source - Principal agent relationship in applicability of tax deduction at source on commission - Trade discount versus commission

Disallowance under Section 40(a)(ia) for failure to deduct tax at source - Principal agent relationship in applicability of tax deduction at source on commission - Trade discount versus commission - Validity of the addition under Section 40(a)(ia) for alleged failure to deduct tax at source on amounts treated as commission - HELD THAT: - The Tribunal found, and this Court concurs, that the amounts treated by the Assessing Officer as commission were in reality discounts extended to independent travel agents who purchased tickets in their own capacity by utilising the assessee's IATA membership. There was no relationship of principal and agent between the assessee and those travel agents; they were consumers of the assessee's services and obtained tickets at concessional rates as trade discounts. Relying on the Court's earlier reasoning in Ahmedabad Stamp Vendors' Association v. Union of India the Tribunal correctly held that the principal agent relationship is essential for invoking the TDS consequence treated as commission under the Act. Having accepted the factual and legal characterization of the payments as trade discounts and not commission payable to agents, the disallowance under Section 40(a)(ia) could not be sustained.

Addition/departure under Section 40(a)(ia) deleted and the Tribunal's order affirmed.

Final Conclusion: The High Court agrees with the Tribunal that the payments were trade discounts to independent purchasers and not commissions to agents; therefore the disallowance under Section 40(a)(ia) was correctly deleted. Tax Appeal dismissed; no substantial question of law arises.

Rejection of book result where assessing officer is not satisfied about correctness or completeness of accounts - reliance on materials collected by the Excise Department including show cause notices and witness statements - obligation of the assessing officer to bring independent material beyond departmental show cause notices - assessments framed pending final adjudication in excise proceedings

Rejection of book result where assessing officer is not satisfied about correctness or completeness of accounts - obligation of the assessing officer to bring independent material beyond departmental show cause notices - Appellate Tribunal was justified in not holding that the Assessing Officer should have rejected the book results under section 145 in the facts of the case. - HELD THAT: - The Court agreed with the Tribunal's approach that the Assessing Officer did not possess independent material sufficient to displace the assessee's books. Although the Assessing Officer may confront the assessee with the contents of an Excise Department show cause notice, mere production of copies of that show cause notice and accompanying witness statements, without verification or additional independent material brought on record, does not establish the correctness of the allegations. The Assessing Officer cannot simply rely on unadjudicated departmental material and thereby shift the onus of proof to the assessee; rejection of book results requires satisfaction based on substantive material in the assessment proceedings, which was absent here. [Paras 6, 7, 11, 13]

Tribunal's deletion of additions on the ground that the Assessing Officer lacked independent material to reject the books is upheld and the question is decided against the Revenue.

Reliance on materials collected by the Excise Department including show cause notices and witness statements - assessments framed pending final adjudication in excise proceedings - Appellate Tribunal was justified in deleting additions that were based primarily on material collected by the Excise Department and statements recorded during the excise proceedings. - HELD THAT: - The Court followed the reasoning that excise show cause notices, being unadjudicated, reflect the departmental case which is yet to be tested; they do not attain finality merely by their issuance. While the Assessing Officer need not await final excise adjudication where time bar concerns exist, he must bring independent corroborative material in the assessment record before making additions. In the present case the Assessing Officer confronted the assessee with the excise material and elicited denials, but did not place independent evidence on record to establish suppressed sales. Consequently, additions founded largely on unverified excise material and witness statements could not be sustained. [Paras 8, 9, 10, 11, 12]

Tribunal's deletion of the additions premised on excise material is sustained; the Revenue's challenge is dismissed.

Final Conclusion: The High Court dismissed the Revenue appeals, upholding the Tribunal's deletion of additions; the Assessing Officer's reliance solely on unadjudicated excise show cause material and witness statements without independent corroboration in the assessment record was held insufficient to reject the books or sustain the additions.

Substantial question of law - restoration of appeal - binding nature of CBDT Circulars - conditional withdrawal under administrative instructions - acceptance of Revenue Audit objection as condition

Substantial question of law - restoration of appeal - Whether the present appeal ought to be admitted on the basis that a related earlier appeal is sought to be restored to this Court's file - HELD THAT: - The Court noted that the earlier Income Tax Appeal No.254 of 2013 has not been restored; only a notice of motion for restoration is pending and any restoration would be subject to this Court's orders. The mere pendency of a request to restore another appeal does not automatically entitle the Revenue to admission of the present appeal. TheCourt declined to entertain an oral submission that admission of the present appeal should follow from the proposed restoration of the other appeal. [Paras 2, 3, 4, 5, 9]

Request to admit the appeal on the basis of proposed restoration of the earlier appeal rejected; appeal not entertained on that basis.

Binding nature of CBDT Circulars - conditional withdrawal under administrative instructions - acceptance of Revenue Audit objection as condition - Whether the Revenue can rely on the CBDT Circulars to justify restoration or admission of the appeal without establishing that conditions in the later Circular are satisfied - HELD THAT: - The Court observed that the Revenue is bound by the CBDT Circulars and their conditions. The later Circular (dated 11.7.2018) raised the monetary threshold and also contained para 10, which prescribed categories of adverse judgments that must be contested notwithstanding the monetary limit. One such category (clause 10(c)) requires that a Revenue Audit objection in the case has been accepted by the Department. The Court held that merely raising the argument is insufficient; the Revenue must produce record showing that the condition (acceptance of the audit objection) is attracted. No such record was placed before the Court and the oral request to rely on the Circulars without proof of the condition was not countenanced. [Paras 5, 6, 7, 8, 9]

Revenue cannot invoke the Circular's exception without proving that the condition (acceptance of the Revenue Audit objection) is satisfied; absent such proof the Circulars cannot be circumvented.

Final Conclusion: The Court declined to admit the appeal. The Revenue's attempt to rely on restoration of a related appeal and on CBDT Circular exceptions without producing records showing satisfaction of the Circular's conditions was rejected; consequently the appeal is dismissed.

Allowability of deduction under Section 43B where service tax debited but not paid - tax liability arises upon receipt of consideration - treatment of service tax collected on behalf of government

Allowability of deduction under Section 43B where service tax debited but not paid - tax liability arises upon receipt of consideration - Whether service tax debited to profit and loss account but not paid to the Central Government can be disallowed under Section 43B of the Income Tax Act, 1961 - HELD THAT: - The Court considered whether Section 43B mandates disallowance of service tax entries shown as liability in the balance sheet when the tax has been debited but not remitted to the Government. Relying upon and following the Division Bench decision in Commissioner of Income Tax v. Ovira Logistics P. Ltd., the Court held that Section 43B does not contemplate a liability to pay service tax before actual receipt of the funds by the assessee. The liability to remit service tax to the Treasury arises only upon the assessee actually receiving the consideration from the customer; until such receipt, the amount shown in the accounts as unpaid service tax cannot be disallowed under Section 43B. No contrary conclusion was demonstrated by the Revenue and the Tribunal's view, consistent with earlier findings, was sustained. [Paras 10, 11, 13]

Service tax debited but not paid cannot be disallowed under Section 43B where the liability to remit arises only upon receipt of consideration; appeals dismissed as raising no substantial question of law.

Final Conclusion: The appeals were dismissed; the Court followed the Division Bench precedent that Section 43B does not permit disallowance of service tax debited but not paid where the liability to remit arises only after actual receipt of the consideration (Assessment Year 2006-07).

Deemed dividend under Section 2(22)(e) - proviso (ii) to Section 2(22)(e) - substantial non-banking financial activity test - substantiality test for part of a company's business - treatment of deposits within statutory grace period under Section 43B - deduction under Section 36(1)(va) for employer contributions - revenue expenditure - capital/revenue distinction andinterest treatment under Section 36(1)(iii)

Deemed dividend under Section 2(22)(e) - proviso (ii) to Section 2(22)(e) - substantial non-banking financial activity test - substantiality test for part of a company's business - Deletion of addition of Rs. 1.2 crores as deemed dividend under Section 2(22)(e) in respect of loans received from two lending companies. - HELD THAT: - The Tribunal's finding that the amounts received from M/s Deeksha Holdings Pvt. Ltd. and M/s Jyotsana Holdings Pvt. Ltd. fell within the exception in proviso (ii) to Section 2(22)(e) was upheld. The Court applied a qualitative and contextual notion of "substantial" part of a company's business - not rigidly the RBI's 50% benchmark - recognising that an entity may carry multiple non-banking financial activities and that factors such as proportion of turnover, profits, capital employed and manpower may inform the substantiality inquiry. Given that lending/investment activities formed a substantial part of the lenders' activities (circa 19% and over 30% in the respective enterprises as found by the Tribunal), the amounts could not be taxed as deemed dividend and the Tribunal's deletion of the addition was sustained. [Paras 5, 6]

Addition under Section 2(22)(e) deleted; question answered against the Revenue.

Treatment of deposits within statutory grace period under Section 43B - deduction under Section 36(1)(va) for employer contributions - Whether provident fund and employees' state insurance contributions deducted from employees' wages but deposited within the prescribed grace periods qualify for deduction. - HELD THAT: - The Court held that amounts deducted from employees' salaries and deposited with the statutory authorities within the periods prescribed by the Employees' Provident Funds and Miscellaneous Provisions Act and the Employees' State Insurance Act (viz. EPF: 15 days plus a 5-day grace period under the relevant notifications; ESI: three weeks plus any applicable grace) should be treated as duly deposited for income-tax deduction purposes. Amounts deposited beyond those prescribed periods do not qualify. The Tribunal's blanket relief was therefore incorrect to the extent it ignored the statutory timelines; the matter requires scrutiny of actual deposit dates against the applicable grace periods. [Paras 8, 9]

Appeal partly allowed; AO directed to examine deposit dates and allow deduction under Section 36(1)(va) for contributions actually deposited within the prescribed/grace periods; amounts deposited beyond those periods not allowable.

Revenue expenditure - capital/revenue distinction andinterest treatment under Section 36(1)(iii) - Deletion of disallowance of Rs. 74,01,771/- on the ground that the amounts were revenue expenditure (covering construction expenditure at Srinagar, salaries, and interest on loans for infrastructure). - HELD THAT: - The court confirmed the findings that the construction-related expenditure had been appropriately apportioned between capital and revenue (75% capital:25% revenue) as conceded and upheld in earlier proceedings. Salary payments were correctly treated as revenue expenditure. Interest on borrowed funds for the relevant period fell within the scope of Section 36(1)(iii) as it stood for A.Y. 2000-01; reliance on precedent (India Cements Ltd. v. CIT) supports that interest on borrowed funds used for business purposes is allowable without the artificial distinction urged by Revenue. The Tribunal's deletion of the disallowance was therefore unimpeachable. [Paras 10, 11]

Disallowance deleted; question answered in favour of the assessee and against the Revenue.

Final Conclusion: The Revenue's appeal is dismissed except as to Question No.2 where it is partly allowed; the Tribunal's deletions under Section 2(22)(e) and the disallowance challenged as revenue expenditure are upheld in favour of the assessee, and the matter of EPF/ESI deductions is remitted to the Assessing Officer to verify deposit dates and grant deductions under Section 36(1)(va) where statutory/grace period requirements are met.

Deduction under section 80HHC on the basis of book profits under section 115JA - Amortisation of expenditure on issue of shares under section 35D - Allowability of loss on account of exchange fluctuation on mercantile basis prior to payment

Deduction under section 80HHC on the basis of book profits under section 115JA - Tribunal was correct in allowing deduction under section 80HHC computed with reference to book profits under section 115JA despite eligible profits under normal computation being nil. - HELD THAT: - The High Court answered this question against the Revenue by applying and following the Supreme Court decisions in Ajantha Pharma Limited v. Commissioner of Income Tax and Commissioner of Income Tax v. Bhari Information Tech System Private Limited. The court held that where the authorities and Tribunal have applied the legal principle permitting computation of eligible profits under section 80HHC with reference to book profits under section 115JA, such a view is to be sustained in favour of the assessee and against the Revenue.

Allowed the Tribunal's approach; question answered against the Revenue and in favour of the assessee.

Amortisation of expenditure on issue of shares under section 35D - Expenditure incurred on the issue of shares is eligible to be amortised under section 35D. - HELD THAT: - This question was answered against the Revenue by reliance on the assessee's own precedent in Shasun Chemicals and Drugs Limited v. Commissioner of Income Tax. The High Court accepted the Tribunal's conclusion that such expenditure falls within the ambit of amortisable expenditure under the statutory provision and upheld the allowance in favour of the assessee.

Tribunal's holding sustained; amortisation allowed and question answered against the Revenue.

Allowability of loss on account of exchange fluctuation on mercantile basis prior to payment - Loss on account of exchange fluctuation is allowable where accounts are maintained on mercantile basis even though payment in foreign exchange was not made by the close of the assessment year. - HELD THAT: - The High Court affirmed the Tribunal by following the Supreme Court decision in Commissioner of Income Tax v. Woodward Governor India Private Limited. The court endorsed the principle that, under mercantile accounting, exchange differences arising before actual payment may be claimed as deductible loss in the relevant year, and accordingly upheld the Tribunal's allowance.

