TaxTMI Updates e-Newsletter
Oct 23,2019

Input tax credit - restriction under section 17(5) - works contract services - construction of immovable property - plant and machinery (exclusion from restriction) - capitalisation and nature of assets

Input tax credit - restriction under section 17(5) - works contract services - construction of immovable property - Input tax credit on electrical works, pumps and pumping systems and tanks, lighting system, physical security system and fire system - HELD THAT: - The Authority held that the supplies received by the applicant are works contract services as defined in clause (119) of section 2 (building, construction, installation, fitting out etc.) whose outcome is an immovable property. Section 17(5) operates as an overriding restriction on the general entitlement under section 16(1) and disallows credit in respect of works contract services when supplied for construction of an immovable property (other than plant and machinery). The fact that certain items may be movable in a physical sense or shown under a distinct head in the books of account does not alter their legal nature if they are part of and become merged with the building/infrastructure; capitalization and accounting classification do not change the character of the supply. Consequently, where the works contract outcome is an immovable property and the items form part of the building with infrastructure, the restriction in section 17(5) applies and bars ITC even though the applicant uses the premises for renting commercial space. [Paras 11]

Input tax credit on the listed works contract services is not admissible as such credit is blocked by section 17(5) because the supplies are for construction of an immovable property.

Plant and machinery (exclusion from restriction) - definition of plant and machinery - capitalisation and nature of assets - Whether the listed items qualify as "plant and machinery" so as to be excluded from the restriction in section 17(5) - HELD THAT: - The Authority examined the explanation to section 17 which defines "plant and machinery" as apparatus, equipment and machinery fixed to earth by foundation or structural support and used for making outward supply of goods or services, but excludes land, building or civil structures. Although some listed items may be fixed, the Authority found that they do not have independent existence and become part of the building with infrastructure provided on rent; once so merged they are excluded from the definition of "plant and machinery" for the purpose of section 17(5). Thus the applicant's submission that such items are recorded as "plant and machinery" in accounts or are physically movable does not suffice to bring them within the exclusion. [Paras 11]

The listed items do not qualify as "plant and machinery" for the purpose of escaping the restriction in section 17(5) and therefore the exclusion does not apply.

Final Conclusion: The Advance Ruling answers the question in the negative: the applicant cannot avail input GST credit on the specified electrical, pumping, lighting, security and fire systems because the supplies are works contract services for construction of an immovable property and are thereby blocked under section 17(5) of the CGST Act and the corresponding provision of the Karnataka GST Act.

Supply of services - Export of services - Place of supply - Tax invoice

Supply of services - The activity of technical testing and analysis carried out by the applicant is a supply of services under the GST Acts. - HELD THAT: - The Authority examined the nature of the applicant's activity and found that technical testing and analysis amounts to a service for consideration in the course or furtherance of business. The activity falls within the wider statutory concept of "supply" as envisaged in the GST enactments and is not merely a gratuitous act; consideration is received for performing the testing, and therefore the transaction is taxable as a supply of services under the CGST/KGST framework. [Paras 6]

Technical testing and analysis by the applicant is a supply of services under the GST Acts.

Supply of services - Export of services - Services provided by the applicant where the test material is received from outside India and the report is sent to a person outside India constitute a supply of services under the GST Acts. - HELD THAT: - Having concluded that the applicant's activity is a supply of services, the Authority held that it is immaterial where the goods are received from or in what form consideration is received so long as there is a supply for consideration in the course or furtherance of business. Thus, receipt of material from outside India and issuance of the report to a person outside India does not negate the existence of a taxable supply by the applicant. [Paras 6]

The activity remains a supply of services even when goods are sent from outside India and the report is supplied to a person outside India.

Tax invoice - The applicant is required to issue a tax invoice for the supplies made, including where the recipient is located outside India and payment is received in convertible foreign exchange, unless the supply is specifically exempted by notification. - HELD THAT: - Relying on the statutory requirement for registered persons supplying taxable services to issue tax invoices, the Authority observed that a tax invoice must be issued under section 31(2) of the CGST Act unless the Government exempts the supply by notification. Since technical testing and analysis is not specified as exempt under the cited rate notification, the applicant must issue tax invoices for such supplies and charge GST where applicable. [Paras 6]

Applicant must issue tax invoices for the supply of technical testing and analysis services, including when supplied to recipients outside India and paid in convertible foreign exchange, unless exempted by notification.

Export of services - Place of supply - No advance ruling is given on whether the services qualify as export of services because determination requires a finding on the place of supply, which this Authority is not empowered to decide in the advance ruling sought. - HELD THAT: - Although the applicant satisfied several conditions in the definition of export of services (supplier located in India, recipient located outside India, payment in convertible foreign exchange, and distinct persons), the crucial condition of the place of supply being outside India was not determined. The Authority stated it is not authorised to decide the place of supply issue for purposes of this advance ruling and therefore refrained from ruling on the exportability of the services. [Paras 6]

Exportability not decided; no advance ruling on whether the services constitute export of services as place of supply was not determined by this Authority.

Final Conclusion: The Authority ruled that the applicant's technical testing and analysis activities constitute a supply of services under the GST Acts, that such services supplied to persons outside India remain supplies for consideration, and that the applicant must issue tax invoices for those supplies unless specifically exempted; the question whether those services qualify as "export of services" was not decided because determination of the place of supply was not undertaken by this Authority.

Exemption for supply of online educational journals to educational institutions - online information and database access and retrieval service - classification under SAC 998431 as online text based information - taxability at 9% under Notification No.11/2017 Central Tax (Rate)

Exemption for supply of online educational journals to educational institutions - online information and database access and retrieval service - Whether subscription access to the J Gate platform by educational institutions falls within the exemption for supply of online educational journals and periodicals under Notification No.2/2018 Central Tax (Rate). - HELD THAT: - The Authority examined the nature of the applicant's service and found that the applicant does not itself publish journals but aggregates and indexes articles and maintains metadata and links to journals published by third parties. Subscribers can access catalogue entries and, in some cases, full text; in other cases the subscriber must separately obtain full text from the original publisher. The service is thus an aggregation and provision of access to pre existing educational material prepared by others and functions as an online information/database access gateway rather than the supply of an online journal published by the applicant. On these facts the activity does not fall within sub item (v) of item (b) of serial no.66 of Notification No.12/2017 as amended by Notification No.2/2018, which exempts supply of online educational journals and periodicals to educational institutions. [Paras 5]

Access provided by J Gate is not covered by the exemption for supply of online educational journals and periodicals.

Classification under SAC 998431 as online text based information - taxability at 9% under Notification No.11/2017 Central Tax (Rate) - If not exempt, the appropriate classification and rate of tax for the applicant's supply of access to its online portal. - HELD THAT: - Having held that the applicant supplies access to compiled/prepared educational information and acts as an aggregator/gateway, the Authority applied the scheme of classification of services and placed the activity under Heading 9984 (Telecommunications, broadcasting and information supply services), specifically Group 99843 and SAC 998431 which covers 'online text based information such as online books, newspapers, periodicals, directories and the like'. The Authority treated the indexed articles and access service as falling within 'and the like' and therefore within SAC 998431. Consequently the supply is liable to tax under the entry prescribing a 9% CGST rate; the same conclusion follows under the KGST Act by the corresponding entry. [Paras 5, 6]

The supply is classifiable under SAC 998431 and is taxable at 9% CGST and 9% KGST under the relevant notifications.

Final Conclusion: The Authority ruled that the applicant's provision of access to its aggregated online content (J Gate) is not an exempt supply of online educational journals to educational institutions and is classifiable under SAC 998431, taxable at 9% CGST and correspondingly under the KGST Act.

Input tax credit - Exempt supply - Conditional exemption under section 11 - Online information and database access and retrieval services - Service Accounting Code 998431 - Taxability at 9% under Notification No.11/2017 (entry no.22)

Online information and database access and retrieval services - Service Accounting Code 998431 - Exempt supply - Whether the applicant's service is an exempt supply of online educational journals under the educational-institution exemption or a taxable information/database access service falling under SAC 998431. - HELD THAT: - The Authority examined the nature of the applicant's activity and found that the applicant merely provides access to and maintains a database of links and catalogues of journal articles; it does not publish the journals. The service is therefore an online information and database access and retrieval service, consisting of access to text based online content and cataloguing, rather than a supply of online educational journals as contemplated by the educational-institution exemption. Consequently, the transaction does not fall within sub-item (v) of item (b) of serial no.66 of Notification No.12/2017 (as amended) and is not an exempt supply to educational institutions. The service is classifiable under Heading 9984 and SAC 998431 and is liable to tax under entry no.22 of Notification No.11/2017 at the prescribed rate. [Paras 5]

The applicant's supply is taxable as an online information and database access and retrieval service under SAC 998431 and is not covered by the exemption for supply of online educational journals to educational institutions.

Input tax credit - Exempt supply - Section 17(1) and 17(2) - Whether input tax credit on inward supplies is disallowed under the exempt supply rules (Section 17(1), 17(2) read with Rule 42) in view of the exemption for supply of online journals to certain educational institutions. - HELD THAT: - Having held that the applicant's service is taxable and not an exempt supply, the Authority concluded that the ineligibility provisions restricting input tax credit for inputs attributable to exempt supplies do not apply. The conditional exemption in the notification does not alter this conclusion because the applicant's supplies are not within the exemption. Therefore, there is no requirement to disallow or reverse input tax credit under the cited provisions for the applicant's inward supplies in relation to the services it provides. [Paras 5, 6]

Since the transaction is not exempt, input tax credit is not restricted by Section 17(1) or 17(2) and the applicant may claim input tax credit as admissible under the law.

Final Conclusion: The Authority ruled that the applicant's activity is taxable as an online information and database access and retrieval service (SAC 998431) liable to tax under entry no.22 of Notification No.11/2017 at the prescribed rate, and consequently the supplies are not exempt; therefore, input tax credit is not barred by the exempt supply provisions and may be claimed as permissible.

Online Information and Database Access or Retrieval Services (OIDAR) - Non-taxable online recipient (NTOR) - Liability to pay integrated tax by supplier located in a non-taxable territory - Compulsory registration of non-resident supplier of OIDAR to unregistered persons in India - Reverse charge mechanism for supplies to persons in taxable territory other than NTOR - Burden of proof on the supplier to establish non-business use by an unregistered recipient

Online Information and Database Access or Retrieval Services (OIDAR) - Non-taxable online recipient (NTOR) - Liability to pay integrated tax by supplier located in a non-taxable territory - Whether the applicant must charge GST on supplies of OIDAR services to unregistered persons in the taxable territory when those services are received for purposes other than commerce, industry, business or profession. - HELD THAT: - The Authority examined the statutory scheme including the definition of OIDAR and of a non-taxable online recipient (NTOR) and Section 14(1) of the IGST Act which places the liability to pay integrated tax on the supplier located in a non-taxable territory where the recipient is an NTOR. The Authority observed that an unregistered person in the taxable territory who receives OIDAR services for purposes other than commerce, industry or any business or profession falls within the definition of NTOR. Consequently, where the recipient is such an unregistered person using the service for non-business purposes, the supplier is liable to charge and pay tax on the supply of OIDAR services. [Paras 8]

The applicant must charge GST on supplies of OIDAR services made to unregistered persons in the taxable territory when the services are received for purposes other than commerce, industry, business or profession.

Compulsory registration of non-resident supplier of OIDAR to unregistered persons in India - Reverse charge mechanism for supplies to persons in taxable territory other than NTOR - Whether the applicant is required to charge GST on supplies of OIDAR services to Government, local authority, governmental authority and individuals who are registered persons under GST. - HELD THAT: - Section 24(xi) of the CGST Act mandates compulsory registration of a supplier located outside India who supplies OIDAR services to a person in India who is not a registered person. The Authority distinguished registration obligations from liability to pay tax: where the recipient is not an NTOR (for example, a recipient who is a registered person), the tax liability does not lie on the non-resident supplier under Section 14; instead, supplies to persons other than NTOR are liable under reverse charge to the person in the taxable territory. Therefore, when Government, local authority, governmental authority or an individual is a registered person, the supplier need not charge GST. [Paras 8]

The applicant is not required to charge GST on OIDAR services supplied to Government, local authority, governmental authority or an individual if such recipients are registered persons under GST.

Non-taxable online recipient (NTOR) - Reverse charge mechanism for supplies to persons in taxable territory other than NTOR - Whether the applicant is required to charge GST on supplies of OIDAR services to a person in the taxable territory who receives the services for commerce, industry, business or profession. - HELD THAT: - The NTOR definition requires that the recipient receive services for purposes other than commerce, industry or any business or profession. If the recipient in the taxable territory receives the OIDAR services for commerce, industry or any business or profession, that recipient does not qualify as an NTOR. The statutory scheme therefore places tax liability on the person in the taxable territory under the reverse charge mechanism for such supplies, and not on the non-resident supplier. The Authority accordingly ruled that the supplier is not required to charge GST in such cases. [Paras 8]

The applicant is not required to charge GST on OIDAR supplies made to a person in the taxable territory who receives the services for the purpose of commerce, industry or any business or profession.

Burden of proof on the supplier to establish non-business use by an unregistered recipient - On whom lies the burden of proof to establish that an unregistered person received OIDAR services for purposes other than commerce, industry, business or profession. - HELD THAT: - The Authority noted that the statutory consequence (supplier liability under Section 14) attaches only if the recipient qualifies as an NTOR, which requires non-business use. The Authority held that the supplier bears the burden of proving that an unregistered person in the taxable territory received the services for non-business purposes. This places onus on the applicant to establish non-commercial/non-professional use in order to bring the recipient within the NTOR definition and trigger supplier liability. [Paras 8]

The burden of proving that OIDAR services received by an unregistered person were for purposes other than commerce, industry or any business or profession lies with the applicant.

Final Conclusion: The Authority ruled that (i) the non-resident supplier must charge GST when OIDAR services are supplied to unregistered persons in India who use the services for non-business purposes, (ii) no GST need be charged by the supplier when recipients (including Governmental entities or individuals) are registered persons or when recipients use the services for commerce, industry, business or profession (reverse charge applies), and (iii) the supplier carries the burden of proving that an unregistered recipient used the services for non-business purposes.

Classification under HSN 3822 - prepared laboratory reagents - diagnostic kits and reagents - ejusdem generis - interpretation of rate notification entries - residuary entry of Rate Notification (Schedule III) - application of Customs Tariff classification to GST rate determination

Prepared laboratory reagents - diagnostic kits and reagents - classification under HSN 3822 - interpretation of rate notification entries - residuary entry of Rate Notification (Schedule III) - ejusdem generis - Whether Pharmaceutical Reference Standards (prepared laboratory reagents) classifiable under HSN 3822 00 90 are covered by Entry No.80 of Schedule II (12%) or by Entry No.453 of Schedule III (18%) of Notification No.1/2017-Integrated Tax (Rate). - HELD THAT: - The Authority accepted that the goods are classifiable under HSN 3822 00 90 as prepared laboratory reagents and are not diagnostic reagents (findings recorded). Entry No.80 of Schedule II describes the covered goods as "All diagnostic kits and reagents" of Heading 3822. Applying the principle of ejusdem generis and ordinary grammatical construction, the adjective "diagnostic" qualifies both "kits" and "reagents", so the entry covers diagnostic kits and diagnostic reagents of Heading 3822 (HSN 38220011-38220019). The applicant's goods, being laboratory reagents used for analytical calibrating and referencing purposes and not for medical diagnosis, do not fall within the class of "diagnostic" reagents covered by Entry No.80. As those HSN 3822 goods that are not diagnostic kits or diagnostic reagents are not specifically covered by Schedules I, II, IV, V or VI, they fall under the residuary Entry No.453 of Schedule III. Consequently, prepared laboratory reagents of HSN 3822 00 90 that are not diagnostic reagents attract the rate specified in the residuary entry. [Paras 9, 10]

Prepared Laboratory Reagents/Pharmaceutical Reference Standards (HSN 3822 00 90) which are not diagnostic reagents are not covered by Entry No.80 of Schedule II and are leviable under Entry No.453 of Schedule III at 18% IGST.

Final Conclusion: The Authority ruled that Pharmaceutical Reference Standards classifiable as prepared laboratory reagents under HSN 3822 00 90, being non-diagnostic reagents, are excluded from Entry No.80 of Schedule II and are chargeable under the residuary Entry No.453 of Schedule III of Notification No.1/2017-Integrated Tax (Rate) at 18%.

Taxability of goods bearing registered brand versus exemption for goods in unregistered brand - voluntary forfeiture of actionable claim or enforceable right as condition for exemption - affidavit and printing of disclaimer on unit container as procedural condition for exemption - de-registration of a registered brand not mandatory to claim exemption

Taxability of goods bearing registered brand versus exemption for goods in unregistered brand - voluntary forfeiture of actionable claim or enforceable right as condition for exemption - affidavit and printing of disclaimer on unit container as procedural condition for exemption - Whether sale of rice put up in unit containers bearing a registered brand name is taxable at 5% while sale in an unregistered brand can be exempt if actionable claim is voluntarily forgone and prescribed conditions complied with. - HELD THAT: - The Authority examined Notifications Nos.1/2017 and 2/2017 (as amended by Nos.27/2017 and 28/2017) and concluded that rice put up in unit containers bearing a registered brand name, or bearing a brand name on which an actionable claim or enforceable right is available, is liable to GST at 5%. Conversely, rice in unit containers bearing a brand name where any actionable claim or enforceable right has been voluntarily foregone is eligible for exemption, provided the person packing such unit containers files the prescribed affidavit with the jurisdictional Commissioner and prints the prescribed disclaimer in indelible ink in English and the local language on each unit container. The Authority applied these amendments to the applicant's facts and found that sales under the registered brand remain taxable, while sales under the unregistered brand qualify for exemption only upon compliance with the voluntary-forfeiture and procedural conditions. [Paras 10, 11]

Rice in unit containers bearing a registered brand or a brand with actionable claim is taxable at 5%; rice in unit containers where the actionable claim has been voluntarily forgone, with affidavit filed and disclaimer printed, is exempt.

De-registration of a registered brand not mandatory to claim exemption - possession of registered brand while selling under unregistered brand - Whether it is compulsory to de-register a registered brand in order to sell rice under an unregistered brand and claim exemption. - HELD THAT: - The Authority found that there is no requirement under the relevant notifications to de-register a registered brand in order to sell under an unregistered brand and claim exemption. The determinative condition for exemption is that the seller must not sell the goods using the registered brand; instead, to claim exemption when selling under another (unregistered) brand, the seller must comply with the conditions for voluntary forfeiture of actionable claim and the attendant procedural requirements. Thus holding a registered brand concurrently does not, by itself, preclude claiming exemption so long as the registered brand is not used for the sales in question and the other conditions are met. [Paras 10, 11]

De-registration is not mandatory; a manufacturer may retain a registered brand while selling under an unregistered brand, but cannot claim exemption for sales made under the registered brand.

Voluntary forfeiture of actionable claim or enforceable right as condition for exemption - affidavit and printing of disclaimer on unit container as procedural condition for exemption - Whether sale of rice is exempt if the person deregisters the brand and voluntarily forgoes actionable claim by filing an affidavit and printing the disclaimer. - HELD THAT: - The Authority held that where a person has de-registered a brand and, in respect of the brand used on unit containers, has voluntarily foregone any actionable claim or enforceable right, and has complied with the procedural conditions of filing an affidavit with the jurisdictional Commissioner and printing the prescribed disclaimer on each unit container in indelible ink in English and the local language, such sale of rice is exempt from GST. The ruling applies equally to persons selling under a de-registered brand provided the voluntary-forfeiture and procedural requirements are satisfied. [Paras 10, 11]

Sales under a de-registered brand are eligible for exemption only after voluntary forfeiture of actionable claim or enforceable right and compliance with the affidavit and disclaimer requirements.

Final Conclusion: The Authority ruled that rice in unit containers bearing a registered brand or a brand with actionable claim is taxable at 5%; rice in unit containers where the actionable claim has been voluntarily forgone, with the filing of the prescribed affidavit and printing of the prescribed disclaimer, is exempt. De-registration of a registered brand is not a prerequisite to claim exemption provided the registered brand is not used for the sales in question and the voluntary-forfeiture and procedural conditions are complied with.

