TaxTMI Updates e-Newsletter
Nov 08,2018

Pure agent - value of supply - exclusion from value of supply under Rule 33 - reimbursement as disbursement - GST chargeability on reimbursed expenses - toll charges

Pure agent - exclusion from value of supply under Rule 33 - toll charges - GST chargeability on reimbursed expenses - reimbursement as disbursement - value of supply - Whether toll charges reimbursed by client Banks to the Applicant can be excluded from the value of supply as expenditure incurred by the supplier as a pure agent under Rule 33, and whether GST is chargeable on such reimbursed toll charges. - HELD THAT: - The Authority examined Rule 33 and its Explanation which define a "pure agent" and set out conditions for excluding expenditure from the value of supply. The agreements with the Banks state that toll and parking charges will be paid on actuals but do not specifically authorize the Applicant to act as the Banks' "pure agent" nor treat the tolls as the Banks' liability. The Applicant owns the vehicles and is the beneficiary of the toll-paid service (access to roads/bridges) and is liable to pay the tolls; thus the tolls are incurred as a cost of providing the Applicant's security/transportation service. Given the absence of contractual authorization and the Applicant's beneficial receipt of the toll-related service, the conditions of Rule 33 for treatment as a pure agent are not satisfied. Consequently the toll charges cannot be treated as mere disbursements excluded from the value of supply and must be included in the taxable value for GST purposes.

Toll charges reimbursed by the Banks are not excluded from the value of supply under Rule 33 and are taxable; GST is payable on the entire value of the supply, including the reimbursed toll charges.

Final Conclusion: The Authority ruled that toll charges paid and reimbursed are costs of the Applicant's supply and not disbursements as a "pure agent"; GST is therefore payable on the entire value of the supply including such toll charges.

Educational institution - clause 2(y)(ii) of Notification No. 12/2017-Central Tax (Rate) - exemption under Entry No. 66(a) of Notification No. 12/2017-Central Tax (Rate) - specific exemption for Indian Institutes of Management under Entry No. 67 - benefit of the more beneficial provision

Educational institution - clause 2(y)(ii) of Notification No. 12/2017-Central Tax (Rate) - IIM Act, 2017 - Applicant is an 'educational institution' within the meaning of sub-clause (ii) of clause 2(y) of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017. - HELD THAT: - The Indian Institutes of Management Act, 2017 confers on the Applicant the right to grant degrees, diplomas and other academic distinctions and declares the Institutes to be of national importance. Sub-clause (ii) of clause 2(y) defines an educational institution to include education as part of a curriculum for obtaining a qualification recognised by law. In light of the IIM Act's conferment of degree-awarding powers and recognition, the Applicant falls within the definition in sub-clause (ii) and therefore qualifies as an 'educational institution' under the notification.

Applicant qualifies as an 'educational institution' within sub-clause (ii) of clause 2(y).

Exemption under Entry No. 66(a) of Notification No. 12/2017-Central Tax (Rate) - specific exemption for Indian Institutes of Management under Entry No. 67 - benefit of the more beneficial provision - Applicant is eligible for exemption under Entry No. 66(a) of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017; Entry No. 67 remains available for the specified IIM programmes and the Applicant may avail the more beneficial provision. - HELD THAT: - Entry No. 66(a) grants exemption to educational institutions as defined in clause 2(y), which, as held, includes the Applicant. Entry No. 67 specifically grants exemption to services provided by the Indian Institutes of Management in respect of certain programmes listed therein; that specific exemption continues to exist even after the IIM Act. Established precedents permit an assessee to avail whichever lawful exemption is more beneficial where two provisions are available. Consequently, both Entry No. 66(a) and Entry No. 67 are available to the Applicant, and the Applicant is eligible to claim exemption under Entry No. 66(a). The Authority's consideration was limited to admissible questions under the advance ruling provisions and did not extend to queries on effective dates or refund, which are outside its jurisdiction under Section 97(2).

Applicant eligible for exemption under Entry No. 66(a); Entry No. 67 remains available and the Applicant may choose the more beneficial provision.

Final Conclusion: The Authority rules that the Applicant is an 'educational institution' within sub-clause (ii) of clause 2(y) of Notification No. 12/2017-Central Tax (Rate) and is eligible for exemption under Entry No. 66(a); Entry No. 67 specific to IIM programmes also remains available, and the Applicant may avail the more beneficial exemption. The Ruling is confined to matters admissible under the advance ruling provisions and does not decide on effective dates or refunds.

Zero rated supply - Supply to a Special Economic Zone (SEZ) unit - Supply to employees of an SEZ unit - Interpretation of "zero rated supply" under the IGST Act - Restaurant services versus outdoor/corporate catering - Classification of services under the GST rate schedule

Zero rated supply - Supply to a Special Economic Zone (SEZ) unit - Interpretation of "zero rated supply" under the IGST Act - Whether supply of food by the appellant to employees of an SEZ unit amounts to a zero rated supply under Section 16(1)(b) of the IGST Act, 2017. - HELD THAT: - The Appellate Authority examined the definition of "zero rated supply" in Section 16(1) of the IGST Act which expressly treats supplies to a SEZ developer or a SEZ unit as zero rated. The Authority observed that employees of a SEZ unit are neither SEZ developers nor SEZ units. Consequently, supply made to employees of the SEZ unit cannot be recharacterised as a supply to the SEZ unit for the purpose of Section 16(1)(b). The Authority therefore concluded that such supplies do not fall within the statutory concept of zero rated supply and are subject to GST classification under the ordinary rate schedule. [Paras 8, 9]

Supply of food to employees of a unit located in SEZ is not a zero rated supply under Section 16(1)(b) of the IGST Act, 2017.

Restaurant services versus outdoor/corporate catering - Classification of services under the GST rate schedule - Whether the appellant's activity of preparing food in its kitchen and distributing it to corporate clients in the SEZ amounts to "restaurant services" attracting the concessional rate claimed by the appellant. - HELD THAT: - The Authority noted that "restaurant" is not defined in the GST Act and relied on the ordinary dictionary meaning - a place where meals are prepared and served to the customer. The appellant's admitted business model is that of an "Outdoor Caterer": food is prepared at the appellant's own kitchen and distributed to multiple client locations where the employer or client personnel effect consumption or distribution. The Authority held that such activities do not fit the concept of restaurant services as understood and thus cannot be treated as restaurant services for the purpose of attracting the lower rate relied upon by the appellant. The services must therefore be classified in accordance with the applicable entries in the GST rate notifications rather than as restaurant services. [Paras 10, 11]

The appellant's supplies are not in the nature of restaurant services and cannot be taxed at the concessional rate claimed as restaurant services.

