TaxTMI Updates e-Newsletter
Sep 27,2023

Validity of e way bill where Part B is incomplete - Exercise of powers for detention and penalty under Section 129 for movement of goods with defective documentation - Administrative circular mitigating enforcement for procedural errors in e way bills - Filling of Part B at roadside in presence of officer and absence of mala fide

Validity of e way bill where Part B is incomplete - Administrative circular mitigating enforcement for procedural errors in e way bills - Filling of Part B at roadside in presence of officer and absence of mala fide - Whether initiation of proceedings under Section 129 for detention/seizure and imposition of equivalent penalty was warranted where Part B of the e way bills accompanying the goods was not filled at the time of interception but the driver completed Part B in the presence of the officer and the facts fell within the scope of the administrative circular dated 14.09.2018. - HELD THAT: - The Court examined the circular dated 14.09.2018 which lists procedural errors in e way bill documentation where proceedings under Section 129 should ordinarily not be initiated and goods may instead be released on payment of a nominal penalty. The facts show that Part B of the four e way bills was not filled when the vehicle was intercepted, but the driver completed Part B in the presence of the officer and all other documents were produced. The omission related to non mentioning of the vehicle number in Part B, a defect falling within clause (f) of the circular. The Court found no mala fide intention to mislead or facilitate wrongful movement of goods and held that, in such circumstances covered by the circular, initiation of rigorous proceedings under Section 129 was not appropriate. Applying the circular's mitigating mandate to these facts, the Court set aside the appellate order upholding the detention/penalty and instead imposed a nominal penalty consistent with the circular. [Paras 14, 15, 16, 17]

Order imposing detention/penalty under Section 129 set aside; nominal penalty of Rs. 500 imposed in view of circular dated 14.09.2018.

Final Conclusion: Writ petition allowed. The appellate order dated 09.01.2020 is set aside and, applying the administrative circular of 14.09.2018 to the procedural omission in Part B of the e way bills (completed at the roadside in the presence of the officer), a nominal penalty of Rs. 500 is imposed on the petitioner.

Quashing of demand order - opportunity of hearing - alternative remedy by appeal - pre-deposit under Section 107(5) of the Act - inadmissible input tax credit on purchases from fraudulent suppliers

Alternative remedy by appeal - quashing of demand order - Writ petition seeking quashing of the impugned show cause notice and demand order dismissed on availability of alternative remedy by way of appeal. - HELD THAT: - The High Court held that the petitioner has an efficacious alternative remedy in the statutory appeal against the order dated 18.05.2021 and therefore the petition for quashing cannot be entertained. The Court recorded that the petitioner may raise all contentions, including those concerning the correctness of ledger entries and the claimed quantum of purchases and input tax credit, before the Appellate Authority. The existence of that appellate remedy rendered the writ petition not maintainable as a means to obtain the relief sought. [Paras 6, 8]

Writ petition dismissed as remedy by appeal is available.

Pre-deposit under Section 107(5) of the Act - opportunity of hearing - inadmissible input tax credit on purchases from fraudulent suppliers - Liberty granted to the petitioner to file the statutory appeal and to seek exemption from the 10% pre-deposit by placing ledger evidence before the Appellate Authority, which is directed to consider the plea. - HELD THAT: - Although the petitioner contended that pre-deposit of 10% of the disputed amount would be onerous and that ledger entries (P-5 and P-6) show lower taxable purchases than the department's figures, the High Court declined to adjudicate on the pre-deposit requirement. Instead the Court granted liberty to the petitioner to press the ledger-based pleas before the Appellate Authority and indicated that the Appellate Authority may examine the ledger accounts and decide the question of pre-deposit in accordance with law. The Court thereby confined itself to procedural guidance without deciding the merits of admissibility of input tax credit or the correctness of the demand. [Paras 7, 8]

Petitioner granted liberty to file appeal and to make a case for waiver/reduction of pre-deposit before the Appellate Authority, which shall consider the ledger evidence.

Final Conclusion: The writ petition for quashing the show cause notice and demand order is dismissed on the ground of availability of statutory appeal; petitioner is permitted to file the appeal and to seek relief from the pre-deposit obligation by placing ledger evidence before the Appellate Authority, which is to decide the pre-deposit question after considering those documents.

Bogus purchases - addition AO made has primarily relied upon some information received from the office of the Director General of Income Tax (Investigation), Mumbai - as decided by HC [2021 (12) TMI 21 - BOMBAY HIGH COURT] respondent has discharged its onus by producing the books of accounts, stock register, stock tally and also filed various documentary evidences such as statements of banks and once respondent has discharged this burden, the onus shifts to the Revenue and the AO has not conducted any independent inquiry or further verification of the records produced before him - HELD THAT:- No justifiable reason for condoning the delay.

Hence, the Special Leave Petition is dismissed on the ground of delay.

Dismissal of appeal for non-prosecution - non filing of compulsory e-filing of appeal despite notice - assessee failed to appear before the Tribunal on the date of hearing - no request for further date - HELD THAT:- Having heard learned counsel for the parties and also considered the record, this Court is of the opinion that larger interest of justice require that the appeal against the assessment order for A.Y 2012-2013, completed by order issued by the AO i.e. Income Tax Officer, Ward- 7(2)(4), Bangalore should be restored. Accordingly, the Appeal is restored to the file of the Commissioner of Income Tax (Appeals)-7, Bengaluru. The said authority shall issue notice at least two weeks advance notice to the appellant to enable her to prosecute the appeal effectively.

Treatment of foreign exchange gain/loss as operating income/operating loss - Disqualification of comparables for lack of segmental information - Exclusion of comparables under transfer pricing principles - Non-retrospective application of safe harbour rules

Treatment of foreign exchange gain/loss as operating income/operating loss - Classification of foreign exchange gain/loss treated by the Tribunal as operating income/operating loss - HELD THAT: - The Court recorded that the first issue concerning the characterisation of foreign exchange gain/loss is covered against the revenue by an earlier decision in ITA 17/2016 (Pr. Commissioner of Income Tax-3 v. Fiserv India Pvt. Ltd.). The appellant/Revenue conceded that the precedent governs the issue and there was no independent challenge or distinction advanced to displace that view. No further adjudication was undertaken on merits in light of the binding effect of the earlier decision.

Issue stands covered by existing precedent and adverse to the appellant/revenue.

Disqualification of comparables for lack of segmental information - Exclusion of comparables under transfer pricing principles - Validity of the Tribunal's exclusion of Wipro Technologies Services Ltd. and Infosys Ltd. from the list of comparables - HELD THAT: - The Tribunal excluded the two comparables because the companies derived income from both software development services and sale of software products, and segmental information showing the relative contribution of software services was not available. The High Court found no error in this approach, noting it is consistent with the reasoning adopted by a coordinate bench and earlier appellate observations which upheld exclusion when segmental data was absent. The Court accepted that where segmental information is lacking, exclusion under the relevant transfer pricing analysis is permissible and not perverse.

The Tribunal's exclusion of the comparables is upheld.

Non-retrospective application of safe harbour rules - Applicability of the notification dated 18.09.2013 and the CBDT guidelines on safe harbour rates/margins to AY 2011-12 - HELD THAT: - The Court observed that the notification of 18.09.2013 could not have application to AY 2011-12. It further noted the CBDT guidelines dated 20.12.2013 clarify that safe harbour rates and margins apply only where an assessee opts for them, and that the safe harbour rules do not have retrospective effect. Consequently, the notification and guidelines do not affect the assessment year in issue.

Notification and safe harbour rules not applicable to AY 2011-12; no retrospective operation.

Final Conclusion: The appeal is dismissed/closed as no substantial question of law arises; the Tribunal's order is upheld for AY 2011-12.

Reassessment under Section 153A in case of completed assessment - absence of incriminating material - addition under Section 68 as undisclosed income - adoption of income determined in earlier completed assessments - precedential application of CIT v. Kabul Chawla and Principal Commissioner of Income Tax v. Abhisar Buildwell

Reassessment under Section 153A in case of completed assessment - absence of incriminating material - addition under Section 68 as undisclosed income - adoption of income determined in earlier completed assessments - Validity of making an addition under Section 68 in a reassessment under Section 153A where the earlier scrutiny assessment was completed and no incriminating material was found during search. - HELD THAT: - The Tribunal held, and this Court agrees, that where a search under Section 132 takes place and assessments for the relevant years are already completed, fresh assessments under Section 153A will adopt the total income determined in the earlier completed assessments and additions can be made only if incriminating material is found during the search. In the present case the assessment for AY 2008-09 was a completed assessment and the Tribunal recorded that no incriminating material was found to justify reopening and making the addition under Section 68. Applying the principle that absence of incriminating material precludes fresh additions in completed assessments, the Court found the AO's addition unsustainable. The Court further noted that this view is in consonance with the decision in CIT v. Kabul Chawla, which has been affirmed by the Supreme Court in Principal Commissioner of Income Tax v. Abhisar Buildwell, and accordingly concluded that no substantial question of law arises. [Paras 13, 14, 15, 16]

The addition made by the Assessing Officer under Section 68 in reassessment under Section 153A is not sustainable in the absence of incriminating material; appeal dismissed.

Final Conclusion: The reassessment-based addition for AY 2008-09 was set aside because no incriminating material was found to justify altering a completed assessment; appeal dismissed and no substantial question of law arises.

Reassessment under Sections 147/148 - reliance on statements recorded by investigation wing without corroboration - right to cross-examine prosecution/investigation witness in reassessment proceedings - change of opinion doctrine (Kelvinator principle) - binding effect of acceptance of sales in seller's assessment and VAT records

Reliance on statements recorded by investigation wing without corroboration - right to cross-examine prosecution/investigation witness in reassessment proceedings - Validity of reopening and reassessment where AO relied on statements of third parties recorded by the investigating wing without independent verification or production of the witness for cross-examination. - HELD THAT: - The Tribunal and this Court found that the Assessing Officer acted on the statement of Sh. Madan Lal Pahuja obtained by the investigating wing without having independently corroborated that information in the assessment records. The assessee sought opportunity to cross-examine the witness but the revenue did not produce him during reassessment proceedings. In that factual backdrop the statement could not be allowed to form the basis for reopening the assessment or for making additions. The absence of verification and the failure to produce the witness for cross-examination rendered the reliance on the investigatory statement an inadequate and impermissible foundation for reassessment. [Paras 5, 6]

Reassessment set aside insofar as it rests on uncorroborated investigatory statements and on material not subjected to cross-examination.