Composite supply of works contract - Government Entity - Governmental Authority - proviso requiring procurement in relation to work entrusted to Government - residual rate under item no. (xii) of Serial No.3 of Notification No.11/2017

Composite supply of works contract - The service provided by the applicant to NCBS is a works contract service as defined under the GST law. - HELD THAT: - The Authority records that there is no dispute that the applicant is providing works contract service to NCBS. The service falls within clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017 and is therefore correctly characterised as a composite supply of works contract. [Paras 5]

Service is a works contract service.

Government Entity - Governmental Authority - proviso requiring procurement in relation to work entrusted to Government - residual rate under item no. (xii) of Serial No.3 of Notification No.11/2017 - NCBS is neither a Governmental Authority nor a Government Entity for the purposes of Notification No.11/2017 and the proviso to clause (vi) is not satisfied; consequently the concessional rate under clause (vi) does not apply and the residual rate under item no. (xii) applies. - HELD THAT: - The Authority examined the composition, genesis and control of NCBS. The definition of "Governmental Authority" in paragraph 4(ix) requires establishment by statute or government with 90% or more participation to perform municipal/panchayat functions; NCBS does not satisfy this test. The definition of "Government Entity" in paragraph 4(x) requires being set up by statute or established by Government with 90% or more participation and to carry out a function entrusted by Government; NCBS was constituted as an autonomous centre under the aegis of TIFR, is not set up by an Act nor established by Government, government nominees on the council do not constitute 90% control and the work is not one entrusted to NCBS by Government. The proviso to clause (vi) additionally requires that services be procured by the Government Entity in relation to a work entrusted to it by Government, which is not the case here. On these findings the Authority concluded that the transaction does not fall within clause (vi) of Serial No.3 of Notification No.11/2017. [Paras 5]

NCBS is not a Governmental Authority or Government Entity under the Notification; concessional clause (vi) does not apply and the supply attracts the residual rate under item no. (xii).

Final Conclusion: The works contract service supplied by the applicant to NCBS is a works contract service and, since NCBS is not a Governmental Authority or Government Entity within the meaning of Notification No.11/2017 and the proviso to clause (vi) is not satisfied, the concessional rate is not available; the supply is taxable under the residual entry (item no. (xii) of Serial No.3) and is liable to tax at 9% CGST and 9% KGST as ruled.

Supply of service by leasing of Government land - reverse charge - value of supply includes taxes, duties, cesses, fees and charges - statutory contributions linked to royalty form part of taxable value - Notification No. 13/2017 - SI. No. 5 (services by Government to business entities)

Supply of service by leasing of Government land - reverse charge - Notification No. 13/2017 - SI. No. 5 (services by Government to business entities) - value of supply includes taxes, duties, cesses, fees and charges - Liability to pay GST on contributions to National Mineral Exploration Trust (NMET) and District Mineral Foundation (DMF) under reverse charge. - HELD THAT: - The authority held that the grant of Government land on lease to the applicant for mining constitutes a supply of service (lease/licence to occupy land) as treated under Schedule II. The payments to DMF and NMET are statutory amounts calculated as a percentage of royalty and are made in addition to royalty under the MMDR Act; therefore they are payments connected with the Government's provision of the leased mining rights. Under section 15(2)(a) the value of a taxable supply of service includes taxes, duties, cesses, fees and charges levied under any law (other than GST) if charged separately. Notification No.13/2017 - SI. No.5 specifies that services supplied by Central/State/Local authorities to a business entity (subject to listed exceptions) attract tax under reverse charge. Applying these provisions, the authority concluded that the DMF and NMET contributions are includible in the value of the Government's supply of the leased mining rights and that GST on these amounts is payable by the applicant on reverse charge basis in terms of the notification. [Paras 32, 33, 34, 35, 36]

The applicant is liable to pay GST under reverse charge on the contributions made towards NMET and DMF pursuant to SI. No. 5 of Notification No. 13/2017 - Central Tax (Rate) dated 28.06.2017.

Final Conclusion: Advance ruling: GST under reverse charge is payable by the applicant on payments to NMET and DMF, those statutory contributions being part of the taxable value of the service of leasing Government land and covered by SI. No. 5 of Notification No. 13/2017.

Classification of goods under HSN 4403 as "wood in the rough" - distinction between "wood in chips, sawdust, wood waste and scrap" and "wood in the rough" - applicability of GST rate consequent to HSN classification - entry no. 134 of Schedule III to Notification No.01/2017 - Central Tax (Rate)

Classification of goods under HSN 4403 as "wood in the rough" - distinction between "wood in chips, sawdust, wood waste and scrap" and "wood in the rough" - applicability of GST rate consequent to HSN classification - Whether the pulpwood procured (poles of length about 4-5 feet, debarked or with bark) is classifiable as "wood in the rough" under HSN 4403 or as "wood in chips/wood waste and scrap" under HSN 4401, and the consequent GST rate applicable. - HELD THAT: - The Authority found the commodity to be poles of wood of length approximately 4 to 5 feet which are not fuel wood, not wood in chips or particles and not sawdust or agglomerated wood waste. Because the goods are of the dimensions and form of "wood in the rough" (whether or not stripped of bark) and are not reduced to chips, particles or sawdust, they fall within Heading 4403 rather than Heading 4401. Having classified the goods under HSN 4403, the Authority applied the corresponding entry in the notifications and concluded that the specified schedule entry governing HSN 4403 prescribes the applicable GST rates. [Paras 4, 5, 6]

Pulpwood supplied to the applicant is classifiable under HSN 4403 as "wood in the rough" and, accordingly, the notified GST rates applicable to that entry apply.

Final Conclusion: The Advance Ruling holds that the pulpwood in question falls under HSN 4403 and is taxable accordingly: CGST 9% and KGST 9% as per entry no. 134 of Schedule III to Notification No.01/2017, and IGST 18% for inter-State supplies under the corresponding integrated tax notification.

Composite supply - principal supply - composite supply treated as supply of services - treatment under Schedule II entry 6(b) - classification under chapter 9963 - reduced rate subject to non-availment/reversal of input tax credit

Composite supply - principal supply - Whether the supplies of ice creams, chocolates, ice cream cakes and pizza cakes made to order and served at IBACO outlets constitute a composite supply - HELD THAT: - The Authority found that the IBACO transactions involve both goods (ice creams, cakes, chocolates) and ancillary services (mixing toppings, serving, seating, air-conditioning and related amenities) which are supplied together in the ordinary course of business. Applying the statutory definition of composite supply the Authority held that these supplies consist of two or more taxable supplies, are naturally bundled and include a predominant element which is the supply of goods; accordingly the combined supplies satisfy the test of composite supply under section 2(30). [Paras 6]

The IBACO supplies qualify as a composite supply under section 2(30) of the CGST Act and the corresponding provision of the KGST Act.

Composite supply treated as supply of services - treatment under Schedule II entry 6(b) - Whether the composite supply described above is to be treated as a supply of service by virtue of Schedule II entry 6(b) - HELD THAT: - Entry 6(b) of Schedule II treats as a supply of services any composite supply where goods being food or other articles for human consumption are supplied as part of, or by way of, any service for consideration. The Authority noted that the applicant supplies food items for human consumption as part of a service (consumption at outlet or takeaway) and therefore the composite supply falls squarely within entry 6(b). On that basis the nature of the composite supply is to be treated as a supply of service irrespective of the principal supply being goods. [Paras 6]

The composite supply is deemed to be a supply of service under entry 6(b) of Schedule II to the CGST Act and the corresponding entry under the KGST Act.

Classification under chapter 9963 - reduced rate subject to non-availment/reversal of input tax credit - Whether the said supply is classifiable under chapter 9963 and chargeable at the concessional rate subject to conditions of the Notifications - HELD THAT: - The Authority applied entry 7(i) of Notification No.11/2017-Central Tax (Rate) as amended by Notification No.46/2017 and its Explanation, which prescribes a reduced rate for supplies of food or drink by restaurants/eating joints (excluding specified hotel premises) subject to the condition that input tax credit on goods and services used in supplying the service has not been taken (or is required to be reversed). Given that the IBACO supplies are to be treated as supply of service under Schedule II and are provided by a restaurant/eating joint arrangement, the supplies fall under the amended notification and are classifiable under chapter "9963" and attract the specified concessional rate subject to the input tax credit conditions contained in the notification and its explanation. [Paras 6]

The supplies are classifiable under chapter "9963" and are chargeable at the concessional rate specified in entry 7(i) of Notification No.11/2017 as amended, subject to the conditions regarding non-availment or reversal of input tax credit.

Final Conclusion: The Authority ruled that IBACO's made-to-order supplies of ice creams, chocolates and ice cream/pizza cakes are composite supplies, are to be treated as supplies of service under Schedule II entry 6(b), and are classifiable under chapter "9963" attracting the concessional rate specified by the amended notification subject to the notification's input tax credit conditions.

Royalty as consideration for licensing services for right to use minerals including exploration and evaluation - classification under Service Accounting Code 997337 - rate of tax as applicable on supply of like goods involving transfer of title in goods versus 9% residual rate - statutory contributions to District Mineral Foundation and National Mineral Exploration Trust forming part of value of supply - inclusion in value of supply under Section 15 - reverse charge liability for services supplied by Government to a business entity - rejection of 'profit a prendre' characterisation of royalty

Royalty as consideration for licensing services for right to use minerals including exploration and evaluation - classification under Service Accounting Code 997337 - rejection of 'profit a prendre' characterisation of royalty - Royalty payable under a mining lease is a consideration for licensing services for the right to use minerals including exploration and evaluation and is not a 'profit a prendre' outside the ambit of GST. - HELD THAT: - The Authority held that royalty is payable in respect of minerals removed or consumed from the leased area and therefore constitutes consideration for the activity of extraction and use of mineral ore rather than an incidental profit a prendre. The Annexure to Notification No. 11/2017 indicates that licensing services for the right to use minerals, including its exploration and evaluation, fall under SAC 997337. The applicant's reliance on prior decisions characterising certain benefits as profit a prendre was found inapplicable because the primary activity and product here is extraction of mineral ore for which royalty is expressly payable under Section 9 of the MMDR Act. Consequently, royalty is a supply of service taxable under GST and classifiable under SAC 997337. [Paras 20, 21]

Royalty is a taxable consideration for licensing services for the right to use minerals including exploration and evaluation and is not excluded as a profit a prendre.

Rate of tax as applicable on supply of like goods involving transfer of title in goods versus 9% residual rate - classification under residual entries of Notification No. 11/2017 and subsequent amendments - The service of licensing the right to extract and use mineral ore falls under the residual entry of Heading 9973 and, therefore, attracts the tax rate applicable to like goods upto 31.12.2018 and 9% CGST/9% SGST from 01.01.2019 onwards. - HELD THAT: - The Authority examined Serial No.17 of Notification No.11/2017 and its amendments. The lease of the right to extract and use mineral ores is not covered by any specific sub-entries (i)-(v) and thus falls within the residual entry for leasing/rental services. Prior to the amendment by Notification No.27/2018 the residual entry attracted the same rate as applicable on supply of like goods involving transfer of title; after the amendment the transaction (being lease of land/right to extract minerals) falls under the residual item taxable at 9% CGST (and 9% SGST from 01.01.2019). The Authority also noted Entry 2(a) of Schedule II, confirming lease/licence of land is a supply of services. [Paras 22]

The licensing service is taxable at the rate applicable on like goods upto 31.12.2018 and at 9% CGST (and 9% SGST from 01.01.2019) thereafter under the residual entries of Serial No.17 of Notification No.11/2017.

Statutory contributions to District Mineral Foundation and National Mineral Exploration Trust forming part of value of supply - inclusion in value of supply under Section 15 - reverse charge liability for services supplied by Government to a business entity - Statutory contributions to DMF and NMET are part of the consideration for the licensing service, included in the value of supply, and the recipient (business entity) is liable to pay GST under reverse charge where the supplier is the Government. - HELD THAT: - Sections 9B and 9C of the MMDR Act mandate payments to DMF and NMET calculated as percentages of royalty. Under Section 15(2) of the CGST Act and Rule 27, amounts which the supplier is liable to pay in relation to a supply but which have been incurred by the recipient, and statutory duties/charges linked to the supply, are includible in the value of supply. The Authority found that royalty, DMF and NMET contributions constitute a single composite consideration for the licence to extract and use minerals because non-payment of any of these would prevent issuance of permits and thereby negate the supply. Further, Notification No.13/2017 places services supplied by Government to business entities (with specified exceptions) on reverse charge; since the licensing service is provided by the State Government to the applicant, the recipient must discharge tax on reverse charge basis. [Paras 23, 24]

DMF and NMET contributions form part of the value of the licensing service and are taxable; the recipient (business entity) is liable to pay GST under reverse charge for services supplied by the Government.

Final Conclusion: The Authority rules that (i) royalty payable under a mining lease is consideration for licensing services for the right to use minerals including exploration and evaluation (SAC 997337) and is taxable; (ii) such services were chargeable at the rate applicable to like goods upto 31.12.2018 and at 9% CGST (and 9% SGST from 01.01.2019) thereafter under the residual entries of Notification No.11/2017; (iii) statutory DMF and NMET contributions are part of the consideration and included in the value of the supply; and (iv) where the supplier is the Government and the recipient is a business entity, tax on these services is payable by the recipient under the reverse charge mechanism.

Breach of principles of natural justice - opportunity of hearing by all members of a multi-member quasi-judicial Authority - quorum and collective decision-making by the National Anti-Profiteering Authority - institutional decision-making versus adjudicatory hearing - reopening/remand for fresh consideration by the Authority

Breach of principles of natural justice - opportunity of hearing by all members of a multi-member quasi-judicial Authority - quorum and collective decision-making by the National Anti-Profiteering Authority - Whether the impugned order was vitiated by violation of natural justice because a member who did not participate in hearings signed the final order - HELD THAT: - The Court held that proceedings before the Authority are quasi-judicial, express statutory rules and the Authority's own methodology contemplate oral hearing and deliberation by members. When three members conducted hearings and a fourth member joined only after hearings were completed and merely signed the final order, that practice violated the basic rule that those who hear must decide; allowing a member who did not participate in the hearing to become a party to the ultimate decision undermines fairness and the litigant's opportunity to persuade each adjudicating member. Clauses of the Procedure stating that irregularities not affecting merits do not invalidate proceedings must be read subject to the Authority's obligation to follow principles of natural justice; an irregularity that amounts to denial of hearing cannot be so discounted. On these findings the Court concluded that the impugned order suffered from breach of natural justice and fairness and was liable to be set aside. [Paras 16, 21, 22, 23, 29]

Impugned order set aside on ground of breach of principles of natural justice; decision vitiated because a member who had not heard the case joined post-hearing and signed the order.

Reopening/remand for fresh consideration by the Authority - preservation of substantive contentions for fresh adjudication - Disposition of the proceedings following setting aside of the order - HELD THAT: - The Court restored the proceedings before the National Anti-Profiteering Authority (Case No. 14 of 2018) and ordered that the matter proceed afresh; fresh notice was held unnecessary as the petitioner was to appear before the Authority on a specified date. The Court expressly left all substantive contentions on merits, jurisdiction and validity of the Authority open for fresh consideration by the Authority. [Paras 32, 33]

Proceedings restored and remitted to the Authority for fresh hearing and determination; merits and other contentions to be considered afresh.

Final Conclusion: The National Anti-Profiteering Authority's order dated 16 November 2018 is set aside for breach of natural justice; the proceedings (Case No. 14 of 2018) are restored and remitted to the Authority for fresh consideration, with substantive issues left open for determination and the petitioner directed to appear before the Authority on the appointed date.

Section 171(1) of the CGST Act, 2017 - benefit of Input Tax Credit (ITC) - commensurate reduction in prices - anti profiteering obligation - methodology of ratio of CENVAT/ITC to turnover - periodic computation and passing on of ITC benefit - provision for reversal of ITC in respect of unsold units

Section 171(1) of the CGST Act, 2017 - benefit of Input Tax Credit (ITC) - anti profiteering obligation - methodology of ratio of CENVAT/ITC to turnover - Whether the Respondent violated the obligation under Section 171(1) by not passing on the benefit of additional ITC to recipients - HELD THAT: - The Authority accepted the DGAP's finding that the Respondent availed higher aggregate input credit in the post GST period compared with the pre GST period and that the additional ITC must be passed to recipients by way of commensurate reduction in prices. The Authority held that Section 171(1) mandates comparison of ITC and sales realisations for pre and post GST periods to compute the benefit; cost of construction is irrelevant to that statutory obligation. Periodic assessment of the ITC benefit is required because ITC is availed month to month while projects have long gestation, and a supplier cannot defer passing on benefits until project completion while utilising the credit in business. The Authority rejected contentions based on market driven pricing, subcontractor apportionment and earlier VAT/Service Tax practices as not displacing the statutory duty to pass on additional ITC. [Paras 43, 44, 46, 48, 51]

The Respondent contravened Section 171(1) by not passing on the additional ITC benefit; the methodology of comparing the ratio of CENVAT/ITC to turnover for pre and post GST periods is upheld.

Methodology of ratio of CENVAT/ITC to turnover - quantification of profiteering - commensurate reduction in prices - interest under Rule 133(3)(b) - What is the quantum of profiteering and the relief to be ordered - HELD THAT: - Applying the accepted ratio methodology, the DGAP computed an increase in ITC benefit of 2.23% of taxable turnover (difference between post GST 6.55% and pre GST 4.32%). On the base of receipts from buyers during 01.07.2017-31.08.2018, the Authority adopted the DGAP's recalibration and found excess collection (profiteered amount) of Rs. 5,06,78,069 (inclusive of GST). The Authority excluded units sold after 01.07.2017 at negotiated all inclusive prices from the investigation scope (subject to the principle that agreements cannot oust Section 171 rights). The Respondent is directed to refund the identified amounts to the 1061 eligible recipients (including Rs. 58,450 in respect of the Applicant) with interest @18% p.a. from the dates of collection until payment, and to reduce future prices commensurate with the ITC benefit; compliance and monitoring are to be effected by the Commissioners CGST/SGST Karnataka under DGAP supervision. [Paras 23, 24, 49, 51, 52]

Profiteering quantified at Rs. 5,06,78,069; Respondent directed to return Rs. 58,450 to Applicant and Rs. 5,06,19,619 to other eligible buyers with interest @18% and to reduce future prices commensurate with ITC benefit.

Provisional reversal of ITC for unsold units on completion certificate - periodic computation and passing on of ITC benefit - Treatment of units where consideration was partly received pre GST or where instalments were not received during the investigation period - HELD THAT: - The Authority accepted the DGAP's approach that (a) units sold after 01.07.2017 at negotiated all inclusive prices were excluded from the current profiteering computation, and (b) for 243 units where payment was made in pre GST period but no instalments were received post GST during the investigation window, inclusion of their ITC would distort the ratio; accordingly, the Respondent is directed to compute and pass on the ITC benefit for those units when instalments are actually received, taking proportionate ITC into account. The Authority also noted that ITC in respect of unsold units may require reversal upon issuance of completion certificate under the statutory provisions, but that completion certificate has not been issued in this case. [Paras 23, 24, 48, 50]

ITC benefit for 243 units remanded for computation when post GST instalments are received; units sold post 01.07.2017 at negotiated prices excluded from present calculation (subject to Section 171).

Penalty under Section 171(3A) - show cause for imposition of penalty - Whether penalty proceedings should be initiated for contravention of Section 171 - HELD THAT: - Having found contravention of Section 171(1), the Authority held that the Respondent committed an offence under Section 171(3A). The Authority therefore directed issuance of a show cause notice to the Respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed. [Paras 51, 53]

Show cause notice to be issued to the Respondent for imposition of penalty under Section 171(3A).

Final Conclusion: The Authority finds the Respondent guilty of contravening Section 171(1) by not passing on additional ITC benefit, quantifies profiteering at Rs. 5,06,78,069 for the period 01.07.2017 to 31.08.2018, directs refund with interest to 1061 eligible recipients and reduction of future prices commensurate with ITC benefit, remands computation for 243 specific units pending receipt of instalments, and directs issuance of a show cause notice for penalty under Section 171(3A).