Final Conclusion: The appeal is disposed by holding that supplies of food by the appellant to employees of an SEZ unit are not zero rated under Section 16(1)(b) IGST Act, 2017, and the appellant's activity is not "restaurant services"; GST applicability and rate are to be determined by ordinary classification under the GST rate notifications.

Detention and release of goods under Section 129 of the Goods and Services Tax Act - Interim release on payment under protest - Payment under protest and appellate remedy under Section 107 - Penalty imposed for transportation violations under GST - Procedural irregularities in detention and notice format

Detention and release of goods under Section 129 of the Goods and Services Tax Act - Interim release on payment under protest - Penalty imposed for transportation violations under GST - Payment under protest and appellate remedy under Section 107 - Authority to obtain release of detained goods by payment under protest and subsequent challenge of penalty before appellate forum - HELD THAT: - Petitioner's consignment was detained and adjudication under the detention provisions was initiated. The Court declined to adjudicate the merits of the detention or the correctness of the penalty. Observing that procedural irregularities in the manner of detention and notice were alleged, the Court directed that the petitioner may pay the demand for tax and penalty under protest to secure release of the goods. The order preserves the petitioner's right to challenge the penalty and any other aspects of the adjudication before the statutory appellate authority under the remedy provided in the Act. The direction is procedural and interim in nature and does not constitute a decision on the merits of the detention or penalty. [Paras 4]

Petitioner may pay the demanded tax and penalty under protest for release of the goods and thereafter contest the penalty proceedings before the appellate forum; merits not decided.

Final Conclusion: Writ petition disposed by permitting payment under protest to obtain release of detained goods, with liberty to the petitioner to pursue statutory appeal against the penalty; merits of detention and penalty were not adjudicated.

Failure to upload FORM GST TRAN-1 due to technical glitches - IT Grievance Redressal Mechanism - nexus of nodal officer's duty to investigate and facilitate remediation - direction to enable credit of input tax on migration where portal failure persists

Failure to upload FORM GST TRAN-1 due to technical glitches - IT Grievance Redressal Mechanism - Remedial procedure where a registered dealer was unable to upload FORM GST TRAN-1 on account of portal/system glitches - HELD THAT: - The Court applied the procedure envisaged in the Government of India Circular No.39/13/2018-GST (para.5) concerning the IT Grievance Redressal Mechanism and directed that the petitioner may apply to the designated Nodal Officer identifying the demonstrated glitch and enclosing evidence of bona fide attempt to comply. The Nodal Officer is to collate and examine the application and facilitate resolution through GSTN in accordance with the circular. In the present case the Court ordered that the Nodal Officer shall look into the petitioner's application and facilitate uploading of FORM GST TRAN-1 without reference to the statutory time-frame, treating the inability to upload as a consequence of technical failure affecting multiple taxpayers. The Court specified a procedural timeline for administrative convenience: the petitioner should apply within two weeks of the judgment and the Nodal Officer should act within one week thereafter. [Paras 3, 5, 6]

Petitioner permitted to apply to the Nodal Officer who shall examine the grievance and facilitate uploading of FORM GST TRAN-1 notwithstanding time limits, subject to the procedure in Circular No.39/13/2018-GST and the specified timelines.

Direction to enable credit of input tax on migration where portal failure persists - Relief where uploading remains impossible despite nodal intervention - HELD THAT: - The Court further directed that if, after the Nodal Officer's intervention, uploading of FORM GST TRAN-1 remains impossible for reasons not attributable to the petitioner, the competent authority shall enable the petitioner to take credit of the input tax available at the time of migration. This direction implements the remedial object of the grievance redressal mechanism to protect taxpayers from loss of credit caused by portal failures. [Paras 6]

If uploading cannot be effected for reasons not attributable to the petitioner, the authority shall enable the petitioner to claim the input tax credit available at migration.

Final Conclusion: Writ petition disposed by directing the petitioner to apply to the Nodal Officer under the IT Grievance Redressal Mechanism; the Nodal Officer to facilitate uploading of FORM GST TRAN-1 irrespective of time limits and, if uploading remains impossible for reasons beyond the petitioner's control, to enable the petitioner to take the input tax credit available at migration, with the court-specified short timelines for processing.

Detention and adjudication under Section 129 of the CGST Act - release of detained goods on compliance with Rule 140(1) of the Kerala GST Rules, 2017 - expeditious completion of statutory adjudication - release of goods pending adjudication

Detention and adjudication under Section 129 of the CGST Act - expeditious completion of statutory adjudication - Direction to the competent authority to complete adjudication under Section 129 of the CGST Act within a week - HELD THAT: - The Court, having regard to the earlier Division Bench decision in W.A. No.1802 of 2017 and the circumstances of the case, directed that the competent authority shall complete the adjudication proceedings under Section 129 of the Central Goods and Services Tax Act within one week from the date of production of a copy of this judgment. The order emphasises prompt disposal and adherence to the statutory adjudicatory timeline as the determinative course of action. [Paras 2]

Adjudication under Section 129 shall be completed within one week from production of a copy of the judgment.

Release of goods pending adjudication - release of detained goods on compliance with Rule 140(1) of the Kerala GST Rules, 2017 - Permissibility of releasing the detained goods upon compliance with Rule 140(1) of the Kerala GST Rules, 2017 - HELD THAT: - Relying on the Division Bench's approach in W.A. No.1802 of 2017, the Court ordered that if the petitioner complies with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017, the authority shall release the detained goods without further delay. The direction conditions release on statutory compliance with Rule 140(1) while preserving the authority's power to complete the adjudication within the time directed. [Paras 2]

Detained goods shall be released forthwith upon the petitioner's compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Final Conclusion: Writ petition disposed by directing expeditious completion of adjudication under Section 129 within one week; detained goods to be released on compliance with Rule 140(1) of the Kerala GST Rules, 2017.