Tribunal's finding upheld; loss allowed and question answered against the Revenue.

Final Conclusion: All three substantial questions of law were answered against the Revenue and in favour of the assessee by following the cited Supreme Court decisions; the appeals are dismissed.

Penalty under Section 271(1)(c) - voluntary disclosure/surrender and penalty liability - bona fide or inadvertent error - wilful omission to disclose particulars of income - withdrawal of claim by filing revised return and penalty

Penalty under Section 271(1)(c) - wilful omission to disclose particulars of income - bona fide or inadvertent error - Levy of penalty under Section 271(1)(c) was justified on the facts of the case - HELD THAT: - The assessee included an amount under 'other expenses' for land up-keep in its profit and loss account. When the Assessing Officer queried the item, the assessee could not substantiate the expenditure and accepted it to be a non-business expense, requesting disallowance; the sum was accordingly added back to income. The assessee's later contention before the CIT(A) that it had sought to file a revised return was not raised before the Assessing Officer and was not established on the facts. The Court found that the conduct - acceptance of the disallowance only after detection and lack of cogent evidence to show absence of concealment - could not be treated as an inadvertent or bona fide error. Reliance on authorities where the assessee had withdrawn claims by filing revised returns or had bona fide mistakes was distinguished on facts. Concurrent findings of the Authorities below and the Tribunal that the omission was wilful and that penalty was leviable were factual determinations which this Court declined to disturb in an appeal on a substantial question of law. Accordingly, the imposition of penalty under Section 271(1)(c) was sustained. [Paras 8, 11, 21, 22]

Penalty under Section 271(1)(c) upheld and sustained by the High Court.

Final Conclusion: The tax case appeal is dismissed; the substantial question of law is answered against the assessee and in favour of the Revenue.

Disallowance under Section 40A(2)(b) for unverified related party purchases - remand to the Assessing Officer for fresh adjudication - verification of production of books of accounts, vouchers and invoices - assessment additions for unverified fixed assets - allowability of depreciation on bottles and tetra packs

Disallowance under Section 40A(2)(b) for unverified related party purchases - remand to the Assessing Officer for fresh adjudication - verification of production of books of accounts, vouchers and invoices - Remand by the Tribunal in respect of disallowance of purchases from related parties under Section 40A(2)(b) was upheld. - HELD THAT: - The Assessing Officer made an addition on account of purchases from step up holdings and fellow subsidiaries, concluding transactions were not at arm's length and computing an addition. The Commissioner (Appeals) reversed that calculation by including indirect costs. The High Court observed that the issue of unverified related party purchases is interlinked with operating expenses and indirect costs, and that the Tribunal's direction to remit this interconnected question to the Assessing Officer for fresh adjudication was not erroneous. Consequently the Tribunal's remand on this aspect was sustained so that the Assessing Officer may verify facts and documents relevant to the Section 40A(2)(b) disallowance. [Paras 7, 8, 9, 10, 16]

Order of remand by the Tribunal in respect of disallowance under Section 40A(2)(b) is upheld.

Assessment additions for unverified fixed assets - allowability of depreciation on bottles and tetra packs - verification of production of books of accounts, vouchers and invoices - The Tribunal's remand in respect of disallowance of unverified fixed assets and disallowance of depreciation on bottles and tetra packs was set aside and the Tribunal was directed to examine the record afresh; remand to the Assessing Officer was permitted only if the Tribunal found the record insufficient to decide the matter. - HELD THAT: - The Assessing Officer had disallowed portions of fixed asset purchases and depreciation, in part because books and vouchers were said not to have been produced. The Commissioner (Appeals) recorded that voluminous documents (about 536 pages) including sample invoices and supplier details had been filed. The High Court found that the Tribunal had not specifically considered the appellant's contention that documents and vouchers were produced; consequently the Tribunal's blanket remand to the Assessing Officer on these issues was set aside. The Court directed the Tribunal to peruse and decide the question on the material already on record, and only if the Tribunal concluded that decision was not possible on the existing papers should it remit the matter to the Assessing Officer for further verification. [Paras 12, 13, 14, 15, 16]

Tribunal's remand on unverified fixed assets and depreciation is set aside; Tribunal to examine the papers and decide the issue afresh, with remand to the Assessing Officer permissible only if necessary.

Final Conclusion: The substantial question is partly answered for the appellant and partly for the Revenue: the Tribunal's remand is sustained for the Section 40A(2)(b) disallowance of related party purchases, whereas the Tribunal's remand on unverified fixed assets and depreciation is set aside and the Tribunal is directed to decide those issues afresh on the record (with remand to the Assessing Officer only if the record is inadequate). The appeals are disposed of and the stay is vacated.

Minimum Alternate Tax (MAT) credit set-off - credit under Section 115JAA - priority of set-off before charging interest under Sections 234A, 234B and 234C - treatment of tax deducted at source and advance tax vis-a -vis MAT credit - priority of set-off under Schedule G of Form 1

Minimum Alternate Tax (MAT) credit set-off - credit under Section 115JAA - treatment of tax deducted at source and advance tax vis-a -vis MAT credit - MAT credit is to be set off from the tax payable before setting off Tax Deducted at Source and Advance Tax paid. - HELD THAT: - The Court, following the decision of the Supreme Court in Commissioner of Income Tax v. Tulsyan Nec Ltd and the Division Bench decision in Commissioner of Income Tax v. Aban Loyd Chiles Offshore Ltd, held that the carry forward credit under Section 115JAA (MAT credit) must be given effect to prior to adjusting tax payable against Tax Deducted at Source and Advance Tax. The Revenue conceded that the substantial questions were covered by the cited authorities. Applying those precedents, the Tribunal's conclusion on the ordering of set-offs was affirmed. [Paras 6]

Answered against the Revenue; MAT credit set off prior to TDS and advance tax.

Priority of set-off under Schedule G of Form 1 - priority of set-off before charging interest under Sections 234A, 234B and 234C - MAT credit cannot be subordinated to the scheme of Schedule G of Form 1 and is to be given priority of set-off. - HELD THAT: - Relying on the same Supreme Court and Division Bench precedents, the Court rejected the contention that Schedule G of Form 1 mandates a contrary priority. The earlier decisions established that MAT credit under Section 115JAA must be applied before charging interest under Sections 234A, 234B and 234C and before other set-offs that would defeat the benefit of the MAT credit. Consequently, the Tribunal's approach in giving effect to MAT credit first was upheld. [Paras 6]

Answered against the Revenue; MAT credit has priority and is not displaced by Schedule G.

Final Conclusion: Following the binding precedents relied upon, both substantial questions of law were answered against the Revenue and in favour of the assessee; the Tax Case Appeal is dismissed with no costs.

Short term capital gain - capital gain versus business income - rule of consistency - treatment in books of accounts as evidence of intention - application of section 14A

Short term capital gain - capital gain versus business income - rule of consistency - treatment in books of accounts as evidence of intention - application of section 14A - CIT-A was justified in directing the AO to treat the income from sale of shares as short term capital gain for A.Y. 2010-11. - HELD THAT: - The Tribunal upheld the CIT-A's finding that the assessee consistently showed shares under the 'investment' column in preceding and succeeding assessment years and treated gains/losses therefrom as STCG/LTCG in its returns and assessments. The AO had accepted similar treatment in other years (including assessments completed under section 143(1) and 143(3)) and, for the relevant year, the AO's contrary view rested on the volume and quantum of transactions rather than any change in treatment in the books. The CIT-A noted that the AO's own actions were inconsistent: invoking disallowance under section 14A on account of dividend from investments while treating profits from the same transactions as business income. The Tribunal found that the transaction chart relied on by the AO did not uniformly support trading character (many transactions showed losses; several holdings exceeded short periods; some shares purchased in prior years were sold in the relevant year), and that identical facts were accepted as capital gains in other years. In view of consistent treatment in the books of accounts, uniform departmental acceptance in earlier and later years, and binding precedents relied upon by the CIT-A and the assessee, the income was to be assessed as short term capital gain. [Paras 3, 4, 5]

Appeal dismissed; direction confirmed that the income of the assessee from sale of shares for A.Y. 2010-11 is to be treated as short term capital gain.

Final Conclusion: The Revenue's appeal is dismissed; the order of the CIT(A) directing the AO to treat the income from sale of shares as short term capital gain for A.Y. 2010-11 is upheld.

Disallowance of deduction under section 80IA - eligibility for deduction based on contractual documents and regulatory approvals - disallowance under section 36(1)(va) in respect of employer contributions to PF and ESI - effect of payment of statutory contributions before filing of return on disallowance - remand to Assessing Officer for fresh examination and verification of evidence

Disallowance of deduction under section 80IA - eligibility for deduction based on contractual documents and regulatory approvals - remand to Assessing Officer for fresh examination and verification of evidence - Whether the disallowance of deduction claimed under section 80IA for the Kerala unit should be sustained or the matter should be remitted for fresh examination in view of the documents filed by the assessee. - HELD THAT: - The Tribunal observed that the issue is materially identical to matters previously considered in the assessee's own cases for earlier assessment years, where the SMC B Bench set aside the appellate order and directed remand to the Assessing Officer to examine the contract documents and other evidence as a whole to determine whether actual work was executed and whether the conditions for deduction are satisfied. Having regard to the agreements, consents/authorisations from the State Pollution Control Board and other documents placed on record by the assessee, the Tribunal found it appropriate to set aside the order of the CIT(A) and remit the issue to the Assessing Officer for fresh adjudication in accordance with law after affording the assessee a reasonable opportunity of being heard. [Paras 9]

Order of CIT(A) confirmed by AO on disallowance under section 80IA set aside and matter remitted to Assessing Officer for fresh decision after considering the contractual and regulatory documents and affording opportunity of hearing; grounds 1-4 allowed for statistical purposes.

Disallowance under section 36(1)(va) in respect of employer contributions to PF and ESI - effect of payment of statutory contributions before filing of return on disallowance - remand to Assessing Officer for verification of timing of payment - Whether contributions to Provident Fund and ESI, remitted beyond the due date, are disallowable where such payments were made before filing the return of income. - HELD THAT: - The Tribunal noted the settled legal position that contributions to PF and ESI paid after the statutory due date but before filing the return under section 139(1) are not liable to be disallowed. Consequently, the matter was remitted to the Assessing Officer to verify whether the challenged amounts were in fact paid before filing of the return; if so, the disallowance should be deleted. The Tribunal permitted the ground for statistical purposes and directed verification by the AO. [Paras 10]

Grounds relating to disallowance under section 36(1)(va) remitted to the Assessing Officer for verification of payment dates and deletion of disallowance if payments were made before filing of the return; grounds 5-6 allowed for statistical purposes.

Final Conclusion: Appeal treated as allowed for statistical purposes by setting aside the CIT(A) findings on section 80IA and remitting the matter to the Assessing Officer for fresh consideration on the documents filed, and remitting the section 36(1)(va) disallowance for verification of payment dates; order pronounced on 12/09/2018.

Application of the first proviso to section 2(15) where activity constitutes trade, commerce or business - charitable exemption under sections 11 and 12 of the Income tax Act - effect of earlier tribunal decision in the assessee's own case and reliance on High Court precedent

Application of the first proviso to section 2(15) where activity constitutes trade, commerce or business - charitable exemption under sections 11 and 12 of the Income tax Act - effect of earlier tribunal decision in the assessee's own case and reliance on High Court precedent - Whether the first proviso to section 2(15) is attracted so as to deny exemption under sections 11 and 12 to the assessee for A.Y. 2011-12 - HELD THAT: - The facts for A.Y. 2011-12 are identical to those adjudicated by the Tribunal in the assessee's own case for A.Y. 2009-10, where after considering the activities (including a revenue sharing arrangement for restaurant/club facilities) the ITAT held that the proviso to section 2(15) was not attracted because the activities did not amount to carrying on trade, commerce or business or running a service in relation to trade or business for a fee. The CIT(A) followed that Tribunal decision and also relied on the Delhi High Court decision in India Trade Promotion Organization , which held that mere receipt of fee or charge does not ipso facto convert an activity into trade, commerce or business. No contrary material was placed before the Tribunal to distinguish or displace the earlier findings; accordingly the Assessing Officer's invocation of the proviso and denial of exemption under sections 11 and 12 was not sustained.

Proviso to section 2(15) not attracted; exemption under sections 11 and 12 upheld for A.Y. 2011-12 and Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y. 2011-12, upholding the CIT(A)'s allowance of exemption under sections 11 and 12 by following the earlier ITAT decision in the assessee's own case and the Delhi High Court precedent; no interference was called for in absence of any distinguishing or contrary material.