Certificate under Section 197(1) - Rate of deduction of tax at source - No requirement of personal hearing before issuance of certificate - Requirement to record and communicate reasons for upward revision of TDS rate - Standard operating procedure for upward revision of TDS rate

Certificate under Section 197(1) - No requirement of personal hearing before issuance of certificate - Personal hearing is not a prerequisite before an Assessing Officer issues a certificate under Section 197(1) raising the rate of TDS. - HELD THAT: - Relying on this Court's earlier decision in Jiangdong Fittings Equipment Co. Ltd (and taking note of Bentley Nevada LLC and other precedents), the court held that Section 197(1) does not mandate that the Assessing Officer grant a personal hearing to the assessee prior to issuance of the certificate raising the rate of deduction. The determinative requirement is not a prior personal hearing but that the Assessing Officer possess good reasons for issuing the certificate. [Paras 4]

No personal hearing is required before issuing a certificate under Section 197(1) that increases the TDS rate; what is required is that the Assessing Officer have good reasons for the action.

Requirement to record and communicate reasons for upward revision of TDS rate - Standard operating procedure for upward revision of TDS rate - Reasons for upward revision of the rate of TDS must be recorded and communicated to the assessee, and respondents were directed to furnish such reasons. - HELD THAT: - The court emphasised that although personal hearing is not required, the Assessing Officer must have good reasons for issuing the certificate and those reasons must be communicated to the assessee. The respondents stated that a standard operating procedure has been formulated to ensure communication of reasons when the rate is upwardly revised. The court directed the respondents to provide the petitioner, within one week, the reasons recorded for fixing the TDS rate at the higher percentage, leaving open the petitioner's right to challenge those reasons if aggrieved. [Paras 5, 6]

Respondents must communicate the recorded reasons for the upward revision of the TDS rate to the assessee; the petitioner's right to assail those reasons is preserved, and the respondents were directed to supply the reasons within one week.

Final Conclusion: The petition is disposed of: personal hearing is not required before issuing a certificate under Section 197(1) that increases the TDS rate, but the Assessing Officer must have and must communicate good reasons for such upward revision; respondents are directed to furnish the recorded reasons to the petitioner within one week.

Validity of reopening notice issued to legal heir - Maintainability of writ petition challenging assessment order when appellate remedy is available - Court's power to exclude time for filing statutory appeal and direct appellate authority to admit hard copy

Validity of reopening notice issued to legal heir - Impugned reopening notice addressed to 'Shobha Jagdish Ahuja, Legal Heir Jagdish M Ahuja' is not void for being issued in the name of a deceased person. - HELD THAT: - The Court examined the reopening notice dated 29 March 2018 and observed that the notice was addressed to the late assessee along with an express reference to the petitioner as her legal heir. On that basis the notice could not be treated as having been issued in the name of a dead person so as to render the reopening invalid. The submission that the notice was without jurisdiction for that reason was rejected. [Paras 2]

The challenge to jurisdiction of the reopening notice on the ground that it was issued in the name of a dead person is dismissed.

Maintainability of writ petition challenging assessment order when appellate remedy is available - Court's power to exclude time for filing statutory appeal and direct appellate authority to admit hard copy - Whether the High Court should entertain the writ petition when the petitioner has an appellate remedy, and associated directions regarding filing of appeal and exclusion of time. - HELD THAT: - The Court declined to entertain the petition because the petitioner has the statutory remedy of appeal to the Commissioner of Income Tax (Appeals)-34. Noting the petitioner's difficulty in e-filing due to absence of an heirship certificate and the earlier undertaking by the CIT(A)'s office (recorded in a prior petition concerning AY 2010-11) that a hard copy would be accepted, the Court granted the petitioner liberty to file a hard copy appeal within two weeks. The Court directed the Commissioner of Income Tax (Appeals)-34 to entertain and decide the appeal on merits and ordered that the time spent in pursuing the writ petition be excluded for the purpose of filing the appeal, since the petitioner had bona fide prosecuted the petition. In view of these directions, the writ petition was not retained for adjudication on merits. [Paras 3, 4, 5, 6]

Writ petition dismissed as not maintainable; petitioner granted liberty to file a hard copy appeal within two weeks, CIT(A)-34 directed to accept and decide it on merits, and time spent in this petition excluded for filing the appeal.

Final Conclusion: The petition is dismissed. The petitioner is permitted to file a hard copy appeal to the Commissioner of Income Tax (Appeals)-34 within two weeks; the CIT(A) is directed to admit and decide the appeal on merits, and the time spent pursuing this petition is excluded for the purpose of filing the appeal.

Best judgment assessment - opportunity of being heard in assessment under section 144 - unexplained investment under section 68 - use of Individual Transaction Statement from ITD system as material - penalty for non-compliance of notice

Best judgment assessment - opportunity of being heard in assessment under section 144 - Validity of best judgment assessment where the assessee alleged no opportunity to question the materials relied upon by the Assessing Officer - HELD THAT: - The Tribunal reviewed the assessment record and the impugned appellate order and found that the Assessing Officer had issued notices under section 153C and section 142(1), recorded non-compliance by the assessee, and also issued a show-cause notice under section 271(1)(b) for non-compliance. The CIT(A) had given detailed reasons on merit and the assessee was afforded opportunity at the appellate stage under section 250(2). The assessee filed written submissions but produced no material to rebut the departmental material. In these circumstances the Tribunal held that reasonable opportunity had been provided and there was no infirmity in making the best judgment assessment after taking into account the relevant material gathered during search and seizure and available on record.

The best judgment assessment under section 144 was validly made after due opportunity; the contention of no opportunity to question the materials is rejected.

Unexplained investment under section 68 - use of Individual Transaction Statement from ITD system as material - Sustainability of addition of Rs. 20,00,000 as unexplained investment on account of purchase of bonds/debentures - HELD THAT: - The Assessing Officer relied on the Individual Transaction Statement downloaded from the ITD system showing purchase of bonds/debentures, and the assessee failed to produce any documentary evidence or explanation to show that the investment was not made or was from explained sources despite multiple opportunities during assessment, appellate proceedings before the CIT(A) and before the Tribunal. The CIT(A) recorded that the bank statement submitted by the assessee was not for the relevant period and that, given the meagre declared incomes in relevant years, the source of the investment remained unexplained. The Tribunal found no material to interfere with the concurrent finding of the CIT(A).

The addition of the purchase of bonds/debentures as unexplained investment is sustained.

Unexplained investment under section 68 - use of Individual Transaction Statement from ITD system as material - Sustainability of addition of Rs. 68,07,900 as unexplained investment on account of purchase of equity shares - HELD THAT: - The Assessing Officer recorded purchases of equity shares in the Individual Transaction Statement and the assessee did not bring forward any evidence to displace this information or to explain the source of funds for such large investments. The CIT(A) considered the assessee's submissions and bank statement (found not for the relevant period) and, having regard to declared incomes in adjacent years, treated the source as unexplained and confirmed the addition. The Tribunal, on perusal of the record and absence of any corroborative material from the assessee, declined to interfere with the concurrent appellate finding.

The addition on account of purchase of equity shares as unexplained investment is sustained.

Final Conclusion: The appeal is dismissed; the Tribunal upheld the CIT(A)'s speaking order sustaining the best-judgment assessment and the additions treated as unexplained investments, while noting the assessee remains at liberty to seek restoration in accordance with the applicable rules.

Deduction under Section 80IC - substantial expansion - initial assessment year - cap of ten years on deduction - binding precedent - disallowance under Section 14A - Rule 8D - recording of dissatisfaction

Deduction under Section 80IC - substantial expansion - initial assessment year - cap of ten years on deduction - binding precedent - Entitlement to 100% deduction under Section 80IC for assessment years following substantial expansion - HELD THAT: - The Tribunal held that where an undertaking carried out "substantial expansion" within the statutory window, the previous year in which the substantial expansion occurred becomes an "initial assessment year" and from that year the undertaking is entitled to 100% deduction for five assessment years subject to the overall ten-year cap prescribed by the section. The Tribunal applied the binding ratio in Aarham Softronics (Supreme Court) and the decisions of the jurisdictional Himachal Pradesh High Court and its own earlier orders, and observed that the Assessing Officer had not disputed that substantial expansion was carried out. Having followed the binding precedent which permits more than one initial assessment year (and consequent repetitions of the five year 100% benefit, subject to the ten year limit), the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to allow the 100% deduction as per the rulings relied upon. [Paras 6]

Grounds 1.1-1.4 allowed; order of the CIT(A) set aside and AO directed to allow deduction at 100% under Section 80IC in accordance with binding precedent.

Disallowance under Section 14A - Rule 8D - recording of dissatisfaction - Validity of disallowance under Section 14A read with Rule 8D where Assessing Officer's satisfaction is challenged - HELD THAT: - The Tribunal found that the assessee's challenge was limited to the contention that the statutory precondition of recording dissatisfaction had not been satisfied. The Assessing Officer had expressly recorded dissatisfaction regarding the assessee's claim about expenses incurred to earn exempt income (recorded in para 26 of the assessment order). On this basis the Tribunal upheld the CIT(A)'s confirmation of the disallowance under Section 14A read with Rule 8D, noting that no substantive challenge as to utilization of own funds was pressed before it. [Paras 7]

Ground 2.1 (and related grounds) dismissed; disallowance under Section 14A read with Rule 8D upheld.

Final Conclusion: The appeals are partly allowed: the Tribunal directs allowance of 100% deduction under Section 80IC for the assessment years in issue in accordance with the binding precedents on substantial expansion (subject to the ten year cap), and upholds the disallowances made under Section 14A read with Rule 8D.

Royalty - right to use a copyrighted article vs rights in copyright - transfer of right to use computer software - business income - interpretation of DTAA - amendment to Section 9(1)(vi) by Finance Act, 2012 - unilateral domestic amendment cannot alter treaty obligations

Royalty - right to use a copyrighted article vs rights in copyright - transfer of right to use computer software - business income - Receipts from sale/licence of software were not taxable as royalty but characterised as business income. - HELD THAT: - Relying on the authoritative reasoning of the Jurisdictional High Court in DCIT v. Infrasoft Ltd., the licence/sale in question conveyed only a limited right to use the copyrighted material or a copy of the software while the incorporeal copyright and associated rights remained with the owner. The licence was non-exclusive, non-transferable, restricted copying to what was necessary for operation (including a single backup), prohibited sublicensing/rental/transfer and preserved the vendor's proprietary notices and control. Such arrangements amount to transfer of a copyrighted article (a copy) enabling internal use and do not effect transfer of any rights in respect of the copyright itself. Payments for such transfer are therefore business receipts attributable to the enterprise (Article 7) and do not fall within the definition of royalty under the DTAA or under domestic law in the facts of this case. The Tribunal accordingly upheld the CIT(A)'s conclusion that the receipts are not royalty but business income. [Paras 9]

Upheld that consideration for the licence/sale of the software is not royalty; it is business income.

Interpretation of DTAA - amendment to Section 9(1)(vi) by Finance Act, 2012 - unilateral domestic amendment cannot alter treaty obligations - The amendment to section 9(1)(vi) effected by the Finance Act, 2012 cannot be read into or applied to the DTAA; a unilateral change in domestic law does not alter treaty obligations. - HELD THAT: - The Tribunal followed the Delhi High Court's decision in DIT v. New Skies Satellite BV that a change in domestic legislation or explanatory position does not effect a change in a bilateral treaty unless the treaty itself is amended or the parties incorporate the change into the agreement. A mere amendment to domestic law to clarify or change domestic interpretation cannot unilaterally be imported into a DTAA. Consequently the Finance Act, 2012 amendment to Section 9(1)(vi) does not alter the characterisation of receipts under the India-Sweden DTAA in this case, and the Assessing Officer's reliance on the amendment for treating receipts as royalty was rejected. [Paras 10, 11]

Held that the Finance Act, 2012 amendment to Section 9(1)(vi) cannot be read into the DTAA; it does not change treaty application in this case.

Final Conclusion: Both appeals filed by the revenue are dismissed: the receipts from sale/licence of software were held not to be royalty but business income, and the Finance Act, 2012 amendment to Section 9(1)(vi) cannot be unilaterally applied to alter the DTAA.

Reopening of assessment - Approval under section 151 as safeguard for reopening - Requirement of independent application of mind by sanctioning authority - Borrowed satisfaction / mechanical approval - Quashing reassessment proceedings and consequential orders

Approval under section 151 as safeguard for reopening - Requirement of independent application of mind by sanctioning authority - Borrowed satisfaction / mechanical approval - Quashing reassessment proceedings and consequential orders - Validity of reassessment proceedings where supervisory approvals merely recorded formulaic satisfaction without independent application of mind - HELD THAT: - The Bench examined the copy of the approvals given by the Addl. CIT and the PCIT which merely stated, in identical terms, that they were satisfied it was a fit case for reopening/issue of notice u/s 148. Such perfunctory endorsements demonstrate that the supervisory authorities did not apply their minds independently. Relying on the reasoning of the jurisdictional High Court in N.C. Cables and consistent decisions of coordinate benches, the Tribunal held that the safeguard envisaged by the approval procedure was rendered nugatory by ritualistic and formal endorsements amounting to borrowed satisfaction. Because the requisite independent satisfaction was not recorded, the reopening was vitiated and the reassessment proceedings were held to be bad in law. Consequentially, the assessment order passed pursuant to the invalid reopening also became unsustainable. The Tribunal expressly declined to adjudicate the merits of additions as those grounds became academic in view of the quashing of the reassessment process. [Paras 10, 11, 12]

Reassessment proceedings quashed for lack of valid approval; consequential assessment order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, quashed the reassessment proceedings for want of valid supervisory approval given without application of mind, set aside the consequential assessment order, and declined to adjudicate the merits as academic.

Arm's length principle - comparability analysis - functional comparability - selection and exclusion of comparables - reliability of financials - extraordinary events affecting profitability - working capital adjustment in transfer pricing

Comparability analysis - functional comparability - selection and exclusion of comparables - Vishal Information Technologies Limited excluded from the list of comparables - HELD THAT: - The Tribunal found that Vishal Information Technologies Limited (earlier Coral Hub Ltd.) is functionally dissimilar to the assessee because it operates as an intermediary/agency outsourcing substantial work to third-party vendors, has a markedly lower employee-cost-to-operating-cost ratio, and provides diversified high-end services unlike the tested party which provides in house IT enabled back office services. The Tribunal relied on its own earlier finding in the assessee's AY 2009 10 and the reasoning of the Delhi High Court in Rampgreen Solutions that a distinct business model and outsourcing substantially affect profitability and therefore render an entity non-comparable. On these grounds the AO/TPO/DRP were directed to exclude Vishal from the comparable set. [Paras 14, 15]

Vishal Information Technologies Limited excluded from the comparable list and directed to be omitted by A.O./TPO/DRP.

Comparability analysis - reliability of financials - extraordinary events affecting profitability - Asit C. Mehta Financial Services Ltd. (segmental) excluded from the list of comparables - HELD THAT: - The Tribunal held that Asit C. Mehta Financial Services Ltd. (segmental) is functionally dissimilar because its income comprises portfolio management fees, IT enabled services and software development with no segmental breakup available; its employee cost to revenue ratio differs materially from the assessee; and there was an amalgamation (Nucleus Netsoft & GIS India Ltd.) in the year that changed its business model. The Tribunal also noted precedent that entities affected by extraordinary events distorting profitability should be excluded. In view of these factors and supporting decisions in the paper book, the AO/TPO/DRP were directed to exclude this entity. [Paras 16]

Asit C. Mehta Financial Services Ltd. (segmental) excluded from the comparable list and directed to be omitted by A.O./TPO/DRP.

Comparability analysis - reliability of financials - selection and exclusion of comparables - Maple eSolutions Limited excluded from the list of comparables - HELD THAT: - The Tribunal concluded that Maple eSolutions Limited is not comparable because its financial statements include change in inventories and purchases without sufficient detail for a service provider, its margins fluctuate widely, and the reliability of its financials is undermined by fraudulent activities involving promoters. The Tribunal relied on coordinate decisions excluding Maple on grounds of tainted financials and absence of segmental data and directed exclusion of this company from the comparable set. [Paras 17]

Maple eSolutions Limited excluded from the comparable list and directed to be omitted by A.O./TPO/DRP.

Comparability analysis - functional comparability - selection and exclusion of comparables - Triton Corp Limited excluded from the list of comparables - HELD THAT: - The Tribunal found Triton Corp Limited functionally dissimilar and non-comparable because it is engaged in sale of IT peripherals as well as IT/ITES without segmental disclosures, its financials were unclear, it had inventory and purchase items unexplained for a service provider, promoters were implicated in fraudulent activities affecting reliability, and the company had undergone extraordinary events (including amalgamations and BIFR status). The Tribunal noted that the TPO had earlier excluded this entity for AY 2008 09 and directed its exclusion now. [Paras 18]

Triton Corp Limited excluded from the comparable list and directed to be omitted by A.O./TPO/DRP.

Working capital adjustment in transfer pricing - Arm's length principle - Working capital adjustment remanded for verification and grant to the assessee - HELD THAT: - The Tribunal observed that the TPO/AO had allowed working capital adjustment in the assessee's prior years (AY 2007 08 and 2008 09) and the DRP had allowed it for AY 2011 12, and found no change in the assessee's business model warranting denial for AY 2006 07. Consequently the Tribunal directed that the working capital adjustment issue be restored to the TPO's file for verification of necessary details and computation, with a direction to grant the working capital adjustment after such verification and to compute the final TP adjustment accordingly. [Paras 19]

Issue restored to TPO/A.O. for verification and grant of working capital adjustment and recomputation of final adjustment.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2006 07: it directed exclusion of Vishal Information Technologies Ltd., Asit C. Mehta Financial Services Ltd. (segmental), Maple eSolutions Ltd. and Triton Corp Ltd. from the comparable set and remanded the working capital adjustment issue to the TPO/A.O. for verification and recalculation of the arm's length adjustment.

Revenue expenditure - Capital expenditure - enduring benefit - license versus assignment - ownership of know how - exclusive/non exclusive license - limited right to use

Revenue expenditure - enduring benefit - limited right to use - ownership of know how - Nature of the license fee paid to Onco Labs-whether capital expenditure requiring amortization or revenue expenditure deductible in the hands of the assessee - HELD THAT: - The Tribunal examined the license agreement and concluded that the assessee received only a non exclusive, limited right to use the Dossier, Technical Information, Regulatory Approval and related information to commercialise and market specified products in India during the currency of the agreement (paras 15-16). The agreement expressly retained ownership and proprietary rights in OLL (clause 2.2) and required return/cessation of use of confidential information on termination (clause 16.1), evidencing that title to know how and approvals did not pass to the assessee (para 16). Reliance on the Hilton Roulands decision was considered and applied as a factual guide: factors such as nature of right, duration, manner of payment and retention of rights by licensor determine whether a licence amounts to acquisition of capital asset (para 17). The Tribunal held that exclusivity alone is not conclusive; what matters is whether ownership of know how vested in the licensee (para 19). The facts showed no enduring benefit inuring to the assessee beyond facilitation of its existing business of marketing and distribution without addition to the profit earning apparatus; the advantage was co terminous with the agreement and did not amount to acquisition of a capital asset (paras 20-22). Consequently, the licence fee was held to be revenue expenditure and allowable (para 23). [Paras 19, 20, 21, 22, 23]

Licence fee paid was revenue expenditure (not capital); appeal allowed and deduction permitted.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the lump sum payment for the limited non exclusive licence did not confer ownership of know how or an enduring capital asset and therefore the licence fee is revenue expenditure and deductible.