Detention of goods under Section 129 of the Goods and Services Tax Act - e-way bill validity and expiry - interim release of detained goods on personal bond in lieu of bank guarantee - extraneous circumstances and force majeure (floods) affecting carriage and compliance - adjudication under Section 129 to remain unaffected by interim relief

Detention of goods under Section 129 of the Goods and Services Tax Act - e-way bill validity and expiry - extraneous circumstances and force majeure (floods) affecting carriage and compliance - Lawfulness of detention of the consignment intercepted after expiry of the e-way bill. - HELD THAT: - The record shows the e-way bill generated on 01.08.2018 expired on 18.08.2018 and the vehicle, which had earlier broken down at Surathkal, was only ready on 13.08.2018. The subsequent unprecedented floods in Kerala impeded timely movement of the consignment. While the petitioner has produced documents explaining the breakdown and the flood-related delay, the authorities were entitled to detain the goods once the e-way bill period had expired. The Court found no basis to fault the respondents for detaining the goods under the statutory power exercised in the circumstances. [Paras 7, 8]

Detention of the goods by the authorities was not impermissible in the facts and circumstances.

Interim release of detained goods on personal bond in lieu of bank guarantee - extraneous circumstances and force majeure (floods) affecting carriage and compliance - adjudication under Section 129 to remain unaffected by interim relief - Whether the detained goods could be released interimly on a personal bond without insisting on a bank guarantee. - HELD THAT: - Although detention was not set aside, the petitioner had furnished explanations and documentary proof regarding the vehicle breakdown and flood-induced delay. In view of these exceptional and uncontrollable circumstances, the Court directed a practical and lenient interim arrangement: release of the goods upon the petitioner executing a personal bond instead of producing a bank guarantee. The Court expressly clarified that this interim relief is without prejudice to the statutory adjudication under Section 129, which remains to be completed by the authorities. [Paras 8]

Respondents are directed to release the goods on personal bond without insisting on a bank guarantee; the adjudication under Section 129 remains unaffected.

Final Conclusion: The detention of the consignment after expiry of the e-way bill was not impermissible, but in view of the vehicle breakdown and exceptional flood conditions causing delay, the detained goods are to be released interimly on the petitioner executing a personal bond in lieu of a bank guarantee; this interim release does not prejudice the pending adjudication under Section 129.

Grossing up - tax deducted at source - Double Taxation Avoidance Agreement between India and UK - computation of income for deduction of tax at source - income payable 'net of tax' - computation under Section 195A - definition of 'income' under Section 2(24) - exemption under Section 10(6A)

Grossing up - tax deducted at source - Double Taxation Avoidance Agreement between India and UK - computation under Section 195A - definition of 'income' under Section 2(24) - exemption under Section 10(6A) - Liability to deduct tax at source was to be computed on the gross amount including the tax liability undertaken by the assessee. - HELD THAT: - The Court held that the India UK DTAA prescribes the rate of tax but does not supply a mechanism to compute the income on which that rate applies because the treaty does not define the terms "gross amount" or "income". In the absence of such definitions in the DTAA, the computation must follow domestic law. Section 195A governs cases where payments are "net of tax" and provides for grossing up the income where the payer undertakes the tax liability. The inclusive definition of "income" in Section 2(24) (which covers net of tax payments) further supports treating the tax borne by the payer as part of the recipient's income unless an exemption under Section 10(6A) applies. As no exemption under Section 10(6A) was shown in this case, the tax borne by the assessee had to be added to the income of the non resident and the principle of grossing up applied for deduction of tax at source. [Paras 34, 35, 36, 37, 38]

The Tribunal was correct in law to compute the liability to deduct tax at source on the gross amount including the tax liability undertaken by the assessee; grossing up under Section 195A applies.

Final Conclusion: The substantial question of law was answered against the assessee and the appeals were dismissed; the tax deductible at source had to be computed after grossing up to include the tax liability borne by the payer.

Taxation of winnings from betting and gambling - special rate of tax under Section 115BB - set-off of business loss against winnings taxed under a special provision - scope of standalone special provision vis-a -vis general set-off rules

Taxation of winnings from betting and gambling - special rate of tax under Section 115BB - set-off of business loss against winnings taxed under a special provision - Loss sustained in business cannot be set off against winnings from betting and gambling taxed under the special provision; total winnings are taxable at the special rate under Section 115BB. - HELD THAT: - The Court followed earlier decisions in the assessee's own cases and held that Section 115BB is a standalone special provision which governs taxation of winnings from betting and gambling. The legislative scheme and intent indicate that winnings covered by the special rate must be taxed in accordance with that provision; therefore general set-off principles relied upon by the Tribunal and Commissioner (Appeals) cannot be applied to undermine the special charging provision. Reliance on administrative circulars to depart from the statutory method of computing tax under a special provision was not accepted. Consequently, the combined reading preferred by the lower authorities was rejected and the appeal was allowed in favour of the Revenue. [Paras 5]

Appeal allowed; substantial question of law answered in favour of the Revenue and against the assessee that winnings from betting are taxable at the special rate under Section 115BB and business losses cannot be set off against such winnings.

Final Conclusion: The High Court allowed the Revenue's appeal, answering the substantial question of law in favour of the Revenue and holding that winnings from betting and gambling are to be taxed at the special rate under Section 115BB without allowance for set-off of business losses.

Failure to furnish TDS certificate (Form No.16) - penal and administrative measures against employers defaulting on TDS certificate issuance - public disclosure of defaulting employers - direction to file comprehensive affidavit - prima facie applicability of criminal breach of trust under Section 405 IPC

Direction to file comprehensive affidavit - Petition posted for further hearing and respondents directed to file a comprehensive affidavit. - HELD THAT: - The Court adjourned the matter to enable respondent No.1 to place on record a comprehensive affidavit dealing with the allegations raised by the petitioner and directed that the matter be listed on 19th November, 2018 for further consideration. The adjournment was made to permit the respondents to respond substantively to the concerns about non-issuance of Form No.16 and related consequences to employees. [Paras 1, 3]

Matter posted to 19th November, 2018 and respondents, particularly the Commissioner of Income Tax (TDS), Mumbai, directed to file a comprehensive affidavit.