Change of opinion doctrine (Kelvinator principle) - Whether the Assessing Officer could reopen assessment by changing the earlier concluded view based on the same information which had been considered in the original scrutiny assessment. - HELD THAT: - The Tribunal observed, and this Court agreed, that the very information relied upon in reassessment had already been available and considered in the scrutiny assessment completed under Section 143(3). Having admitted that information in the original assessment, the Assessing Officer could not legitimately alter that conclusion merely by re-acting on the same material. The principle that a change of opinion cannot be the basis for reopening was applied to deny the validity of the reassessment founded on identical information. [Paras 5]

Reopening held impermissible where it amounted to a mere change of opinion on the same information already placed before and accepted in the original assessment.

Binding effect of acceptance of sales in seller's assessment and VAT records - Effect of acceptance of corresponding sales in the seller's assessment and VAT records on disallowance of purchases in the buyer's hands. - HELD THAT: - The Tribunal noted that sales by the seller (Madan Lal Pahuja) had been accepted by the department in his assessment and were reflected in VAT forms, and that similar transactions were not in dispute in subsequent assessment years. Given such acceptance in the seller's assessment and contemporaneous VAT documentation, the Assessing Officer could not treat the purchases as wholly bogus merely on suspicion about some invoices. The Tribunal also observed that only a fraction of the purchases (seven bills) gave rise to specific suspicion and that the entire purchases could not be disallowed on that account. [Paras 5]

Purchases could not be wholly disallowed where corresponding sales were accepted in the seller's assessment and supported by VAT records; disputed fraction could not justify addition of entire purchases.

Final Conclusion: The appeal by revenue is dismissed. Reassessment for AY 2010-11, founded on uncorroborated investigatory statements, without production of the witness for cross-examination, and amounting to a change of opinion on the same material already considered in scrutiny assessment, cannot be sustained; the Tribunal's order allowing the assessee's appeal is upheld.

Exclusion of comparables in transfer pricing - Segmental data - Knowledge Process Outsourcing (KPO) as non-comparable activity - Final fact-finding role of the Tribunal - Arm's length principle in transfer pricing - Substantial question of law

Exclusion of comparables in transfer pricing - Segmental data - Final fact-finding role of the Tribunal - Arm's length principle in transfer pricing - The correctness of the Tribunal's exclusion of Avani, Wipro and Persistent as comparables on the ground that no segmental data was available. - HELD THAT: - The Tribunal found as a matter of fact that Avani, Wipro and Persistent carried on businesses comprising software products and services and that no segmental data was available to identify activities comparable to the assessee's software development services. The court accepted the Tribunal's role as the final fact-finding authority in transfer pricing disputes and observed that positions taken at earlier stages can be revisited by statutory authorities; what matters is whether the authority examined the merits and reached a conclusion. On the record, the Tribunal examined the matter and concluded that these three entities should be excluded for want of segmental data; having returned findings of fact, the Tribunal's conclusion was not interfered with. [Paras 17, 18, 22]

Tribunal's exclusion of Avani, Wipro and Persistent was upheld and not interfered with.

Exclusion of comparables in transfer pricing - Knowledge Process Outsourcing (KPO) as non-comparable activity - Final fact-finding role of the Tribunal - Arm's length principle in transfer pricing - The correctness of the Tribunal's exclusion of E-Zest on the ground that it was engaged in KPO and thus not comparable to the assessee. - HELD THAT: - The Tribunal recorded a finding that E-Zest was engaged in software product development and high-end technical services falling within KPO, and that the assessee did not carry on KPO activities. On that factual basis the Tribunal excluded E-Zest from comparables. The High Court treated this as a factual conclusion of the Tribunal and declined to interfere with the finding, as the Tribunal had examined and reached a conclusion on the merits. [Paras 23, 24]

Tribunal's exclusion of E-Zest as a non-comparable was upheld and not interfered with.

Final fact-finding role of the Tribunal - Substantial question of law - Whether the appeal raised any substantial question of law warranting interference with the Tribunal's conclusions. - HELD THAT: - Having recorded that the Tribunal returned findings of fact on the exclusion of the comparables and having declined to interfere with those factual conclusions, the court found that no substantial question of law arose for its consideration. The appeal was therefore closed without admission of any question of law calling for interference. [Paras 24, 25, 26, 27]

No substantial question of law arises; the appeal is closed.

Final Conclusion: The High Court upheld the Tribunal's factual findings to exclude the four disputed comparables (Avani, Wipro, Persistent and E-Zest) for lack of relevant segmental data or because the entities were KPOs, declined to interfere with the Tribunal's conclusions and held that no substantial question of law arose, thereby dismissing the appeal.

Maintainability of appeal in light of insolvency resolution - clean slate approach - effect of a resolution plan excluding statutory dues on pending tax appeals - corporate insolvency resolution process

Maintainability of appeal in light of insolvency resolution - effect of a resolution plan excluding statutory dues on pending tax appeals - clean slate approach - Whether the revenue's appeal should be continued when the Corporate Insolvency Resolution Process was commenced after the tax period in question and the NCLT approved resolution plan makes no provision for statutory dues - HELD THAT: - The Court noted that the Corporate Insolvency Resolution Process against the assessee commenced on 19.03.2017 and that the resolution plan finally approved by the NCLT on 04.02.2020 made no provision for statutory dues. The claims in the present appeal relate to AY 2008 09, a period prior to the approval of the resolution plan. Given that the resolution plan provides no mechanism for satisfying statutory claims, continuation of the appeal would serve no practical purpose. Applying the clean slate approach, the court concluded that there was no utility in permitting further prosecution of this appeal despite the Tribunal having decided the merits in favour of the assessee, and therefore the appeal should be closed. [Paras 13, 14, 15]

The appeal is closed as continuation would serve no purpose because the NCLT approved resolution plan makes no provision for statutory dues and the matter is governed by the clean slate approach.

Final Conclusion: The High Court closed the revenue's appeal relating to AY 2008 09 as the corporate insolvency resolution plan, approved after commencement of the CRIP, contained no provision for statutory dues and, applying the clean slate approach, continuation of the appeal was held to be purposeless.

Taxation of property received without consideration or for inadequate consideration under section 56(2)(vii)(c) - allotment of right shares versus transfer - creation of shares principle - exclusion for receipts from relatives under section 56(2)(vii)(c) - application of anti abuse provisions to fresh allotment of shares - valuation of unlisted shares - fair market value assessed by reference to the previous audited balance sheet

Allotment of right shares versus transfer - creation of shares principle - taxation of property received without consideration or for inadequate consideration under section 56(2)(vii)(c) - Whether section 56(2)(vii)(c) applies to 1,03,000 right shares allotted to the assessee proportionate to his existing shareholding. - HELD THAT: - The Court held that right shares allotted proportionately are a creation of new shares by appropriation out of unappropriated capital and not a transfer of pre existing property. Section 56(2)(vii)(c) applies where an individual receives property from any person for inadequate consideration or without consideration; the provision presupposes existence of the property prior to receipt. The legislative intent and explanatory notes show the provision targets transfers of existing shares and anti evasion transactions, not fresh allotments. Where allotment is strictly proportionate, any increase in number of shares is offset by apportionment of existing value and no taxable receipt arises under section 56(2)(vii)(c). [Paras 8, 9, 10, 17, 18]

Section 56(2)(vii)(c) does not apply to the 1,03,000 proportionate right shares allotted to the assessee.

Exclusion for receipts from relatives under section 56(2)(vii)(c) - what cannot be done directly cannot be done indirectly - Whether section 56(2)(vii)(c) applies to the additional 82,200 shares allotted to the assessee on renunciation of rights by his wife and father. - HELD THAT: - The Court accepted the principle that a transaction which would be non taxable if effected directly cannot be rendered taxable by an indirect mode. The wife and father fall within the statutory exemption of 'relative' under section 56(2)(vii)(c), so had they directly transferred shares the receipt would be exempt. Renunciation by relatives in favour of the assessee is therefore not caught by section 56(2)(vii)(c). The Tribunal's reliance on precedents supporting that renunciation by relatives does not attract the provision was affirmed. [Paras 11, 17, 18]

Section 56(2)(vii)(c) does not apply to the 82,200 shares received by the assessee on renunciation by his wife and father.

Taxation of property received without consideration or for inadequate consideration under section 56(2)(vii)(c) - application of anti abuse provisions to disproportionate allotment - Whether section 56(2)(vii)(c) applies to 14,800 shares allotted to the assessee resulting from renunciation by third party shareholders not related to the assessee. - HELD THAT: - The Court agreed with the Tribunal that renunciation by unrelated third parties led to a disproportionate allotment in favour of the assessee and, unlike renunciation by relatives, cannot claim the exemption. Such disproportionate accretion of shares amounts to receipt of property for inadequate consideration within the ambit of section 56(2)(vii)(c), and therefore the provision applies to the 14,800 shares. [Paras 12, 17]

Section 56(2)(vii)(c) is attracted in respect of the 14,800 shares allotted to the assessee on renunciation by unrelated third party shareholders.

Valuation of unlisted shares - fair market value assessed by reference to the previous audited balance sheet - rule for determining FMV where balance sheet is not drawn on date of allotment - Whether the Tribunal and CIT(A) were correct in adopting FMV of shares at Rs. 205.55 per share instead of the Assessing Officer's valuation of Rs. 255 per share. - HELD THAT: - The Court accepted the concurrent factual finding that where the company's balance sheet for the relevant year was not drawn on the date of allotment, the FMV may be computed by reference to the previous audited balance sheet approved at the AGM and adjusted for consideration received on issuance of additional shares. The Tribunal and CIT(A) applied this method and reduced the FMV to Rs. 205.55 per share; these factual and valuation conclusions were affirmed as not warranting interference. [Paras 13, 20]

The reduction of the FMV to Rs. 205.55 per share was upheld and the Assessing Officer's valuation of Rs. 255 per share was not sustained.

Final Conclusion: The appeals are dismissed. The Tribunal's judgment - that proportionate right allotments do not attract section 56(2)(vii)(c), that renunciation by relatives does not attract the provision, that renunciation by unrelated third parties resulting in disproportionate allotment does attract the provision, and that the FMV computed by reference to the previous audited balance sheet is sustainable - is affirmed; no substantial question of law arises.

Long term capital gains exemption under section 10(38) - reliance on interim regulatory report versus final report - admissibility of SEBI findings in income-tax assessment - concurrent findings of fact - absence of independent incriminating findings by the Assessing Officer

Long term capital gains exemption under section 10(38) - admissibility of SEBI findings in income-tax assessment - reliance on interim regulatory report versus final report - absence of independent incriminating findings by the Assessing Officer - concurrent findings of fact - Validity of deletion by the Tribunal of addition disallowing exemption claimed under section 10(38) in respect of long term capital gains. - HELD THAT: - The Tribunal's deletion of the addition was upheld. The Assessing Officer's action was founded on an interim SEBI order; the final SEBI report contained no adverse findings against the entities listed and expressly indicated revocation of directions issued by the interim orders in respect of those entities. The appellate authority (CIT(A)) recorded that the SEBI final report absolved the assessee and noted that the Assessing Officer's remaining observations merely reiterated the interim findings without any independent adverse finding. The material before the authorities also showed that purchase and sale were routed through banking channels, the shares were held in demat for over twelve months, sale was effected on the exchange platform and securities transaction tax was paid. In the absence of any independent factual finding displacing these aspects, the Tribunal correctly concluded that there was no basis to fasten tax liability by denying exemption under section 10(38). The High Court found these concurrent factual findings by the CIT(A) and the Tribunal unassailable and therefore no substantial question of law arose for consideration. [Paras 5, 6]

The Tribunal's deletion of the addition was affirmed and the departmental appeal was dismissed.