Rectification under section 254(2) of the Act - mistake apparent from the record - opportunity to be heard on additional grounds - recording of satisfaction for initiating proceedings under section 153C - limited scope of recall/amendment power to obvious and patent errors

Opportunity to be heard on additional grounds - mistake apparent from the record - Whether admission of the assessee's additional ground of appeal and the opportunity afforded to the Revenue amounted to a mistake apparent from the record warranting rectification of the Tribunal's order. - HELD THAT: - The Tribunal applied the statutory test under section 254(2) and relevant precedents, observing the additional ground was filed on 04.06.2019, the appeal was adjourned and listed for hearing on 11.06.2019, the copy of the additional ground was forwarded to the departmental representative, and the departmental representative was present on the dates in question without objection or request for adjournment. The Tribunal noted the matter was a stay matter with restriction on adjournments and that no objection was taken by the Revenue at hearing. On these facts the Tribunal concluded that the Revenue had sufficient opportunity and that the allegation of non-supply of documents or insufficient time did not demonstrate an obvious, self-evident error. Applying the settled principle that rectification is confined to patent, non-debatable mistakes apparent on the face of the record, the Tribunal held there was no mistake apparent warranting amendment of its order on this ground. [Paras 4, 5, 6, 7, 8]

No mistake apparent from the record in respect of opportunity given to the Revenue; rectification under section 254(2) is not warranted on this ground.

Recording of satisfaction for initiating proceedings under section 153C - rectification under section 254(2) of the Act - limited scope of recall/amendment power to obvious and patent errors - Whether the Tribunal's quashing of assessment proceedings under section 153C (on technical ground of non-recording of satisfaction) was a mistake apparent from the record requiring recall, having regard to departmental contentions that satisfaction had been recorded and to CBDT guidance. - HELD THAT: - The Tribunal considered the Revenue's contention that satisfaction was recorded and that the assessee had admitted ownership in statements, and it considered CBDT Circular No. 24/2015 emphasising the need to record satisfaction even where the AOs are same. However, the power to rectify under section 254(2) permits amendment only for obvious, patent mistakes on the face of the record where no two reasonable views are possible. The Tribunal found that it had taken a considered decision after applying its mind to the materials (including RTI material) and that the error alleged by the Revenue involved matters of contention and application of law and facts rather than a self-evident clerical or patent error. The Tribunal therefore held that non-adjudication on merits (since the order was decided on a technical ground) does not by itself amount to a mistake apparent from the record and does not justify rectification. [Paras 9, 10]

No mistake apparent from the record in respect of the Tribunal's decision on recording of satisfaction under section 153C; rectification under section 254(2) is not permissible.

Final Conclusion: Miscellaneous Application by the Revenue seeking recall/rectification of the ITAT order dated 24.07.2019 (AY 2014-15) dismissed; the Tribunal's exercise of its appellate discretion and its technical conclusion did not disclose any patent or self-evident mistake warranting amendment under section 254(2).

Requirement to establish identity, creditworthiness and genuineness of transactions for additions under cash credits - opportunity to confront and cross-examine a declarant whose statement is proposed to be used in assessment - remand to Assessing Officer for fresh decision after affording opportunity of hearing and verification - estimation of household expenditure as basis for additions in block assessment

Remand to Assessing Officer for fresh decision - opportunity to confront and cross-examine a declarant whose statement is proposed to be used in assessment - Restoration to Assessing Officer of disputed addition relating to payments connected with purchase from John D'Souza for fresh decision and opportunity to cross-examine the maker of the statement. - HELD THAT: - The Tribunal, having earlier rectified its order, concluded that where a statement of a third party is proposed to be used against the assessee, the assessee must be afforded an opportunity to confront and, if desired, to cross examine that person. The Tribunal accordingly restored the issue in respect of the portion of the addition (confirmed at Rs. 92,800 out of the disputed Rs. 1.95 lakhs) to the file of the Assessing Officer for fresh adjudication after providing the assessee an opportunity to cross examine John D'Souza and after following the procedures of natural justice. The direction leaves factual inquiry and final quantification to the AO subject to affording adequate hearing and verification as required by law.

Matter restored to the Assessing Officer for fresh decision with direction to afford the assessee opportunity to confront and cross examine John D'Souza.

Remand to Assessing Officer for fresh decision - verification of unimpeachable bank evidence and confrontation of third party replies - Restoration to Assessing Officer for fresh decision of addition of Rs. 55,000 as undervaluation in investment in a residential flat. - HELD THAT: - The AO relied on information obtained from the construction company to compute an undervaluation of investment; the Tribunal found no clear record that the reply from the construction company was confronted to the assessee. The assessee asserted that the shortfall arose from a payment from a now closed bank account and that the amount was from disclosed sources. The Tribunal set aside the CIT(A)'s order on this point and remanded the matter to the AO to confront the construction company's reply to the assessee, allow production of details of the closed bank account, and pass orders after affording adequate opportunity of hearing and verification of the asserted disclosed source.

Issue remitted to the Assessing Officer for fresh decision after confronting the construction company's reply and allowing the assessee to produce and prove the closed bank account and sources.

Requirement to establish identity, creditworthiness and genuineness of transactions for additions under cash credits - Sustaining of additions made in respect of certain gifts (from Abbubakar, P.V. Gangadharan and Oswal Pinto) on facts; appeal on this ground rejected. - HELD THAT: - The Tribunal applied the settled principle that the assessee must establish the identity and creditworthiness of donors and the genuineness of gift transactions. In respect of Abbubakar, the donor's bank deposits (notably a deposit of Rs. 2.20 lakhs) were unexplained and not attributable to usual dollar conversion, undermining the donor's creditworthiness and the genuineness of the gift. For P.V. Gangadharan, the donor could not be located (deceased) and no relationship or credible explanation was furnished to show why an unrelated person would make such a gift. For Oswal Pinto, correct address or means of verifying the donor could not be furnished. Diary entries, seized documents and account payee cheques notwithstanding, the Tribunal found that the assessee failed to discharge the evidential burden and therefore saw no infirmity in sustaining the additions.

Ground challenging the additions by way of these gifts rejected; additions sustained.

Requirement to establish identity, creditworthiness and genuineness of transactions for additions under cash credits - Sustaining of additions in respect of alleged loans from Maxim Lobo and Madhukumar; appeal on this ground rejected. - HELD THAT: - Applying the tri partite test for cash credit additions, the Tribunal accepted the AO's findings that Madhukumar denied advancing any loan and was an employee with limited means, and that the creditor Maxim Lobo could not be located due to an insufficient address provided by the assessee. The assessee therefore failed to establish identity, creditworthiness and genuineness of these loan transactions, and the Tribunal found no reason to interfere with the CIT(A)'s confirmation of the additions.

Ground rejected; additions sustained.

Requirement to establish identity, creditworthiness and genuineness of transactions for additions under cash credits - Sustaining of additions in respect of alleged advances evidenced by blank cheques and of advance to Kumble Associates; appeals on these grounds rejected. - HELD THAT: - Regarding two blank cheques (A.H. Timbers and Jyothi Apparels), the AO relied on statements (including of T. Amin) and absence of specific contemporaneous evidence of the alleged pigmy collection source; the assessee's general assertion of pigmy collections without names or documentary support was held to be insufficient to prove source and genuineness. As to the cheque said to represent a surety in favour of Kumble Associates, no confirmation from Kumble Associates was produced to support the assessee's contention. On these facts the Tribunal concurred with the AO and CIT(A) that the assessee failed to discharge the evidential burden to rebut additions.

Grounds rejected; additions sustained.

Requirement to establish identity, creditworthiness and genuineness of transactions for additions under cash credits - Sustaining of addition in respect of refund from KSRTC treated as unexplained receipt; appeal on this ground rejected. - HELD THAT: - The assessee claimed the refund was originally paid by the father in law as EMD and later gifted to the assessee, but no corroborative evidence (including any statement by the father in law to that effect) was produced. The AO's finding that the claim was unsubstantiated was upheld by the Tribunal in absence of supporting material, and no interference with the CIT(A)'s order was warranted.

Ground rejected; addition sustained.

Estimation of household expenditure as basis for additions in block assessment - Sustaining of addition for insufficiency in drawings on the basis of estimated household expenditure during the block period; appeal on this ground rejected. - HELD THAT: - The AO estimated monthly household expenditure at Rs. 6,500 for the block period and computed a shortage by comparing total withdrawals with estimated expenses. The assessee's own admission of monthly expenditure of Rs. 3,000-5,000 did not displace the AO's estimate, and club and telephone expenses borne during the period supported the AO's computation. The Tribunal found the AO's estimation not excessive or unreasonable and therefore affirmed the addition.

Ground rejected; addition for insufficiency in drawings sustained.

Consequential interest in block assessments - Claim for cancellation of interest under the relevant provision treated as consequential and not separately argued; ground rejected as not pressed. - HELD THAT: - The assessee raised objection to interest charged being consequential to the primary additions. No separate argument was advanced before the Tribunal and the ground was treated as consequential. Remaining grounds not argued were held to be not pressed.

Ground dismissed as consequential/not pressed.

Final Conclusion: Appeal partly allowed for statistical purposes by remitting two specific issues to the Assessing Officer for fresh decision - (i) the undervaluation addition of Rs. 55,000 in respect of investment in a residential flat (with directions to confront the construction company's reply and allow proof of the closed bank account) and (ii) the portion of the addition connected with payments to John D'Souza (with direction to afford the assessee opportunity to cross examine the declarant). All other grounds challenging various additions and the insufficiency in drawings addition were rejected and the orders of the authorities below sustained; consequential interest objection was not pressed.

Cessation of amalgamating company upon approved scheme of amalgamation - assessment passed in name of a non-existent entity is void ab initio - revisional jurisdiction under Section 263 of the Income-tax Act - inability of Commissioner to revise an assessment void ab initio

Cessation of amalgamating company upon approved scheme of amalgamation - assessment passed in name of a non-existent entity is void ab initio - Validity of an assessment order framed in the name of an amalgamating company which had ceased to exist on the date of assessment - HELD THAT: - The Tribunal held that where an approved scheme of amalgamation has effect from an earlier date and the amalgamating company has ceased to exist, the amalgamating entity no longer has legal existence for the purposes of assessment. Applying the principle affirmed by the Supreme Court in Pr. CIT, New Delhi v. Maruti Suzuki India Ltd. and in CIT v. M/s Spice Enfotainment Ltd. , the assessment framed in the name of M/s Satyam Computers Services Ltd. - an entity merged w.e.f. 01.04.2011 - is non-est in law. The orders of the assessing officer show awareness of the merger yet the assessment and its PAN particulars were recorded in the name of the dissolved/amalgamated entity; such framing is therefore void and cannot be treated as a mere procedural irregularity curable under Section 292B. The Tribunal relied on the settled doctrine that on amalgamation the amalgamating company loses its entity (see Saraswati Industrial Syndicate Ltd. ) and concluded the assessment lacks legal sanctity. [Paras 8, 9]

Assessment order passed in the name of the non-existent amalgamating company is void ab initio and cannot be sustained.

Revisional jurisdiction under Section 263 of the Income-tax Act - inability of Commissioner to revise an assessment void ab initio - Whether the Commissioner can exercise powers under Section 263 to revise an assessment that is void ab initio for being passed in the name of a non-existent entity - HELD THAT: - The Tribunal held that where the underlying assessment is void ab initio because it was framed in the name of a non-existent amalgamating company, the Commissioner is divested of jurisdiction to revise that order under Section 263. Permitting revision in such circumstances would effectively validate an assessment which has no legal existence and would amount to extending fresh limitation to the assessing officer. The Tribunal followed the reasoning in Maruti Suzuki and West Life Development Ltd. (coordinate bench) to conclude that the revisional order passed in the name of the dissolved entity is also invalid. Consequently, the proceeding under Section 263 itself is vitiated by the foundational invalidity of the assessment on which it purports to act. [Paras 9]

Order under Section 263 passed in the name of the non-existent amalgamating company is void and cannot be sustained; the Commissioner had no jurisdiction to revise an assessment that was non-est.

Final Conclusion: The order passed by the Principal Commissioner under Section 263 dated 24.10.2017 is quashed as it was passed in the name of a company that had ceased to exist and because Section 263 could not be validly exercised over an assessment void ab initio; the Tribunal refrained from adjudicating merits of the assessment which remain open.

Reliance on DVO report where books of account not rejected - Acceptability of marginal variation between book value and DVO valuation - Application of Sargam Cinema principle on referral to DVO - Assessment-year 2008-09 - Assessment-year 2009-10

Reliance on DVO report where books of account not rejected - Application of Sargam Cinema principle on referral to DVO - Whether the Assessing Officer/CIT(A) could make additions on the basis of the DVO's valuation when the assessee's books of account were not rejected prior to referral to the DVO (A.Y. 2008-09). - HELD THAT: - The Tribunal noted that it was an admitted fact that the assessee's books of account were not rejected before the Assessing Officer referred the matter to the District Valuation Officer. Applying the principle in Sargam Cinema, the Tribunal held that an assessing authority cannot refer a matter to the DVO without first rejecting the books of account; reliance on a DVO report under those circumstances is misconceived. Because the books and supporting vouchers were maintained and not found false, the Assessing Officer's reliance on the DVO to sustain additions was impermissible. The Tribunal therefore concluded that the part addition sustained by the CIT(A) on the basis of the DVO's report was not justified and set aside that addition. [Paras 11, 13, 15]

Addition sustained on account of DVO report set aside because books of account were not rejected before referral to DVO; assessee's grounds allowed.

Acceptability of marginal variation between book value and DVO valuation - Application of precedent on insignificant valuation differences - Whether the small percentage difference between the assessee's cost of construction and the DVO's estimated cost justified sustaining an addition (A.Y. 2008-09). - HELD THAT: - The Tribunal observed that the difference between the assessee's declared cost and the DVO's valuation was approximately less than 3% of the total cost. Relying on the Delhi High Court decision in Ambience Developers, the Tribunal held that such an insignificant variation, particularly where no specific unreasonable item of expenditure was identified and the books were otherwise maintained, did not justify an addition based on the DVO valuation. Consequently, the Tribunal found the sustained addition to be unjustified and directed deletion. [Paras 14, 15]

Addition sustained by CIT(A) on account of marginal variation with DVO valuation deleted; assessee's grounds allowed.

Assessment-year 2009-10 - Consistency of decision across assessment years - Whether the holdings in respect of A.Y. 2008-09 apply to the appeal relating to A.Y. 2009-10 where identical contentions were raised by the assessee. - HELD THAT: - The Tribunal noted that the grounds in ITA No.5309/Del/2013 (A.Y. 2009-10) were identical to those decided for A.Y. 2008-09. Having allowed the assessee's grounds for 2008-09 on the twin bases that the books were not rejected before referral to the DVO and that the variation was insignificant, the Tribunal applied the same reasoning to the subsequent year and allowed the assessee's appeal for A.Y. 2009-10. [Paras 17, 18]

Grounds raised for A.Y. 2009-10 allowed following the decision for A.Y. 2008-09; assessee's appeal allowed.

Revenue's challenge to deletion of addition - Whether the Revenue's appeal against deletion of the major portion of the AO's addition (i.e., challenge to CIT(A)'s deletion of the addition) was maintainable/successful. - HELD THAT: - The Tribunal observed that the Assessing Officer in the assessment for A.Y. 2010-11 had accepted the DVO's valuation and made proportionate adjustments for that year. Given that the CIT(A) granted relief to the assessee by following the DVO report and reducing the disallowance, the Tribunal found no valid ground for the Revenue's grievance in the present appeals. Consequently, the Revenue's grounds were dismissed. [Paras 12]

Revenue's appeals dismissed.

Final Conclusion: The Tribunal set aside the CIT(A)'s sustaining of the addition based on the DVO report for A.Y. 2008-09 and allowed the assessee's appeals for A.Y. 2008-09 and A.Y. 2009-10, holding that referral to the DVO was impermissible without rejection of books and that the small (<3%) variation with DVO valuation was insignificant; the Revenue's appeal was dismissed.

Advertising and Marketing Promotion (AMP) as an international transaction - Bright Line Test - Transactional Net Margin Method (TNMM) and segmental benchmarking - Marketing Development Fund (MDF) reimbursements treated as operating income - Requirement of agreement/arrangement/action in concert for recognising AMP as international transaction - Working capital adjustment for transfer pricing comparability - Protective assessment - impermissibility of alternative protective/substantive additions for same assessee - Proviso to Section 92C(2) - 5% tolerance for adjustments - Marked-to-market (MTM) foreign-exchange losses recognised under commercial accounting deductible - Depreciation on UPS systems to be treated as computer peripheral (60%) - Exclusion of comparables on functional dissimilarity and related party transaction thresholds

Advertising and Marketing Promotion (AMP) as an international transaction - Bright Line Test - Requirement of agreement/arrangement/action in concert for recognising AMP as international transaction - Transactional Net Margin Method (TNMM) and segmental benchmarking - Whether AMP expenditure incurred by the assessee can be characterised as an international transaction beyond the reimbursements received and whether the Bright Line Test is a valid method to determine existence or ALP of such a transaction; and whether AMP can be segregated where TNMM has been applied at segment/entity level. - HELD THAT: - The Tribunal held that AMP expenditure cannot be treated as an international transaction merely because the assessee's AMP spend exceeds an industry average; existence of an international transaction under Chapter X requires tangible evidence of an agreement/arrangement or action in concert beyond inference, and the scope/value of an international transaction cannot be expanded beyond the reimbursements actually agreed under the MDF agreement. The "Bright Line Test" is held to be untenable for either establishing existence of an international transaction or for determining its ALP. Further, where TNMM has been adopted at segment/entity level, AMP is part of operating expenditure that goes into the net profit indicator; it is impermissible to segregate and subject AMP to a separate benchmarking unless TNMM is not the most appropriate method for the bundled transactions. Consequently, AMP-based adjustments made by the TPO/AO are deleted and protective assessment on AMP is impermissible against the same assessee. [Paras 41, 44, 45, 46, 53]

AMP adjustments deleted; Bright Line Test rejected; scope of international transaction limited to reimbursed amounts under MDF; segregation of AMP impermissible where TNMM is applied at segment/entity level; protective alternative assessment not permissible.

Marketing Development Fund (MDF) reimbursements treated as operating income - Transactional Net Margin Method (TNMM) and segmental benchmarking - Whether reimbursements received from the foreign AE under the MDF agreement must be treated as operating income (and correspondingly as part of operating expenditure) for TNMM computation. - HELD THAT: - The Tribunal accepted that the reimbursements under the pre-approved MDF agreement correspond to specific marketing expenditures and have been disclosed as international transactions in Form 3CEB and in the TP study. The reimbursements therefore form part of operating income as well as operating expenditure for computation of net profit margin under TNMM. The TPO's approach of grossing-up advertisement expense while excluding the reimbursements from income was contrary to prior Tribunal findings in the assessee's case and was held unjustified. [Paras 40, 41, 43, 103]

Reimbursements under MDF to be included in operating income (and operating expenditure) for TNMM; TPO's grossing-up approach rejected.

Proviso to Section 92C(2) - 5% tolerance for adjustments - Whether the proviso to Section 92C(2) (5% tolerance) bars the TP adjustment in Class II segment for AY 2005-06. - HELD THAT: - On the facts for AY 2005-06 the Tribunal examined the CIT(A)'s computation and the assessee's submission that the difference between the ALP and recorded price fell within the 5% tolerance under the proviso. The Tribunal found the assessee's unchallenged computations showed the difference to be within the permissible range and therefore no adjustment was warranted. [Paras 54, 55]

Adjustment deleted for Class II segment for AY 2005-06 as difference was within 5% tolerance under the proviso to Section 92C(2).

Exclusion of comparables on functional dissimilarity and related party transaction thresholds - Validity of exclusion/inclusion of specific comparables (Videocon Industries Ltd., Samtel Colour Ltd., Control Print (India) Ltd., Gemini Communications Ltd.) for benchmarking under TNMM/RPM. - HELD THAT: - The Tribunal analysed the functional and product profiles and prior year consistent findings. Videocon was excluded on facts showing it to be a component manufacturer with backward integration, functionally dissimilar to the assessee's finished-goods manufacturing (paras 61). Samtel was excluded because of significant related party transactions (RPT > permitted threshold) and prior consistency (paras 62-66). Control Print and Gemini were excluded for functional dissimilarity (manufacturing coding/marking machines and end-to-end IT solutions respectively) and consistency with prior-year orders (paras 71-76, 101-102). The Tribunal emphasised that if sufficient comparables exist under a lower RPT threshold (15%), that threshold should be preferred for accuracy. [Paras 61, 66, 72, 76, 101]

Exclusions upheld: Videocon, Samtel Colour, Control Print and Gemini Communications properly excluded as comparables.