Failure to furnish TDS certificate (Form No.16) - public disclosure of defaulting employers - penal and administrative measures against employers defaulting on TDS certificate issuance - Court recorded serious concern at widespread non-issuance of Form No.16, requested that the Department of Revenue/Income Tax make the Ministry of Finance aware, provide information on defaulters and consider penalising them. - HELD THAT: - The Court observed that salaried employees suffer serious consequences where employers fail to issue Form No.16, noting lack of transparency and absence of information display about such defaulters. The Court requested that the Department of Revenue and the Ministry of Finance be informed and expected the Income Tax Department to provide information on defaulting employers and to take penal and other legal measures contemplated by law so that future occurrences are avoided. The petitioner was identified as a senior citizen who has suffered due to non-possession of Form No.16, and the Court recorded its expectation that the writ petition may serve as a test case. [Paras 2, 4]

Respondents directed to bring the matter to the attention of the Ministry of Finance, to provide information about defaulting employers, and to consider appropriate penal and administrative action against them.

Prima facie applicability of criminal breach of trust under Section 405 IPC - Court found prima facie that the conduct of persons who fail to issue Form No.16 may attract the offence of criminal breach of trust under Section 405 IPC and sought the respondent's response on this aspect. - HELD THAT: - During submissions the Court referred to Section 405 IPC and its explanation, observing that a prima facie reading of the provision furnishes sufficient ground to consider prosecuting persons responsible for non-issuance of Form No.16 under the criminal law. The Court noted no record of the Department having applied Section 405 IPC in prosecutions against such defaulters and invited the learned counsel for respondent No.1 to enlighten the Court on whether and how that provision has been or can be applied. [Paras 5]

Court recorded prima facie applicability of criminal breach of trust under Section 405 IPC to persons failing to issue Form No.16 and sought a response from respondent No.1 on that aspect.

Final Conclusion: The High Court adjourned the petition for further hearing (listed 19th November, 2018), directed the Income Tax authorities to file a comprehensive affidavit, urged notification to the Ministry of Finance and disclosure/penal measures against employers defaulting in issuance of Form No.16, and recorded a prima facie view that such conduct may attract criminal breach of trust under Section 405 IPC while seeking the Department's response.

Deduction under section 54F - Rectification for non-adjudication - Remand for verification of claimed expenditures - Registration charges as matter of record - Opportunity of hearing before adjudication

Remand for verification of claimed expenditures - Deduction under section 54F - Registration charges as matter of record - Opportunity of hearing before adjudication - Rectification of Tribunal order to adjudicate ground no. 2.1 and direction to the Assessing Officer to verify claimed expenditures for allowance of deduction under section 54F in respect of residential house No. 79, Vivek Vihar, Jagatpura. - HELD THAT: - The Tribunal acknowledged that ground no. 2 (relating to eligibility of deduction under section 54F for investments in more than one house) had been decided against the assessee in the impugned order. However, ground no. 2.1, which challenged the quantum of deduction allowed by the AO in respect of expenditure alleged to have been incurred on construction, registration charges and payment to deed writer, was not adjudicated. The Tribunal observed that registration charges are a matter of record and cannot be disputed on that basis, while the claims for construction expenditure and payment to deed writer require verification and examination of supporting evidence. In consequence, the impugned order has been modified and the matter remitted to the Assessing Officer for verification of these claims and fresh adjudication, after affording the assessee an opportunity of hearing. The Tribunal accordingly allowed ground no. 2.1 for statistical purposes. [Paras 4]

Impugned order modified; AO directed to verify the claimed expenditures (construction, registration charges and payment to deed writer) and adjudicate allowance of deduction under section 54F for property No. 79 after giving the assessee an opportunity of hearing; ground no. 2.1 allowed for statistical purposes.

Final Conclusion: Miscellaneous Application allowed; the Tribunal's order is modified to direct verification and fresh adjudication by the Assessing Officer on the claimed expenditures for allowance of deduction under section 54F in respect of the specified residential property, with the assessee to be heard.

Addition under section 68 - addition under section 41(1) - onus of proof under section 68 - representative's admission not binding without authority - remand for de novo consideration

Addition under section 41(1) - representative's admission not binding without authority - remand for de novo consideration - Validity of additions of Rs. 1,64,55,601 treated as cessation of liability under section 41(1) and the effect of the assessee's representative's alleged agreement during assessment proceedings. - HELD THAT: - The Tribunal found that the AR's signature or attendance in the assessment proceedings cannot be construed automatically as the company's affirmation of all contents of the assessment order; a representative can act only within the instructions given by the assessee. Since the assessee subsequently challenged the admissions attributed to its AR before the CIT(A) and raised additional grounds, the CIT(A) ought to have examined the admissibility and merits of those grounds. In view of these contested factual and legal contentions and the assessee's contention that some liabilities were trading liabilities or subsequently discharged, the Tribunal considered it appropriate to remit the matter to the AO for fresh verification. The AO is directed to permit the assessee to place relevant evidence within a specified period, examine the genuineness, identity and sufficiency of proof regarding the liabilities, and thereafter decide the issue in accordance with law after affording a fair hearing. [Paras 12, 13, 14]

Addition of Rs. 1,64,55,601 under section 41(1) set aside and remitted to the AO for de novo consideration with opportunity to produce evidence.

Addition under section 68 - onus of proof under section 68 - remand for de novo consideration - Sustainability of additions made under section 68 in respect of sundry creditors and whether the CIT(A)'s confirmation should stand. - HELD THAT: - The Tribunal observed that the CIT(A) had directed deletion where confirmations were produced but confirmed certain additions; however, computational errors and the assessee's production of subsequent account records warranted reconsideration. Given the contested factual matrix as to identity, creditworthiness and genuineness of credits and the assessee's ability to file supporting evidence (including proof of subsequent discharge of liabilities), the Tribunal remanded the section 68 additions confirmed by the CIT(A) to the AO for re-examination. The AO is to allow submission of relevant evidence within a specified period and to dispose of the matter in accordance with law after granting the assessee a fair opportunity of hearing. [Paras 13, 14]

Additions confirmed under section 68 set aside and remitted to the AO for fresh consideration and adjudication in accordance with law.