Final Conclusion: The concurrent factual findings that the SEBI final report contained no adverse findings against the assessee and that the Assessing Officer had no independent incriminating material were upheld; the departmental appeal fails and is dismissed with no order as to costs.

Penalty under section 271AAB - definition of "undisclosed income" in the explanation to section 271AAB - search and seizure under section 132 - statement recorded under section 132(4) - evidentiary value of voluntary disclosure in absence of incriminating material - requirement of incriminating material or book entry to classify disclosed amount as undisclosed income

Penalty under section 271AAB - definition of "undisclosed income" in the explanation to section 271AAB - statement recorded under section 132(4) - evidentiary value of voluntary disclosure in absence of incriminating material - Whether penalty under section 271AAB could be sustained where the assessee voluntarily disclosed additional income during search proceedings but there was no incriminating material, no book entry or corroboration linking the disclosure to seized documents or false expenditure. - HELD THAT: - The Tribunal examined whether the admitted amount qualifies as "undisclosed income" as defined in the explanation to section 271AAB. The Assessing Officer had not pointed to any incriminating material, specific discrepancies in the books, any entry in the books, or any false expenditure found from search that would connect the voluntary disclosure to undisclosed income. A paper found during search recorded only a small loss and was not relied upon by the Assessing Officer for the addition; no nexus was established between that paper and the Rs. 1 crore surrendered. The Tribunal followed precedents holding that a statement under section 132(4) alone, without incriminating material or corroboration, lacks evidentiary value to attract penalty under section 271AAB. It noted that the definition in the explanation requires the income to be represented by money, bullion, jewellery, an entry in books or other document or a transaction found in the course of search, or to arise from an expense found to be false on search; mere voluntary disclosure to "buy peace" does not satisfy these criteria. Consequently, the CIT(A)'s finding-that the disclosure did not fall within the statutory definition of "undisclosed income" and that penalty was therefore unsustainable-was held to be correct. [Paras 11, 13, 16, 17, 18]

Penalty under section 271AAB deleted as the disclosed amount did not qualify as "undisclosed income" within the explanation to section 271AAB in absence of incriminating material, book entry, or corroborative seized material; Revenue's appeal dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) and dismissed the Revenue's appeal, holding that a voluntary disclosure recorded during search cannot sustain a penalty under section 271AAB unless the disclosed amount falls within the statutory definition of "undisclosed income" by being corroborated by seized material, entries in books, or false expenditure unearthed on search.

Processing of returns under section 143(1)(a)(vi) - presumptive taxation under section 44AD - presumptive income under section 44ADA - binding force of CBDT Instruction No.10/2017 in processing of returns - treatment of differences between receipts in return and Form 26AS

Processing of returns under section 143(1)(a)(vi) - presumptive taxation under section 44AD - binding force of CBDT Instruction No.10/2017 in processing of returns - treatment of differences between receipts in return and Form 26AS - Validity of invoking section 143(1)(a)(vi) to make adjustment where the assessee declared presumptive income under section 44AD and gross receipts in the return were not understated vis-a -vis Form No.26AS - HELD THAT: - The Tribunal held that sub-clause (vi) of section 143(1)(a) was inserted with effect from 01-04-2017 and applied to the assessment year under consideration. That provision permits adjustment where income appearing in Form No.26AS was not included in the return, and CBDT Instruction No.10/2017 clarifies application of clause (vi). Paragraph 3.2 of the Instruction states that clause (vi) applies where receipts are 'completely omitted' from the return, and that differences in receipts where presumptive income under sections such as 44AD is declared should generally be excluded from clause (vi); an exception in the Instruction applies only where gross receipts shown under presumptive schemes in the return are less than the receipts in the three Forms. In the present case the assessee declared presumptive income under section 44AD and declared gross receipts greater than the amount shown in Form No.26AS. Therefore the conditions for invoking section 143(1)(a)(vi) were not satisfied and the intimation making the adjustment under that clause was not permissible; the CIT(A) was incorrect to confirm the adjustment and the subsequent rectification to reverse an earlier correct rectification was also unsustainable. [Paras 4, 5, 6]

The addition made by invoking section 143(1)(a)(vi) was held to be impermissible in the facts; the CIT(A)'s confirmation and the AO's subsequent rectification were set aside and the appeals allowed.

Final Conclusion: Both appeals by the assessee for assessment year 2017-18 are allowed; the intimation adjustment under section 143(1)(a)(vi) and the subsequent rectification were held impermissible and the impugned orders are set aside.

Royalty - process as an item of intellectual property - Explanation 5 and Explanation 6 to section 9(1)(vi) - use or right to use under the DTAA - non-incorporation of domestic amendment into DTAA - ejusdem generis / noscitur a sociis - taxability of roaming / interconnect charges

Royalty - process as an item of intellectual property - Explanation 5 and Explanation 6 to section 9(1)(vi) - use or right to use under the DTAA - taxability of roaming / interconnect charges - Whether the roaming charges of Rs. 7,45,72,448 received by the non-resident assessee from an Indian telecom operator are taxable as "royalty" under section 9(1)(vi) of the Income-tax Act and Article 13(3) of the India UK DTAA. - HELD THAT: - The Tribunal held that the payments received were for provision of roaming services rendered outside India by the assessee using its own network and equipment and did not involve transfer or grant of any right in a "process" to the Indian payer. Applying the statutory scheme and principles of statutory construction, the word "process" in Explanation 2 to section 9(1)(vi) must be read as a species of intellectual property alongside patents, designs, secret formulae etc., so that a payment would be "royalty" only where there is transfer or grant of rights in such intellectual property (ejusdem generis / noscitur a sociis). The authorities below did not demonstrate how any right to use or exclusivity in the process was given to the Indian operator; the assessee continued to use its own process/equipment and VIL had existing, standard processes. Further, the Tribunal followed earlier decisions in the assessee's group and other authorities which held that Explanation 5 & 6 (even if clarificatory domestically) cannot be read automatically into the DTAA to enlarge the treaty definition of "royalty" unless the treaty itself is amended. Relying on the reasoning that the DTAA's test is "use or right to use" and that the domestic amendments do not alter treaty obligations, the Tribunal concluded that the roaming receipts do not qualify as royalty under either the Act or the India UK DTAA and therefore are not taxable as such in India. [Paras 15, 16, 17, 18, 19]

The roaming charges are not taxable as "royalty" under section 9(1)(vi) of the Act or Article 13(3) of the India UK DTAA; the assessee's appeal on this ground is allowed.

Final Conclusion: ITA No.771/Mum/2023 is partly allowed insofar as the roaming charges are held not to be taxable as royalty; ITA No.772/Mum/2023 is dismissed as academic.

Admission of additional ground in appeal - Validity of reopening assessment under section 147/notice under section 148 - Jurisdiction of Assessing Officer to make additions beyond reasons recorded - Non-disclosure of material facts as condition for reopening after four years

Admission of additional ground in appeal - Tribunal's power to entertain questions of law not raised earlier - The Tribunal admitted the additional ground raising the legality of the reopening and assessment. - HELD THAT: - The Tribunal held that the additional ground challenged the legality of the assessment framed under section 143(3) read with section 147 and was a pure question of law requiring no further fact-finding. Applying the principles in National Thermal Power Co. Ltd. and Jute Corporation of India Ltd., the Bench observed that the Tribunal has plenary power to decide questions of law arising from facts on record and may permit new grounds when relevant facts are available and the ground is bona fide. Consequently, the additional ground was admitted for adjudication. [Paras 5, 6, 7]

Additional ground admitted.

Jurisdiction of Assessing Officer to make additions beyond reasons recorded - Validity of assessment framed after reopening where additions differ from reasons recorded - In ITA No.103/Kol/2022 the assessment framed after reopening was quashed because the AO made additions not corresponding to matters set out in the reasons recorded under section 148(2). - HELD THAT: - The Tribunal examined the reasons recorded for reopening and the assessment order and found that the AO had re-opened the assessment on the basis of an alleged undisclosed investment of Rs. 6 lakh, but the assessment recorded additions in respect of loans aggregating a different amount. Relying on the decisions of coordinate benches and relevant High Courts, the Bench held that the AO lacks jurisdiction to make additions on items which were not the subject matter of the reasons recorded under section 148(2). As the additions made did not correspond with the matters in the reasons for reopening, the assessment was quashed. [Paras 8, 10, 11, 12]

Assessment quashed for being outside jurisdiction of reasons recorded; additional ground allowed.

Validity of reopening assessment under section 147/notice under section 148 - Non-disclosure of material facts as condition for reopening after four years - In ITA No.104/Kol/2022 the reopening (notice issued after four years) was quashed because the issue had been examined in the original assessment and there was no failure to disclose any material fact. - HELD THAT: - The Tribunal found that the assessment for the relevant year had been framed under section 143(3) accepting the return and that the AO issued a notice under section 148 more than four years later. The reasons recorded purported to show escapement of income but the record (including the original assessment order and balance sheet) demonstrated that the transaction was examined and the assessee had disclosed the investment. The Bench applied the proviso to section 147 and the Apex Court's decision in ACIT v. CEAT Ltd., concluding that reopening without demonstrating failure to disclose material facts and where there was no application of mind is impermissible. Therefore the reopening and the resultant assessment were quashed. [Paras 15, 16, 17]

Reopening quashed for lack of satisfaction under proviso to section 147; assessment set aside.

Final Conclusion: The Tribunal admitted the additional ground and, applying settled principles on the scope of reasons for reopening and the proviso to section 147, quashed the assessments arising from the re-openings in both appeals; both appeals are allowed.