Working capital adjustment for transfer pricing comparability - Whether working capital adjustments should be made to comparables' margins to improve comparability under TNMM. - HELD THAT: - The Tribunal recognised working capital differences (inventory, receivables, payables) can materially affect net profit margins and are an accepted economic adjustment under Rule 10B and international guidance. It observed the TPO had allowed such adjustments in prior years and that the OECD/UN endorse working-capital adjustments. The Tribunal directed the TPO to compute and allow suitable working-capital adjustments (subject to verification) when determining net profit margins of comparables. [Paras 134, 136, 184]

Working capital adjustments must be considered and allowed to enhance comparability; TPO directed to compute/verify such adjustments.

Protective assessment - impermissibility of alternative protective/substantive additions for same assessee - Whether the TPO/AO can make both a substantive and a protective transfer-pricing addition on the same issue against the same assessee. - HELD THAT: - The Tribunal held protective additions are permitted only where identity of real owner of income is unclear and apply where income may be taxable in hands of more than one person. Applying precedent, the Tribunal concluded that making alternative substantive and protective assessments in the hands of the same assessee on the same item is not permissible. [Paras 35, 51]

Protective substantive dual assessments on same issue in same assessee are impermissible; TPO's use of protective assessment in this manner is unjustified.

Marked-to-market (MTM) foreign-exchange losses recognised under commercial accounting deductible - Whether MTM forex losses on open forward contracts at year-end (restatement losses) are deductible under section 37 principles. - HELD THAT: - Following Supreme Court authority (Woodward Governor) and consistent Tribunal precedent, the Tribunal held MTM losses recognised under consistent accounting policy in relation to trading transactions are not merely notional and are deductible, provided they represent a definite liability or arise from binding trading contracts recorded in accordance with accounting principles. The Tribunal allowed such forex MTM losses. [Paras 141, 142]

MTM forex losses on open forward contracts, recognised in accounts under consistent accounting policy, are deductible.

Depreciation on UPS systems to be treated as computer peripheral (60%) - Whether UPS connected to computers should attract depreciation at 60% as computer peripheral or at 15% as plant and machinery. - HELD THAT: - The Tribunal followed controlling authority and prior decisions that UPS used as essential peripherals for computers (supporting servers, PCs, LAN) are to be treated as computer peripherals and thus eligible for 60% depreciation rather than 15% as general plant & machinery. [Paras 111, 112]

Depreciation on UPS allowed at 60% (treated as computer accessory/peripheral).

Recruitment and training expenses as revenue deduction - Whether recruitment and training expenses are revenue in nature and allowable in full in the year incurred, or ought to be capitalised/deferred. - HELD THAT: - Relying on Tribunal and High Court precedents in the assessee's prior years, the Tribunal held recruitment and training expenses are revenue expenditures incidental to business and do not create enduring benefit requiring capitalization or deferral; they are deductible in the year incurred. [Paras 78, 110, 161]

Recruitment and training expenditure is revenue in nature and allowable in the year incurred; disallowance/deferment rejected.

Exclusion/remand of comparables showing persistent losses - fact-specific assessment - Whether certain proposed comparables exhibiting persistent losses should be excluded or remanded for verification (Voltas, VXL Instruments, PCS Technology, Caliber Point, R Systems). - HELD THAT: - The Tribunal emphasised that exclusion on grounds of persistent losses requires factual determination of a sustained multi-year loss trend (current year plus two prior years under Rule 10B(4)) and erosion of net worth; absent a clear three-year trend and net-worth erosion, comparables should not be excluded. Accordingly, the Tribunal remanded issues to the TPO for verification of whether the twin conditions (three-year persistent losses and net-worth erosion) are met (Voltas, VXL), rejected PCS on lack of reliable extrapolation, and directed the TPO to verify availability of quarterly/public data before accepting Caliber/R Systems extrapolations. [Paras 94, 127, 128, 236, 240]

Matters remanded to TPO for factual verification of multi-year loss trends and net-worth erosion for exclusion; PCS dismissed where extrapolation not reliable; Caliber/RSystems to be examined for availability of public quarterly data for reliable extrapolation.

Proportionate adjustment limited to value of international transactions - Whether TP adjustment must be proportionately limited to the value of international transactions vis-a -vis total segment cost base. - HELD THAT: - The Tribunal reiterated that Chapter X applies only to international transactions; adjustments should be restricted and proportionate to the value of transactions with AEs. It directed the TPO to confine adjustments to the portion attributable to international transactions when appropriate. [Paras 106, 108]

TPO directed to restrict any adjustment proportionately to the value of international transactions with AEs.

Software segment comparables - exclusion of very large branded ITeS/IT firms (Infosys, TCS) and functionally dissimilar entities - Validity of inclusion of very large branded and diversified IT/ITeS firms (Infosys, TCS, Wipro Technology) and companies lacking segmental data (E-Infochips, Infinite Data) as comparables for captive software-development benchmarking. - HELD THAT: - The Tribunal found that very large, branded, diversified IT companies possessing significant intangibles, large scale, substantial R&D and different FAR profiles (e.g., Infosys, TCS) are functionally and economically dissimilar to a small captive software development unit and hence should be excluded. Entities that combine software and ITeS/hardware without segmental profitability disclosure (E-Infochips, Infinite) are also unsuitable. Wipro Technology was excluded for being effectively an AE-controlled/related-party serviced entity in light of its contractual structure. The Tribunal directed remand/verification where extrapolation or quarterly data might permit inclusion (Caliber, R System) but excluded the specified large/diversified comparables. [Paras 178, 179, 205, 212, 235]

Infosys, TCS, Wipro Technology, E-Infochips and Infinite Data held inappropriate as comparables; certain other comparables remanded for verification of quarterly data/extrapolation.

Disallowance under section 40(a)(i)/(ia) and reversal of prior-year provisions - Whether reversal of prior-year provisions (previously added back/treated as disallowance) which increased income on reversal should be disallowed under section 40(a)(i)/(ia) when no TDS had been deducted earlier. - HELD THAT: - The Tribunal found that the provision had been voluntarily added back in the earlier year (and thus had been taxed). When the provision was subsequently reversed in the later year, allowing the reversal as a reduction in computing current-year income was appropriate; applying section 40(a)(i)/(ia) would lead to double taxation because the earlier year had already disallowed/added back the provision. The Tribunal directed the AO to allow the reversal after verification. [Paras 242, 247, 248]

Disallowance u/s 40(a)(i)/(ia) on reversal of prior-year provision rejected; reversal to be allowed to avoid double taxation.

Final Conclusion: The Tribunal, while partly allowing the assessee's appeals for AYs 2005-06 to 2011-12, held that AMP expenditure cannot be presumed to be an international transaction beyond the reimbursements under MDF, rejected the Bright Line Test, directed deletion of AMP adjustments where made, held MDF reimbursements to be operating income for TNMM, endorsed working-capital adjustments and proportionate limitation of TP adjustments to the value of international transactions, allowed MTM forex losses and 60% depreciation on UPS, allowed recruitment/training expenses as revenue deductions, sustained several exclusions of functionally dissimilar comparables and remanded specific comparability questions (persistent-loss and data-extrapolation issues) to the TPO for factual verification; consequential reliefs and deletions were ordered accordingly.

Characterisation of rental receipts as business income vis-a -vis income from house property - Condonation of delay in filing appeal - Treatment of sale of depreciable assets as part of block of assets and application of Section 50 - Allowability of depreciation, interest and running expenses where vehicle is purchased by company but registered in director's name - Allowability of expenditure on director's higher education as business expenditure under Section 37

Characterisation of rental receipts as business income vis-a -vis income from house property - Rental receipts claimed as business income were correctly held to be income from business and not income from house property. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case for A.Y. 2010-11, which accepted that the assessee's main objects include letting out property and that rental receipts were properly assessable as business income. The Assessing Officer's view that absence of a formal services agreement compelled treatment as house property was rejected. On this basis the Tribunal directed that rental receipts be assessed as business income and restored the related allowance of expenses and depreciation which were incurred for carrying on that business activity. [Paras 9]

Ground No.1 allowed; rental receipts to be assessed as business income.

Condonation of delay in filing appeal - Delay of four days in filing the appeal was condoned. - HELD THAT: - The assessee provided an affidavit explaining inadvertent and bona fide reasons (office closure for Diwali and unavailability of director). The Department did not object. The Tribunal found the explanation satisfactory and condoned the delay. [Paras 5, 6]

Application for condonation of delay allowed.

Treatment of sale of depreciable assets as part of block of assets and application of Section 50 - Profit on sale of properties forming part of the assessee's block of assets must be computed under the block provisions and not as long term capital gain. - HELD THAT: - Having held that the assessee is engaged in the business of purchase and sale of properties and that the properties were business/depreciable assets (rental receipts treated as business income and depreciation claimed), the Tribunal held that the correct computation is under the block of assets rules (Section 50) rather than treating the sale as LTCG. The Assessing Officer's characterisation of the assessee as an investor and consequent computation of LTCG was vacated. [Paras 11]

Ground No.3 allowed; assessment as LTCG set aside and sale to be dealt with under block provisions.

Allowability of depreciation, interest and running expenses where vehicle is purchased by company but registered in director's name - Depreciation, interest and related motor car expenses claimed by the company are allowable despite the vehicle being registered in the director's name. - HELD THAT: - The Tribunal observed that purchase of the motor car out of company funds and its reflection as an asset in the company's balance sheet establish the company's ownership for Income tax purposes; symbolic registration in the director's name under Motor Vehicles Act does not defeat claim for depreciation and related expenditure. The fact that the director was also a director in other companies, or that the director may derive benefit, does not preclude allowability where the expenditure satisfies the commercial expediency test. Reliance was placed on judicial precedents to support the principle that registration in the director's name does not automatically disentitle the company from depreciation and related deductions. [Paras 12]

Disallowance of motor car depreciation and related expenses set aside; claim allowed.

Allowability of expenditure on director's higher education as business expenditure under Section 37 - Expenditure incurred by the company on the director's advanced management programme is allowable as wholly and exclusively for business. - HELD THAT: - The Tribunal found that sponsorship of the director's management programme was incurred for the purpose of the assessee's business and satisfied the test of being wholly and exclusively for business. The fact that the director's enhanced skills would also benefit other companies in which he was a director did not disentitle the assessee to claim the deduction. The Tribunal applied established authorities holding that such expenditures are deductible under Section 37 where the requisite nexus with business is present. [Paras 13]

Ground No.5 allowed; education expenses of the director deleted from disallowance.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, on merits, allowed the appeal: rental receipts were held to be business income; consequential claims (interest under house property head) rendered infructuous; sale of properties to be computed under block provisions (Section 50) and not as LTCG; disallowance of motor car depreciation and related expenses set aside; and disallowance of director's education expenses deleted. The appeal is allowed in terms of these observations.

Validity of reassessment notice under Section 147/148 - Requirement of conscious application of mind by sanctioning authority - Limits of reassessment - scope confined to issue on which reopening was justified - Disallowance under Section 40A(3) for cash payments

Validity of reassessment notice under Section 147/148 - Requirement of conscious application of mind by sanctioning authority - Reopening of assessment by issuance of notice under Section 148/147 was invalid and the reassessment proceedings were quashed. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the approval given by the Joint Commissioner. The record of approval consisted only of a brief endorsement: "Yes, it is a fit case for issue of notice u/s 148 of the Act, 1961." Following the Delhi High Court's decision in N.C. Cables Ltd., the Tribunal held that the sanctioning authority must apply its mind and record satisfaction in a manner that is more than a mere ritualistic or formal approval. The Joint Commissioner's perfunctory endorsement showed no meaningful application of mind; consequently the prerequisite sanction for reopening was defective. For these reasons the reassessment proceedings were held not to be in accordance with law and were quashed. [Paras 11, 12]

Reassessment proceedings pursuant to the notice under Section 148/147 quashed for want of proper sanction and application of mind by the approving authority.

Limits of reassessment - scope confined to issue on which reopening was justified - Disallowance under Section 40A(3) for cash payments - Addition under Section 40A(3) was not sustainable because it related to a matter different from the specific ground on which reopening was initiated. - HELD THAT: - The Tribunal noted that the assessment was reopened on the stated basis that cash purchases recorded in third-party books indicated income escaping assessment (transactions allegedly not verifiable and income in excess of Rs.1 lakh escaped assessment). However, the Assessing Officer did not make any addition on that specific ground for which reassessment was initiated; instead an addition was made under Section 40A(3) on account of alleged cash payments shown in the supplier's books. Established principle permits the Assessing Officer to assess or reassess only on the issue for which the belief of escapement was formed; if other matters come to notice during reassessment, a separate notice is required. As the AO made an addition on a different basis than that invoked for reopening, he lacked jurisdiction to make that addition in the reassessment. On this ground too the addition sustained by the CIT(A) was set aside and the appeal allowed. [Paras 13]

Addition under Section 40A(3) set aside for want of jurisdiction to make additions unrelated to the ground of reopening.

Final Conclusion: The appeal is allowed: the reassessment proceedings initiated by notice under Section 148/147 are quashed for defective sanction, and the disallowance under Section 40A(3) upheld below is set aside as outside the scope of the reopening.

Applicability of Chapter XII of the Code of Criminal Procedure to offences under special statutes - Section 4(2) Cr.P.C. - special enactment subject to procedural application of the Code in absence of contrary provision - Section 166 A Cr.P.C. - issuance of Letter of Rogatory only "in the course of an investigation" under Chapter XII - Requirement of commencing investigation under Section 154/155 Cr.P.C. before invoking Section 166 A - Limited operation of non obstante clause - cannot override mandatory procedural safeguards in Chapter XII - Cognizable/non cognizable classification under the Customs Act and consequent procedural consequences

Requirement of commencing investigation under Section 154/155 Cr.P.C. before invoking Section 166 A - Section 166 A Cr.P.C. - issuance of Letter of Rogatory only "in the course of an investigation" under Chapter XII - Investigation under Chapter XII of the Cr.P.C. must be validly commenced under the procedure in Section 154 (cognizable) or Section 155 (non cognizable) before an investigating authority can invoke Section 166 A for obtaining extraterritorial evidence. - HELD THAT: - The Court held that Section 166 A operates "in the course of an investigation" and therefore must be read as part of Chapter XII. Where the Customs Act does not prescribe a contrary procedure for commencing or conducting investigation, Section 4(2) Cr.P.C. makes the procedural provisions of the Code applicable. Consequently, an investigating officer cannot treat Section 166 A as a standalone power to seek Letters of Rogatory without first complying with the mandatory modalities for commencement of investigation under Section 154 or, in the case of a non cognizable offence, obtaining the magistrate's order under Section 155(2). The non obstante opening of Section 166 A does not authorise bypassing these foundational procedural safeguards; the non obstante clause must be given a limited operation consistent with legislative intent and the structure of Chapter XII. [Paras 32]

Section 166 A cannot be invoked unless an investigation has been validly commenced under Chapter XII (Section 154 or Section 155 as applicable).

Cognizable/non cognizable classification under the Customs Act and consequent procedural consequences - Applicability of Chapter XII of the Code of Criminal Procedure to offences under special statutes - Where the Customs Act classifies offences as cognizable or non cognizable but does not specify the procedure for commencement of investigation, the procedural scheme of Chapter XII Cr.P.C. (including Sections 154/155) applies by virtue of Section 4(2) Cr.P.C. - HELD THAT: - The Court analysed the statutory scheme of the Customs Act and observed that although the Act confers powers akin to police powers (search, seizure, arrest, summon, examine), it does not prescribe the manner of commencing investigations corresponding to cognizable or non cognizable designations. In that void, Section 4(2) of the Cr.P.C. imports the Code's procedural provisions. Therefore, classification of an offence under the Customs Act as cognizable or non cognizable must be read with the definitions and procedural consequences in the Cr.P.C.; for non cognizable offences, magistratal permission under Section 155(2) is mandatory before investigation can proceed. [Paras 17, 30]

In absence of a contrary procedure in the Customs Act, the Code's Chapter XII procedures govern investigation of offences classified under the Customs Act as cognizable or non cognizable.

Limited operation of non obstante clause - cannot override mandatory procedural safeguards in Chapter XII - Section 166 A Cr.P.C. - issuance of Letter of Rogatory only "in the course of an investigation" under Chapter XII - The non obstante language in Section 166 A does not empower an investigating authority to bypass the mandatory procedural requirements of Chapter XII; the provision must be read in context and applied only after a valid investigation under the Code has been initiated. - HELD THAT: - Although Section 166 A begins with a non obstante clause to facilitate collection of extraterritorial evidence, the Court held the clause has a contextual and limited operation. It overrides only those parts of the Code inconsistent with the foreign evidence mechanism; it does not nullify the foundational requirement that an investigation must have been legally commenced under Sections 154/155 of the Code. The legislative purpose of Section 166 A (to allow admissibility of foreign obtained evidence) cannot be used to circumvent Chapter XII safeguards against arbitrary or vexatious investigation. [Paras 32]

Section 166 A's non obstante clause is limited; it does not dispense with the requirement to commence investigation under Chapter XII before seeking Letters of Rogatory.

Validity of Letter of Rogatory issued without statutory pre requisites - Section 166 A Cr.P.C. - issuance of Letter of Rogatory "in the course of investigation" - The Letters of Rogatory issued by the Metropolitan Magistrate in this matter (in respect of imports of Indonesian coal) were issued in the absence of a validly commenced investigation under Chapter XII and are therefore liable to be quashed. - HELD THAT: - Applying the principles that Section 166 A must be invoked only during a valid investigation commenced in accordance with Chapter XII, the Court found that the DRI had embarked upon investigatory steps in relation to a non cognizable offence without obtaining the mandatory magistratal order under Section 155(2). Because the statutory pre requisites for invocation of Section 166 A were not complied with, the Letters of Rogatory that were issued and given effect to do not meet the Chapter XII requirements and cannot be sustained. [Paras 34]

The Letters of Rogatory issued in the present case are quashed and set aside as they did not follow the mandatory procedural requirements of Chapter XII Cr.P.C.

Final Conclusion: Writ petition allowed. The Court held that Section 166 A Cr.P.C. may be invoked only "in the course of an investigation" validly commenced under Chapter XII (Section 154 or Section 155 as applicable); the DRI proceeded in relation to a non cognizable offence without obtaining the magistrate's order under Section 155(2), and the Letters of Rogatory issued in those circumstances were quashed and set aside.

Discharge of export obligation - redemption certificate - demand of customs duty on imported raw material - penalty for mis-declaration - precedent effect of earlier Tribunal and Supreme Court orders

Discharge of export obligation - redemption certificate - demand of customs duty on imported raw material - precedent effect of earlier Tribunal and Supreme Court orders - Sustainability of demand of customs duty where export obligation under advance licences has been discharged and redemption certificate issued. - HELD THAT: - The Court held that the export obligation arising from the advance licences has been discharged and DGFT has issued redemption certificates or otherwise the records and Part F submitted by the appellant corroborate fulfilment of the obligation. The Tribunal's earlier order in the appellant's own case (dated 01.04.2005) had held that the disputed shipping bill was not used to discharge the licence obligation and that the licence obligations stood discharged; the Supreme Court dismissed the revenue's appeal against that order. The appellant therefore cannot be subjected to a demand of customs duty on the imported raw material once the export obligation is shown to be discharged and redemption certificates stand issued, and the departmental appeal allowed by the Tribunal in the impugned order could not sustain the demand in view of the prior adjudication and the factual record confirming discharge. [Paras 7, 9, 10, 11]

Demand of customs duty set aside as export obligations stand discharged and redemption certificate(s) issued; appeals on the duty demand allowed.