Final Conclusion: Both contested additions (under sections 41(1) and 68) confirmed by the CIT(A) are set aside and remitted to the AO for de novo consideration; the assessee's appeal is treated as allowed for statistical purposes.

Reopening of assessment under section 147/148 - reason to believe - application of mind - quashing of reassessment proceedings

Reopening of assessment under section 147/148 - application of mind - reason to believe - quashing of reassessment proceedings - Reopening of assessment and issuance of notice under section 148 was invalid for want of application of mind and was quashed, with the consequent assessment order set aside. - HELD THAT: - The Tribunal examined whether the Assessing Officer applied his mind before issuing the notice under section 148. The reasons recorded relied on AIR information alleging a sale/purchase of immovable property and stated that the assessee "is not assessed to tax." That statement was factually incorrect because the assessee had filed the return of income electronically. Further contemporaneous communications and the assessee's replies (notices and responses regarding financial transactions and PAN) demonstrated that the Department had correspondence and information on record which were inconsistent with the reasons recorded. In these circumstances the reasons recorded are held to be devoid of any application of mind and therefore inadequate to sustain reopening of assessment. Consequently the notice under section 148 and the assessment completed pursuant thereto cannot be upheld and are quashed. As the reassessment is quashed, the Tribunal did not decide the merits of the additions made in the assessment order. [Paras 6, 7, 11]

Notice under section 148 and the assessment framed thereunder quashed for want of application of mind; appeal allowed.

Final Conclusion: The reassessment proceedings initiated by issuance of notice under section 148 and the assessment order for A.Y 2010-11 are quashed for lack of application of mind; the assessee's appeal is allowed.

Burden of proof under section 68 - remand for fresh consideration - failure to consider material evidence - adjudicatory duty to give effective opportunity to the assessee

Burden of proof under section 68 - failure to consider material evidence - remand for fresh consideration - adjudicatory duty to give effective opportunity to the assessee - Whether additions made by the Assessing Officer on account of cash and unexplained bank deposits, sustained by the CIT(A) as unexplained under section 68, can be upheld without addressing the evidences and remand report filed by the assessee - HELD THAT: - The Tribunal found that the Assessing Officer and the Commissioner (Appeals) sustained additions treating cash deposits as unexplained under section 68 but did not properly deal with, rebut, or record findings on the array of evidences, affidavits, statements recorded during remand proceedings and other documents placed on record by the assessee. Those evidences went to the root of the explanation offered and were neither considered nor satisfactorily rebutted in the remand report or the appellate order. In view of the authorities' failure to examine and decide upon the evidentiary material and the assessee's explanation, the matter requires fresh adjudication. The Tribunal therefore directed that the issue be remanded to the Assessing Officer for fresh consideration and decision in accordance with law after giving the assessee a due and effective opportunity to substantiate its case. [Paras 7, 8]

Additions sustained by lower authorities set aside and the issue remanded to the Assessing Officer for fresh consideration of the evidences and explanations after affording opportunity to the assessee; grounds allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the impugned findings on unexplained cash/bank deposits and remanding the matter to the Assessing Officer to consider afresh all evidences and explanations on the issue in accordance with law after giving the assessee effective opportunity to be heard.

Chargeability of receipt as capital v. revenue - Compensation for loss of source of income / sterilisation of profit-making apparatus - Construction of agreements and surrounding circumstances to determine nature of receipt - Receipts in settlement of termination of contract-capital or revenue

Chargeability of receipt as capital v. revenue - Compensation for loss of source of income / sterilisation of profit-making apparatus - Construction of agreements and surrounding circumstances to determine nature of receipt - Whether the amount received from Lafarge India Pvt. Ltd. is a revenue receipt taxable as business income or a capital receipt not chargeable to tax - HELD THAT: - The Tribunal examined the MOU dated 31.01.2009, the antecedent MOU of 19.11.2001, correspondence including a certification by Lafarge confirming payment as compensation for stalling/discontinuance of the agreed works, and the factual matrix showing that the assessee was incorporated to undertake the railway siding project and had its business effectively eliminated by termination of the earlier MOU. The Assessing Officer treated the amount as consideration for services and hence revenue; the CIT(A) concluded, and the Tribunal agreed, that the impugned payment was determined and paid in lieu of cancellation/termination of the earlier MOU resulting in loss of the assessee's source of income and sterilisation of its profit making apparatus. Applying established tests and authorities on distinguishing capital and revenue receipts (including the principles in Kettlewell Bullen, Oberoi Hotels and related decisions), the Tribunal held that where termination results in destruction or severe impairment of the profit making structure the amount is capital in nature. The Tribunal found no infirmity in the CIT(A)'s construction of the MOU in light of surrounding circumstances and the supplier's clarification, and therefore upheld the conclusion that the receipt is a capital receipt not chargeable to tax. [Paras 16, 17, 21, 22]

Addition of the amount by the Assessing Officer deleted; the payment is a capital receipt not chargeable to tax and the revenue's appeal is dismissed.

Final Conclusion: On the facts and documentary material (including the MOU and Lafarge's clarification) the Tribunal affirms the CIT(A): the payment received on termination of the earlier MOU constituted compensation for loss of the assessee's source of income (sterilisation of profit making apparatus) and is a capital receipt, accordingly the revenue's appeal is dismissed.