Treatment of consumer contributions as capital receipts - treatment of government/subsidy grants for fixed assets under Accounting Standard-12 - computation of depreciation having regard to actual cost and Explanation 10 to actual cost - adjustment of book depreciation and taxable depreciation in computation of income

Treatment of consumer contributions as capital receipts - treatment of government/subsidy grants for fixed assets under Accounting Standard-12 - adjustment of book depreciation and taxable depreciation in computation of income - Whether amounts received from consumers (and subsidy under RGGVY) are capital receipts and not taxable revenue, and whether the addition made by the Assessing Officer was correctly deleted. - HELD THAT: - The Tribunal accepted the accounting treatment adopted by the assessee that consumer contributions and the RGGVY subsidy were capital in nature and had been reflected in the balance sheet as contributions/subsidies towards cost of capital assets. Following Accounting Standard-12 and the principle in Explanation 10 to actual cost, the assessee reduced the gross asset value by such contributions/subsidy for computing depreciation under the Income-tax Act. In the books gross depreciation was debited to P&L and the portion attributable to assets funded by contributions/subsidy was credited to P&L under 'other income'; while computing taxable income, gross depreciation was added back and depreciation computed as per the Income-tax Act (taking into account reduction of actual cost by contributions/subsidy) was allowed. This accounting and computation method meant that the credited depreciation attributable to consumer contributions/subsidy did not represent taxable income. The Tribunal, following its earlier decision in the assessee's own case for A.Y. 2009-10 (paras 17-18), found the Assessing Officer's interpretation erroneous and held the addition unsustainable, resulting in deletion of the addition. [Paras 2, 4, 5]

The addition treating consumer contributions and the RGGVY subsidy as taxable revenue was deleted and the Revenue's appeals are dismissed.

Final Conclusion: Revenue's appeals for A.Ys 2013-14 & 2014-15 are dismissed; the Tribunal upheld the treatment of consumer contributions and the RGGVY subsidy as capital in nature and sustained the deletion of the addition after applying Accounting Standard-12 and the computation principles under Explanation 10 to actual cost.

Re-test of imported goods - random sampling and representativeness of sample - provisional assessment/provisional release - benefit of favourable laboratory report - onus on Department to prove mis-declaration - confiscation and penalty for mis-declaration

Re-test of imported goods - random sampling and representativeness of sample - benefit of favourable laboratory report - provisional assessment/provisional release - Whether the second laboratory test report, obtained after the Department acceded to the assessee's request for re-test, was determinative for the imported consignments and whether the Department could treat the transaction as split on the basis of the earlier adverse report. - HELD THAT: - The Court held that samples drawn by the Department are random and, absent any notice to the importer identifying which containers were sampled initially, the transaction could not be split such that an adverse report on one sample would be applied to only part of the import while denying effect to a later favourable re-test. Where the Department agreed to a re-test and the subsequent test report supported the importer's declared description, that favourable result should be extended to the goods covered by the relevant bills of entry. The Court further observed that provisional release does not impeach this approach because provisional clearance remains subject to final adjudication; nevertheless, acceptance of a re-test and a favourable second report disentitles the Department from treating the consignment as partly otherwise classified unless it affirmatively proves that the untested containers were of a different character or that there was concealment or wilful mis-statement. Consequently, the Tribunal's conclusion that the second test could not be applied to the earlier lot in the absence of a re-test on the specific first-sampled material was rejected. [Paras 7, 8, 9, 10]

Second test report being favourable and drawn after the Department acceded to re-test must be given effect to the imported goods covered by the bills of entry; the transaction cannot be split and the Tribunal's contrary view is set aside.

Confiscation and penalty for mis-declaration - onus on Department to prove mis-declaration - Validity of the adjudication directing payment of customs duty and imposing confiscation and penalty for alleged mis-declaration when the declaration matched import documents and a favourable re-test report existed. - HELD THAT: - The Court found the Order-in-Original and the Tribunal's confirmation thereof to be untenable because the Department failed to discharge the onus of proving that the goods actually imported were other than as declared. In the absence of any allegation or evidence of concealment or wilful mis-statement and given the favourable re-test report (and subsequent consistent laboratory report in respect of a later bill of entry), the imposition of confiscation and penalty could not be sustained. The orders imposing duty, confiscation and penalty were therefore set aside. [Paras 6, 8, 10, 11]

Order directing payment of customs duty and imposing confiscation and penalty for mis-declaration is quashed; findings against the assessee are set aside.

Final Conclusion: The appeal is allowed; the orders of the Commissioner and the Tribunal confirming demand, confiscation and penalty are set aside and the substantial questions of law are answered in favour of the assessee.

Classification of processed and upgraded ilmenite under Customs Tariff Heading 2614 00 20 - refund of export duty paid under protest - binding effect of Tribunal's decision on subordinate authorities - payment under protest tantamount to claim for refund - High Court interference where binding decision is not followed by adjudicating authority

Classification of processed and upgraded ilmenite under Customs Tariff Heading 2614 00 20 - binding effect of Tribunal's decision on subordinate authorities - Processed and upgraded ilmenite exported by the petitioner is classifiable under CH 2614 00 20 as held by the Tribunal and that the Adjudicating Authority was bound to follow that decision. - HELD THAT: - The Tribunal in V.V. Minerals held that ilmenite exported was classifiable under CH 2614 00 20. Where a higher judicial forum has so decided, subordinate authorities are bound to follow that decision. The petitioner had exported processed and upgraded ilmenite and the Tribunal's classification in the identical controversy applies to the petitioner's shipping bills. The Adjudicating Authority's refusal to follow the Tribunal's decision justified interference by this Court since a binding decision was not followed. [Paras 8, 11]

The Tribunal's classification applies to the petitioner's goods and the Adjudicating Authority was obliged to follow that binding decision.

Refund of export duty paid under protest - payment under protest tantamount to claim for refund - High Court interference where binding decision is not followed by adjudicating authority - The petitioner is entitled to refund of the excess export duty paid under protest because the duty ultimately was not leviable as per the Tribunal's decision. - HELD THAT: - The petitioner paid export duty under protest at the rate applied by the Department though, on the Tribunal's view, a lower rate applied. It is well settled that payment under protest, if ultimately found not leviable, entitles the payer to refund; such payment amounts to a claim for refund and cannot be rejected merely because an appeal may be pending before a higher forum. Given the Tribunal's decision in identical proceedings and absence of any stay against that judgment, the petitioner's refund claim could not be denied. The Court therefore quashed the impugned order refusing the refund and directed the refund subject to immovable property security offered by the petitioner, with liberty to the Adjudicating Authority to pass revised orders in accordance with any future Supreme Court decision. [Paras 9, 10, 12, 13]

The petitioner is entitled to refund of the excess duty paid under protest; the impugned order refusing refund is quashed and the respondent is directed to refund upon receipt of immovable property security, with liberty to revise in light of any higher court decision.

Final Conclusion: The writ petition is allowed: the impugned order refusing refund is quashed; the respondent is directed to refund the amount after taking the petitioner's immovable property security (to remain unencumbered) within four weeks, subject to the Adjudicating Authority's liberty to pass revised orders based on the Supreme Court's outcome.

Revocation of customs broker licence - forfeiture of security deposit - vicarious liability for acts of employees - requirement of knowledge/malafide intent for disciplinary revocation - supervisory responsibility of customs broker - scope and effect of remand for fresh enquiry - application of mind in administrative penal orders

Vicarious liability for acts of employees - requirement of knowledge/malafide intent for disciplinary revocation - supervisory responsibility of customs broker - Whether revocation of the customs broker licence and forfeiture of the security deposit were justified when the broker had no knowledge of the employees' forgery and there was no allegation of fraudulent intention on the part of the licencee. - HELD THAT: - The Tribunal found that the Principal Commissioner conceded absence of malafide or fraudulent intention on the part of the customs broker and that the firm did not have knowledge or connivance in the forgery (paras 3, 6). The inquiry had resulted in debarment of the errant employees and a warning endorsement earlier; the firm had removed the employees once the misconduct surfaced. There was no evidence that Revenue suffered any loss or that the Assistant Commissioner would have refused shipment had the oversight been placed before him. The Tribunal held that mere criminal intent of an employee, without knowledge, connivance or benefit to the broker, and in circumstances pointing to an act of expediency to avoid delay, did not suffice to justify extreme penal consequences against the licencee. The report of supervisory failure did not furnish additional evidence in the fresh proceedings to alter the earlier conclusion that the licencee was unaware of the forgery. Consequently the disciplinary measures impugned were disproportionate and unsupported by material on record. [Paras 3, 6]

Revocation of the customs broker licence and forfeiture of the security deposit could not be sustained in the absence of any finding that the broker knew of or connived in the forgery; the removal of errant employees and lack of revenue impact showed the broker's bona fides.

Scope and effect of remand for fresh enquiry - application of mind in administrative penal orders - Whether the Principal Commissioner misapplied the Tribunal's remand and failed to apply his mind before imposing the extreme penalty of revocation and forfeiture. - HELD THAT: - The Tribunal noted that an earlier Tribunal order had remanded the matter for thorough scrutiny and re-examination in view of the gravity of forgery (para 2). In the fresh proceedings the Principal Commissioner proceeded to revoke the licence despite not recording any new evidence or findings that would warrant a different conclusion; the Tribunal observed a marked lack of justification for the extreme detriment imposed and concluded that the licensing authority did not sufficiently apply his mind to the facts, the inquiry report and the framework of chargesheet (paras 6-7). The Tribunal also recorded that there was a sufficient probability that the remand was misconstrued, leading to the revision of conclusions without fresh supporting material. [Paras 2, 7]

The impugned order manifested a failure to apply mind and a misconstruction of the remand; the disciplinary action taken in those circumstances was set aside.

Final Conclusion: Appeal allowed; the revocation of the customs broker licence and forfeiture of the security deposit are set aside and the customs broker licence is restored.

Classification of imported goods - principles of natural justice - reconsideration on remand - show cause notice

Classification of imported goods - show cause notice - principles of natural justice - reconsideration on remand - Whether the matter should be remitted for fresh adjudication because the lower authorities decided classification without giving the respondent appropriate notice. - HELD THAT: - The Tribunal found that both the adjudicating authority and the first appellate authority had adopted their own classifications of the imported items without putting the respondent on notice of those specific classifications. The Tribunal held that the matter requires fresh consideration by the adjudicating authority, which must rehear and decide the classification after following the principles of natural justice and in accordance with the allegations contained in the show cause notice dated 13.02.2009. Consequently, the impugned order is set aside and the file is remanded for fresh adjudication consistent with the above directions. [Paras 4, 5]

Impugned order set aside and matter remanded to the adjudicating authority for fresh adjudication after giving notice and following principles of natural justice in accordance with the show cause notice dated 13.02.2009.

Final Conclusion: The Tribunal set aside the impugned order and remitted the classification dispute to the adjudicating authority for fresh consideration, directing that the respondent be given appropriate notice and that the matter be decided in accordance with the show cause notice and principles of natural justice.

Correction of clerical or arithmetic mistakes under Sec.154 of the Customs Act - finality of assessment and challenge required for refund - provisional assessment subject to chemical examiner's report - refund of excess duty paid

Correction of clerical or arithmetic mistakes under Sec.154 of the Customs Act - provisional assessment subject to chemical examiner's report - finality of assessment and challenge required for refund - refund of excess duty paid - Whether the Asst. Commissioner was entitled to rectify the shipping bill under Sec.154 and sanction refund of the differential duty where the shipping bills were assessed subject to the chemical examiner's report but the exporter had paid duty at a higher rate without express protest or endorsement. - HELD THAT: - The Tribunal found that the assessing officer had made the assessment subject to the outcome of the chemical examiner's report, so the assessment was in substance provisional even though the shipping bill did not use the word "provisionally assessed." The duty paid at the higher rate was incorrectly calculated in law because the chemical examiner's report confirmed Fe content below 62%, attracting the lower rate; thus the Asst. Commissioner corrected the clerical/arithmetic mistake in the assessment under the corrective power conferred by Sec.154. The Tribunal rejected the Revenue's reliance on the finality principle that an assessment becomes final unless challenged, observing that where an assessment is expressly made contingent on a test report the correction under Sec.154 to reflect the true rate and to sanction refund is permissible. Consequently, sanctioning the refund was within the power of the customs officer and the appellate authority rightly upheld that exercise of power. [Paras 5]

Order-in-Original amending the shipping bill under Sec.154 and sanctioning refund was correct; the Revenue's appeal is rejected.

Final Conclusion: The appeal filed by the Revenue against the Order-in-Appeal is dismissed; the correction of the assessment under Sec.154 and sanction of refund was upheld as proper.