Penalty for mis-declaration - Validity of the penalty imposed by the Adjudicating Authority. - HELD THAT: - Although the Court allowed the appeals insofar as the demand of customs duty was concerned, the appellant did not dispute the levy of penalty before this Court. The adjudicating authority had earlier imposed penalty which was reduced on first appeal; in the present appeals the Court expressly declined to interfere with the penalty imposition and upheld the penalty imposed by the Adjudicating Authority. [Paras 4, 11]

Penalty imposed by the Adjudicating Authority is upheld.

Final Conclusion: Appeals allowed insofar as the demand of customs duty is concerned because export obligations under the advance licences have been discharged and redemption certificates stand issued; the penalty imposed is upheld.

Exemption from customs duty on goods imported into a Special Economic Zone under Section 26(1)(a) of the SEZ Act - domestic clearance from SEZ chargeable to customs duty only where such duty is leviable on import into SEZ - goods classified as scrap machine parts not dutiable on removal from SEZ to Domestic Tariff Area - manual realisation of customs duty without an order specifying reasons and rates is not sustainable - refund of unlawfully realised customs duty

Domestic clearance from SEZ chargeable to customs duty only where such duty is leviable on import into SEZ - exemption from customs duty on goods imported into a Special Economic Zone under Section 26(1)(a) of the SEZ Act - goods classified as scrap machine parts not dutiable on removal from SEZ to Domestic Tariff Area - Whether the movable goods purchased at the Company Court auction and removed from the SEZ to the Domestic Tariff Area were chargeable to customs duty - HELD THAT: - Relying on the scheme of the SEZ Act, in particular the fiscal exemptions under Section 26(1)(a) and the domestic clearance rule in Section 30(a), and the ratio in the Gujarat High Court decision cited, customs duty on goods removed from a SEZ to the Domestic Tariff Area can only be levied where such goods would have been chargeable to customs duty on import into the SEZ. The auctioned items consisted of scrap machine parts (described in the inventory as 'Scrap parts' beneath 'Old Machines') which, when taken into the SEZ to carry on authorised operations, were exempt from import duty under Section 26(1)(a). Consequently, those goods were not dutiable on removal to the Domestic Tariff Area as scrap machine parts and no customs liability arose on their removal.

The goods removed by the auction purchaser, being scrap machine parts that were exempt on import into the SEZ, were not chargeable to customs duty on removal to the Domestic Tariff Area.

Manual realisation of customs duty without an order specifying reasons and rates is not sustainable - refund of unlawfully realised customs duty - Whether the customs duty realised by respondent no. 2 from the auction purchaser could be sustained and what relief follows - HELD THAT: - The Official Liquidator pointed out that the objection by respondent no. 2 did not disclose the basis or rates of duty nor record an order imposing duty with reasons. The Court found that, in absence of any valid basis for levy and having held that the goods were not dutiable, the amount realised as customs duty was wholly unwarranted. The appropriate relief is to set aside the realised duty and direct refund on demand accompanied by a certified copy of the order.

The customs duty realised from the applicant is set aside and respondent no. 2 is directed to refund the amount realised upon demand within three weeks of such demand being made together with a certified copy of this order.

Final Conclusion: The Court held that the auctioned items being scrap machine parts were not liable to customs duty on removal from the SEZ to the Domestic Tariff Area and set aside the duty realised; respondent no. 2 was directed to refund the amount realised on demand within three weeks upon production of a certified copy of the order.

Arms Rules classification of air weapons - muzzle energy threshold for licensing of air weapons - bore-size based exclusion from licence requirement - freely importable item under customs regime - confiscation of imported goods for breach of Arms Act - evidentiary value of commercial invoice

Arms Rules classification of air weapons - bore-size based exclusion from licence requirement - muzzle energy threshold for licensing of air weapons - evidentiary value of commercial invoice - freely importable item under customs regime - confiscation of imported goods for breach of Arms Act - Validity of confiscation of the imported air pistol in view of invoice stating power less than 7.5 joules and bore less than 4.5 mm and consequent requirement (or not) of licence under the Arms law and customs exemptions - HELD THAT: - The Tribunal found that the invoice produced by the appellant expressly described the imported air pistol as having power less than 7.5 joules and bore less than 4.5 mm (0.177). Under the Arms Rules classification relied upon in the proceedings, an air weapon within those parameters does not attract the licensing requirement premised on exceeding the specified muzzle-energy or bore limits. The adjudicating authority and Commissioner (Appeals) failed to properly consider the invoice description and thus erred in treating the import as requiring a licence and in ordering confiscation under the Foreign Trade (Exemption from Application of Rules in Certain Cases) Amendment Order 2017 read with the Arms Act. The Tribunal observed that, where a weapon falls within the non-licensable description on the basis of the invoice, confiscation was not warranted and any licence (if later considered necessary) could be sought after release from Customs.

Impugned order of confiscation set aside; appeal allowed and confiscation held unsustainable in law for the reasons stated.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders of confiscation, holding that the invoice description establishing the pistol as having power below 7.5 joules and bore below 4.5 mm showed it to be freely importable and not liable to confiscation under the Arms Rules/Act as applied by the authorities.

Burden of proof under Section 123 of the Customs Act - confiscation of goods as smuggled under Section 111(d) - option to redeem seized goods by payment of fine under Section 125 - penalty for contravention under Section 112

Burden of proof under Section 123 of the Customs Act - confiscation of goods as smuggled under Section 111(d) - Whether the seized gold bars were smuggled and whether the appellant failed to discharge the burden to prove otherwise, justifying confiscation. - HELD THAT: - The Tribunal found that the gold bearing foreign markings was seized within the country on suspicion of being smuggled and not as baggage, thereby attracting the statutory burden on the person from whose possession the goods were seized to prove they were not smuggled under Section 123. The appellant could not discharge that burden; she admitted not declaring the gold on arrival and produced invoices showing purchase abroad but no evidence of lawful import formalities or payment of duty. On that basis the adjudicating authority's finding of smuggling and consequent order of absolute confiscation under Section 111(d) was sustained. [Paras 2, 6]

Finding that the appellant failed to prove the goods were not smuggled and that confiscation under Section 111(d) was justified.

Option to redeem seized goods by payment of fine under Section 125 - Whether redemption of the seized gold could be allowed in lieu of confiscation under Section 125 and, if so, on what basis. - HELD THAT: - The Tribunal examined Section 125, which permits an officer to offer an option to pay a fine in lieu of confiscation (with statutory limits and applicability to both prohibited and other goods). Taking into account the appellant's factual circumstances - return after a long absence, disclosure during investigation, production of purchase documents, absence of commercial quantity, and no evidence of an attempt to mislead authorities - the Tribunal concluded that redemption was appropriate in the exercise of the officer's discretion. Accordingly, the Tribunal allowed redemption on payment of a specified fine and directed that statutory duties and charges would remain payable as required by Section 125(2). [Paras 6, 7]

Redemption of the seized gold allowed under Section 125 on payment of a redemption fine, with duties and charges payable in addition.

Penalty for contravention under Section 112 - Whether the penalty imposed under Section 112 should be upheld. - HELD THAT: - The Tribunal considered the imposition of penalty by the adjudicating authority and the first appellate authority. Although mitigation factors supported redemption, the Tribunal found no reason to interfere with the imposition of penalty under Section 112(b)(i). The adjudicated penalty was accordingly maintained. [Paras 2, 7]

Penalty imposed under Section 112 upon the appellant is upheld.

Final Conclusion: The appeal is allowed in part: confiscation is avoided by permitting redemption of the seized gold on payment of a redemption fine and applicable duties, while the finding of smuggling (failure to discharge burden under Section 123) and the penalty under Section 112 are affirmed; the appeal is disposed accordingly.

Self-assessment - appealability of assessment order - maintainability of refund application - requirement to challenge assessment before refund

Self-assessment - maintainability of refund application - appealability of assessment order - Whether an application for refund of customs duty is maintainable where the assessee has effected self-assessment and has not challenged that assessment before the appropriate appellate authority - HELD THAT: - The Tribunal applied the binding Larger Bench decision of the Supreme Court in ITC Ltd., which reaffirmed Priya Blue and held that an order of self-assessment is an assessment order and is appealable; consequently, a refund claim cannot be entertained unless the assessment or self-assessment order has been modified by taking recourse to appropriate proceedings (for example, appeal under Section 128 or other provisions). The appellant's contention that self-assessment under amended Section 17 removes the requirement of challenging assessment before seeking refund was rejected in view of the Larger Bench holding that the statutory scheme requires the assessment (including self-assessment) to be subject to challenge/modification before a refund can be granted. Applying that principle to the facts, the appellant's refund applications were held not maintainable because the self-assessment was not challenged prior to seeking refund. [Paras 4, 5]

Refund applications were not maintainable in the absence of challenge to the self-assessment; appeals rejected and impugned orders upheld.

Final Conclusion: The Tribunal rejected the appeals and upheld the orders refusing refund, holding that in terms of the Supreme Court's Larger Bench authority a self-assessment is an appealable assessment order and a refund claim cannot be entertained unless that assessment has first been challenged and modified through appropriate proceedings.

Distinction between filing of an appeal and entertaining an appeal - mandatory pre-deposit for entertaining appeal under Section 129E of the Customs Act, 1962 - condonable filing period under Section 128(1) of the Customs Act, 1962 - remittal for decision on merits where appeal is filed within condonable period

Distinction between filing of an appeal and entertaining an appeal - mandatory pre-deposit for entertaining appeal under Section 129E of the Customs Act, 1962 - condonable filing period under Section 128(1) of the Customs Act, 1962 - Whether the date of filing of the appeal or the date of making the mandatory pre-deposit is to be reckoned for computing the time limit under Section 128 of the Customs Act, 1962 - HELD THAT: - The Tribunal accepted the distinction drawn by the Hon'ble High Court of Gujarat that filing an appeal under Section 128 and entertaining an appeal under Section 129E are not synonymous. Section 129E makes the pre-deposit a condition for entertaining (i.e., hearing and deciding) an appeal but does not, by its language, render filing of the memorandum of appeal impermissible if the challan is not yet produced. The Commissioner (Appeals) may refuse to entertain an appeal for want of the pre-deposit, but that statutory condition does not convert the act of filing into non-filing. Applying that principle to the facts, the appellant filed the appeal within the condonable period; a deficiency memorandum was issued for non-payment of pre-deposit and the deficiency was subsequently cured. The First Appellate Authority erred in treating the date of curing the defect (payment of pre-deposit) as the date of filing and thereby holding the appeal time-barred. Following the ratio in Ramesh Vasantbhai Bhojani, the Tribunal held that the appeal was filed within the condonable time and remitted the matter to the First Appellate Authority for adjudication on merits. [Paras 5]

Appeal allowed; appeal treated as filed within the condonable period and the matter remitted to the First Appellate Authority for decision on merits.

Final Conclusion: The Tribunal held that filing of the appeal within the condonable period is distinct from making the mandatory pre-deposit required for entertaining the appeal; the appellant's appeal was accordingly held to have been filed within time and was remitted to the First Appellate Authority for adjudication on merits.

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of default for initiation of corporate insolvency resolution process - effect of acknowledgement of debt on limitation - assignment of financial debt by registered assignment agreement - pendency of parallel proceedings not a bar to initiation under Section 7 - declaration and scope of moratorium under Section 14 of the Code - appointment of interim resolution professional

Existence of default for initiation of corporate insolvency resolution process - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The application under Section 7 was complete and the corporate debtor had committed default, warranting admission of the petition and initiation of corporate insolvency resolution process. - HELD THAT: - On consideration of the records and documents filed by the applicant, including banker's books and loan agreements, the Tribunal was satisfied that the corporate debtor's account had been classified as NPA on 31.03.2013 and that a financial debt remained outstanding. The application was in prescribed Form-1 with requisite fee and proposed an interim resolution professional with registration certificate. Relying on the principle in Innoventive Industries Ltd. v. ICICI Bank & Anr., the adjudicating authority need only be satisfied from records that a default has occurred; it is not precluded from admission merely because the debt is disputed. Applying this test, the Tribunal found existence of default and that the petition met the requirements of Section 7, and therefore admitted the petition. [Paras 12, 13, 14, 15, 16]

Petition admitted under Section 7 and corporate insolvency resolution process initiated.

Effect of acknowledgement of debt on limitation - assignment of financial debt by registered assignment agreement - The plea that the petition was time barred was rejected on the ground that the corporate debtor had acknowledged the debt and the financial creditor held the assigned debt. - HELD THAT: - The Tribunal observed communications between the corporate debtor and UCO Bank evidencing acknowledgements of debt, including settlement proposals prior to expiry of the limitation period and entries in the corporate debtor's financial statements showing a liability to the bank. The assignment of the debt from UCO Bank to the applicant by registered assignment dated 26.03.2014 established the applicant as the financial creditor. In view of such acknowledgements and the assignment, the limitation objection was held not maintainable and did not preclude admission. [Paras 10, 11]

Limitation objection overruled; petitioner recognised as financial creditor by virtue of assignment.

Pendency of parallel proceedings not a bar to initiation under Section 7 - Pendency of other proceedings did not prevent admission of the Section 7 petition. - HELD THAT: - The Tribunal noted that the pendency of proceedings before other fora, including arbitrators or courts, does not operate as a bar to the initiation of CIRP under Section 7. Consequently, the existence of parallel proceedings was not a ground to reject or stay the petition under the Code. [Paras 11]

Parallel proceedings do not preclude admission under Section 7.

Appointment of interim resolution professional - An interim resolution professional was appointed upon admission of the petition. - HELD THAT: - The applicant proposed a named insolvency professional and furnished Form 2 and the professional's registration certificate declaring no disciplinary proceedings. On examination of the records, the Tribunal appointed the proposed professional as interim resolution professional and recorded the registration details as contained in the application. [Paras 14]

Mr. Hiten M. Parikh appointed as Interim Resolution Professional.

Declaration and scope of moratorium under Section 14 of the Code - Moratorium was declared on admission and its scope with respect to suits, transfer of assets, enforcement of security and recovery was specified. - HELD THAT: - Upon admission, the Tribunal declared moratorium under Section 14(1) effective from receipt of the authenticated order and until completion of the CIRP or approval of a resolution plan or order for liquidation. The moratorium prohibits institution or continuation of suits or proceedings, transfer or encumbrance of assets, enforcement of security interests including actions under the SARFAESI Act, and recovery of property occupied by the corporate debtor; it also protects supply of goods and essential services from termination during the moratorium except as notified by the Central Government. [Paras 17, 18, 19]

Moratorium declared with the specified prohibitions and protections.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by JM Financial Asset Reconstruction Company Limited on the basis of established default and valid assignment of debt, rejected the limitation and parallel proceedings objections, appointed an interim resolution professional, and declared the moratorium as prescribed under the Code; the petition is disposed of with no order as to costs.

Operational creditor - operational debt - claim in respect of the provision of goods or services - application for initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency & Bankruptcy Code - credit notes and reduction of purchase price - purchase return not constituting provision of goods

Operational creditor - operational debt - claim in respect of the provision of goods or services - credit notes and reduction of purchase price - purchase return not constituting provision of goods - Whether the applicant is an operational creditor and whether the claimed amounts (credit notes and debit note for returned goods) constitute an operational debt entitling initiation of CIRP under Section 9. - HELD THAT: - The Tribunal examined the definitions of "operational creditor" and "operational debt" and framed the threshold question of whether the applicant's claim arises from a claim in respect of provision of goods or services. The applicant's asserted claim comprised credit notes that operate to reduce the purchase price of Timex watches already received and a debit note in respect of returned watches. The Tribunal held that credit notes, which merely adjust or reduce the purchase price post-supply, do not constitute a fresh claim in respect of provision of goods; they are adjustments to the consideration for goods already provided. Similarly, a debit note raised for returned goods relates to purchase returns and does not amount to a claim for provision of goods or services. Having applied these legal principles to the material before it, and after considering the parties' contentions and cited authorities, the Tribunal concluded that the applicant failed to establish that an operational debt was owed to it and therefore failed to qualify as an operational creditor for the purposes of Section 9. Consequently, the Section 9 petition could not be maintained and further statutory requirements of Section 9 were not examined. [Paras 19, 20, 23, 24]

The applicant is not an operational creditor and the claimed amounts do not constitute an operational debt; the Section 9 application is rejected.

Final Conclusion: The petition under Section 9 of the Insolvency & Bankruptcy Code for initiation of CIRP against Timex India Group Limited is dismissed as the applicant has not established an operational debt or its status as an operational creditor; no order as to costs and the order is to be forwarded to the IBBI.

Service tax - negative list regime - definition of service - small scale exemption - threshold exemption - cum-tax benefit - remand for re-quantification - penalty - absence of mala fide / bona fide belief - limitation

Service tax - negative list regime - definition of service - Whether the activity of collecting shipments from the door of Gati Ltd. and delivering to consigners amounts to taxable 'service' under the negative list regime for the period January, 2013 to March, 2014. - HELD THAT: - The Tribunal agreed with the lower authorities that the appellant's activity of collection and delivery performed for M/s Gati Ltd. falls within the definition of 'service' and is not covered by the negative list introduced from 01/07/2012 nor by any exemption under the Mega Notification No.25/2012. Earlier decisions relating to periods prior to 01/07/2012 were held inapplicable to the negative list era. The appellant did not establish that the services fell within any exclusion or exemption under the new regime; accordingly the demand of service tax was sustained in principle.

Demand for service tax in relation to the said activity is upheld subject to re-quantification on remand.

Small scale exemption - threshold exemption - remand for re-quantification - cum-tax benefit - Whether the appellant is entitled to threshold/small scale exemption under Notification No.33/2012-ST and consequent re-quantification of demand. - HELD THAT: - The Tribunal observed that the total consideration received by the appellant from M/s Gati Ltd. was approximately the threshold level and that the lower authorities had not given the benefit of Notification No.33/2012 ST. The matter was set aside and remanded to the Original Adjudicating Authority to re-quantify any demand after allowing the threshold exemption available under that Notification. The Tribunal further directed that, if liability is found, quantification should extend the benefit of cum-tax.

Matter remanded for re-quantification of demand after allowing threshold/small scale exemption and, if liable, quantification with cum tax benefit.

Penalty - absence of mala fide / bona fide belief - Whether the penalty imposed on the appellant is justified. - HELD THAT: - The Tribunal took into account that the appellant is a small scale delivery person who may have reasonably believed the services were not taxable and that similar services were not taxable for earlier periods; no positive evidence of mala fide or deliberate tax evasion was produced. On this basis the Tribunal held the imposition of penalty unjustified and set aside the penalty.

Penalty imposed upon the appellant is set aside.

Limitation - Whether the appellant may contest part of the demand on limitation grounds. - HELD THAT: - The Tribunal expressly left the appellant free to contest any portion of the demand on the point of limitation before the adjudicating authority, without adjudicating the limitation issue itself.

Appellant permitted liberty to contest part of the demand on limitation; limitation issue left open for adjudication.

Final Conclusion: Appeal disposed: service tax liability upheld in principle for January, 2013 to March, 2014 but remanded for re quantification after allowing Notification No.33/2012 ST threshold exemption and applying cum tax benefit; penalty set aside; appellant granted liberty to contest limitation.

Cenvat credit - input service - insurance services for deposit insurance - entitlement of a banking company to avail Cenvat credit - reference to Larger Bench

Cenvat credit - input service - insurance services for deposit insurance - banking company - conflicting Tribunal decisions - Whether a banking company is entitled to avail Cenvat credit on service tax paid to Deposit Insurance and Credit Guarantee Corporation for insuring deposits - HELD THAT: - The Tribunal recorded that there are contrary decisions of coordinate benches on the entitlement to Cenvat credit in respect of insurance services provided by the Deposit Insurance and Credit Guarantee Corporation. In view of the conflicting precedents relied upon by the parties, the Tribunal considered it appropriate in the interest of justice to refer the question for authoritative decision by a Larger Bench. No adjudication on the merits of the entitlement was undertaken; instead the matter was formulated as a question of law requiring resolution by a Larger Bench of the Tribunal. [Paras 5]

The question whether a banking company can avail Cenvat credit on service tax paid to the Deposit Insurance and Credit Guarantee Corporation for insuring deposits is referred to a Larger Bench of the Tribunal for decision.