Rectification under Section 154-limitation and knowledge of order - credit for Tax Deducted at Source (TDS) appearing in Form 26AS - intimation under section 143(1) and its communication to the assessee - duty of the Assessing Officer to furnish copy of the order - reckoning limitation from date of knowledge of the order

Rectification under Section 154-limitation and knowledge of order - credit for Tax Deducted at Source (TDS) appearing in Form 26AS - intimation under section 143(1) and its communication to the assessee - duty of the Assessing Officer to furnish copy of the order - reckoning limitation from date of knowledge of the order - Whether the rectification application under Section 154 filed by the assessee is time-barred and whether credit of TDS shown in Form 26AS must be allowed against the demand - HELD THAT: - The Tribunal found that the return processed under section 143(1) had failed to give credit for TDS appearing in Form 26AS and that the assessing officer raised a demand without allowing that credit. Neither the date of passing of the 143(1) intimation nor a copy of that order was placed on record by the Revenue, and the assessee averred that he had not received the intimation. The Tribunal noted authorities treating the limitation period for rectification as to be reckoned from the date the order came to the knowledge of the assessee and observed that, in the absence of proof that intimation under section 143(1) was communicated to the assessee, the assessing officer could not reject the rectification application as time-barred. The Tribunal therefore concluded that denial of TDS credit-where the TDS had been reflected in Form 26AS and remitted to the exchequer-was unsustainable and that the AO had a duty to furnish or record the order and to consider rectification when knowledge of the order was shown to be lacking within the statutory period. [Paras 3, 11]

Rectification application not to be treated as barred by limitation where intimation under section 143(1) was not shown to have been communicated to the assessee; AO directed to rectify and give credit of the TDS as appearing in Form 26AS.

Final Conclusion: The appeal is allowed: the Tribunal set aside the orders rejecting rectification, directed the Assessing Officer to carry out necessary rectification and grant credit of the TDS shown in Form 26AS for AY 2011-12.

Recognition of revenue under Percentage Completion Method - assessment of profits on transfer of land in development projects - requirement of factual verification of realization of sale consideration - relevance of physical stage of construction to revenue recognition

Recognition of revenue under Percentage Completion Method - requirement of factual verification of realization of sale consideration - relevance of physical stage of construction to revenue recognition - assessment of profits on transfer of land in development projects - Addition towards alleged profits on transfer of land in respect of villas was not finally sustained and the matter was remitted for factual verification. - HELD THAT: - The Tribunal examined the sale deeds, payment schedules and the books. Several sale deeds described the properties as semi finished and contained photographs showing construction at preliminary stage, while numerous cheques recorded as payment were dated beyond the relevant year. The balance sheet and the chart produced by the assessee showed advances/receipts figures broadly consistent with the assessee's claimed recognition by Percentage Completion Method. The Assessing Officer's conclusion that the entire construction was complete and that full sale consideration was realized during the relevant year was found to be factually unsupported and not verified by inspection or reconciliation of receipts. Neither the Assessing Officer nor the CIT(A) carried out the necessary enquiry to ascertain (a) how much sale consideration was actually received in the relevant year and (b) whether the percentage of revenue recognized by the assessee corresponded to the percentage completion of the project as on 31/03/2013. In view of these unresolved factual questions, the Tribunal held that the addition could not be finally adjudicated on the record before it and directed that the Assessing Officer should make factual verification and decide the issue afresh in accordance with law after giving the assessee an opportunity of being heard. [Paras 15, 16, 17]

Quashed the orders below and restored the issue to the file of the Assessing Officer for enquiry into amounts realised in the relevant year and verification of percentage completion; directed fresh decision after hearing the assessee.

Final Conclusion: The Revenue's appeal is treated as allowed for statistical purposes; the question of addition for profits on transfer of land (AY 2013-14) is remitted to the Assessing Officer for factual verification of receipts during the relevant year and verification of the percentage completion basis of revenue recognition, to be decided in accordance with law after affording opportunity of being heard.

Exemption under EPCG Scheme from Integrated Goods and Services Tax (IGST) - exemption notification as part of an incentive scheme and not an exemption simpliciter - clarificatory/amending notification applying to the interregnum period - invalidity of Trade Notice insofar as it required payment of IGST under Chapter 5 - entitlement to refund of IGST subject to fulfillment of EPCG conditions

Exemption under EPCG Scheme from Integrated Goods and Services Tax (IGST) - Whether IGST was payable on import of capital goods imported under a valid EPCG authorisation during the period 1.7.2017 to 13.10.2017. - HELD THAT: - The Court followed the reasoning in the Division Bench decision in Prince Spintex which examined the Foreign Trade Policy, the EPCG Scheme and the sequence of notifications. The EPCG Scheme permitted import of capital goods at zero customs duty subject to export obligations and Notification No.16/2015-Cus was issued to give effect to that incentive scheme. Although the IGST regime commenced on 1.7.2017 and subsections (7) and (9) were inserted in section 3 of the Customs Tariff Act, the subsequent amendment of Notification No.16/2015-Cus by Notification No.26/2017 omitted reference to those subsections by inadvertence; that omission was corrected by Notification No.79/2017. Reading the policy and notifications together, the Court held that imports under a valid EPCG authorisation were always intended to be exempt from integrated tax and compensation cess, and therefore IGST was not chargeable on such imports for the interregnum period. [Paras 6]

IGST was not payable on capital goods imported under a valid EPCG authorisation during 1.7.2017 to 13.10.2017; petitioners are entitled to refund of IGST paid, subject to fulfillment of EPCG conditions.

Clarificatory/amending notification applying to the interregnum period - Whether Notification No.79/2017 (and the corresponding amendment to the Foreign Trade Policy) operates as a clarificatory/curative amendment applicable to imports made between 1.7.2017 and 13.10.2017. - HELD THAT: - The Court accepted the Division Bench's conclusion that the omission of subsections (7) and (9) in Notification No.26/2017 was inadvertent or an oversight and that Notification No.79/2017, which expressly exempted integrated tax and compensation cess, must be read as clarificatory or curative so as to effectuate the policy intent of the EPCG Scheme. Reading the sequence of policy instruments and notifications together shows that the Central Government's intention was to grant total exemption under the EPCG Scheme, and the later notification corrects the gap in the interregnum period. [Paras 6]

Notification No.79/2017 is to be read as clarificatory/curative and applies to imports during 1.7.2017 to 13.10.2017.

Invalidity of Trade Notice insofar as it required payment of IGST under Chapter 5 - entitlement to refund of IGST subject to fulfillment of EPCG conditions - Whether Trade Notice 11/2018 to the extent it stated that importers under Chapter 5 would need to pay IGST is sustainable, and the consequent relief available to petitioners. - HELD THAT: - Applying the conclusion that imports under EPCG were intended to be exempt from IGST, the Court held that Trade Notice 11/2018 is unsustainable to the extent it required payment of IGST under Chapter 5. Consequently, where petitioners have paid IGST on such imports during the interregnum period, they are entitled to refund of the IGST paid along with interest, subject to meeting the conditions of the EPCG Scheme and the exemption notification as amended. [Paras 6]

Trade Notice 11/2018 is quashed insofar as it requires IGST under Chapter 5; petitioners are entitled to refund of the IGST paid with interest, subject to fulfillment of EPCG conditions.

Final Conclusion: The petitions are allowed; having applied the Division Bench reasoning in Prince Spintex, the Court held that imports under a valid EPCG authorisation were intended to be exempt from IGST and related cess for the period 1.7.2017 to 13.10.2017, read Notification No.79/2017 as clarificatory for that interregnum, quashed the Trade Notice insofar as it required IGST, and directed refund of the IGST paid (with interest) subject to compliance with EPCG conditions.

Levy of Clean Energy Cess on goods classified under Customs Tariff Heading 2704 - Provisional assessment and scope of finalization - Appealability of self-assessment before first appellate authority - Reassessment excluding wrongly levied cess

Provisional assessment and scope of finalization - Provisional assessment is provisional for all purposes and at finalization all relevant factors must be examined. - HELD THAT: - The Tribunal held that a provisional assessment cannot be treated as provisional for a single limited purpose only. Where an assessment is left provisional (for example, on valuation or demurrage), the officer finalizing the assessment must examine and reckon all factors necessary for finalization, including classification and other requirements that may affect levy. Consequently, matters not finally determined at the provisional stage may be considered and reopened at finalization; there can be no compartmentalized provisional assessment limited to one issue. [Paras 6]

Provisional assessment is open to full finalization and the finalizing authority must consider all factors necessary to complete the assessment.

Appealability of self-assessment before first appellate authority - Self-assessments are amenable to challenge before the first appellate authority. - HELD THAT: - Relying on the Larger Bench decision in I.T.C. Limited as cited, the Tribunal recorded that all assessments, including self-assessments, can be challenged before the first appellate authority. The revenue contention that the importer could not challenge an element of their provisional/self-assessment was rejected in light of the settled principle that orders of assessment (which include self-assessments) are subject to modification through appropriate appellate proceedings. [Paras 7]

The importer was competent to challenge the imposition of Clean Energy Cess before the first appellate authority despite having provisionally declared it.

Levy of Clean Energy Cess on goods classified under Customs Tariff Heading 2704 - Reassessment excluding wrongly levied cess - Clean Energy Cess is not leviable on goods falling under Customs Tariff Heading 2704; the first appellate authority correctly directed reassessment excluding the cess. - HELD THAT: - After examining the contentions and applying the principles above, the Tribunal agreed with the first appellate authority's conclusion that the levy of Clean Energy Cess did not extend to goods under Heading 2704. The appellate order setting aside finalization of six bills of entry and directing reassessment under the appropriate classification without levy of Clean Energy Cess was held to be correct and sustainable. [Paras 8]

The impugned appeals were correctly allowed and the six Bills of Entry were to be reassessed excluding Clean Energy Cess.

Final Conclusion: The Revenue appeal is dismissed; the order of the first appellate authority is upheld and reassessment of the six Bills of Entry shall proceed excluding Clean Energy Cess as directed.

Section 436-A of the Code of Criminal Procedure, 1973 - custody undergone for predicate offences to be included for benefit of statutory bail - bail under the Prevention of Money Laundering Act, 2002 - limited scope of relief to specified proceedings

Section 436-A of the Code of Criminal Procedure, 1973 - custody undergone for predicate offences to be included for benefit of statutory bail - bail under the Prevention of Money Laundering Act, 2002 - Applicability of Section 436-A CrPC and entitlement to bail in Crl. Misc. (PMLA) Case No. 34/2016 where the appellant has undergone custody including for predicate offences exceeding half the period of sentence. - HELD THAT: - The Court recorded that the Directorate of Enforcement did not seek extension of the appellant's custody after the initial remand. It was an accepted factual position that the appellant had undergone incarceration for about nine years and two months, inclusive of custody and sentence for predicate offences, and that such custody exceeded half of the period of sentence prescribed since registration and arrest under the PMLA. On these findings the Court held that the statutory condition in Section 436-A CrPC is satisfied. Applying that statutory provision, the Court allowed the appeal, set aside the impugned order which had imposed a six-month restriction, and directed that the appellant shall appear before the trial court and be released on bail in the specified PMLA proceeding on terms to be fixed by that court. [Paras 2, 3]

Section 436-A CrPC applies; appeal allowed and impugned order set aside; appellant to be released on bail in Crl. Misc. (PMLA) Case No. 34/2016 on terms fixed by the trial court.