Requirement of purchase within prescribed period for exemption under section 54(1) - Source of funds not material for claiming deduction under section 54(1) - Section 54(2) applicable where time limit of section 54(1) is not complied with

Requirement of purchase within prescribed period for exemption under section 54(1) - Source of funds not material for claiming deduction under section 54(1) - Section 54(2) applicable where time limit of section 54(1) is not complied with - Entitlement to deduction under section 54(1) of the Income Tax Act where the new house was purchased within the prescribed period but part of the consideration was met by a housing loan disbursed after the purchase - HELD THAT: - The Tribunal examined whether utilization of a housing loan towards the purchase of the new house disentitles the assessee from claiming deduction under section 54. The facts on record prima facie indicate that the new flat was purchased by agreement dated 23 September 2010 and the total consideration was paid before or at the time of execution of the agreement, whereas the housing loan from Citi Bank was sanctioned and disbursed later. The Tribunal held that sub section (1) of section 54 requires only that the new house be purchased within one year before or two years after the date of transfer of the original asset. If the purchase is made within that prescribed period, the assessee is entitled to claim deduction under section 54(1) irrespective of the source of funds used for the purchase. The interpretation advanced by the Department-that the consideration received from the sale must be actually utilised to acquire the new house-would render the statutory time period criterion redundant (for purchases made before the date of transfer) and is therefore rejected. The Tribunal observed that sub section (2) operates only where the time limits of sub section (1) are not complied with. Applying this principle to the facts, since the assessee purchased the new house within the two year period, the deduction under section 54(1) was to be allowed despite the subsequent housing loan disbursement. [Paras 6, 7]

Assessee entitled to deduction under section 54(1); Assessing Officer directed to allow the claim.

Final Conclusion: Appeal allowed: deduction under section 54(1) to be allowed as the new house was acquired within the statutory period and the source of funds (including a subsequently disbursed housing loan) does not defeat the claim.

Percentage completion method versus completed contract method of accounting - consistency in method of accounting - assessing officer's application of mind and verification of material - prejudice to the interest of revenue - revision under section 263 of the Income Tax Act - possible view doctrine in exercise of revisional powers

Percentage completion method versus completed contract method of accounting - consistency in method of accounting - assessing officer's application of mind and verification of material - revision under section 263 of the Income Tax Act - possible view doctrine in exercise of revisional powers - prejudice to the interest of revenue - Validity of the Commissioner's revision under section 263 quashing the AO's assessment for A.Y. 2012-13 on the ground that the AO accepted the assessee's accounting and claims without proper enquiries causing prejudice to revenue. - HELD THAT: - The Tribunal held that the Assessing Officer had received and considered detailed explanations and documents during scrutiny, including the assessee's letter dated 05.01.2015 explaining the use of Percentage Completion Method in books and Completed Contract Method for income-tax purposes and the basis for allocation of interest to work-in-progress. The assessee had consistently followed the same method in earlier years and earlier appellate orders (including those of the Tribunal and the Bombay High Court in the assessee's/group's cases) supported the method adopted. The AO queried and examined the material and framed the assessment under section 143(3) accordingly. In these circumstances the view adopted by the AO was a possible view and therefore not open to be upset by the Commissioner under section 263 merely because an alternative view existed. The PCIT's conclusion that the AO failed to make relevant and meaningful enquiries was not borne out on the record; there was no change in the method of accounting giving rise to previously unassessed income, and no demonstrable prejudice to revenue established. Applying the principle that revisional power under section 263 should not be exercised where the AO's view is a possible view, the Tribunal concluded that the revision order was not sustainable. [Paras 5, 10, 11, 12]

The revision order passed by the Pr. Commissioner under section 263 is quashed and the appeal of the assessee is allowed; the AO's assessment stands.

Final Conclusion: The Tribunal allowed the assessee's appeal, quashed the PCIT's revision order under section 263 for A.Y. 2012-13, and held that the AO had applied his mind and taken a possible view on the accounting methods and interest allocation which could not be disturbed by revisional proceedings.

Allowability of unrealized foreign exchange loss - mark to market loss - deduction despite non-routing through books of account - reliance on judicial precedents - prohibition on double deduction - verification of subsequent year's accounts

Allowability of unrealized foreign exchange loss - mark to market loss - deduction despite non-routing through books of account - reliance on judicial precedents - Loss of Rs. 489.66 lakhs arising on revaluation of foreign exchange outstanding as at the year end (mark to market/unrealized loss) is allowable as a deduction in A.Y. 2009-10 even though not routed through the books of account. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the claimed mark to market foreign exchange loss is allowable. The Tribunal relied on the authorities cited by the lower authority, notably Kedarnath Jute Manufacturing Co. Ltd., which holds that an assessee cannot be debarred from claiming a deduction merely because it failed to debit the liability in its books, and Woodward Governor India Pvt. Ltd., which recognises that unrealised loss on foreign exchange fluctuations in respect of trading assets and liabilities as on the last date of the accounting year is allowable. The CIT(A) had also noted disclosure of the loss in the notes to accounts and acceptance in the succeeding year's books; on that basis the Tribunal held the allowance to be justified and directed deletion of the disallowance made by the Assessing Officer. [Paras 5, 7]

Claim of loss of Rs. 489.66 lakhs is allowed in A.Y. 2009-10.

Prohibition on double deduction - verification of subsequent year's accounts - Whether the same loss was subsequently accounted for in A.Y. 2010-11 (and therefore must be disallowed in that year to avoid double deduction) is remitted to the Assessing Officer for verification. - HELD THAT: - The Tribunal observed that the CIT(A) relied upon entries in the succeeding year's books (A.Y. 2010-11) showing accounting for the loss and subsequent foreign exchange gains, but those materials were not put to the Assessing Officer. To prevent double deduction of the same amount across years, the Tribunal restored the matter to the file of the AO for limited inquiry and verification. The assessee was directed to furnish all information and explanations called for by the AO so that appropriate adjustment (including disallowance in the succeeding year, if warranted) can be made. [Paras 6]

Issue restored to the Assessing Officer for limited purpose of verifying treatment in A.Y. 2010-11 to avert double deduction.

Final Conclusion: The Revenue's appeal is dismissed: the mark to market foreign exchange loss is allowed in A.Y. 2009-10, but the question of whether the same loss was accounted for in A.Y. 2010-11 (and thus requires adjustment there to prevent double deduction) is remitted to the Assessing Officer for verification.