Final Conclusion: The appeal is not decided on merits; the determinative question regarding entitlement to Cenvat credit for deposit insurance services is referred to a Larger Bench and the Registry is directed to place the papers before the Hon'ble President for constitution of the Larger Bench.

Cenvat credit entitlement - Input service provider payment verification - Availability of credit where tax is paid by input service provider - Admissibility of credit on proof of payment - Remand for de-novo adjudication - Right to cross-examination of deponents

Cenvat credit entitlement - Availability of credit where tax is paid by input service provider - Input service provider payment verification - Whether the claim of cenvat credit availed by the appellant against invoices issued by M/s Sakshi Trade Link Pvt. Ltd. requires fresh adjudication to verify payment of service tax by the input service provider and, if established, whether the credit is admissible. - HELD THAT: - The appellants produced additional documents - an affidavit/retraction by a director of the invoicing entity, a certificate from another director, and bank statements evidencing deposits said to be payment of service tax by M/s Sakshi Trade Link Pvt. Ltd. The Tribunal observed that cenvat credit is available to a service recipient where the input service provider has in fact paid the service tax. The Revenue contested existence of the service provider at the time of its investigation and relied on statements of various persons who were not cross-examined. In view of the newly placed material and the factual dispute on whether the input service provider actually deposited the service tax, the Tribunal found that the question requires verification by the Original Adjudicating Authority. The Tribunal therefore declined to express any view on the merits of the retraction or the affidavits and remanded the matter for a de-novo decision, permitting the appellant to raise all issues including seeking cross-examination of deponents to those statements. [Paras 4, 5, 6]

Impugned order set aside and matter remanded to the Original Adjudicating Authority for fresh adjudication to verify whether M/s Sakshi Trade Link Pvt. Ltd. actually paid the service tax; if payment is established and no objection was raised by the Revenue on receipt, the credit shall be admissible to the assessee.

Final Conclusion: The appeals are allowed by setting aside the impugned order and remanding the dispute to the Original Adjudicating Authority for de-novo adjudication to verify payment by the input service provider and to decide admissibility of the cenvat credit; the appellant may pursue cross-examination and all pleas before the Authority.

Refund of service tax for SEZ units - requirement of approval list of taxable services for authorized operations - evidentiary requirement to substantiate receipt and use of input services in SEZ - time limitation for filing refund applications and discretionary extension of limitation - Notification No.17/2011-S.T. provisions on refund and approval of services

Requirement of approval list of taxable services for authorized operations - Notification No.17/2011-S.T. provisions on refund and approval of services - Denial of refund on the ground that the Letter of Approval for the list of services was obtained after the period of refund claim is not sustainable. - HELD THAT: - The Tribunal examined paragraph 2(b) of the Notification dated 01.03.2011 which requires that the Developer or Unit of SEZ shall obtain an approved list of taxable services required for authorized operations. The provision does not mandate that the Letter of Approval must be obtained prior to filing a refund application. On the undisputed finding that the appellant was a unit operating under the SEZ Scheme and was procuring services on the basis of approval issued by the Approval Committee, denial of refund solely because the Letter of Approval was dated after the refund period is not supported by the Notification and is therefore legally improper. [Paras 5]

Denial of refund on this ground set aside; refund cannot be denied for lack of prior approval letter.

Evidentiary requirement to substantiate receipt and use of input services in SEZ - Notification No.17/2011-S.T. provisions on refund and approval of services - Denial of refund on the ground that documentary evidence of receipt and use of specified services in SEZ was not produced is not sustained. - HELD THAT: - The Tribunal referred to the formula and information requirements prescribed in the Notification (Table (B) and columns 9.1, 9.2 read with para 3(f)(iii)(A)). On perusal of the records, the lower authorities did not specifically find non-compliance with those prescribed conditions. The appellant had submitted the information as required under Table (B); consequently, a generalized allegation of non-submission of documents does not justify denial of refund under the Notification. [Paras 5]

Denial of refund on the alleged non-submission of documentary evidence set aside; refund entitlement upheld subject to compliance with prescribed form/content.

Time limitation for filing refund applications and discretionary extension of limitation - refund of service tax for SEZ units - Refund claim filed beyond the one-year period could not be rejected where the empowered authority did not exercise the discretionary power to extend limitation and the department did not dispute use of services for SEZ operations. - HELD THAT: - Paragraph 3(e) of the Notification dated 01.03.2011 prescribes that refund claims shall be filed within one year from the end of the month in which payment was made, but also vests discretion in Central Excise officers to extend the period. In the present case the refund application was filed after the stipulated period and the statutory discretion to condone delay was not exercised by the adjudicating authority. Since the department did not deny or dispute the use of input services for SEZ operations and the Tribunal's earlier decisions on similar facts were held applicable, rejection on limitation alone without exercising the statutory discretion was unsustainable. [Paras 5]

Rejection of refund solely on the ground of limitation set aside; matter decided in favour of the appellant with consequential refund.

Final Conclusion: The impugned order is set aside; the appeals are allowed and the appellant is entitled to refund of service tax claimed for SEZ operations, the denials based on late approval letter, alleged non-production of documents, and limitation being unsustainable in the facts of this case.

Condonation of delay under Section 5 of the Limitation Act - maintainability of appeal under Section 35G of the Central Excise Act, 1994 vis-a -vis remedies under Section 35L - effect of dismissal of connected appeal on similar appeals

Condonation of delay under Section 5 of the Limitation Act - Application for condonation of 270 days' delay in re-filing/filing the appeal was allowed. - HELD THAT: - The Court considered the application seeking condonation of delay of 270 days in re-filing and, separately, under Section 5 of the Limitation Act for filing the appeal. For the reasons set out in the applications (recorded in the applications before the Court), the Court exercised its discretion to condone the delay. No further factual or evidentiary dispute on the propriety of condonation was addressed in the order; the applications were allowed and the delay stood condoned.

Delay of 270 days in re-filing and in filing the appeal is condoned.

Maintainability of appeal under Section 35G of the Central Excise Act, 1994 vis-a -vis remedies under Section 35L - effect of dismissal of connected appeal on similar appeals - Present appeal under Section 35G was dismissed because a connected appeal raising the same question was held to be maintainable only before the Supreme Court under Section 35L. - HELD THAT: - The Court noted that the CESTAT had set aside the original order and the Revenue filed an appeal under Section 35G. At the hearing the appellant conceded that the connected appeal (CEA 12 of 2018) challenging the same common order in respect of the company was dismissed on 13.11.2018 on the ground that the appeal ought to be filed before the Supreme Court under Section 35L. In view of that conceded position and the decision in the connected appeal, the Court dismissed the present appeal in the same terms as CEA 12 of 2018. The dismissal follows from the determination that the remedy for the subject matter of the common order lies under Section 35L before the Supreme Court, and the connected appeal's outcome is dispositive of the present appeal.

Present appeal dismissed in the same terms as the connected appeal held to be maintainable only before the Supreme Court under Section 35L.

Final Conclusion: Applications for condonation of 270 days' delay were allowed; however, the appeal on merits was dismissed because the connected appeal on the same common order was held to be maintainable only before the Supreme Court under Section 35L, and the present appeal was disposed of in the same terms.

Clandestine manufacture and surreptitious removal - standard of proof for clandestine removal - requirement of direct, positive and corroborative evidence beyond mere presumptions or theoretical calculations - reliability of trial run/consumption-based estimation from packing material (Printed Laminated Roll) for past production - retracted/confessional statements and right to cross-examination - evidentiary value and requirement of corroboration - confiscation of raw/packing materials and unfinished goods - requirement that goods must have reached accounting stage before seizure - duty demand based solely on third party/transporter records - insufficiency without link to assessee

Reliability of trial run/consumption-based estimation from packing material (Printed Laminated Roll) for past production - standard of proof for clandestine removal - requirement of direct, positive and corroborative evidence beyond mere presumptions or theoretical calculations - Whether a duty demand for clandestine manufacture and removal can be sustained on the basis of a disputed single trial run and theoretical consumption of packing material (PLR). - HELD THAT: - The Tribunal held that a demand founded solely on an estimation of production derived from a trial run of Printed Laminated Roll is unsustainable. The trial run was disputed, conducted on a single day and machine, and exposed to contradictions in the officers' accounts; crucial raw materials for manufacture (supari, katha, tobacco, menthol etc.) showed no unaccounted receipts. Applying established authorities, the Tribunal emphasised that clandestine manufacture and removal is a serious charge which must be proved by direct, tangible and corroborative evidence and cannot rest on presumptions or theoretical calculations drawn from packing material alone. Consequently the average consumption formula based on the disputed trial run could not support the large duty demand for the period in question.

Demand based on the disputed PLR trial run and consumption formula set aside; such estimation alone cannot sustain allegation of clandestine manufacture and removal.

Retracted/confessional statements and right to cross-examination - evidentiary value and requirement of corroboration - standard of proof for clandestine removal - requirement of direct, positive and corroborative evidence beyond mere presumptions or theoretical calculations - Whether reliance could be placed on statements retracted by witnesses and whether denial and cross-examination deprived the assessee of natural justice. - HELD THAT: - The Tribunal found that several statements relied upon by the adjudicating authority were subsequently retracted and that witnesses, including employees and the director, alleged coercion; cross-examinations disclosed material discrepancies in investigation (including manner of trial run and attendance of panchas). When statements are disputed and retracted, their evidentiary value is weakened and corroboration by independent evidence is necessary to sustain grave allegations. The Tribunal held that the request for cross examination was a valuable right and, having been allowed and resulting in contradictions, those outcomes had to be considered; absent corroboration, the retracted/confessional statements could not support the demands.

Retractions and cross examination undermined reliance on the statements; the impugned findings based solely or primarily on such statements could not be sustained.

Duty demand based solely on third party/transporter records - insufficiency without link to assessee - Whether a demand premised on transporter records (Sarco Roadlines etc.) without direct linking evidence to the assessee can be sustained. - HELD THAT: - The Tribunal observed that demands founded on transporter records are third party in nature and, in the absence of evidence identifying consignor/consignee from the assessee or establishing origin of the goods, such records do not suffice to fasten liability for clandestine clearances. The adjudicating authority produced no corroborative material to connect the transporter entries to the appellant's factory or to show who effected the consignments from the appellant's concern.

Demand based solely on transporter records set aside for want of evidentiary link to the appellant.

Confiscation of raw/packing materials and unfinished goods - requirement that goods must have reached accounting stage before seizure - Whether confiscation of seized packing material, raw material and PMG pouches in strip/unfinished form was justified. - HELD THAT: - The Tribunal found that most seized items were legally acquired raw or packing materials and only a portion comprised PMG in strip (loose) form awaiting inner carton and corrugated boxing; such strips had not reached RG 1 accounting stage. Since the goods were not in finished, accounted state nor was there evidence of preparation to remove them clandestinely, confiscation was not justified. Established principle requires that seizure/confiscation of materials alleged to be part of clandestine removal must be supported by evidence that they constituted finished goods or were intended for unauthorized removal.

Confiscation of raw/packing materials and unfinished strips set aside; no warrant for seizure where goods had not reached accounting/finished stage.

Reliability of trial run/consumption-based estimation from packing material (Printed Laminated Roll) for past production - retracted/confessional statements and right to cross-examination - evidentiary value and requirement of corroboration - Whether the separate demand under rule/provisions for PLR found in godown and related penalties could be sustained where goods were later used in manufacture after provisional release. - HELD THAT: - The Tribunal noted that PLR seized from the godown was ultimately released and consumed in manufacture; there was no evidence the goods were intended to be removed without payment of duty. Given the absence of intention to export or clandestinely clear such PLR and lack of corroborative evidence of misuse, the technical breach alleged could not justify the confirmed demand. The Tribunal reiterated that mere presence of inputs in godown does not establish wrongful clearances absent positive evidence.

Demand and penalties relating to PLR found in the godown set aside.

Standard of proof for clandestine removal - requirement of direct, positive and corroborative evidence beyond mere presumptions or theoretical calculations - Whether confiscations and demands based on seizures from third parties (Vinayak Agencies, Jeevan Agencies) lacking consistent identification could be sustained. - HELD THAT: - The Tribunal found contradictions in the statements of third parties (for example, inconsistent accounts by a partner of a distributor and subsequent retraction). There was no independent evidence connecting the seized consignments to the appellant's factory. In such circumstances and in line with established precedents, the Tribunal held that the department failed to produce strict, tangible and corroborative evidence to justify confiscation or to sustain demands based on those seizures.

Confiscations and related demands based on third party seizures set aside for want of corroborative evidence linking goods to the appellant.

Final Conclusion: The appeals by M/s Dhariwal Industries Ltd. and co appellants are allowed: the adjudicated demands, penalties and confiscations founded on the disputed PLR consumption trial run, retracted statements, transporter records and third party seizures are set aside for lack of direct, positive and corroborative evidence; the appeal of Shri R.M. Dhariwal stands abated.

Proportionate reversal of CENVAT credit - treatment of "total CENVAT credit" in Rule 6(3A) - procedural lapse of non-filing of intimation - extended period of limitation and suppression of facts - retrospective clarificatory amendment to Rule 6(3A)

Treatment of "total CENVAT credit" in Rule 6(3A) - proportionate reversal of CENVAT credit - retrospective clarificatory amendment to Rule 6(3A) - Whether the formula in Rule 6(3A) requires consideration of CENVAT credit availed on all inputs and input services or only the CENVAT credit of common input services for computing proportionate reversal. - HELD THAT: - The Tribunal followed the Division Bench decision in Commissioner of Central Excise, Rajkot v. Reliance Industries Ltd., holding that when Rule 6 is read harmoniously, the term "total Cenvat credit" in the formula under Rule 6(3A) refers only to the total CENVAT credit of common input services and does not include credit on inputs or input services exclusively used for dutiable goods. The substituted sub rule (3A) by Notification No.13/2016 was viewed as clarificatory and retrospective in effect, confirming that it was never the legislative intent to deny credit for inputs/input services used in manufacture of dutiable goods. Applying that ratio, the impugned orders which applied "total CENVAT credit" across all credits were held not sustainable and set aside. [Paras 6]

Impugned demand for short reversal based on treating "total CENVAT credit" as inclusive of all credits is set aside; only CENVAT credit of common input services is to be considered for proportionate reversal.

Procedural lapse of non-filing of intimation - extended period of limitation and suppression of facts - Whether non filing of the intimation under Rule 6 and the consequent invocation of extended period of limitation were justified as amounting to suppression of material facts with intent to evade duty. - HELD THAT: - Relying on Tribunal precedents (Vertiv Energy Pvt. Ltd. and Merceds Benz India Pvt. Ltd. as discussed by the Tribunal), non filing of the intimation/declaration was held to be a procedural lapse because the information was available to the Department through periodic ST 3 returns. There was no evidence of suppression of material facts with intent to evade duty. Consequently, invocation of the extended period of limitation on the ground of suppression was not justified. Since the appeals were allowed on merits following the Ratio in Reliance, there was no need to further examine limitation. [Paras 6, 7]

Non filing of intimation is a procedural lapse and does not amount to suppression; extended period of limitation was not to be invoked on these facts.

Final Conclusion: Both appeals allowed on merits: the demands and penalties confirmed by the Commissioner (Appeals) are set aside by applying the Tribunal's ratio that the Rule 6(3A) formula contemplates only CENVAT credit of common input services for proportionate reversal, and non filing of intimation is a procedural lapse not warranting extended limitation.

Applicability of Rule 6 of CCR, 2004 to electricity generated from waste/residuals - Waste products/char as non-manufacture - Rule 6(3AA) CCR, 2004 - reversal/payment of proportionate CENVAT credit - Electricity not excisable goods

Applicability of Rule 6 of CCR, 2004 to electricity generated from waste/residuals - Waste products/char as non-manufacture - Demand under Rule 6(3)(i) for 6% of the value of electricity sold is not sustainable where electricity is generated by use of waste heat and residual waste (char/dolochar) arising from the manufacture of a dutiable final product. - HELD THAT: - The Tribunal proceeded on the finding that the electricity in the present case was generated by utilising waste heat and residual waste (char/dolochar) arising from the process of manufacture of sponge iron. Applying the settled principle that generation or use of waste heat or residual ash/char is not a process of manufacture of a separate final product, the provisions of Rule 6 of the CCR, 2004 (which address common inputs/services attributable to both dutiable and exempted outputs) do not apply. The conclusion is reinforced by reliance on the Supreme Court and Tribunal authorities cited in the order to the effect that burning of coal and generation/use of residual waste does not constitute manufacture of a new product, and that waste/char is a residual by-product. On these findings the demand calculated as 6% of the value of electricity sold was held unsustainable. [Paras 6]

Demand under Rule 6 for 6% of the value of electricity sold set aside insofar as electricity was generated from waste heat and residual waste.

Rule 6(3AA) CCR, 2004 - reversal/payment of proportionate CENVAT credit - Payment/reversal made by the appellant under Rule 6(3AA) (inserted w.e.f. 01/04/2016) satisfied the statutory requirement and was a proper mode of compliance in place of the 6% demand. - HELD THAT: - The Tribunal noted that Rule 6(3AA), introduced with effect from 01/04/2016, permits an assessee to reverse or pay proportionate CENVAT credit attributable to common inputs or input services. In the present case the appellant had made payments under the said sub-rule and produced challans evidencing payment of the proportionate amount along with interest after the issuance of the show-cause notice. The authorities below had failed to take this amendment and the subsequent compliance into account. The Tribunal found that the payments made by the appellant satisfied the requirement of Rule 6(3AA)/6(3A) and that this remedial step precluded sustaining the demand under Rule 6(3)(i) for the period in issue. [Paras 6]

Payments under Rule 6(3AA) accepted as satisfying the statutory obligation; consequential demand set aside.

Electricity not excisable goods - Prior Tribunal finding that electricity, though listed in the tariff, is not excisable goods was affirmed as relevant to the present dispute and supports the conclusion against the demand. - HELD THAT: - The Tribunal recorded that in the appellant's own earlier proceedings it had held that electricity, despite tariff classification, does not constitute excisable goods for the purposes of the duty regime relied upon by the Department. That earlier decision was treated as persuasive for the same factual matrix in the present appeal. Coupled with the finding that the electricity in the present case was generated from waste/residuals and the availability of Rule 6(3AA) remedy, the characterization of electricity as not attracting excise in this context weighed against sustaining the demand. [Paras 6]

Earlier Tribunal finding that electricity is not excisable goods applied; supports setting aside the demand.

Final Conclusion: Appeal allowed. The impugned order rejecting the appellant's challenge is set aside; the demand of 6% of the value of electricity sold to the distribution company is held not sustainable in law, having regard to the use of waste/residuals for electricity generation and the appellant's compliance under Rule 6(3AA), with consequential relief as due.

CENVAT credit of service tax - repair and maintenance services during warranty period - place of provision of service and credit eligibility for services rendered at customers' premises - precedential application of Tribunal decisions

CENVAT credit of service tax - repair and maintenance services during warranty period - place of provision of service and credit eligibility for services rendered at customers' premises - precedential application of Tribunal decisions - Admissibility of CENVAT credit of service tax paid on repair and maintenance of DG sets carried out at customers' premises during the warranty period. - HELD THAT: - The Tribunal noted that it was undisputed that the repair and maintenance services of DG sets were rendered during the warranty period at the customers' premises (i.e., outside the factory). The question of entitlement to CENVAT credit for such service tax has been considered in earlier Tribunal decisions, including M/s Carrier Airconditioning & Refrigeration Ltd and Honda Motorcycles & Scooter India Pvt. Ltd, which held such credit to be admissible. Applying these precedents, and finding no error in the appellant's claim for the period September 2014 to July 2015, the Tribunal concluded that the impugned denial of credit by the Commissioner (Appeals) was not sustainable. [Paras 6, 7]

Impugned order denying CENVAT credit set aside; credit for service tax paid on repairs and maintenance of DG sets during the warranty period allowed.

Final Conclusion: The appeal is allowed; the Commissioner (Appeals) order denying CENVAT credit for service tax paid on warranty-period repairs and maintenance of DG sets carried out at customers' premises for the period September 2014 to July 2015 is set aside, and credit is held admissible following relevant Tribunal precedents.