Limited scope of relief to specified proceedings - Whether the bail granted by this Court operates beyond Crl. Misc. (PMLA) Case No. 34/2016. - HELD THAT: - The Court expressly clarified that its order granting bail is confined to Crl. Misc. (PMLA) Case No. 34/2016 and does not operate as bail in any other case or proceeding. This limitation was made part of the operative direction to avoid any unintended extension of the relief to other matters in which the appellant may be involved. [Paras 4]

Relief confined to Crl. Misc. (PMLA) Case No. 34/2016; no bail granted in other cases or proceedings.

Final Conclusion: The appeal is allowed: having found that the appellant has undergone custody (including for predicate offences) exceeding half the sentence period, the Court applied Section 436-A CrPC, set aside the impugned restriction, and directed release on bail in Crl. Misc. (PMLA) Case No. 34/2016 on terms to be fixed by the trial court; the order is expressly confined to that proceeding and pending applications stand disposed of.

Grant of bail under PMLA - Section 45 PMLA - threshold for attributing proceeds of crime - Mens rea and the broad probabilities test at bail stage - Professional role of chartered accountant and contours of criminal liability - Liberty as exception in exceptional cases

Grant of bail under PMLA - Mens rea and the broad probabilities test at bail stage - Professional role of chartered accountant and contours of criminal liability - Section 45 PMLA - threshold for attributing proceeds of crime - Whether the petitioner, a chartered accountant accused under PMLA, should be admitted to bail - HELD THAT: - The court applied the established principle that at the bail stage under special enactments like the PMLA the court must form a prima facie view on the scale of broad probabilities and examine whether the accused possessed the requisite mens rea (paras 21-24). It noted that liberty ought not to be interfered with except in exceptional cases and that a detailed appreciation of evidence is inappropriate at this stage (paras 21, 26). The petitioner was admittedly the chartered accountant of the principal accused and the core allegation relates to projecting tainted funds as untainted by filing ITRs and facilitating transactions. The court observed, however, that a professional ordinarily acts on client instructions and whether the petitioner exceeded professional duties - thereby attracting criminal liability - requires trial-level testing; such factual and evidentiary appraisal cannot be undertaken at bail stage (paras 25-26). While the seriousness of economic offences was acknowledged, the court found that the petitioner's case, on the material before it, did not displace the balance of probabilities against bail. Applying the broad-probabilities standard, the court concluded that further appreciation now could prejudice the trial and that the allegation that the principal accused had shifted blame on the petitioner must be examined during trial (paras 25-26). The petition was therefore allowed subject to conditions including personal bond, surety, surrender of passport and prohibitions on contacting co-accused or witnesses (para 27). [Paras 23, 24, 25, 26, 27]

Petitioner admitted to bail on furnishing personal bond and surety with conditions imposed, and the bail application is disposed of.

Final Conclusion: Bail granted to the petitioner under PMLA on the basis of prima facie assessment and broad probabilities; substantive guilt and factual disputes including the extent of professional culpability to be adjudicated at trial.

Informing the arrestee of the grounds of arrest - compliance with Section 19 of the PMLA - grounds of arrest to be informed "as soon as may be" - supply of copy of ECIR/grounds of arrest not mandatory - non-compliance of Section 19 vitiates the arrest - judicial remand and maintainability of habeas corpus/writ - twin conditions for grant of bail under Section 45 of PMLA

Informing the arrestee of the grounds of arrest - compliance with Section 19 of the PMLA - grounds of arrest to be informed "as soon as may be" - Whether grounds of arrest must be furnished in writing contemporaneously at the time of arrest or whether informing the arrestee (including orally or by permitting him to read written grounds) "as soon as may be" suffices. - HELD THAT: - Section 19(1) requires the authorised officer to record reasons in writing and to inform the arrestee of the grounds for arrest "as soon as may be". Section 19(2) and the 2005 Rules prescribe forwarding the written order and material to the Adjudicating Authority and provide procedural safeguards. The Supreme Court in Vijay Madanlal Choudhary held that informing the person about the grounds of arrest is sufficient compliance of Article 22(1) and that supply of ECIR in every case is not mandatory; contemporaneous disclosure of grounds suffices. V. Senthil Balaji emphasises that non-compliance of Section 19(1) would vitiate the arrest but must be read in context of factual compliance. Applying these authorities and the statutory scheme, the court held that the core requirement is that the arrestee be informed of the grounds "as soon as may be" and that disclosure in writing which the arrestee read and acknowledged, and further disclosure in the remand application, amounted to being duly informed and served. [Paras 66, 72, 74, 89]

The statutory requirement is satisfied by informing the arrestee of the grounds "as soon as may be"; in this case the petitioner was given written grounds which he read and signed and the grounds were further disclosed in the remand application, so the requirement is met.

Informing the arrestee of the grounds of arrest - right to consult and be defended by legal practitioner - compliance with Section 19 of the PMLA - Whether the petitioner's fundamental rights, including the right to consult and be defended by a legal practitioner, were violated because the grounds of arrest were not served to him in writing. - HELD THAT: - Article 22(1) and Section 19 require informing the arrestee of the grounds. The court examined the record, the remand order and the petitioner's acknowledgement that he had read and been informed of the written grounds. There is no material to show denial of the right to consult or be defended; the remand court examined the grounds and found no violation of Section 19. Therefore, on the facts, there is no infringement of the petitioner's rights to consult and be defended arising from non-supply of a separate physical copy at the point of arrest. [Paras 72, 84, 89]

There was no violation of the petitioner's fundamental rights on account of non-supply of a separate copy; the petitioner was informed and there is no record of denial of his right to legal consultation or defence.

Non-compliance of Section 19 vitiates the arrest - vitality of reason to believe recorded in writing - judicial remand and review of legality of arrest - Whether the petitioner's arrest was illegal and thus a deprivation of life and personal liberty under Article 21 because Section 19(1)'s requirements were not followed. - HELD THAT: - Section 19(1) requires recording reasons in writing and informing the arrestee of grounds. The court analysed the material, including the arrest memo, the petitioner's written acknowledgement, and the remand order of the Special Judge which found no violation of Section 19. The court relied on the statutory scheme, the Rules, and binding Supreme Court precedents that inform the standard for compliance; on the facts the required reason to believe was recorded and the grounds were brought to the petitioner's notice. Consequently, there is no basis to hold the arrest illegal or to conclude a breach of Article 21. [Paras 66, 72, 86, 89]

The petitioner failed to show illegality of arrest; the reason to believe was recorded and the grounds were communicated, therefore Article 21 was not violated.

Compliance with Section 19 of the PMLA - supply of copy of ECIR/grounds of arrest not mandatory - twin conditions for bail under Section 45 of PMLA - Whether the petitioner's arrest contravened Section 19 of the PMLA and whether that contravention vitiates proceedings such that relief should be granted (including interim release) despite applicability of Section 45 bail conditions. - HELD THAT: - The court considered competing authorities: Vijay Madanlal Choudhary (larger bench) and V. Senthil Balaji (Supreme Court), and the statutory rules. Vijay Madanlal holds that informing the person of grounds suffices and supply of ECIR is not mandatorily required; V. Senthil Balaji reiterates strict compliance with Section 19 but must be read in context. On the facts the remand order upheld validity of arrest and the petitioner acknowledged the written grounds. Further, the statutory twin conditions under Section 45 govern grant of bail in PMLA matters; the petitioner's bail application had been rejected and the special court's detailed order was not challenged in these proceedings. Given the factual compliance and existing remand/judicial custody orders, the court declined to grant interim relief. [Paras 72, 74, 86, 89]

The petitioner failed to demonstrate contravention of Section 19 that would vitiate proceedings; the arrest was not contrary to Section 19 and relief (including interim release) is not warranted in these proceedings.

Final Conclusion: The writ petition is dismissed. The court found that the requirements of Section 19 of the PMLA and Article 22(1) were complied with on the record (the petitioner was informed of and acknowledged the written grounds and the remand court found no violation), no illegality of arrest under Articles 14/21/20 was established, and the petitioner is not entitled to interim release in these proceedings.

Service tax liability w.e.f. 01.06.2007 - no service tax on composite works contracts prior to 01.06.2007 - adjustment and refund of amounts paid - penalty under Section 76 of the Finance Act, 1994

Service tax liability w.e.f. 01.06.2007 - Business Auxiliary Service - Goods Transport Agency service - construction service from 01.06.2007 - adjustment and refund of amounts paid - Confirmation of service tax demand for Business Auxiliary Service, Construction Service and GTA from 01.06.2007 onwards and appropriation/refund of amounts paid. - HELD THAT: - The Tribunal found that the assessee did not dispute liability for Business Auxiliary Service, Construction Service and GTA from 01.06.2007 onwards and that the confirmed total demand for those services is Rs.22,70,491/-. The amounts already paid by the assessee during investigation and after issuance of show-cause notice are to be appropriated against the confirmed demand. Any excess paid must be refunded to the assessee. The demand is confirmed along with interest and directions are given for adjustment or refund within 30 days. [Paras 6, 9]

Demand for Business Auxiliary Service, GTA and construction service from 01.06.2007 onwards confirmed with interest; amounts already paid to be adjusted and any excess refunded.

No service tax on composite works contracts prior to 01.06.2007 - composite works contract - construction service prior to 01.06.2007 - Whether service tax is payable on construction services forming part of composite contracts prior to 01.06.2007. - HELD THAT: - Applying the principle that composite indivisible works contracts involving supply of materials fall within the classification of works contract service and were not taxable under service tax prior to 01.06.2007 (as reflected in the decision relied upon by the assessee), the Tribunal held that the assessee's construction activity prior to 01.06.2007 involved supply of materials and therefore the demand for that period is unsustainable and set aside. [Paras 7, 10]

No service tax is payable on construction services rendered as part of composite contracts prior to 01.06.2007; the demand for that period is set aside.

Penalty under Section 76 of the Finance Act, 1994 - Levy of penalty under Section 76 against the assessee. - HELD THAT: - In the circumstances of the case, including the confirmed and adjusted liabilities and the set aside demand for the pre-01.06.2007 period, the Tribunal held that no penalty under Section 76 of the Finance Act, 1994 is imposable on the assessee. The Revenue's appeal against non-imposition of penalty is accordingly dismissed. [Paras 8]

No penalty under Section 76 is imposable on the assessee.

Final Conclusion: The Tribunal confirmed the service tax demand for Business Auxiliary Service, GTA and construction service from 01.06.2007 onwards (with interest) and directed adjustment/refund of amounts paid; it set aside the demand in respect of construction services prior to 01.06.2007 as not taxable being part of composite works contracts; and held that no penalty under Section 76 is imposable.