Correction of clerical or arithmetical mistakes under Section 154 of the Customs Act, 1962 - finality of assessment and challenge requirement for refund claims - provisional assessment subject to chemical examiner's report - refund of excess duty paid following chemical analysis

Provisional assessment subject to chemical examiner's report - finality of assessment and challenge requirement for refund claims - refund of excess duty paid following chemical analysis - Whether the refund of differential export duty sanctioned by the Assistant Commissioner was lawful where shipping bills were assessed subject to the chemical examiner's report but duty was paid at a higher rate without an express endorsement of protest or provisional assessment. - HELD THAT: - The Assessing Officer had made the assessments subject to the outcome of the chemical examiner's report; although the shipping bills did not use the word 'provisionally assessed', the liability to pay lower duty would arise if the chemical report confirmed Fe content below the threshold. The finding that duty had been paid at the higher rate was attributable to a mistake in assessment calculation by the customs officer. Section 154 empowers correction of clerical or arithmetical mistakes in any decision or order, and the Assistant Commissioner correctly invoked that power to amend the shipping bills and sanction refund of the differential duty once the chemical examiner's report confirmed the lower Fe content. The ratio relied upon by Revenue concerning finality of assessment and requirement to challenge an assessment (as in Priya Blue Industries) does not apply where the assessment was expressly made subject to the test report and the error was clerical/arithmetic capable of correction under Section 154. The appellate authority rightly upheld the Order-in-Original. [Paras 6]

The refund sanctioned under corrective action in exercise of powers under Section 154 was upheld and the revenue's appeal was rejected.

Final Conclusion: The Tribunal dismissed the Revenue appeal, holding that assessments made subject to the chemical examiner's report could be corrected under Section 154 to refund the excess duty paid once the test report confirmed lower Fe content; the Order-in-Original and the first appellate order were upheld.

Refund of duty - finality of assessment - maintainability of refund claim - claim under Section 27 - duty 'borne by him' - distinction between duty paid 'pursuant to an order of assessment' and duty 'borne by him'

Refund of duty - maintainability of refund claim - claim under Section 27 - duty 'borne by him' - finality of assessment - Whether the appellant's refund claim for excess duty consequent upon rebate and freight reduction was maintainable despite the assessed Bill of Entry reaching finality. - HELD THAT: - The Tribunal found that the lower authorities rejected the refund claim on the ground that the assessment embodied in the Bill of Entry had attained finality and had not been challenged. Relying on the Tribunal decision in Commissioner of Customs (Export) New Delhi v. Lalit Kumar, the Court held that Section 27 provides two alternatives: duty paid pursuant to an order of assessment and duty 'borne by him'. Where the duty incidence is borne by the importer because the benefit (rebate/notification) was not considered at assessment, the claim falls under the second alternative and is maintainable. The Supreme Court decision in Priya Blue Industries Ltd. was distinguished because that case involved duty paid pursuant to an assessment order; its ratio does not apply where there is no adversarial assessment order and the importer bears the duty. Applying that reasoning, the Tribunal concluded that the appellant's claim was maintainable under Section 27 as duty borne by it and that the finality of the assessed Bill of Entry did not preclude the refund claim.

The refund claim was held maintainable under Section 27 as duty 'borne by him' and the impugned rejection based on finality of assessment was set aside.

Final Conclusion: The impugned order rejecting the refund claim is set aside and the appeal is allowed, holding the appellant's refund claim maintainable under Section 27 as duty borne by it.

Summary order. [Four weeks' time granted to cure registry defects; Special Leave Petition to stand dismissed if defects not cured within that period]

Extended period of limitation - normal period of limitation - penalty under Section 78 of the Finance Act, 1994 - chargeability of charitable institutions to service tax for Commercial Training or Coaching - bonafide belief defence

Extended period of limitation - normal period of limitation - chargeability of charitable institutions to service tax for Commercial Training or Coaching - bonafide belief defence - Tribunal correctly held that the extended period of limitation was not invokable and restricted the demand to the normal period of limitation. - HELD THAT: - The Court recorded that prior to the decision in Sri Chaitanya Educational Committee the question whether charitable institutions rendering Commercial Training or Coaching were chargeable to service tax was debatable. The reference to a third member in Sri Chaitanya themselves demonstrated that the point was not free from doubt. On the facts the Tribunal found that the assessee had a bonafide belief that no service tax was payable. Given that state of the law and the Tribunal's factual finding of bonafide belief, the extended period of limitation could not be invoked and the demand was rightly confined to the normal period of limitation. [Paras 5, 7]

Demand beyond the normal period of limitation deleted; demand confined to normal period.

Penalty under Section 78 of the Finance Act, 1994 - bonafide belief defence - chargeability of charitable institutions to service tax for Commercial Training or Coaching - Tribunal was justified in setting aside the penalty under Section 78. - HELD THAT: - Because the issue of liability was a genuinely debatable question prior to the Sri Chaitanya decision and the Tribunal found on the facts that the assessee held a bonafide belief of non-liability, imposition of penalty under Section 78 was not warranted. The Tribunal's deletion of the penalty followed from its conclusion on the law's unsettled nature and the assessee's bona fide belief. [Paras 5, 7]

Penalty under Section 78 deleted.

Final Conclusion: The appeal is dismissed; the questions of law urged by Revenue do not disclose any substantial question of law in view of the Tribunal's finding that liability was a debatable issue and the assessee's bonafide belief, and the impugned order confining demand to the normal period and deleting the penalty is sustained.

CENVAT credit - input service credit - agency acting as conduit/agent - finding of fact and perversity test - substantial question of law

CENVAT credit - input service credit - agency acting as conduit/agent - finding of fact and perversity test - entitlement to claim CENVAT credit on service tax shown in broadcasters' invoices where invoices also name an advertising agency - HELD THAT: - The Tribunal examined the broadcasters' invoices and found as a matter of fact that the invoices were in the name of the respondent and that the advertising agency merely acted as a conduit/agent for payment. The High Court recorded that this factual finding by the Tribunal-that the agency was shown only as the agent and the invoices operated in the name of the respondent-was not shown to be perverse. Because the contested entitlement to input service/CENVAT credit turned on that factual conclusion, no substantial question of law arose for admission. The Court therefore declined to interfere with the Tribunal's finding and dismissed the appeal. [Paras 5, 6, 7]

The respondent is entitled to avail CENVAT credit on the invoices; the Tribunal's factual finding that the agency was only a conduit is not perverse and the appeal is dismissed.

Final Conclusion: The appeal is dismissed: the Tribunal's factual finding that the advertising agency acted as a conduit and that the invoices were in the respondent's name stands unassailed, permitting the respondent to avail CENVAT/input service credit; no substantial question of law is posed.

Support services - business entity - ejusdem generis - exemption for services provided to a governmental authority / services for non-commercial public use - post-negative-list tax regime excluding services by Government or local authority

Business entity - ejusdem generis - The appellant is not a 'business entity' for the purposes of service tax. - HELD THAT: - The Tribunal held that the statutory phrase 'any other business' in the definition of 'business entity' must be read ejusdem generis with 'industry' and 'commerce' and therefore confined to profit oriented commercial activities. The Institute, established under the National Institute of Technology Act, 2007, is dedicated to education and knowledge dissemination; the unit under it partakes of the same non commercial character and cannot be characterised as a profit motivated business entity. The adjudicating authority's finding to the contrary was held unsustainable. [Paras 7]

Appellant is not a business entity.

Support services - outsourcing of functions - The services received from CPWD do not qualify as 'support services'. - HELD THAT: - The definition of 'support services' requires that the functions so received be ones the recipient ordinarily carries out in its operations but has outsourced. The services in dispute were construction and related civil works, functions which the educational Institute does not itself perform in the ordinary course. Outsourcing such construction therefore does not bring those services within the definition of 'support services'. The Tribunal found the adjudicating authority's interpretation to be incorrect and the classification unsustainable. [Paras 7]

Services received from CPWD are not 'support services'.

Exemption for services provided to a governmental authority / services for non-commercial public use - post-negative-list tax regime excluding services by Government or local authority - The demand for service tax, interest and penalty is unsustainable because the services were exempt as services to a governmental authority/for non commercial public use during the relevant period. - HELD THAT: - Under the post negative list regime the Tribunal applied the Notifications in force during the relevant period (Notification No.25/2012, subsequently clarified by Notification No.2/2014) and pertinent circular guidance to conclude that services provided by a Governmental authority and construction of structures predominantly for educational use were exempt. The CPWD is a Governmental authority and the works related to an educational institute; the exemption applied for the impugned periods (noting that the later omission of the clause occurred after the demand period). Consequently the confirmed demand, and the attendant interest and penalty, could not be sustained. [Paras 7]

Demand, interest and penalty set aside as the services were exempt for the relevant period.

Final Conclusion: The appeal is allowed; the impugned order confirming service tax demand, interest and penalty is set aside for the stated tax periods.

Levy of service tax on leasing of motor vehicles between Rent-a-Cab operators - Precedential effect of Tribunal decisions over departmental clarifications - Restriction of demand to normal period of limitation and setting aside of penalty

Levy of service tax on leasing of motor vehicles between Rent-a-Cab operators - Precedential effect of Tribunal decisions over departmental clarifications - Providing motor vehicles on monthly leasing rent by one registered Rent-a-Cab operator to another registered Rent-a-Cab operator is liable to service tax under the category of Rent a Cab. - HELD THAT: - The appellant, though registered and discharging tax as a Rent-a-Cab service provider, leased vehicles to another Rent-a-Cab operator who in turn used them in his operations. Revenue contended that such leasing falls within the Rent-a-Cab service and issued demands. The Board's 1997 circular relied on by the appellant was found unclear in its use of pronouns and incapable of conclusively negating taxability. The Tribunal's decision in Carzonrent (India) Pvt. Ltd., addressing identical circumstances and holding such leasing taxable as Rent-a-Cab service, was held binding and determinative under judicial discipline. Applying that precedent, the leasing activity of the appellant is covered by the Rent-a-Cab service and gives rise to service tax liability. [Paras 6]

Levy of service tax on the appellant for leasing motor vehicles to another Rent-a-Cab operator is upheld, following the Tribunal precedent.

Restriction of demand to normal period of limitation - Setting aside of penalty for absence of mala fide and complex legal interpretation - The demand is to be restricted to the normal period of limitation and the penalty imposed is set aside; re-quantification within the normal limitation is remanded to the Original Adjudicating Authority. - HELD THAT: - The appellant challenged the show cause notice on the ground that a longer period of limitation was invoked. Relying on the Tribunal's approach in the Carzonrent decision, and noting that the matter involves complicated legal interpretation with no direct evidence of mala fide on the part of the assessee, the Tribunal held that extension of limitation in favour of Revenue is not justified. Consequently, the demand is confined to the normal limitation period. The penalty was set aside in full. The computation/quantification of the demand within the normal period is to be carried out afresh by the Original Adjudicating Authority. [Paras 7]

Demand restricted to the normal period of limitation; penalty set aside; matter remitted for re-quantification by the Original Adjudicating Authority.

Final Conclusion: Appeal dismissed; taxability of leasing by one Rent-a-Cab operator to another upheld following Tribunal precedent, demand limited to the normal period of limitation, penalty set aside, and quantification remanded to the Original Adjudicating Authority for computation within the normal limitation.

Condonation of delay - sufficient cause - closure of factory as sufficient cause for delay - absence of responsible person during plant closure - negligence versus unavoidable closure - pragmatic and liberal approach to limitation

Condonation of delay - closure of factory as sufficient cause for delay - absence of responsible person during plant closure - Delay in filing the appeal before the Tribunal was condoned on account of closure of the appellant's factory due to poor market demand. - HELD THAT: - The Tribunal examined the material including intimation letters sent to the Maharashtra Pollution Control Board showing that the plant was stopped on 09.04.2016 and that no responsible person was available at the unit during the closure. The appellant's inability to prosecute the appeal was attributable to the unavoidable shutdown caused by poor market demand rather than deliberate inaction or negligence. Applying a pragmatic and liberal approach to the requirement of 'sufficient cause' and having regard to precedents relied upon by the appellant, the Tribunal concluded that the closure of the factory constituted a sufficient cause to excuse the delay. Consequently the petition for condonation was allowed and the appeal was admitted for hearing. [Paras 4]

Petition for condonation of delay allowed; delay in filing the appeal condoned and the appeal admitted for hearing.

Final Conclusion: The Tribunal allowed the petition for condonation of delay, holding that the factory closure due to poor market demand and the consequent absence of responsible personnel constituted sufficient cause to excuse the delay; the appeal was admitted for hearing.