Reimbursement of expenses and TDS applicability - disallowance under section 40(a)(ia) for failure to deduct TDS - deduction of tax at source under the TDS provisions including section 194C - assessee in default under section 201(1) and interest under section 201(1A) - time-bar for issuing order under section 201 - verification of challans and OLTAS/CIN mismatch

Reimbursement of expenses and TDS applicability - disallowance under section 40(a)(ia) for failure to deduct TDS - Deletion of the disallowance under section 40(a)(ia) in respect of reimbursements to clearing and forwarding agents was upheld. - HELD THAT: - The Tribunal found on the material and verification undertaken by the assessing officer that the amounts claimed (aggregate shown as reimbursement) represented reimbursement of actual expenses incurred by the clearing and forwarding agents and did not contain any element of income or service/commission. The bills were separately raised for reimbursement of specific expenditures and for service charges, and the Departmental confirmations supported that characterisation. The Tribunal followed the coordinate-bench authority and the High Court decision holding that where reimbursement bills are separately raised and factual verification establishes they are pure reimbursements, the TDS provisions do not apply and section 40(a)(ia) disallowance is not warranted. On these findings the CIT(A)'s deletion of the addition was sustained and the revenue appeal dismissed. [Paras 6, 7]

The disallowance under section 40(a)(ia) in respect of the reimbursement amount of Rs.4,27,30,166/- was deleted and the revenue appeal in this regard is dismissed.

Assessee in default under section 201(1) and interest under section 201(1A) - time-bar for issuing order under section 201 - verification of challans and OLTAS/CIN mismatch - Order under section 201(1) declaring the assessee an assessee-in-default was set aside as time-barred and the assessing officer was directed to verify challans; consequential relief was granted resulting in dismissal of the revenue appeal. - HELD THAT: - The CIT(A) held that the order under section 201(1) for the relevant period was time-barred and therefore directed its deletion. The CIT(A) accepted the assessee's explanation that TDS had been deposited but credit was not reflected due to a CIN mismatch in OLTAS and a technical inability to file a revised TDS statement; the assessee had furnished bank challans and filed for rectification. The CIT(A) directed the AO to verify the bank challans and, on such verification, to give consequential relief. The AO carried out the verification and granted reduction in accordance with the CIT(A)'s directions. The Tribunal, on review of these facts and the verification carried out, found no merit in the revenue appeal and dismissed it. [Paras 10, 11]

The order under section 201(1) was deleted as time-barred and, after verification of challans and rectification, the interest/demand consequences were addressed; the revenue appeal is dismissed.

Final Conclusion: Both revenue appeals are dismissed: the disallowance under section 40(a)(ia) in respect of reimbursed expenses to clearing and forwarding agents is deleted on the finding that the amounts were pure reimbursements, and the challenge to the section 201(1)/201(1A) order fails as the section 201(1) order was time-barred and the AO's verification of challans resulted in consequential relief.

Allowability of provision for diminution in realizable value of export incentive entitlements - treatment of DEPB licences in income computation - application of accounting assumptions of prudence, going concern, consistency and accrual for tax purposes - ad hoc disallowance of expenses in absence of specific discrepancies in books - burden on revenue to demonstrate particular non-business or personal expenditure before making estimated disallowance

Treatment of DEPB licences in income computation - allowability of provision for diminution in realizable value of export incentive entitlements - application of accounting assumptions of prudence, going concern, consistency and accrual for tax purposes - Whether the assessee could estimate the realizable value of DEPB licences at 90% and account for subsequent shortfall on sale or lapse as write-offs rather than recognising full value as income in the year of accrual. - HELD THAT: - The Tribunal examined the factual matrix and the sales realizations recorded by the assessee which showed actual realizations in the range of about 83.14% to 88.08% of DEPB face value in identified years, and instances of lapse in 2014. The authorities accepted the factual data of realizations and there was no dispute by the revenue as to those realizations. Having regard to those statistics and the highest observed realizable rate of 90% from a buyer, the Tribunal found a reasonable and scientific basis for the assessee to estimate realizable value at 90%. The Tribunal further relied on the permitted accounting practice under the Notification No. SO 69(E) dated 25.1.1996 issued under section 145, which allows provision for known liabilities and losses based on best estimates if the fundamental accounting assumptions of going concern, consistency and accrual are followed. On that basis the Tribunal concluded that recognising the realizable value at 90% and writing off subsequent shortfalls on sale or lapse was not irregular and the addition based on notional provision was not sustainable. [Paras 7, 8]

Addition made by the AO in respect of the value of DEPB licences deleted and the assessee's accounting approach of estimating realizable value at 90% and writing off subsequent shortfalls accepted.

Ad hoc disallowance of expenses in absence of specific discrepancies in books - burden on revenue to demonstrate particular non-business or personal expenditure before making estimated disallowance - Whether the ad hoc 10% disallowance of mobile, local conveyance and export promotion expenses could be sustained in the absence of specific findings rejecting the books or pointing to particular discrepancies. - HELD THAT: - The AO disallowed a portion of expenses on estimate basis, citing possible personal use and lack of supporting details such as log books and phone-wise particulars. The CIT(A) sustained part of that disallowance. The Tribunal reviewed the material produced by the assessee (detailed expense records) and observed that the disallowance was wholly ad hoc, made without identifying any particular discrepancy in the books or formally rejecting the books of account. In the absence of any specific finding demonstrating that particular payments were personal or not for business, the Tribunal held that an estimate-based disallowance lacked logic and could not be sustained. Consequently the Tribunal directed deletion of the disallowance. [Paras 9, 10, 11]

Ad hoc disallowances of telephone, local conveyance and export promotion expenses deleted and the assessments to be revised accordingly.

Final Conclusion: The appeal is allowed: the addition relating to DEPB licence value is deleted, and the ad hoc disallowances in respect of telephone, local conveyance and export promotion expenses are deleted; the AO is directed to give effect to these deletions.