Business Support Service - principal-to-principal transaction - export of service - place of provision of services (Rule 10 of the POP Rules) - export of services rules (Rule 6A of the Service Tax Rules, 1994) - extended period of limitation requiring suppression with intent/fraud - penalty under Section 77 and Section 78 of the Finance Act, 1994

Business Support Service - principal-to-principal transaction - Whether margins earned by the appellant from buying and reselling ocean freight space constitute taxable 'Business Support Service'. - HELD THAT: - The Tribunal found that the appellant purchased space for international transportation of containerized goods in bulk and resold that space to customers on its own account, earning a trading margin. Such transactions were held to be principal-to-principal commercial trading and not activities rendered on behalf of another in a principal-agent relationship. The definition of Business Support Service applies where services are rendered on behalf of another; it does not encompass profit margins arising from purchase-and-resale of freight space. The Tribunal followed earlier decisions of the Tribunal on identical facts and concluded that the excess realized as margin is trading profit and not consideration for a taxable business-support service. Accordingly, the demand confirmed under this head was set aside. [Paras 17, 18, 19]

Margins from purchase-and-resale of ocean freight space are not taxable as Business Support Service; demand set aside.

Export of service - place of provision of services (Rule 10 of the POP Rules) - export of services rules (Rule 6A of the Service Tax Rules, 1994) - Whether discounts/commission or brokerage (discounts received from shipping lines on bulk purchase) are taxable or qualify as export of services/place of provision outside India. - HELD THAT: - The Tribunal noted that the discounts arose from bulk purchase of space from shipping lines and were connected to sale of that space outside India. The discounts were billed and received in foreign currency. The place of provision for transportation-related services is the destination of the goods under Rule 10, and the conditions of Rule 6A(1) for export of services (provider in taxable territory, recipient outside India, payment in convertible foreign exchange, place of provision outside India, etc.) were satisfied. Export of services is outside the service-tax net; therefore the demand in respect of commission/brokerage was not sustainable and was set aside. [Paras 20, 21]

Commission/brokerage amounts treated as export of service/place of provision outside India; demand set aside.

Export of service - place of provision of services (Rule 10 of the POP Rules) - export of services rules (Rule 6A of the Service Tax Rules, 1994) - Whether miscellaneous charges (amendment charges, container detention, DTHC, handling, seal charges etc.) collected in foreign currency for onward movement are taxable. - HELD THAT: - The Tribunal held these charges were incurred in the course of providing clearing and forwarding services for onward movement of goods from India to destinations outside India. Under Rule 10 the place of provision of transportation services by sea/air is the destination of the goods; and the conditions of Rule 6A for export of services were satisfied. Thus these receipts fall within export of services and are outside the service-tax net. The Tribunal further noted the appellant had paid service tax when similar charges were collected in Indian currency from Indian customers, distinguishing those instances. [Paras 22]

Miscellaneous charges billed in foreign currency for onward movement are exports of service/place of provision outside India; demand set aside.

Extended period of limitation requiring suppression with intent/fraud - penalty under Section 77 and Section 78 of the Finance Act, 1994 - Whether the extended period of limitation and penalties under the Finance Act could be invoked on facts of the case. - HELD THAT: - The Tribunal observed there was no evidence of suppression of facts, fraud, collusion, or willful misstatement necessary to invoke the extended period of limitation. The ingredients that justify extended limitation were absent. Because the extended period could not be invoked, the demand was time-barred and the penalties imposed under the Finance Act (Sections 77 and 78) were not sustainable. The Tribunal therefore set aside the demand and the penalties on limitation and evidentiary grounds. [Paras 12, 24]

Extended limitation not attracted for lack of suppression with intent; charges/time-bar and penalties under the Finance Act set aside.

Adjudicating authority's finding to drop demand - Whether the department's appeal to restore the dropped demand should succeed. - HELD THAT: - The Tribunal found that the adjudicating authority had given a clear finding for dropping the demand in the original order-in-original and agreed with that conclusion. The department's appeal was therefore rejected. [Paras 23]

Department's appeal against dropping the demand rejected.

Final Conclusion: The Tribunal allowed the appellant's appeal, set aside the service-tax demands confirmed in the impugned order in respect of trading margins on ocean freight, commission/discounts and miscellaneous foreign-currency charges (holding them to be exports/place of provision outside India), and held the extended period of limitation and the penalties under the Finance Act inapplicable; the department's appeal was rejected.

Point of taxation - Point of Taxation Rules, 2011 - Determination of point of taxation in case of change in effective rate of tax (Rule 4 POTR) - Determination of point of taxation (Rule 3 POTR) - Non-obstante clause - Service tax liability on advance receipts - Prospective applicability of Section 67A - Interest on delayed payment of service tax - Demand under Section 73A - Penalty for improper disclosure under Section 77(2)

Point of taxation - Determination of point of taxation in case of change in effective rate of tax (Rule 4 POTR) - Determination of point of taxation (Rule 3 POTR) - Non-obstante clause - Applicability of Rule 4 of the Point of Taxation Rules, 2011 and the correct point of taxation for the transactions in question. - HELD THAT: - The Tribunal held that where there is a change in the effective rate of tax the non-obstante opening of Rule 4 POTR makes Rule 4 override Rule 3. Applying the temporal facts, the rate change occurred in May 2012 while the invoices and the principal provision of service (lease agreement) occurred in October 2012. Though part payment (advance) was received in March 2012, the service was provided and invoices were issued after the change in rate. Under Rule 4(b)(iii) POTR the point of taxation in such circumstances is the date of issuing of invoice, which in this case is October 2012. The Tribunal therefore accepted the appellant's contention that Rule 4, not Rule 3, governs the point of taxation and that the point of taxation is October 2012. The Tribunal also noted the relevance of section 67A as giving prospective effect to the rate/value applicable when the service is provided or agreed to be provided, supporting the application of Rule 4. [Paras 11, 13]

Rule 4 POTR applies by virtue of its non-obstante clause and the point of taxation is the invoice date in October 2012.

Service tax liability on advance receipts - Interest on delayed payment of service tax - Prospective applicability of Section 67A - Whether the appellant was liable to service tax (and interest) in March 2012 on the advance received, or whether liability arose only in October 2012. - HELD THAT: - Having found the point of taxation to be October 2012 under Rule 4(b)(iii), the Tribunal concluded there remained no service tax liability on the advance received in March 2012. The Tribunal observed that the actual provision of service, issuance of invoices and receipt of the balance payment occurred after the change in rate; therefore the tax liability attaches at that later point. The Tribunal relied on earlier Tribunal decisions which held that advances not constituting completed provision of service do not give rise to immediate tax liability and that interest cannot be sustained where the rate could not be ascertained until the service was rendered. Consequently, the demand of service tax and interest confirmed by the adjudicating authority on the March 2012 advance was held unsustainable. [Paras 11, 13, 14]

No service tax (or related interest) is leviable in March 2012 on the advance; liability arose in October 2012 and the confirmed demand and interest are unsustainable.

Demand under Section 73A - Penalty for improper disclosure under Section 77(2) - Service tax liability on advance receipts - Validity of the demands under Section 73A for alleged excess collection and imposition of penalty under Section 77(2) for improper disclosure in returns. - HELD THAT: - The impugned order computed an alleged excess collection by comparing tax at the pre-change rate and post-change rate on the March 2012 receipt and proceeded to confirm demand under Section 73A and impose penalty under Section 77(2). The Tribunal held that once the point of taxation is October 2012, there was no excess collection on the March 2012 advance and no liability under Section 73A. Likewise, penalty for improper disclosure could not be sustained where the correct point of taxation and taxable event occurred only in October 2012 and the returns reflected the amount in the appropriate period. Therefore the factual and legal basis for both the demand under Section 73A and the penalty under Section 77(2) fell away. [Paras 13]

The demand under Section 73A and the penalty under Section 77(2) are not sustainable and are set aside.

Final Conclusion: The appeal is allowed. The Tribunal held that Rule 4 of the Point of Taxation Rules, 2011 applies by virtue of the change in effective rate of service tax and that the point of taxation is the invoice date in October 2012; accordingly, there is no service tax liability or interest in respect of the advance received in March 2012, and the demands and penalties confirmed by the adjudicating authority are set aside.

Classification of services - works contract service - commercial or industrial construction service - bifurcation of composite works contracts - liability to pay service tax - abatement - penalty waiver under section 80 of the Finance Act, 1994 - extended period of limitation

Classification of services - works contract service - commercial or industrial construction service - bifurcation of composite works contracts - Whether services rendered to BHEL for construction of a Thermal Power Plant are exigible to service tax as commercial or industrial construction service or as works contract service. - HELD THAT: - The Tribunal found that the appellant rendered the contested activity along with supply of material and therefore the activity falls within the ambit of a composite works contract. Relying on the reasoning of the Apex Court in CCE & C, Kerala v. Larsen & Toubro Ltd., the Tribunal applied the principle that composite works contracts require bifurcation and ascertainment of the service element and that such contracts are to be treated as works contract service rather than pure commercial or industrial construction service. Applying that principle to the facts, the Tribunal held that the demand classified as commercial or industrial construction service could not be sustained and set aside the confirmed demand of Rs.30,11,274/-. [Paras 8, 9]

Demand confirmed under commercial or industrial construction service is set aside and the activity is held to be works contract service.

Abatement - liability to pay service tax - Extent of admitted liabilities for other service categories (works contract, maintenance & repair, supply of tangible goods, goods transport agency) and outstanding short payment. - HELD THAT: - The Tribunal recorded that the appellant did not contest the demands confirmed under works contract service, maintenance & repair, supply of tangible goods and goods transport agency, and that those demands have been discharged by the appellant except for a short payment admitted by the appellant due to a calculation error. The appellant conceded the shortfall and was directed to pay the admitted outstanding amount along with interest within thirty days. [Paras 6, 12]

Demands in those categories are confirmed (already paid) except admitted shortfall which the appellant must pay with interest.

Penalty waiver under section 80 of the Finance Act, 1994 - payment on pointing out - extended period of limitation - Whether penalty should be imposed where service tax was paid on pointing out by the department and before issuance of show cause notice, and where the department invoked extended period of limitation. - HELD THAT: - Noting that the appellant had deposited the applicable service tax along with interest upon being pointed out by the department and before issuance of the show cause notice, the Tribunal exercised discretion under section 80 of the Finance Act, 1994 to refrain from imposing penalty. The Tribunal observed these facts as the basis for granting relief and thereby waived penalty despite initiation of proceedings under extended limitation. [Paras 4, 10, 11]

Penalty is not imposable and is waived by applying the benefit of section 80 of the Finance Act, 1994.