Cenvat credit inadmissibility - stay of operation of appellate order - appellate discretion to grant stay - balance of convenience - revenue protection - enforcement of order-in-original during pendency of appeal

Stay of operation of appellate order - cenvat credit inadmissibility - balance of convenience - enforcement of order-in-original during pendency of appeal - Whether the stay of operation of the Commissioner (Appeals) order setting aside the original demand should be granted in favour of the department - HELD THAT: - The Appellate Tribunal examined the stay petition filed by the department seeking suspension of an order of the Commissioner (Appeals) which had set aside an adjudicating authority's confirmation of demand of cenvat credit as inadmissible. The Tribunal observed that the Commissioner (Appeals) had not acted without authority of law and had reversed the adjudicating authority's technical finding on invoicing. The department's assertions of recurring improper invoicing and consequent revenue loss were treated as speculative and not supported by the impugned appellate order. The Tribunal balanced the contentions and noted that while the department feared revenue loss, the respondent would suffer real inconvenience if the original order were enforced during the appeal. Weighing the balance of convenience, and finding the department's case for stay unestablished on the material placed before it, the Tribunal concluded that stay was not warranted. The order therefore rejected the prayer for interim suspension of the appellate order, without adjudicating the substantive merit of the cenvat credit dispute. [Paras 2, 3, 4]

Stay petition dismissed; operation of the Commissioner (Appeals) order is not stayed and the department's request for interim relief is rejected.

Final Conclusion: The Appellate Tribunal dismissed the department's stay petition and refused to stay the Commissioner (Appeals) order that had set aside the original demand; the question of admissibility of the cenvat credit was left for adjudication on merits.

Non-compliance with pre-deposit - dismissal for non-compliance with pre-deposit - modification of tribunal order - recovery of demanded amount

Non-compliance with pre-deposit - modification of tribunal order - Miscellaneous applications seeking modification of the Tribunal's orders dated 29.5.2012 and 17.9.2012 are dismissed. - HELD THAT: - The Tribunal noted that the appeal had already been dismissed on 17.9.2012 for non-compliance with the Tribunal's direction to make a pre-deposit. Despite giving an undertaking and repeatedly filing applications for modification, the appellant had not made the directed pre-deposit even after the passage of several years. The Revenue placed on record a letter dated 4.4.2018 confirming that the directed amount had not been paid and that the payments now claimed by the appellant had already been considered by the adjudicating authority. In view of the continued non-compliance with the pre-deposit direction and absence of any payment, there was no merit in entertaining the modification applications. [Paras 3, 4]

Miscellaneous applications for modification dismissed; Revenue directed to recover the amount without further delay.

Final Conclusion: The Tribunal dismissed the miscellaneous applications for modification of its earlier orders because the appellant failed to comply with the pre-deposit direction; the Revenue is expected to recover the amount without further delay.

Business Auxiliary Service - leviability of service tax on commission received by distributor - application of precedent of coordinate Bench

Business Auxiliary Service - leviability of service tax on commission received by distributor - application of precedent of coordinate Bench - Whether the commission received by the appellant from M/s. RMP Infotec Pvt. Ltd. is exigible to service tax under the category of Business Auxiliary Service, and whether the impugned demand and adjudication should be upheld. - HELD THAT: - The Tribunal held that the circumstances of the present case are similar to those in the coordinate-Bench decision relied upon by the lower authority, and that the amount paid to the distributor by M/s. RMP Infotec Pvt. Ltd. is a commission which is leviable to service tax under the category of Business Auxiliary Service. The appellant's representative conceded that the issue is covered by the Tribunal's earlier decision in Lalit Dongre which is adverse to the appellant, while pointing out that that decision follows an observation in Surendra Singh Rathore which is the subject of a pending High Court appeal; the Tribunal rejected the submission that pendency of that appeal justified withholding decision, noting that an appeal against a Tribunal judgment does not by itself stay the binding effect of the coordinate Bench precedent. Applying the precedent, the Tribunal found no merit in the appeal and affirmed the adjudication which had confirmed demand (with interest) for the commission received, noting that the Commissioner (Appeals) had already adjusted certain benefits and dropped penalty as recorded in the impugned order.

Impugned order affirmed; appeal dismissed.

Final Conclusion: The Tribunal, following its coordinate-Bench precedent, concluded that the commission paid to the distributor is taxable as Business Auxiliary Service and accordingly upheld the adjudicated demand for the period April 2010 to March 2012, dismissing the appeal.

Manpower Recruitment or Supply Agency Service - service tax liability and recovery - suppression of facts to evade tax - interest under Section 73(2) of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - penalties under Section 77 of the Finance Act, 1994 - power to set aside penalty under Section 80 of the Finance Act, 1994

Manpower Recruitment or Supply Agency Service - service tax liability and recovery - Whether the appellant rendered taxable manpower recruitment or supply services during Apr, 2007 to Mar 2010 and whether the demand for service tax is sustainable. - HELD THAT: - The Tribunal accepted the departmental finding that, in addition to registered maintenance/repair services, the appellant rendered manpower supply services for the period Apr, 2007 to Mar 2010 but did not obtain registration, file returns or discharge service tax. The appellant did not contest the tax demand before the Tribunal and had paid the service tax liability (though not the interest). Having regard to the records and the appellant's admission as to payment of the tax element, the Tribunal found the demand for service tax for the stated period to be correctly raised and sustained by the adjudicating authorities. [Paras 3, 5, 6]

The demand for service tax in respect of manpower recruitment or supply services for Apr, 2007 to Mar 2010 is affirmed; the appeal on this head is rejected.

Suppression of facts to evade tax - interest under Section 73(2) of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - penalties under Section 77 of the Finance Act, 1994 - power to set aside penalty under Section 80 of the Finance Act, 1994 - Whether penalties and interest imposed by the adjudicating authorities should be set aside or reduced. - HELD THAT: - The adjudicating authorities found that the appellant had intentionally suppressed provision of taxable services and invoked penalties under the relevant provisions, in addition to interest under Section 73(2). The appellant contended for setting aside of penalties invoking provisions referred to in the record (including Section 80). The Tribunal noted that although the appellant paid the principal service tax, it had not discharged the interest liability and produced no evidence warranting exercise of power to set aside penalties. The Tribunal observed that the appellant had been given opportunities to pay outstanding interest and that there was no basis on record to interfere with the imposition of penalties imposed for suppression, delayed registration and non-filing of returns. [Paras 3, 6]

Penalties and interest as imposed by the lower authorities are sustained; the plea to set aside penalties is rejected and the appeal is dismissed on this ground.

Final Conclusion: The Tribunal finds the departmental demand for service tax in respect of manpower recruitment/supply services for Apr, 2007 to Mar 2010 to be sustainable; having considered payment of the tax element but noting non-payment of interest and absence of grounds to set aside penalties, the impugned orders are upheld and the appeal is rejected.

Scope of review - power of review under Section 84 - limitations on initiating review proceedings on fresh grounds - requirement of consignment note declarations for GTA services - benefit of Notification No. 35/2004-ST

Scope of review - power of review under Section 84 - limitations on initiating review proceedings on fresh grounds - Validity of the Commissioner initiating review proceedings and confirming demand on grounds not raised in the original show cause notice adjudicated by the Adjudicating Authority. - HELD THAT: - The Tribunal held that the Commissioner, acting as a reviewing authority under the statutory review power, is confined to the allegations and grounds that were the subject matter of the original show cause notice which was adjudicated by the subordinate authority. The reviewing authority cannot traverse beyond the scope of the original show cause notice by raising fresh allegations not previously made and not adjudicated by the original authority. Because the Commissioner issued a show cause notice and confirmed demand on a ground (absence of declarations on consignment notes regarding non-availment of CENVAT credit) that was not part of the original show cause notice and on which the Adjudicating Authority had not recorded any finding, the review exceeded its permissible scope. On this jurisdictional basis the impugned order was set aside without adjudicating other contentions. [Paras 4]

Impugned review order set aside and appeal allowed on the ground that review traversed beyond the scope of the original show cause notice.

Requirement of consignment note declarations for GTA services - benefit of Notification No. 35/2004-ST - No finding was recorded on the existence or absence of consignment-note declarations for non-availment of CENVAT credit; the Tribunal did not adjudicate the substantive entitlement to Notification No. 35/2004-ST because the appeal was disposed for want of jurisdiction in the review. - HELD THAT: - The Tribunal expressly refrained from recording any findings on the rival submissions regarding the consignment-note declarations and entitlement under Notification No. 35/2004-ST because the appeal was disposed on the preliminary jurisdictional question. The matter concerning whether the appellant satisfied the statutory requirement on consignment notes was therefore left undecided and was not examined on merits.

Substantive contentions regarding consignment-note declarations and entitlement under Notification No. 35/2004-ST not adjudicated; no findings recorded.

Final Conclusion: The review order passed by the Commissioner was quashed for exceeding the permissible scope of review by raising fresh grounds not contained in the original show cause notice; the appeal is allowed and other substantive issues remain undecided.

Non-speaking order - classification of services - cargo handling service - site formation and clearance service - excavation and earthmoving services - confirmation of service tax demand - remand for fresh consideration - opportunity to produce evidence

Non-speaking order - confirmation of service tax demand - The impugned appellate order is non-speaking and liable to be set aside. - HELD THAT: - The Tribunal examined the Commissioner (Appeals) order which upheld a demand of service tax confirmed by the adjudicating authority. The Commissioner (Appeals) did not record any reasons why the services rendered by the appellant should be classified under the taxable category of site formation and clearance and excavation and earthmoving and demolition services, rather than under the cargo handling service claimed by the appellant. For want of such reasoning the order was held to be devoid of determinate findings and thus non-speaking. [Paras 5]

Impugned order set aside on the ground that it is non-speaking.

Classification of services - cargo handling service - site formation and clearance service - excavation and earthmoving services - remand for fresh consideration - opportunity to produce evidence - The question of correct classification of the services rendered by the appellant is remanded for fresh consideration after affording opportunity and receipt of relevant documents. - HELD THAT: - Rather than deciding the classificatory dispute on the material before it, the Tribunal directed that the matter be remitted to the Commissioner (Appeals) to record reasons on whether the services fall within cargo handling service as claimed by the appellant or within site formation/excavation categories as alleged by Revenue. The Tribunal required that the Commissioner (Appeals) afford the appellant an opportunity to produce evidence, including agreements and other documents, and then decide the classification with reasons. [Paras 5]

Matter remanded to the Commissioner (Appeals) to consider and record reasons on classification after giving the appellant opportunity to produce documents.

Final Conclusion: The appeal is allowed to the extent that the impugned order is set aside as non-speaking and the matter is remanded to the Commissioner (Appeals) for fresh consideration and reasoned determination of the correct classification of services for the period April 2007 to September 2009 after affording the appellant an opportunity to produce relevant documents.

Retrospective amendment - retrospective levy of tax - interest on retrospective levy - validating Act / validation clause - clarificatory amendment

Retrospective amendment - interest on retrospective levy - validating Act / validation clause - clarificatory amendment - Admission of the appeal for final consideration of the substantial question of law on whether interest on duty made payable by a retrospective amendment should be computed from the date of enactment of the amending Finance Act or from the retrospective effective date of the amendment. - HELD THAT: - The Court recorded the substantial question of law presented by the Revenue concerning calculation of interest where duty became payable consequent to an amendment said to be retrospective in effect from 29.04.2010 but enacted on 08.04.2011. Although an earlier inclination to dismiss the appeal was recorded, the Bench reconsidered its view in light of the Supreme Court's decision in Star India (P.) Ltd. v. Commissioner of Central Excise and the contextual presence of a validation clause in Finance Act, 2002 which was material to that decision. Observing that Finance Act, 2011 (the impugned amending enactment) does not contain a validation clause similar to that in Finance Act, 2002, and that it is necessary to examine whether the amendment in question is clarificatory or a substantive retrospective imposition of liability, the Court concluded that the issue cannot be summarily disposed of. The Tribunal's order relied on a coordinate-bench decision (Premier Industries Ltd.) which is itself the subject of a pending appeal before the Madhya Pradesh High Court; the Revenue was directed to produce the order admitting that appeal and any final order, if available. In these circumstances the Court admitted the appeal for detailed consideration at the final hearing rather than deciding the substantive question on the papers. [Paras 2, 8, 9]

The appeal is admitted for final hearing on the substantial question of law; the parties directed to place on record the order admitting the related appeal before the Madhya Pradesh High Court and any subsequent disposal, and the question of interest on a retrospectively effective amendment shall be considered on merits.

Final Conclusion: The High Court admitted the Revenue's appeal for final consideration of the substantial question whether interest on duty arising from a retrospectively effective amendment is payable from the date of enactment of the Finance Act or from the retrospective effective date; the matter is to be heard on merits and related orders from the Madhya Pradesh High Court are to be produced.