Classification of composite supplies under Central Excise Tariff - application of Rule 3(c) of interpretation rules - manufacture and taxable event - brand-name labelling and liability for excise - extended period for assessment and suppression/fraud - time-bar and limitation in excise assessments

Classification of composite supplies under Central Excise Tariff - manufacture and taxable event - brand-name labelling and liability for excise - application of Rule 3(c) of interpretation rules - Whether the complete meal tray served on board was liable to Central Excise duty as an edible preparation bearing a brand-name and properly classifiable as a manufactured item by the appellant. - HELD THAT: - The Tribunal held that the Department had not established that the appellants manufactured and removed a branded edible preparation. The appellants prepared items such as dal, roti, rice and curry and supplied them in trays/bowls wrapped in aluminium foil, while cutlery pouches bearing labels/logo were supplied separately and the items were assembled by airline staff at time of service. The Original Authority applied Rule 3(c) of the interpretation rules without sequentially considering competing headings or examining whether a taxable manufacture had in fact taken place. Given that the food items left the appellant's premises without brand-name and various bought-out labelled items and cutlery were supplied separately, it was unsustainable to tax the entire assembled meal tray on its whole value as a manufactured branded edible preparation. The Tribunal therefore found no basis to uphold classification and demand based on branding or on taxing the full value of the tray. [Paras 9, 10, 11, 12, 13]

Demand and classification of the entire meal tray as excisable branded edible preparation is not sustainable; the impugned findings on manufacture/classification are set aside.

Extended period for assessment and suppression/fraud - time-bar and limitation in excise assessments - Whether invocation of the extended period for issuance of the show-cause notice was justified on grounds of suppression or intent to evade duty. - HELD THAT: - The Tribunal observed that the show-cause notice covering 1-2-2005 to 3-5-2006 was issued after many years invoking the extended period, alleging suppression. The Original Authority relied on the appellants' prior registration for other products to infer knowledge and non-disclosure. The Tribunal found no evidence of fraud, suppression or wilful misstatement; catering to airlines and the mode of supply were well-known facts and other similarly placed caterers had not been paying excise on such meals. In these circumstances and given that the dispute was essentially one of legal interpretation rather than concealment, invocation of the extended period was unjustified. [Paras 14]

Invocation of the extended period is not sustainable; the demand for the extended period is set aside.

Final Conclusion: The impugned order is set aside and the appeal is allowed; the findings of excisable manufacture/classification and the invocation of the extended period are quashed, with consequential relief as per law.

Cenvat credit - place of removal - input service - Section 4A valuation (MRP-based valuation) - job worker / manufacture on behalf of principal - outward Goods Transport Agency (GTA) service - conflicting precedents requiring larger bench reference

Cenvat credit - place of removal - Section 4A valuation (MRP-based valuation) - outward Goods Transport Agency (GTA) service - job worker / manufacture on behalf of principal - Reference to a Larger Bench on entitlement to cenvat credit of service tax paid on outward GTA for transportation from job worker's premises to principal's depot when excise valuation is under Section 4A. - HELD THAT: - The Tribunal noted that the appellant manufactures biscuits as a job worker for the principal and clears goods to the principal's depots while paying excise duty on MRP under Section 4A. There are contrary decisions on whether outward GTA up to the principal's depot qualifies as an input service admissible for cenvat credit when valuation is under Section 4A: certain Division Bench and High Court decisions have allowed credit on similar facts, while other Division Bench and High Court decisions (including Kohinoor Biscuits) have held that where valuation under Section 4A treats the factory gate as the place of removal, outward GTA beyond the factory gate is not an admissible input service. Given these directly conflicting precedents and the absence of a consistent position, the Tribunal concluded that the legal question whether such outward GTA is admissible for cenvat credit in the facts stated requires authoritative determination by a Larger Bench, and therefore proposed a reference of the stated question to the Larger Bench for decision. [Paras 5, 6, 7, 8]

Question framed for reference to a Larger Bench and Registry directed to place the matter before the President of the Tribunal for constitution of a Larger Bench.

Final Conclusion: Because of conflicting decisions on whether outward GTA services used to transport goods from a job worker to the principal's depot are admissible as input services for cenvat credit when valuation is under Section 4A, the matter is referred to a Larger Bench of the Tribunal to decide the stated question; the Registry is directed to place the matter before the President for constitution of the Larger Bench.

Remand for fresh consideration - Dissolution of partnership and liability - Mixed question of law and fact - Maintainability of proceedings against dissolved firm - Duty liability arising prior to dissolution

Dissolution of partnership and liability - Mixed question of law and fact - Maintainability of proceedings against dissolved firm - Whether proceedings and demand could be continued against the partnership firm after its dissolution and whether liability for the alleged shortfall survives dissolution - HELD THAT: - The appellants raised, for the first time before the Tribunal, a defence that the partnership firm had been dissolved by deed dated 09.03.2007 and that accordingly proceedings could not be continued against the dissolved firm. The Tribunal observed that although the cause of action and initiation of proceedings pre dated the alleged dissolution, the new plea involves mixed questions of law and fact which were neither raised before nor considered by the lower authorities. Because the issue requires factual verification (production and examination of records relating to dissolution, timing of cause of action and whether liability attaches to partners post dissolution) the Tribunal refrained from deciding the question on merits and remanded the matter to the adjudicating authority for fresh consideration. The appellants were directed to produce all relevant records and the adjudicating authority was directed to pass a fresh order preferably within three months. [Paras 4]

Matter remanded to the adjudicating authority to decide the plea about dissolution of the partnership (with direction to produce records and to decide preferably within three months); appeals and miscellaneous application disposed of by remand.

Final Conclusion: The Tribunal did not adjudicate the new contention that the partnership's dissolution precludes continuing proceedings; it remanded that mixed question of law and fact to the adjudicating authority for fresh consideration with directions to receive records and pass a fresh order within the stipulated time, and disposed of the appeals and miscellaneous application by remand.

Assessment under section 4A of the Central Excise Act, 1944 - retail sale price / maximum retail price (MRP) requirement under the Drugs (Prices Control) Order, 1995 - supplies to institutional buyers for consumption not being "offered for retail sale" - printing/affixing of MRP as condition for applicability of section 4A - remand rendering earlier appellate/administrative proceedings infructuous

Assessment under section 4A of the Central Excise Act, 1944 - retail sale price / maximum retail price (MRP) requirement under the Drugs (Prices Control) Order, 1995 - supplies to institutional buyers for consumption not being "offered for retail sale" - Supplies of medicaments to institutional buyers running hospitals which are intended for consumption in those hospitals and not offered for retail sale are not liable to assessment on the basis of retail sale price under section 4A. - HELD THAT: - The Tribunal examined notification bringing medicaments within the scope of section 4A and the definition of "retail sale price" as tied to the Drugs (Prices Control) Order, 1995 (DPCO). DPCO paras 14 and 15 require printing/display of retail price/MRP on containers and minimum packs of formulations "offered for retail sale." The Tribunal found that the requirement to display MRP is triggered only where the formulation is "offered for retail sale." Evidence produced by the appellant (certificates from institutional purchasers) showed supplies were for consumption in institutional hospitals and bore markings such as "hospital supply - not for sale;" Revenue produced no evidence that institutional buyers further sold the goods at retail. Relying on the reasoning in USV Ltd., the Tribunal held that where goods are not offered for retail sale the DPCO MRP display obligation does not apply and consequently assessment under section 4A (based on retail sale price) cannot be sustained in respect of such institutional supplies.

Demand under section 4A in respect of medicaments supplied to institutional hospitals for consumption (and not for retail sale) set aside; appeals E/12757/2018 and E/12758/2018 allowed.

Remand rendering earlier appellate/administrative proceedings infructuous - Revenue's appeal E/778/2011 filed against the earlier order became infructuous after the Tribunal remanded the matter to the adjudicating authority and is accordingly dismissed as infructuous. - HELD THAT: - The Tribunal noted that its earlier order remanding the matter to the adjudicating Commissioner made the prior order (against which Revenue's appeal E/778/2011 was directed) academic. Since the subject order was remanded by Tribunal vide A/10920-10926/2017 dated 09/05/2017, the subsequent Revenue appeal challenging that earlier order had no operative foundation and was therefore dismissed as infructuous.

Appeal E/778/2011 dismissed as infructuous.

Final Conclusion: The demands under section 4A in respect of medicaments supplied to institutional hospitals for consumption and not offered for retail sale are not maintainable; those appeals are allowed. The Revenue appeal against the earlier order is dismissed as infructuous following the Tribunal's remand.

Classification of goods for sales/trade tax - toilet requisite - unclassified item - binding effect of prior inter partes decision - res judicata principle applied to recurring tax assessments

Classification of goods for sales/trade tax - unclassified item - Mirror glass sheets sold by the assessee are not 'toilet requisite' and are to be treated as an unclassified item for the assessment year in question. - HELD THAT: - The Court accepted the earlier inter partes decision of this Court in Sales/Trade Tax Revision No. 2269 of 2006 (dated 28.05.2014) where mirror glass sheets were held not to be 'toilet requisite' but an unclassified item, noting that mirror glass sheet by itself requires further working before it can be used and therefore cannot be treated as a 'toilet requisite'. The commodity in the present revision remained identical and no new legal or factual circumstance was shown to justify departing from the earlier conclusion. Reliance by the Tribunal on another decision involving a different commodity (mirror glass) was held to be misplaced. Applying the principle that a fundamental aspect consistently adjudicated between the same parties should not be reopened in subsequent years where the position was allowed to stand, the Court answered the question against Revenue and in favour of the assessee. [Paras 5, 10, 12, 13]

The mirror glass sheets are not taxable as 'toilet requisite' and are to be treated as an unclassified item; the earlier decision in favour of the assessee governs the present assessment year.

Binding effect of prior inter partes decision - res judicata principle applied to recurring tax assessments - The Tribunal was not justified in treating the mirror glass sheets as falling within Entry-39 or as toilet requisites in view of the earlier binding decision between the parties. - HELD THAT: - The Court relied on the finality of the earlier judicial determination between the same parties, observing that Revenue did not challenge that decision further. The Court cited the principle recognised by the Supreme Court that, although res judicata does not strictly apply to income-tax proceedings, where a fundamental aspect has been decided and the parties have allowed that position to stand by not challenging it, it is inappropriate to permit a change in subsequent years. On that basis, the Tribunal's reliance upon a different decision (The Commissioner of Trade Tax, U.P. Vs. Kohinoor Glass House) was erroneous because the commodity there differed, and there was no justification to reclassify the same goods now. [Paras 10, 11, 12]

The Tribunal's classification of the mirror glass sheets as toilet requisites or under Entry-39 is set aside due to the binding effect of the earlier inter partes decision.

Final Conclusion: The revision is allowed; the Tribunal's order confirming reassessment to the extent that the glass mirror sheets were treated as toilet requisites is set aside and the goods are held to be unclassified items in favour of the assessee for A.Y. 2000-01 (U.P.).

Machinery and spare parts of machinery valuing Rupees Ten Lac or more - meaning of machinery - individual item valuation - application of Section 2(2) of the U.P. Tax on Entry of Goods Act - exclusion by virtue of separate taxation entries - non overlapping of taxation entries - remand for fresh adjudication

Machinery and spare parts of machinery valuing Rupees Ten Lac or more - meaning of machinery - individual item valuation - Whether the Tribunal recorded a categorical finding that the specific imported goods were identifiable machinery (or spare parts) each of value Rs.10 lac or more - HELD THAT: - The Court held that the Tribunal did not address the essential question whether the assorted goods described by the assessee (electronic goods, computer goods, generators, telecommunication parts, SMPS Power Plant, electrical goods, telecom equipment and SIM cards) included identifiable individual machinery or parts whose value was Rs.10 lac or more. It noted that the taxable event under the Entry Tax Act depends on the value of the individual machinery or part and not a composite bill, and that the Tribunal ought to have first recorded categorical findings on identification and valuation of specific items before holding them taxable as machinery. Because the Tribunal's order lacks such reasoned findings, the Court found it necessary to remit the matter for fresh adjudication on that question.

Tribunal's order set aside on this point and remitted for fresh consideration of whether specific imported items qualify as machinery/spare parts each valued at Rs.10 lac or more

Application of Section 2(2) of the U.P. Tax on Entry of Goods Act - exclusion by virtue of separate taxation entries - non overlapping of taxation entries - Whether items found to be machinery of value Rs.10 lac or more are nevertheless excluded from the Entry Tax entry by virtue of their specific classification under the VAT Act (by application of Section 2(2) of the Entry Tax Act) - HELD THAT: - The Court observed that even if one or more imported items are held to be machinery meeting the value threshold, the Tribunal must next examine the assessee's contention that such items fall under separate schedule entries in the VAT Act and therefore ought to be excluded from taxation as 'machinery' under the Entry Tax Act by operation of Section 2(2). The Court referred to the principle that separately provided taxable events under different entries should not be mingled and that a classification under the VAT schedule may narrow the field of taxation under the Entry Tax Act. The impugned order did not contain reasoned findings on this issue and therefore the Court remitted it for fresh adjudication.

Remitted to the Tribunal to determine, after identifying any machinery meeting the value threshold, whether those items are excluded from the Entry Tax entry because they are specifically taxable under separate VAT schedule entries

Final Conclusion: The Tribunal's common order is set aside and the matters are remitted to the Commercial Tax Tribunal for fresh adjudication on the identification and individual valuation of the imported items as machinery (or spare parts) meeting the Rs.10 lac threshold and, if any such items are found, whether they are excluded from entry tax by virtue of their separate classification under the VAT Act; the Tribunal is directed to decide the issues after hearing the parties, preferably within four months.

Judicial review under Article 226 - scope of interference in intra Court appeal - finality of assessment order - possession under Section 13(4) of the SARFAESI Act includes movables within premises - remedy under Section 17 of the SARFAESI Act for return of documents - condonation of delay in preferring appeal - stay of recovery not justified in absence of prima facie entitlement to appellate relief

Judicial review under Article 226 - scope of interference in intra Court appeal - finality of assessment order - stay of recovery not justified in absence of prima facie entitlement to appellate relief - Whether this Court should interfere under Article 226 to set aside the ex parte assessment or stay the recovery citation and Tehsildar's notice. - HELD THAT: - The Court held that the ex parte assessment order dated 31.08.2018 had attained finality and that it was not appropriate, in judicial review proceedings under Article 226, to interfere with the recovery citation or to stay recovery merely because the assessee claimed its books were inaccessible. The scope of interference in an intra Court appeal is extremely limited and, absent patent illegality, interference is not called for. Whether the appellate authority would entertain an appeal after lapse of time and whether condonation of delay should be granted are matters for the appellate authority to determine and do not justify pre emptive relief from this Court. In these circumstances the appellant was not entitled to a stay of the recovery proceedings. [Paras 8, 9, 10, 11]

The Court refused to interfere with the recovery citation or stay the recovery proceedings and dismissed the appeal on this ground.

Possession under Section 13(4) of the SARFAESI Act includes movables within premises - remedy under Section 17 of the SARFAESI Act for return of documents - Whether the appellant can seek return of books and documents from the bank and the appropriate forum for such relief. - HELD THAT: - The Court observed that possession taken by the bank under Section 13(4) of the SARFAESI Act of the factory premises would include movables such as books of account. Accordingly, any application for return of such documents should be made to the Debts Recovery Tribunal under Section 17 of the SARFAESI Act in the pending proceedings. The High Court declined to entertain a parallel claim for return of documents in this judicial review, noting that the DRT is the proper forum to consider an IA for release of documents and to adjudicate consequential issues. [Paras 7, 8]

The Court directed that the appellant may file an application before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act for return of documents; this Court will not grant the relief sought in the writ proceedings.

Final Conclusion: The Special Appeal is dismissed. The appellant is left to pursue an application before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act for release of documents; no interference is made with the assessment or recovery proceedings and no stay of recovery is granted.

Service of statutory notice by registered post - Section 138 Negotiable Instruments Act - proviso clauses (b) and (c) - Presumption of service under Section 27 of the General Clauses Act and Section 114 of the Evidence Act - Dishonour of cheque - 'contact drawer/drawee bank' return memo - Quashing of criminal proceedings under Section 482 Cr.P.C.

Service of statutory notice by registered post - Presumption of service under Section 27 of the General Clauses Act and Section 114 of the Evidence Act - Section 138 Negotiable Instruments Act - proviso clauses (b) and (c) - Whether the complaint under Section 138 of the Negotiable Instruments Act was premature or liable to be quashed for non-service of the statutory demand notice where the notice sent by registered post was returned with endorsement of non-availability of the addressee. - HELD THAT: - The Court held that the question whether the statutory demand notice was actually received by the drawer is not to be decided at the cognizance stage but on evidence at trial. The proviso to Section 138 contemplates that the payee must give a notice in writing and the cause of action arises only after receipt by the drawer; however, a dispatch of notice by registered post to the correct address raises a legal presumption of service which is rebuttable only by evidence. Reliance was placed on precedents holding that where a notice is sent by registered post to the correct address and returned with endorsements of non-availability, a presumption of service may arise and that the issue of actual service is to be considered during trial. Accordingly, the magistrate did not err in taking cognizance and summoning the accused since the adequacy of service can be tested by oral and documentary evidence led at trial. [Paras 12, 13, 14, 16, 17]

The challenge to cognizance on ground of non-service of the statutory notice is rejected; validity of service is a matter to be decided on evidence at trial.

Dishonour of cheque - 'contact drawer/drawee bank' return memo - Section 138 Negotiable Instruments Act - proviso clauses (b) and (c) - Whether the return memo remark 'Kindly contact drawer/drawee bank and pleasen' negates the allegation of dishonour under Section 138 so as to warrant quashing of proceedings at the threshold. - HELD THAT: - The Court observed that the reason recorded on the return memos does not conclusively establish that the cheques were not dishonoured; the initial presumption in favour of the complainant arises on production of the cheques and their return memos. The onus lies on the accused to adduce bank records or other evidence to show that the cheques were not dishonoured for the reasons alleged (for example, sufficient balance at the relevant time). Determination of the precise cause of return and whether it falls within the mischief of Section 138 requires evidence and appreciation at trial rather than summary adjudication at the cognizance stage. [Paras 7, 15, 16, 17]

The contention that the return memo precludes establishment of dishonour is not accepted at this stage; the question is to be adjudicated on evidence during trial.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the complaint and cognizance order was dismissed; the High Court held that both service of the statutory notice and the cause of dishonour of the cheques are matters to be examined on evidence at trial and do not warrant interference at the cognizance stage.

Maintainability of writ petition where statutory remedy under Section 17 of the Act exists - non-interference by High Court when alternative remedy lies before the Debt Recovery Tribunal - challenge to recovery proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - direction to approach the Debt Recovery Tribunal

Maintainability of writ petition where statutory remedy under Section 17 of the Act exists - non-interference by High Court when alternative remedy lies before the Debt Recovery Tribunal - Writ petition challenging a recovery citation is not maintainable in the High Court where the petitioner has an available statutory remedy before the Debt Recovery Tribunal under Section 17 of the Act. - HELD THAT: - The petitioner had earlier been directed by this Court to pursue the statutory remedy under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and has filed an appeal before the Debt Recovery Tribunal. A subsequent recovery citation issued by the Tehsildar was challenged by the petitioner by way of writ petition. The Court held that, in view of the availability of the statutory remedy and the prior direction to approach the statutory authority, the High Court should not entertain the writ petition and the petitioner must pursue relief before the Debt Recovery Tribunal. The Court therefore declined to exercise writ jurisdiction and dismissed the petition in limine. The petitioner was granted liberty to move the Debt Recovery Tribunal for return of documents, which the Tribunal shall consider in accordance with law.

Writ petition dismissed in limine; petitioner directed to pursue remedy before the Debt Recovery Tribunal and granted liberty to apply to the Tribunal for return of documents.

Final Conclusion: The High Court dismissed the writ petition as the petitioner must challenge the recovery citation and pursue the statutory remedy before the Debt Recovery Tribunal in accordance with the earlier direction; liberty granted to seek return of documents before the Tribunal.