Final Conclusion: The appeal is allowed in part: the demand of Rs.30,11,274/ classified as commercial or industrial construction service is set aside as the activity is held to be works contract service; demands in other service categories are confirmed and paid save for an admitted shortfall which the appellant must pay with interest within thirty days; penalty is waived by applying section 80 of the Finance Act, 1994.

Business Auxiliary Service - provision of equipment with operators - production of steam as manufacture - service tax liability for services rendered to a principal without third party involvement - Small Scale Industry (SSI) exemption and non-registration

Business Auxiliary Service - provision of equipment with operators - service tax liability for services rendered to a principal without third party involvement - Whether the appellant's activity of providing Steam Generating Units along with crew to ONGC attracted service tax as a Business Auxiliary Service for the period in question. - HELD THAT: - The Tribunal applied the principle that the definition of Business Auxiliary Service is attracted only where services are rendered on behalf of another (involving a third party context) and not where the contract is directly between the service provider and the client. Examination of the contract shows the Steam Generating Unit, with operators and crew, was placed at the disposal of ONGC under a direct contract and operated as per ONGC's directions. The activity therefore did not amount to rendering services 'on behalf of' ONGC such as to fall within the scope of Business Auxiliary Service for the period prior to the later statutory amendments expanding the category. The Tribunal's earlier decision in the cited precedent was applied by analogy: where hiring of equipment with operators under a two party contract was held not to be a Business Auxiliary Servicemanufacture and that it was availing SSI exemption (and hence had not obtained central excise registration) was noted as the factual matrix; on the legal question of service classification the demand under the Business Auxiliary Service category was held not maintainable for the period in dispute.

The activity of providing Steam Generating Units with crew did not attract service tax as a Business Auxiliary Service for the period in question and the demand thereunder is not sustainable.

Final Conclusion: The impugned order confirming demand of service tax is set aside; the appeal is allowed and the appellant is held not liable to pay service tax for the period in dispute, with consequential relief, if any.

Condonation of delay - Withdrawal of special leave petition with liberty to refile - Liberty to seek review before the High Court - Liberty to challenge impugned order in case of adverse review

Condonation of delay - Delay in refiling the special leave petition was condoned. - HELD THAT: - The Court recorded and allowed the application for condonation of delay in refiling the special leave petition and formally condoned the delay, thereby removing any procedural bar to the petitioner(s) withdrawing and re-prosecuting their remedy in another forum.

Delay in refiling the special leave petition is condoned.

Withdrawal of special leave petition with liberty to refile - Liberty to seek relief before the High Court - The special leave petitions were dismissed as withdrawn, with liberty granted to the petitioner(s) to file and move before the High Court. - HELD THAT: - Upon the petitioner(s)' request, the Court permitted withdrawal of the special leave petitions and dismissed them as withdrawn while expressly granting liberty to approach the High Court. The Court recorded the petitioner(s)' submission in support of this course and disposed of the petitions on that basis, enabling the petitioner(s) to continue their challenge in the appropriate High Court forum.

The special leave petitions are dismissed as withdrawn, with liberty to file and move before the High Court.

Liberty to seek review before the High Court - Liberty to challenge impugned order in case of adverse review - Liberty was granted to the petitioner(s) to file a review before the High Court and, if the review result is adverse, to challenge the impugned order further. - HELD THAT: - In addition to permitting withdrawal and refiling, the Court granted specific procedural liberties: the petitioner(s) may file a review petition before the High Court; and if the review petition is decided against them, they retain the liberty to challenge the impugned order thereafter. This preserves the petitioners' right to pursue substantive remedies in the High Court and by further challenge if necessary.

Liberty is granted to file a review before the High Court and to challenge the impugned order in case the decision in the review petition is adverse to the petitioner(s).

Final Conclusion: The Court condoned the delay in refiling, allowed withdrawal of the special leave petitions and dismissed them as withdrawn, and granted the petitioner(s) liberty to file a review before the High Court and, if that review is adverse, liberty to challenge the impugned order thereafter.

Proportionate reversal of CENVAT credit under Rule 6 (3A) - total CENVAT credit versus total common input credit - re-credit/refund of excess reversed CENVAT credit - interest on delayed refund under Section 35FF

Proportionate reversal of CENVAT credit under Rule 6 (3A) - total CENVAT credit versus total common input credit - The formula in Rule 6(3A) is to be applied by reference to total common input credit and not by taking the entire credit availed by the assessee. - HELD THAT: - The Tribunal examined whether the denominator in the formula under Rule 6(3A) should be 'total credit taken' or restricted to 'total common input credit'. Relying on precedents interpreting Rule 6 read harmoniously (including the Tribunal's decision in CCE v. Reliance Industries Ltd. and subsequent appellate treatment), the court observed that construing 'total Cenvat credit' to include credit exclusively attributable to dutiable goods would produce an anomalous result of disallowing credit intended to be allowed. The substituted sub-rule (3A) was held to be clarificatory and retrospective in effect, confirming that the formula contemplates only common input credit in the denominator. Applying these principles to the facts, the Tribunal concluded that the appellant had correctly applied the formula originally and that the additional reversal directed by the audit (using entire credit) amounted to excess reversal which cannot be sustained. [Paras 9, 10]

Demand based on applying the formula to 'total credit' is set aside; the reversal originally made by the appellant (using total common input credit) is correct.

Re-credit/refund of excess reversed CENVAT credit - interest on delayed refund under Section 35FF - The appellant is entitled to re-credit/refund of the excess amount reversed; the claim for interest was not adjudicated in the appeal and therefore not granted. - HELD THAT: - Having found that the additional reversal was excessive, the Tribunal held that the appellant is eligible to avail re-credit/refund of the excess amount reversed. With respect to interest, the Tribunal noted Section 35FF of the Central Excise Act (introduced after earlier decisions relied upon by the appellant) prescribes the commencement of liability to pay interest only after three months; further, no specific request for interest from the date of reversal was made in the appellant's reply to the show cause notice and the adjudication concentrated on the correctness of reversal. Consequently, the Tribunal declined to determine entitlement to interest in the present appeal and limited relief to re-credit/refund with consequential relief, if any. [Paras 11, 13]

Appellant granted re-credit/refund of the excess reversed amount; claim for interest not considered or allowed in this appeal.

Final Conclusion: The appeal is allowed: the additional reversal effected on audit using 'total credit' is held to be excessive, the appellant is entitled to re-credit/refund of the excess amount reversed, and the impugned orders are set aside; the claim for interest was not adjudicated and is not granted by this order.

Dismissal for non-prosecution - restoration of appeal on sufficient cause - adjournment discretion and limits under Section 35C(1A) - appellate procedure for appellant's default - Rule 20 of CESTAT Procedure Rules - consequence of counsel's non-appearance - misuse of adjournments and duty of courts to curb dilatory tactics

Dismissal for non-prosecution - restoration of appeal on sufficient cause - appellate procedure for appellant's default - Rule 20 of CESTAT Procedure Rules - adjournment discretion and limits under Section 35C(1A) - consequence of counsel's non-appearance - Whether the appeal should be dismissed for non-prosecution in view of repeated non-appearance of the appellant/appellant's counsel despite prior opportunities and an earlier restoration. - HELD THAT: - The Tribunal recorded that the appeal had earlier been dismissed for non-prosecution and was restored on the appellant's miscellaneous application. Thereafter the appellant or its counsel repeatedly failed to attend the hearings despite notice being delivered to counsel, and the matter had been adjourned multiple times. The Tribunal considered its powers under Section 35C(1A) to grant and record adjournments and Rule 20 of the CESTAT Procedure Rules which permits dismissal for default or hearing on merits and contemplates restoration where sufficient cause is shown. Relying on principles condemning mechanical or repeated adjournments and on the duty of advocates to appear, the Tribunal held that sufficient opportunities had been afforded and there was no reason to further adjourn. Having regard to the appellant's persistent non-appearance and failure to prosecute the appeal, the Tribunal exercised its discretion to dismiss the appeal for non-prosecution.

Appeal dismissed for non-prosecution.

Final Conclusion: The appeal is dismissed for non-prosecution after repeated non-appearances by the appellant/appellant's counsel despite restoration and multiple opportunities; the Tribunal declined further adjournment and exercised its discretion under the cited procedural provisions to dismiss the appeal.

Strict compliance with conditions of an exemption notification - doctrine of substantial compliance - effect of reversal of CENVAT credit (with interest) on eligibility for exemption - invocation of proviso to Section 11A for extended period of limitation - penalty under Rule 25 read with Section 11AC of the Central Excise Act, 1944

Strict compliance with conditions of an exemption notification - effect of reversal of CENVAT credit (with interest) on eligibility for exemption - doctrine of substantial compliance - entitlement to benefit of Notification No. 1/2011 dated 1.3.2011 where CENVAT credit was availed (and later reversed) on inputs and input services used in manufacture of goods cleared at concessional rate - HELD THAT: - The Tribunal held that entitlement to an exemption notification must be strictly in accordance with the conditions prescribed therein. The appellant admitted that foam inputs (on which CENVAT credit was legitimately availed at standard rates) were captively used in rubberised coir mattresses for which the concessional rate was claimed, and that one unit (Yeshwanthpur) had in fact availed credit contrary to the policy followed by other units. Reliance was placed on Supreme Court authorities that exemption notifications are to be interpreted strictly and that substantial compliance cannot be invoked to vitiate a clear eligibility precondition. The Tribunal found that the immediate reversal of credit with interest after departmental detection did not cure the prior non compliance so as to confer the benefit of the Notification; the contravention was conscious and deliberate at the relevant time and therefore the benefit could not be allowed.

Benefit of Notification No. 1/2011 denied for the period in question; demand for duty confirmed insofar as availing of CENVAT credit precluded the concessional rate.

Invocation of proviso to Section 11A for extended period of limitation - strict compliance with conditions of an exemption notification - validity of invoking the proviso to Section 11A to extend the period of limitation where irregular CENVAT credit was consciously availed - HELD THAT: - The Tribunal upheld the Commissioner's invocation of the proviso to Section 11A, observing that the company had consciously availed irregular credit over an extended period despite a company wide policy (all units except one had not availed such credit), and that the irregularity was discovered only on departmental audit. The Tribunal applied precedents which permit extended limitation where there is suppression or conscious irregularity and where the assessee was aware or ought to have been aware of ineligibility to claim credit.

Invocation of the proviso to Section 11A was upheld and extended period of limitation sustained for recovery.