Condonation of delay - self-operating order rejecting appeal for failure to remove office objections - inadequate affidavit explanation for delay - limitation binds government - diligence and accountability of government departments in litigation

Condonation of delay - inadequate affidavit explanation for delay - diligence and accountability of government departments in litigation - Whether the delay of 529 days in filing the Notice of Motion seeking to set aside the self-operating order dated 21.04.2016 should be condoned. - HELD THAT: - The affidavit in support did not satisfactorily explain the delay: it merely asserted an inadvertent failure to remove office objections and referred to a change in the panel of advocates without specifying dates or when the department became aware of the Prothonotary and Senior Master's rejection dated 21.04.2016. The Court treated such vague, after the event assertions as reflecting negligence and a casual attitude by revenue officers in monitoring appeals, observing that the State cannot routinely claim exemption from limitation because of internal administrative lapses. The Court relied on its earlier observations in Commissioner of Income Tax Vs. Reliance Industries Ltd. and the Apex Court's observations in Office of the Chief Post Master General V. Living Media India Ltd. to emphasise that government departments are bound by limitation and must show plausible, acceptable explanations or bona fide efforts to prosecute litigation; mere reliance on impersonal machinery or change of counsel is insufficient. The Court further noted that, where negligence of officers causes prejudice to the State's cause, action against such officers ought to be shown, which was not done here. Applying these principles, the Court concluded that the explanations offered were inadequate and did not justify condonation of the 529 days' delay.

Notice of Motion dismissed; delay not condoned; no order as to costs.

Final Conclusion: The application for condonation of 529 days' delay to set aside the Prothonotary and Senior Master's order dated 21.04.2016 was refused because the affidavit failed to provide a plausible, specific explanation for the delay and the Court held that government departments must act with diligence and cannot claim exemption from limitation for administrative lapses.

Jurisdiction of adjudicating authority - condonation of lapse under Rule 96ZM - proviso of Section 11A

Jurisdiction of adjudicating authority - proviso of Section 11A - The Tribunal's failure to address the Commissioner (Appeals)'s finding that the Joint Commissioner of Central Excise acted without jurisdiction under the proviso to Section 11A and the consequence thereof. - HELD THAT: - The High Court found that the Tribunal's impugned order did not consider or displace the Commissioner (Appeals)'s conclusion that the order dated 30th May 2008 of the Joint Commissioner was without jurisdiction, in light of the proviso to Section 11A as then in force. That jurisdictional finding was determinative and went to the root of the dispute; absent reversal of that finding by the Tribunal there could be no occasion to direct further action by the original authority. Because the Tribunal failed to deal with this fundamental jurisdictional aspect, its order could not stand and required reconsideration in accordance with law. [Paras 9]

Impugned order of the Tribunal set aside and matter restored to the Tribunal for fresh disposal after considering the jurisdictional finding under the proviso to Section 11A.

Condonation of lapse under Rule 96ZM - Whether the matter should proceed by directing the appellant to seek condonation under Rule 96ZM before the adjudicating authority without first resolving the jurisdictional challenge. - HELD THAT: - The Court held that it was premature to direct condonation proceedings under Rule 96ZM because the Tribunal had not first addressed the Commissioner (Appeals)'s finding on lack of jurisdiction. Since the jurisdictional question must be resolved before any directive about condonation and further adjudication could be meaningful, the Tribunal's direction that the appellant approach the Commissioner for condonation was set aside and the issue remitted to the Tribunal to decide afresh in accordance with law. [Paras 8, 10]

Direction to pursue condonation under Rule 96ZM set aside; matter remitted to the Tribunal for fresh disposal after addressing the jurisdictional issue.

Final Conclusion: The Tribunal's order dated 30th March 2017 is set aside and the matter is restored to the Tribunal for fresh disposal in accordance with law after it deals with the Commissioner (Appeals)'s finding on the lack of jurisdiction of the Joint Commissioner and thereafter proceeds, if appropriate, on condonation under Rule 96ZM.

Clandestine removal - burden of proof - standard of proof in clandestine removal cases - retraction of statement - parallel invoicing - confiscation

Clandestine removal - burden of proof - standard of proof in clandestine removal cases - parallel invoicing - retraction of statement - Whether the allegation of clandestine removal of finished goods without payment of duty was proved and whether the factual findings of the authorities could be interfered with on appeal under Section 35G. - HELD THAT: - The Court recorded that clandestine removal is by nature secretive and direct documentary proof may not always be available; however, where seized records and other material prima facie establish clandestine removal and the assessee fails to give a plausible explanation, the allegation can be held proved. The authorities found discrepancies between private diary records and statutory RG1 entries, shortage in raw material accounts, existence of parallel invoices (one set without running serial numbers), and unaccounted packed finished stock seized during inspection. Retractions of statements by the factory Manager and Managing Director were considered by the Adjudicating Authority and rejected as afterthoughts, noting absence of denial of the material facts and failure to produce exculpatory records. The Appellate Authority and the Tribunal independently considered the factual matrix and affirmed the finding of clandestine removal. In the absence of perversity in those factual findings, the High Court declined to re-appreciate evidence under its limited scope on substantial questions of law. [Paras 28, 29, 30, 31, 32]

The allegation of clandestine removal was held to be proved on the materials and concurrent factual findings of the Adjudicating Authority, the First Appellate Authority and the Tribunal were not interfered with.

Confiscation - retraction of statement - burden of proof - Whether mere storage of finished products lying in the factory, or alleged impossibility of completing inventory in the time taken for search, extinguishes the Department's case or precludes confiscation. - HELD THAT: - The Court noted the contention that inventory of finished goods and raw material could not be completed within 51/2 hours and that mere presence of finished products in the factory does not amount to clandestine removal. The Adjudicating Authority, after comparing production, clearance and diary notings with statutory records, pointed out discrepancies and seized unaccounted packed stocks lacking running serial numbers. The authorities examined and rejected the plea of impossibility and found no credible explanation from the assessee for discrepancies or for parallel invoicing. Given the material on record and the assessee's failure to satisfactorily counter it, mere storage in the factory did not preclude a finding of clandestine removal or the consequential measures proposed (including confiscation) where prima facie proof existed. [Paras 26, 27, 28, 29, 30]

The plea that goods merely lying in the factory and the asserted impossibility of completing inventory within the time available defeated the Department's case was rejected; the authorities' factual conclusion permitting confiscation was upheld.

Final Conclusion: The High Court found no substantial question of law and dismissed the appeal, upholding the concurrent factual findings of clandestine removal, rejection of retractions, and the consequent confirmation of demand and confiscation by the authorities and the Tribunal.

SSI exemption - non-declaration of value in ER-1 returns - proviso to Section 11A-extended period for issuance of notice (requiring mens rea/willful suppression) - onus on department to verify when manufacture of exempted goods is within departmental knowledge - limitation-inapplicability of extended period absent mens rea

Proviso to Section 11A-extended period for issuance of notice (requiring mens rea/willful suppression) - non-declaration of value in ER-1 returns - limitation-inapplicability of extended period absent mens rea - Validity of invoking the extended period by invoking the proviso to Section 11A on account of non-declaration of values of exempted goods in ER 1 returns - HELD THAT: - The Tribunal accepted the First Appellate Authority's factual finding that the assessee had regularly filed ER 1 returns indicating quantities of exempted goods though values were not declared, and that the department had been apprised and had, on occasions, endorsed exemption approvals. In those circumstances the lower authority's invocation of the proviso to Section 11A, which requires willful suppression or mens rea for extension of limitation, was unsustainable. The Tribunal noted that nothing prevented the department from seeking value details once ER 1s disclosed manufacture and clearance of exempted vaccines; therefore there was no effective countering of the First Appellate Authority's finding that mens rea was absent. Reliance on precedents involving different facts (non disclosure despite instructions or faulty records) was held inapposite. The material findings that the demand was hit by limitation were not successfully impugned in the appeal memorandum. [Paras 6]

Extended period could not be invoked; demand barred by limitation as there was no willful suppression of facts by the assessee.

SSI exemption - onus on department to verify when manufacture of exempted goods is within departmental knowledge - non-declaration of value in ER-1 returns - Effect of departmental knowledge of manufacture/clearance of exempted goods on the liability to pay duty and entitlement to SSI exemption - HELD THAT: - The Tribunal upheld the First Appellate Authority's finding that the manufacture and clearance of exempted vaccines were within the department's knowledge through ER 1 returns and departmental endorsements approving exemptions for new vaccines. Once the department was aware that the assessee was operating under the SSI scheme while manufacturing exempted goods, the onus to verify values shifted to the department; in that factual matrix, it was unfair to attribute an intention to evade duty to the assessee merely because values were not declared in ER 1. The Tribunal found the adjudicating authority's reliance on the proviso to Section 11A misplaced on these facts. [Paras 6]

Where manufacture and clearance of exempted goods were within departmental knowledge, the department bore the responsibility to verify values and the assessee's omission to declare values did not establish culpable suppression.

Final Conclusion: The impugned order of the First Appellate Authority setting aside the demand was upheld; the Revenue's appeal is rejected and the demand is held to be barred by limitation and not maintainable on the facts.

Entitlement to Cenvat Credit on supplementary invoices where additional duty arises from disputed assessable value - Validity of supplementary invoice as a duty paying document where additional duty is alleged to be recoverable on account of willful misstatement or suppression - Applicability of prohibition in Rule 9(1)(b) of the Cenvat Credit Rules, 2004 where liability of manufacturer is sub judice - Precedential effect of Tribunal decisions in identical facts pending decision of the Supreme Court

Entitlement to Cenvat Credit on supplementary invoices where additional duty arises from disputed assessable value - Validity of supplementary invoice as a duty paying document where additional duty is alleged to be recoverable on account of willful misstatement or suppression - Applicability of prohibition in Rule 9(1)(b) of the Cenvat Credit Rules, 2004 where liability of manufacturer is sub judice - Precedential effect of Tribunal decisions in identical facts pending decision of the Supreme Court - Appellant entitled to Cenvat Credit on supplementary invoices issued by the coal company where the question of additional excise liability was debatable and pending before the Supreme Court; denial under Rule 9(1)(b) was not justified. - HELD THAT: - The Tribunal examined whether supplementary invoices issued by the coal supplier could serve as duty paying documents for availing Cenvat Credit despite the Department's contention that Rule 9(1)(b) excludes such invoices where additional duty became recoverable due to willful misstatement or suppression. The Court noted that the liability of the coal companies to pay differential duty arose from a debatable issue concerning inclusion of elements in assessable value, which was sub judice before the Hon'ble Supreme Court. In identical factual matrix the Tribunal in Birla Corporation Ltd. allowed credit, observing absence of any element of fraud or suppression where the ultimate question of liability was pending adjudication. Applying that precedent and recognizing that proceedings against the manufacturer had not attained finality, the Court found that allegations of suppression could not be attributed and therefore the prohibition in Rule 9(1)(b) did not operate to deny credit. The impugned order was set aside accordingly.

Impugned order set aside and appeal allowed; appellant entitled to take Cenvat Credit on the supplementary invoices in question.

Final Conclusion: The appeal is allowed by following the Tribunal's decision in identical circumstances: where the coal supplier's liability for additional duty is debatable and pending before the Supreme Court, supplementary invoices qualify for Cenvat Credit and Rule 9(1)(b) cannot be invoked to deny such credit in the absence of established willful misstatement or suppression.

Irregular availment of SSI exemption - differential duty on goods bearing the brand name of another person - recomputation/remand to original authority for verification - penalty under Section 11AC of the Central Excise Act - penalty under Rule 13 of the CENVAT Credit Rules, 2004 - personal liability of managing director/director for company affairs - principles of natural justice in redetermination

Irregular availment of SSI exemption - differential duty on goods bearing the brand name of another person - recomputation/remand to original authority for verification - Differential duty claimed in Annexure D-4 required verification and recomputation by the original authority to restrict demand to clearances where goods bore the brand name of another person; matter remitted for that limited purpose. - HELD THAT: - The Bench observed that Annexure D-4 lists clearances with descriptions and some entries identify brand names such as 'Vandana' or 'Sagar', but the show cause notice itself is not clear whether those brand names were owned by the appellant or by another person. The question whether particular clearances attracted differential duty depends on whether the goods bore the brand name of another person; factual verification was therefore necessary. The Tribunal directed the original authority to determine which clearances in Annexure D-4 involved goods bearing another person's brand and to recompute the differential duty accordingly, following principles of natural justice in the re-determination. The contention of the appellant that the differential duty should be reduced to a specified lesser amount was held to be a matter for verification by the original authority. [Paras 9, 10]

Remitted to the original authority for limited re-computation of differential duty on Annexure D-4 clearances, restricting demand to those clearances where goods bore the brand name of another person; original authority to follow principles of natural justice.

Penalty under Rule 13 of the CENVAT Credit Rules, 2004 - irregular availment of CENVAT/SSI - Penalty of Rs. 10,000 under Rule 13 CCR, 2004 confirmed by the Commissioner (Appeals) was set aside. - HELD THAT: - Since the demand on account of irregular availment (as to which the quantum and applicability were to be re-examined upon remand) had been set aside by the Commissioner (Appeals) and the factual basis remained to be verified, the Tribunal found no basis to uphold the separate penalty under Rule 13 and therefore set aside that penalty. [Paras 10]

Penalty under Rule 13 CCR, 2004 of Rs. 10,000 set aside.