Penalty under Rule 25 read with Section 11AC of the Central Excise Act, 1944 - liability to penalty of senior company officers alleged to be decision makers for irregular availment of credit - HELD THAT: - The Tribunal found that the show cause notice did not contain specific allegations of personal involvement by the Chairman and Managing Director, the Vice President or the Head of Finance in the irregular credit availment. The error was attributable to ground level officers and, in any event, the senior officers ordered immediate reversal of the credit when the irregularity came to their notice. On these findings the Tribunal concluded there was insufficient basis to sustain penalties against the named senior officers.

Penalties imposed on the three senior officers set aside; their appeals allowed.

Penalty under Rule 25 read with Section 11AC of the Central Excise Act, 1944 - determinative quantum of penalty on the company and need for re computation in view of amounts already paid - HELD THAT: - Although the Commissioner imposed a penalty equivalent to the duty demanded, the Tribunal noted that an amount corresponding to duty at 1% had already been paid during the relevant period and that penalty should be re determined to account for the payment made. Accordingly the Tribunal did not decide the final quantum but remanded the matter for re calculation of penalty taking into account the amounts already paid and the correct differential liability.

Appeal by the company disposed of by remanding the penalty for redetermination; penalty quantum to be recomputed in light of amounts already paid.

Final Conclusion: The Tribunal denied the concessional benefit of Notification No. 1/2011 for the period 1.3.2011 to 31.3.2013 where CENVAT credit was availed, upheld invocation of the proviso to Section 11A for extended limitation, set aside penalties on three senior officers for lack of specific personal culpability, and remanded the company's penalty for re determination after accounting for amounts already paid.

Compounded levy scheme for smokeless tobacco products - deemed production based on the number of operating packing machines - duty determination on the basis of Retail Sale Price printed on pouches and machine count - no re-determination of duty on the basis of actual production - treatment of multi-track/multi-line packing machines vis-a -vis single-track duplex machines - capacity determination under the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 - leviable under Section 3A of the Central Excise Act - Circular No. 980/4/2014-CX clarifying assessment practice

Compounded levy scheme for smokeless tobacco products - deemed production based on the number of operating packing machines - no re-determination of duty on the basis of actual production - Circular No. 980/4/2014-CX clarifying assessment practice - Duty payable under the compounded levy scheme is to be determined on the basis of deemed production computed from the number of operating packing machines and RSP printed on pouches and not on actual production. - HELD THAT: - The Tribunal examined the statutory scheme under the Chewing Tobacco & Unmanufactured Tobacco Packing Machines Rules, 2010 and the subsequent Board clarification. The Board's Circular No.980/4/2014-CX expressly states that to minimize subjectivity the number of operating packing machines in the factory and the Retail Sale Price printed on the pouches are the only relevant factors for determining deemed production and the consequent duty liability. Where the adjudicating authority had determined capacity in accordance with the Rules and the assessee paid duty accordingly, excess physical production found on verification does not give rise to additional duty liability assessed on actual production. The Tribunal relied on earlier decisions applying the same principle and held that the appellants, having paid duty as determined under the Rules and Notification No.16/2010, are not liable to pay further duty on account of actual production exceeding the deemed capacity. [Paras 13, 14]

Impugned demands premised on actual production contrary to the deemed-production scheme are not sustainable and are set aside.

Treatment of multi-track/multi-line packing machines vis-a -vis single-track duplex machines - capacity determination under the Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination & Collection of Duty) Rules, 2010 - A duplex single-track packing machine that cuts two pouches at a time is to be treated as a single-track machine (single machine) for the purpose of capacity determination and duty liability, and not as multiple machines. - HELD THAT: - The adjudicating authority had treated the appellant's single-track duplex machine as equivalent to two machines because its output was approximately double the deemed production. The Tribunal analysed the technical distinction between multi-track/multi-line machines and a duplex single-track machine where two pouches are cut on the same track from a single laminate roll. Reliance was placed on earlier Tribunal and High Court decisions holding that higher speed or duplex operation does not convert a single track into multiple tracks. Accordingly, there was no basis to classify the machine as multiple machines merely because its production exceeded the deemed quantity. [Paras 15, 16]

The machine is a duplex single-track machine and must be treated as a single operating packing machine for levy purposes; no additional demand can be sustained.

Final Conclusion: The appeals are allowed: demands framed by re-computing duty on the basis of actual production and by treating the duplex single-track machine as multiple machines are unsustainable; impugned orders are set aside with consequential relief.

Engineering and designing charges includable in the assessable value - contracts for turnkey projects - distinction between manufacturing related and post manufacturing services - simultaneous levy of excise duty and service tax - extended period of limitation - suppression and intention to evade - remand for fresh examination of contracts to ascertain excise liability

Engineering and designing charges includable in the assessable value - contracts for turnkey projects - distinction between manufacturing related and post manufacturing services - remand for fresh examination of contracts to ascertain excise liability - Whether drawing, designing and engineering charges collected by the appellant are includable in the assessable value for central excise when they are connected to the goods manufactured, and whether the matter requires remand for contract wise examination. - HELD THAT: - The Tribunal held that engineering and designing charges are includable in the assessable value under the valuation rules where such charges are integrally connected to the manufacture of goods. The statement of the appellant's Works Manager that drawing, design and engineering are the first step and integral to manufacture supports inclusion. The Tribunal relied on precedent holding that payment of service tax does not preclude excise liability where the activity is excisable. However, because the department had not examined each contract separately to determine whether the design charges in particular contracts related to manufacture or to post manufacturing/site services, the Tribunal remanded the matter to the adjudicating authority for fresh examination of individual contracts and for passing an appropriate order determining duty liability accordingly. [Paras 13, 14, 16, 18]

Held that design and engineering charges are includable in assessable value if connected to manufacture; matter remanded to adjudicating authority to examine each contract and determine duty liability.

Simultaneous levy of excise duty and service tax - Whether excise duty can be demanded on amounts on which service tax has already been discharged. - HELD THAT: - The Tribunal rejected the appellant's contention that payment of service tax precludes levy of excise duty. It affirmed the principle that compliance with one tax statute does not extinguish liability under another; if an activity is exigible to excise duty, duty can be demanded even though service tax was paid on the same consideration. The Tribunal relied on earlier decisions to that effect and applied that legal principle to the present dispute. [Paras 15, 16, 18]

Held that excise duty can be demanded on amounts on which service tax has been paid where the amounts are exigible to excise duty.

Extended period of limitation - suppression and intention to evade - remand for fresh examination of contracts to ascertain excise liability - Whether the extended period of limitation could be invoked in respect of the demand, and consequent direction on further proceedings. - HELD THAT: - The Tribunal found that the appellant had disclosed payment of service tax and filed ST 3 returns reporting the design and engineering charges, and that there was no established suppression with intent to evade excise duty. Given that the department had knowledge of the transactions, the Tribunal concluded that invocation of the extended period was not justified. Consequently, the demand confirmed by invoking the extended period was set aside. Because the exact duty, if any, within the normal limitation period was not determinable on the record, the Tribunal remanded the matter to the adjudicating authority to determine duty liability, if any, within the normal period of limitation after contract wise examination. [Paras 17, 18]

Held that extended period cannot be invoked for lack of suppression with intent to evade; demand confirmed under extended period set aside and matter remanded to determine liability within normal limitation period.

Final Conclusion: The appeal is disposed by remanding the matter to the adjudicating authority: (i) design and engineering charges connected to manufacture are includable in assessable value and may attract excise even if service tax was paid; (ii) invocation of the extended period was unjustified on the facts and that demand is set aside; and (iii) adjudicating authority is directed to examine each contract afresh and determine any excise liability within the normal period of limitation.

Reversal of Cenvat credit for written off / slow moving inputs - Recovery mechanism under Rule 3(5B) and applicability of Rule 14 - Prospective operation of Explanation inserted by Notification No. 3/2013 (01.03.2013) - Proviso to Rule 3(5B) permitting re credit when written off goods are subsequently used - Extended period of limitation versus normal period of limitation - Penalty under Rule 15 of Cenvat Credit Rules

Recovery mechanism under Rule 3(5B) and applicability of Rule 14 - Prospective operation of Explanation inserted by Notification No. 3/2013 (01.03.2013) - Whether Cenvat credit could be recovered under Rule 3(5B) for amounts written off prior to insertion of the Explanation by Notification No. 3/2013. - HELD THAT: - The Tribunal held that during the relevant period there was no provision for recovery of amounts under Rule 3(5B) by invoking Rule 14 and that the Explanation introduced by Notification No. 3/2013 (01.03.2013) which prescribed recovery in the manner provided in Rule 14 operates prospectively. The Tribunal relied on consistent precedents of the Tribunal considering the same change in law and concluded that the recovery mechanism introduced from 01.03.2013 cannot be applied retrospectively to effect recovery for periods earlier than that date. As there was no statutory recovery procedure available under Rule 3(5B) before 01.03.2013, proceedings initiated under Rule 14 read with Rule 3(5B) for the prior period could not be sustained and the demand based on that ground was liable to be dropped. [Paras 13, 14, 16]

Recovery under Rule 3(5B) for amounts written off prior to 01.03.2013 cannot be effected; proceedings based on such recovery are set aside.

Proviso to Rule 3(5B) permitting re credit when written off goods are subsequently used - Reversal of Cenvat credit for written off / slow moving inputs - Whether the appellant was entitled to re take Cenvat credit when provisions for written off slow moving inputs were released upon subsequent use. - HELD THAT: - The Tribunal noted the proviso to Rule 3(5B) which permits taking credit equivalent to earlier Cenvat paid if the goods, earlier written off, are subsequently used. The appellant had recorded release of provisions in their books on account of subsequent creation of demand and use of such inputs. Applying the proviso, the Tribunal accepted that amounts for which provision was released could be re credited and therefore were not exigible for reversal under Rule 3(5B). [Paras 15]

Appellant entitled to re take credit for written off inputs subsequently used; those amounts are not liable for reversal.

Extended period of limitation versus normal period of limitation - Reversal of Cenvat credit for written off / slow moving inputs - Whether the demand for periods prior to March 2009 was sustainable under the extended period of limitation. - HELD THAT: - The Tribunal found that the demand was based on entries in the appellant's financial books and balance sheet and there was no suppression or mala fide conduct by the appellant. In view of absence of suppression and given that the legal requirement to reverse credit under Rule 3(5B) did not subsist for the earlier period, the extended period of limitation could not be invoked. The Tribunal therefore confined any sustainable demand to the normal period of limitation, identified in the order as March 2009 to December 2009. [Paras 15]

Demand for periods prior to March 2009 is time barred; only the normal limitation period (March 2009 to December 2009) could be considered.

Final Conclusion: The appeal is allowed. In view of the absence of a recovery mechanism under Rule 3(5B) prior to 01.03.2013, the proviso permitting re credit when written off goods are subsequently used, and the inapplicability of extended limitation, the impugned demand, interest and penalty are set aside; consequential relief, if any, shall follow as per law.