Penalty under Section 11AC of the Central Excise Act - recomputation linked to duty liability - Penalty under Section 11AC was directed to be recomputed and reduced to the extent the duty liability is re-computed on remand. - HELD THAT: - The Tribunal held that because the duty demand relating to irregular SSI availment is being remanded for recomputation limited to clearances bearing another person's brand, any penalty quantified under Section 11AC must be adjusted correspondingly. The Section 11AC penalty, if any, shall stand reduced in accordance with the amount re-computed by the original authority. [Paras 9, 10]

Section 11AC penalty to be recomputed and reduced proportionately to the re-computed duty liability.

Personal liability of managing director/director for company affairs - reduction of personal penalties - Personal penalties on Shri M.V. Sekhar Rao and Smt. M. Vijayalakshmi were reduced to Rs. 25,000 each. - HELD THAT: - The Tribunal observed that the Managing Director, being the owner-director of an SSI company, could not plausibly be unaware of the company's day-to-day functioning and thus remained liable. Similarly, Shri M.V. Sekhar Rao, who had connection to the other company whose brand was implicated, was found to have liability. However, in view of the likelihood that the duty demand would be reduced upon re-computation, the Tribunal exercised its discretion to reduce the individual penalties to a lower amount to meet the ends of justice. [Paras 10]

Personal penalties on Shri M.V. Sekhar Rao and Smt. M. Vijayalakshmi reduced to Rs. 25,000 each.

Final Conclusion: The Tribunal set aside the Rule 13 CCR penalty, remitted the differential-duty demand in Annexure D-4 to the original authority for limited verification and recomputation (restricting demand to clearances bearing another person's brand) with directions to follow principles of natural justice, directed recomputation and proportionate reduction of any Section 11AC penalty, and reduced the personal penalties on the two directors to Rs. 25,000 each.

Failure to furnish relied upon documents and evidentiary insufficiency - Relevancy of statements under Section 9D of the Central Excise Act - Principles of natural justice - right to cross examination - Entitlement to MODVAT/CENVAT credit where goods not received and only documents exchanged

Failure to furnish relied upon documents and evidentiary insufficiency - Impugned adjudication cannot be sustained where the majority of the relied upon documents are not available with the Department and copies were not before the adjudicating authority or the Bench for examination. - HELD THAT: - The show cause notice listed sixty seven relied upon documents, but only five of those documents were available with the Department at the time of hearing. The Tribunal examined the record and noted that it was not possible to peruse the statements and other relied upon documents because they were not on file. In the absence of the primary relied upon material, the Department could not establish the factual foundation for the demands. For these reasons the adjudication founded on documents that are not produced or made available for scrutiny was set aside for lack of evidence. [Paras 5]

Impugned order set aside for lack of evidence due to non availability/non production of the bulk of relied upon documents.

Relevancy of statements under Section 9D of the Central Excise Act - Statements recorded before Central Excise Officers could not be treated as evidence in the adjudication without compliance with the conditions of Section 9D. - HELD THAT: - The Tribunal referred to the statutory scheme under Section 9D which governs the relevancy of statements made before excise officers and held that such statements may be admitted only in the circumstances prescribed by that provision (for example, where the maker is dead, cannot be found, is incapable of giving evidence, is kept out of the way, or is examined as a witness and the court admits the statement in the interests of justice). In the present case those pre conditions were not satisfied and the persons who made the statements were not examined in accordance with Section 9D(1)(b) nor was cross examination allowed. Reliance on those unverified statements was therefore impermissible, and the adjudication based on them could not stand. [Paras 5]

Statements recorded during investigation could not be relied upon in the adjudication in the absence of compliance with Section 9D; this contributed to setting aside the impugned order.

Principles of natural justice - right to cross examination - Entitlement to MODVAT/CENVAT credit where goods not received and only documents exchanged - Denial of opportunity to cross examine witnesses and failure to permit inspection/verification of relied upon material infringed principles of natural justice and affected the determination on entitlement to MODVAT credit. - HELD THAT: - The appellants contended that they were not supplied copies of the relied upon documents and were not permitted to cross examine persons whose statements were relied upon; transporters' statements were not recorded; and the department's case rested on documentary inferences that the goods were not received. The Tribunal found that cross examination was not allowed and that inspection/verification of the majority of RUDs was not possible because those documents were not produced. Given that entitlement to MODVAT/CENVAT credit was contested on the basis that goods were not actually received but only documents were exchanged, the denial of procedural opportunities and absence of producible evidence deprived the appellants of a fair adjudication. [Paras 5]

Adjudication set aside because procedural denial (non production of documents and non allowance of cross examination) violated natural justice and left the question of MODVAT entitlement without evidentiary support.

Final Conclusion: Appeals allowed; the impugned Order in Original is set aside for want of evidence and for non compliance with the statutory and natural justice requirements (notably the conditions in Section 9D and denial of opportunity to inspect relied upon documents and to cross examine witnesses).

Cenvat credit admissibility - exclusion under Rule 2(l)(C) of the Cenvat Credit Rules, 2004 - input service - services used primarily for personal use or consumption of any employee - membership of club services - life insurance service (group insurance statutory obligation) - air travel agent service - Input Service Distributor (ISD) distribution of credit - precedent and consistency of Tribunal decisions

Cenvat credit admissibility - exclusion under Rule 2(l)(C) of the Cenvat Credit Rules, 2004 - services used primarily for personal use or consumption of any employee - membership of club services - life insurance service (group insurance statutory obligation) - air travel agent service - Input Service Distributor (ISD) distribution of credit - Validity of disallowance of Cenvat credit on Club/Association Service, Life Insurance Service and Air Travel Agent Service under Rule 2(l)(C) when credit was distributed through the appellant's ISD for the period April, 2011 to June, 2015. - HELD THAT: - The Tribunal examined whether the impugned services fall within the exclusion contained in Rule 2(l)(C) read with the definition of input service, which disallows credit where specified services are used primarily for personal use or consumption of any employee. On review of sample invoices and a Chartered Accountant's certificate placed on record, the Tribunal found that the club/membership services related to industry associations and business information (e.g., Indian Home & Personal Care Industry Association, Foreign Exchange Information Service) and were used for business purposes, not for employees' personal benefit. The Tribunal further noted that the life insurance cover was a group insurance scheme which the appellant was statutorily obliged to provide to factory employees and so could not be characterised as primarily for personal benefit. Air travel agent services were found to have been availed by officials for business travel. In these circumstances the exclusion in Rule 2(l)(C) did not apply and the Cenvat credit could not be denied. The Tribunal also recorded that an identical issue for an earlier period had been decided in favour of the appellant by the Tribunal, and applied the same conclusion to set aside the impugned orders.

Impugned orders disallowing Cenvat credit on the said services are set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals for the period April, 2011 till June, 2015, holding that Cenvat credit on the specified Club/Association, Life Insurance (group insurance) and Air Travel Agent services, distributed through the appellant's ISD, was admissible because the services were not used primarily for personal use or consumption of employees; the impugned orders denying credit under Rule 2(l)(C) were set aside.

Exoneration in criminal proceedings - identity of evidence in criminal and departmental/adjudication proceedings - standard of proof beyond reasonable doubt versus preponderance of probabilities - effect of criminal acquittal on confirmation of demand and imposition of penalties - clandestine manufacture and removal

Exoneration in criminal proceedings - identity of evidence in criminal and departmental/adjudication proceedings - standard of proof beyond reasonable doubt versus preponderance of probabilities - effect of criminal acquittal on confirmation of demand and imposition of penalties - Whether demands, interest and penalties confirmed in adjudication based on the same evidence as criminal prosecution can be sustained after acquittal in the criminal proceedings. - HELD THAT: - The Tribunal found that the adjudication and the criminal prosecution relied upon the same set of evidence (recoveries, slips, shortages, supplier statements and unaccounted bags). The Special Judge for Economic Offences, after a full appreciation of that evidence, acquitted the assessee and the managing director on merits, holding that the prosecution had not proved clandestine removal or attempt to evade duty beyond reasonable doubt and that material relied upon was insufficient and based on assumptions. The Tribunal applied the principle that where the charges in departmental proceedings and criminal proceedings are identical and exoneration in the criminal proceedings is on merits, continuing or sustaining departmental demands and penalties based on the same evidence would be unjust, having regard to the higher criminal standard of proof; the Tribunal referenced and followed the reasoning in Radheshyam Kejriwal and the decisions of the High Courts (including A. Mohammed ) which hold that an acquittal/exoneration on merits in criminal proceedings arising from the same material can be a relevant and decisive factor in departmental/adjudication proceedings. On that basis the Tribunal set aside the impugned order confirming demands, interest and penalties and allowed the appeals without adjudicating the rival contentions on merits. [Paras 10, 11, 12]

Impugned Order in Appeal set aside and appeals allowed because criminal acquittal on same evidence exonerated the appellants for purposes of the departmental demands and penalties.

Final Conclusion: The Tribunal allowed the appeals, set aside the Order in Appeal and quashed the confirmation of demands, interest and penalties for the tax periods 97 98 and 98 99 on the ground that the appellants had been exonerated on merits in the criminal prosecution founded on the same evidence.

Input service - CENVAT credit - place of removal - nexus with manufacture - renting of immovable property

Input service - CENVAT credit - place of removal - nexus with manufacture - renting of immovable property - Entitlement to CENVAT credit on service tax paid for renting godowns used to store duty paid sugar sold subsequently. - HELD THAT: - The show cause notice denied credit on the ground that the hired godowns were not "places of removal" and therefore the renting service did not qualify as an input service under the CENVAT Credit Rules, 2004 which allow credit for services used in or in relation to manufacture and clearance of final products up to the place of removal. The Tribunal found that the godowns fall within the definition of "place of removal" in terms of Sec. 4(3)(c) of the Central Excise Act as depots or premises from where excisable goods are to be sold after clearance from the factory. The Tribunal also addressed the nexus issue and, following earlier decisions in DSCL Sugar and Thiru Arooran Sugars Ltd, held that renting of such godowns has sufficient connection with manufacture and clearance to qualify as an input service. Consequently the demand and penalties confirmed by the lower authorities were set aside.

Impugned orders denying CENVAT credit and imposing penalties set aside; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that rented godowns used to store duty paid sugar from which sales are effected are "places of removal" and that rent paid for such godowns qualifies as an input service eligible for CENVAT credit; the orders confirming demand and penalties were set aside.

Refund under Section 11B when burden of duty is borne by the buyer - CENVAT credit entitlement of purchaser of finished excisable goods - Effect of rescission and issue of an identical subsequent notification on refund entitlement

Refund under Section 11B when burden of duty is borne by the buyer - CENVAT credit entitlement of purchaser of finished excisable goods - Entitlement of the respondent (buyer) to claim refund of excise duty paid by its supplier and to treat the same as CENVAT credit - HELD THAT: - The Tribunal held that Section 11B of the Central Excise Act is not confined to the person who physically paid the duty but permits "any person claiming the refund of any duty" to recover duty if he proves entitlement and that he bore the burden. As the supplier (M/s CST) paid duty which it was not liable to pay and the respondent passed on and bore that burden, the respondent is entitled to claim refund. The Tribunal further addressed the contention under the CENVAT Credit regime and accepted that a purchaser of finished excisable goods who has borne the burden of duty may claim refund; the statutory wording of Section 11B and the facts that the respondent bore the burden supported allowing the refund and corresponding relief under CENVAT principles. [Paras 6]

The respondent is entitled to claim refund of the duty paid by its supplier and to obtain relief in the manner claimed.

Effect of rescission and issue of an identical subsequent notification on refund entitlement - Whether Notification No.6/2002-CE having been rescinded precludes relief for clearances during the relevant period, or whether Notification No.6/2006-CE covers the supplier so as to render the duty excess for February-April 2007 - HELD THAT: - The Tribunal noted that although Notification No.6/2002-CE was rescinded on 01.03.2006, an identical Notification No.6/2006-CE dated 01.03.2006 was issued. The first appellate authority had examined this point and recorded that M/s CST fell squarely under Sl. No.91 of Notification No.6/2006-CE. On this basis the Tribunal found that M/s CST had paid duty which was not exigible for the clearances in the relevant period and that the respondent could claim refund of such excess duty. [Paras 6]

The rescission did not defeat the claim; the subsequent identical notification covered the supplier and the duty paid in the relevant period was in excess and refundable.

Final Conclusion: The revenue's appeal is rejected; the respondent is entitled to refund of the duty paid by its supplier for the clearances in February, 2007 to April, 2007, having borne the burden and being covered by the subsequent notification, and the impugned order allowing the refund is upheld.

Rectification of mistake apparent from record - principles of natural justice - pronouncement of judgment in open court and finality - power to amend draft judgment before signing - recording of observations on conduct of counsel

Rectification of mistake apparent from record - power to amend draft judgment before signing - Whether the Tribunal could recall or amend its order dated 23.04.2018 under its power to rectify a mistake apparent from the record - HELD THAT: - The Tribunal has no general power of review under the Central Excise Act but may amend an order within six months to rectify a mistake apparent from the record in terms of section 35C(2). The Court examined the drafts and final order on file and found that the final decision on merits (dismissal of the appeal) remained common to drafts and the final order; the written reasons on merits were an elaboration of the brief dictation made in court. Reliance on authorities establishes that while a judgment pronounced in open court is the operative act, drafting and elaboration of reasons thereafter (so long as the operative decision is not altered) is permissible and corrigible where limited to drafting, grammar or addition of reasons before signing. The Tribunal therefore concluded there was no error apparent on record in respect of the merits or in the member who drafted the final order, and that practices of allocation of drafting do not render the order invalid where the operative decision pronounced in court remains unchanged. The Court further noted a minor imprecision in wording recording what was pronounced in court (use of 'upto' instead of 'in') but treated the gist as pronounced on 23.04.2018 in accordance with Rule 26, and held that this did not constitute a material error affecting the merits. [Paras 4]

No mistake apparent from the record requiring amendment of the merits portion of the order; elaboration of reasons after pronouncement was permissible and not vitiating.

Principles of natural justice - pronouncement of judgment in open court and finality - Whether the appellant was denied adequate opportunity of hearing on 23.04.2018 so as to render the order vitiated for violation of natural justice - HELD THAT: - The events in court on 23.04.2018 - including the bench-bar confrontation, the appellant's counsel leaving the court and a subsequent boycott resolution by members of the Bar - had the effect that the appellant did not obtain a satisfactory hearing. The Tribunal recorded that in such circumstances the principles of natural justice could not be observed in the true sense and that an order passed without satisfactory hearing resulted in an apparent error on the record. While extraordinary courtroom events and actions of other advocates were material, the decisive consideration was that the appellant's case was not adequately presented before the Bench, producing an error apparent on the face of the record which warranted remedial action. [Paras 4]

There was failure of adequate hearing amounting to an apparent error on record; the order is liable to be recalled and the appeal restored for fresh hearing.

Recording of observations on conduct of counsel - principles of natural justice - Whether adverse observations recorded in paragraphs 16 to 22 about the conduct of the appellant's counsel (including findings of walkout, threats of boycott, explosive reaction) were correctly recorded and whether they could be made without affording the counsel an opportunity to defend - HELD THAT: - The impugned order contains adverse findings about the conduct of the appellant's counsel and other members of the Bar. The applicant contested the factual accuracy of those findings and stressed that no opportunity was afforded to the counsel to explain or defend. The Tribunal examined the affidavits filed by several advocates who supported the applicant's version but noted that those persons were also parties to the boycott resolution and thus their affidavits could not alone displace the Bench's recorded observations. Nonetheless, legal principles require that adverse comments on professional conduct should not be recorded without necessity and, when directed at counsel, ordinarily should be preceded by an opportunity to be heard. The Tribunal held that recording observations without affording the affected counsel an opportunity to be heard amounts to an apparent error on record. Simultaneously, the Bench observed that it is not the forum to sit in appellate review of a coordinate Bench's considered remarks unless jurisdictional or apparent error exists. [Paras 5, 7]

Adverse observations recorded without giving the counsel an opportunity to defend constitute an apparent error; those observations warrant reconsideration in proceedings after restoration of the appeal.

Final Conclusion: Miscellaneous application allowed; the order dated 23.04.2018 is recalled on the ground that the appellant was not afforded a satisfactory hearing and an apparent error thereby arose; the appeal is restored to its original number for fresh consideration; no amendment of the merits portion was found necessary on account of drafting changes made after pronouncement.

CENVAT credit - definition of "input" under the CENVAT Credit Rules - exclusive use for repairs and maintenance - goods used in the factory by the manufacturer of the final product

CENVAT credit - definition of "input" under the CENVAT Credit Rules - exclusive use for repairs and maintenance - goods used in the factory by the manufacturer of the final product - Validity of availment of CENVAT credit on Welding Electrodes, Steel Plates, Sheets and Angles used exclusively for repair and maintenance of plant and machinery during May 2015 to March 2016. - HELD THAT: - The Tribunal found on the record that the inputs in question were used exclusively for repairs and maintenance of plant and machinery employed in the manufacture of final products, a fact not disputed by the lower authorities. Applying the definition of "input" in Rule 2(k) of the CENVAT Credit Rules, 2004, which includes "all goods used in the factory by the manufacturer of the final product", the availment of CENVAT credit for such goods falls within the permissible ambit. The First Appellate Authority erred in its interpretation of Rule 2(k) and in setting aside the Adjudicating Authority's order which had dropped the show cause proceedings. For these reasons the impugned order was held unsustainable. [Paras 3, 5, 6, 7]

The impugned order is set aside; the Adjudicating Authority's decision to drop the demands is upheld and the appeal is allowed.

Final Conclusion: The appeal is allowed: CENVAT credit availed on the specified goods for exclusive repair and maintenance of plant and machinery used in manufacture during May 2015 to March 2016 is held lawful; the impugned appellate order is set aside and the adjudicating authority's dropping of proceedings is sustained.

Extension of stay - rectification of mistake / review application (ROM) - difference of opinion in a two-member bench and reference to a third member - maintainability of ROM before final adjudication - Colourtex v. Union of India

Extension of stay - Extension of the interim stay order continued by the Tribunal. - HELD THAT: - The Tribunal heard the parties on the application for extension of the stay order which had earlier been granted by the Tribunal. Noting that the final order in the matter has not yet been passed, the Tribunal exercised its power to continue the interim protection and accordingly granted the extension of the stay order pending final adjudication. [Paras 2]

Interim stay extended until the final order is passed by the Tribunal.

Rectification of mistake / review application (ROM) - difference of opinion in a two-member bench and reference to a third member - maintainability of ROM before final adjudication - Colourtex v. Union of India - Maintainability of ROM application when a two-member bench records a difference of opinion and the matter is referred to a third member without any final outcome. - HELD THAT: - The Tribunal considered an application for rectification of mistake (ROM) in a situation where two members of the bench expressed differing opinions and the matter had been referred to a third member, so that no final order has been rendered by the Tribunal. Relying on the principle stated in the cited Gujarat High Court decision, the Tribunal held that where there is no final outcome because of a reference consequent to a difference of opinion, a ROM application is not maintainable. The applicants were therefore not entitled to have the purported mistake rectified at this stage and were granted liberty to move a ROM after the Tribunal delivers its final order. [Paras 2, 3]

ROM applications dismissed as premature; liberty granted to file ROM after the Tribunal's final order.

Final Conclusion: The Tribunal extended the interim stay pending final adjudication and dismissed the ROM applications as premature where a difference of opinion had been recorded and the matter referred to a third member, permitting filing of ROM only after the final order is pronounced.

Mis-match in returns - purchase from registration cancelled dealers - notice of proposal requiring material particulars - centralised mechanism for mismatch verification

Mis-match in returns - centralised mechanism for mismatch verification - notice of proposal requiring material particulars - Impugned notice of proposal insofar as the mis-match issue is set aside and remitted to the Assessing Officer for fresh action. - HELD THAT: - The Court held that the mis-match issue has previously been the subject of detailed consideration in JKM Graphics Solutions P. Ltd. v. C.T.O., reported in 2017(19) VST 343, which laid down guidelines requiring adoption of a centralised mechanism for dealing with mismatches. The present notice of proposal is not in conformity with those guidelines. Because the Revenue is in the process of implementing the centralised mechanism and the impugned notice does not follow the Court's earlier directions, the notice insofar as the mis-match issues must be set aside and the matter remitted to the Assessing Officer to proceed in accordance with the established guidelines and by issuing fresh notice if appropriate.

Set aside the notice insofar as mis-match issues and remit to the Assessing Officer to reissue notice in conformity with the Court's guidelines and after adopting the centralised mechanism.

Purchase from registration cancelled dealers - notice of proposal requiring material particulars - Impugned notice of proposal insofar as additions or inquiries relating to purchases from registration-cancelled dealers is set aside and remitted for reissue with necessary particulars. - HELD THAT: - The Court found that the notice does not supply essential particulars, specifically the dates (or particulars) of cancellation of registration of the other-end dealers, which prevents the petitioner from making an effective reply. In the absence of such material details, the notice is defective. The matter is therefore remitted to the Assessing Officer with a direction to reissue the notice containing the material particulars enabling the assessee to furnish an effective response.

Set aside the notice insofar as purchases from registration-cancelled dealers and remit to the Assessing Officer to reissue notice with material particulars to enable effective reply.

Final Conclusion: Writ petitions allowed in part: impugned notices are set aside only insofar as the mis-match issues and the issues relating to purchases from registration-cancelled dealers for assessment years 2010-2011 to 2014-2015; those matters are remitted to the Assessing Officer to reissue notices with requisite material particulars and in conformity with the Court's earlier guidelines, while other issues in the notices remain unassailed.

Service of assessment order by registered post and affixture - deemed service on refusal and substituted service by affixture - right of appeal under Section 51 and requirement to exhaust statutory remedies - validity of consequential attachment upon a finalised assessment

Service of assessment order by registered post and affixture - deemed service on refusal and substituted service by affixture - right of appeal under Section 51 and requirement to exhaust statutory remedies - validity of consequential attachment upon a finalised assessment - Assessment order was validly communicated to the petitioner and, having not availed the statutory remedy of appeal, the consequential order of attachment could not be challenged in writ jurisdiction. - HELD THAT: - The original assessment order dated 15.06.2015 was dispatched to the petitioner by registered post to the correct address and was refused by the petitioner; thereafter the authorities affixed the assessment order on the petitioner's residence in the presence of officials and witnesses, as established by the departmental file placed before the Court. Service was therefore completed in the manner known to law. Under the statutory scheme the petitioner had a right of appeal under Section 51; since no statutory appeal was preferred, the assessment stood unchallenged and became final. A consequential order of attachment issued on the basis of that final assessment cannot be the foundation for entertaining the present writ petition. The Court accordingly declined to entertain the challenge to the attachment, while leaving open the petitioner's right to prefer any statutory appeal which may be available for consideration on merits by the competent authority.

Writ petition dismissed for want of merit; attachment order upheld as consequent to a validly served and unchallenged assessment order.

Final Conclusion: The Court held that the assessment order was validly served by registered post and affixture, the petitioner failed to exhaust the statutory remedy of appeal, and therefore the consequential attachment cannot be impugned in this writ; petition dismissed with no order as to costs and liberty to pursue statutory appeal retained.

Capital goods - input tax credit - manufacturing process - integral part of production - inefficacy of statutory appeal where departmental clarification governs subordinate officers

Capital goods - input tax credit - manufacturing process - integral part of production - Renewable energy device and its spare parts, boilers, boiler components and materials for erection of boilers constitute "capital goods" for the purposes of entitlement to input tax credit under Section 19(3) of the Tamil Nadu VAT Act, 2006. - HELD THAT: - The Court construed the statutory definition of "capital goods" to include plant, machinery, equipment, apparatus and their components, spare parts and accessories when used for producing or processing goods for manufacture. The material on record, including the process diagram, demonstrated that the manufacturing of kraft paper involves transmission of raw material through bunker, boiler, superheated steam and turbine stages, and that the Biomass Gasifier Unit (renewable energy device) and boilers form part of that manufacturing sequence. The Court held that apparatus or accessories which are integral to or utilised in the manufacturing process fall within the definition of "capital goods" and therefore attract the benefit of input tax credit under Section 19(3). Reliance on the Court's earlier decision treating energy-generation equipment used in manufacture as capital goods was noted. The respondent's conclusion that such goods had no direct or indirect involvement in production was rejected and the orders reversing the ITC were held unsustainable. [Paras 6, 7, 9, 10, 11]

The renewable energy device and spare parts, boilers and related components are "capital goods" used in the manufacturing process and the claim for input tax credit under Section 19(3) must be allowed; the respondent's orders reversing the ITC are set aside.

Inefficacy of statutory appeal where departmental clarification governs subordinate officers - Maintainability of the writ petition despite an available appeal to the tax authority. - HELD THAT: - The Court considered the contention that the petitioner should first pursue the statutory appeal. It observed that the Commissioner had issued a clarification adverse to the petitioner on the same issue and that subordinate officers would follow that clarification, rendering an appeal before the departmental authority ineffectual. The Court relied on precedent where a departmental clarification that binds subordinate authorities makes the appellate remedy an inadequate one, and held that under those circumstances the writ petition is maintainable. [Paras 12, 13, 14]

The writ petition is maintainable notwithstanding the existence of an appellate remedy because the Commissioner's clarification would make the appeal ineffectual.

Final Conclusion: Writ petitions allowed; the orders reversing input tax credit for TIN No.33173680663 for 2013-14 and 2014-15 are set aside and the petitions are disposed of with no costs.