Deduction under section 80IA - Filing of tax audit report in Form 10CCB - Mandatory versus directory requirement - e-filing requirement under rule 18BBB - Substance over form / procedural lapse

Deduction under section 80IA - Filing of tax audit report in Form 10CCB - Mandatory versus directory requirement - Substance over form / procedural lapse - Claim for deduction under section 80IA could not be denied solely for non-filing of Form 10CCB with the return where the audit report was ready, was filed during assessment proceedings and the assessee furnished a bona fide explanation. - HELD THAT: - The Tribunal noted that the assessee filed the return within the statutory period and that the audit report in Form 10CCB had been prepared but was not e-filed with the return due to an inadvertent oversight; the report was subsequently filed during assessment proceedings and an affidavit from the auditor explaining the omission was placed on record. Relying on the principle that not all statutory prescriptions are substantive and that modern courts give effect to substance over form, the Tribunal followed the binding view of the Jurisdictional High Court in CIT v. Dr. L.M. Singhvi that non-filing of the audit report contemporaneously with the return may be a procedural lapse which, where explained and rectified during proceedings, should not defeat the substantive entitlement to deduction. The Tribunal rejected the Revenue's contention that mandatory e-filing under rule 18BBB rendered the requirement inflexible in the circumstances, and held that denial of the deduction solely on that procedural ground was not warranted where the report was ready and filed during assessment with explanation. [Paras 4]

Deduction under section 80IA allowed; orders of authorities below set aside insofar as they denied the deduction for non-filing of Form 10CCB with the return.

Ad hoc disallowance of expenses - Revenue effect of deductions - Ad hoc disallowances of various expenses were not finally adjudicated but were directed to be reconsidered by the Assessing Officer in light of the Tribunal's decision on the section 80IA claim. - HELD THAT: - The Tribunal observed that, because the eligible portion of the business will now attract deduction under section 80IA as held, the revenues effect of any ad hoc disallowance needs fresh consideration. The AO was therefore directed to re-examine the ad hoc disallowances in the context of the allowed deduction and the factual matrix of the case. [Paras 5]

Ad hoc disallowances remitted to the AO for fresh consideration in light of the allowance of the section 80IA claim.

Final Conclusion: Appeal allowed: deduction under section 80IA restored where Form 10CCB was prepared, explained and filed during assessment; ad hoc disallowances of expenses remitted to the Assessing Officer for reconsideration in light of this finding.

Deductibility of deferred revenue expenditure - principle of consistency in successive assessment years - allowability and carry forward of long term capital loss - genuineness of capital loss arising pursuant to court approved settlement - treatment of shortfall on loan recovery as bad debt - applicability of section 40(a)(ia) to payments to non residents - permanent establishment and situs of accrual for commission to foreign agents - requirement to deduct tax at source under section 195 in relation to non resident commissions

Deductibility of deferred revenue expenditure - principle of consistency in successive assessment years - Deletion of disallowance of 1/5th claim of deferred revenue expenses. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the claimed 1/5th deduction represented deferred revenue expenses of the assessee which had been consistently allowed in earlier assessment years. Relying on the settled principle that, although res judicata does not strictly apply to income tax proceedings, a consistent factual position accepted over years should not be disturbed unless there is a material change of facts or the earlier view is patently erroneous, the Tribunal found no basis for the AO's objection limited to the spreading over of the expenditure. The AO had not disputed the revenue character of the expenditure but only challenged its being written off over a number of years; the Tribunal held that the spreading principle has been recognised by the courts and the revenue practice and, in absence of any contrary material, the disallowance was unjustified. [Paras 4, 6, 9, 10]

Disallowance of Rs. 71,71,319 being 1/5th of deferred revenue expenses deleted; ground no.1 dismissed.

Allowability and carry forward of long term capital loss - genuineness of capital loss arising pursuant to court approved settlement - Deletion of denial of carry forward of long term capital loss claimed on transfer of shares/debentures under terms of settlement approved by the High Court. - HELD THAT: - The Tribunal agreed with the CIT(A) that the loss arose on an actual transfer effected in terms of the settlement approved by the High Court and that the cost and sale price were determined under that order. The AO's characterization of the loss as 'notional' or 'contingent' was rejected because the transaction had in fact taken place pursuant to the court order and the assessee had no control over the sale price fixed by the Court. The CIT(A) had examined the record and held the loss to be genuine; the Tribunal found no infirmity in that conclusion and observed that once a loss is assessed for a year, it cannot be denied carry forward merely because the sale price was determined by a court order. [Paras 12, 13, 15, 16, 17]

Denial of carry forward of long term capital loss set aside; carry forward allowed; ground no.2 dismissed.

Treatment of shortfall on loan recovery as bad debt - Deletion of addition made by AO in respect of loan/settlement shortfall and allowance of claim for bad debt written off (interest portion). - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the assessee had actually recovered a lesser amount under the settlement than the principal advanced and that the assessee had consequently suffered a loss. The CIT(A) allowed the claim to the extent of the interest portion written off as bad debt. On perusal of the settlement terms and the receipts, the Tribunal found no infirmity in the CIT(A)'s approach of treating the shortfall as resulting in a deductible loss for the year, and therefore upheld the deletion of the addition and the allowance of the bad debt claim to the extent considered by the CIT(A). [Paras 19, 20, 21, 24, 25]

Addition deleted to the extent held by CIT(A); bad debt written off allowed as held by CIT(A); ground no.3 dismissed.

Applicability of section 40(a)(ia) to payments to non residents - permanent establishment and situs of accrual for commission to foreign agents - requirement to deduct tax at source under section 195 in relation to non resident commissions - Deletion of addition under section 40(a)(ia) for non deduction of tax in respect of payments to foreign agents and other foreign payments. - HELD THAT: - The Tribunal endorsed the CIT(A)'s finding that TDS had been deducted and deposited where due (on foreign technicians' charges, technical fees and royalty) and that the remaining payments (commission to foreign selling agents) related to services rendered wholly outside India by non residents who had no permanent establishment in India. Applying the rule that business income of a non resident accrues or arises in India only to the extent reasonably attributable to operations in India, the Tribunal found that no part of the commission income was chargeable to tax in India and hence no requirement to deduct tax under section 195 arose. The Tribunal also noted precedents, circulars and coordinate bench decisions relied upon by the CIT(A) and found no contrary material from Revenue. [Paras 27, 28, 31, 32, 33]

Disallowance under section 40(a)(ia) deleted; no TDS liability in respect of payments to foreign agents as held by CIT(A); ground no.4 dismissed.

Final Conclusion: The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal in respect of all grounds; the additions and disallowances made by the AO were deleted or adjusted as directed by the CIT(A), and the appeal of the Revenue is dismissed.

Appeal to Appellate Tribunal under Section 129A - Adjudicating authority - Customs Brokers Licensing Regulations, 2013 - Regulation 21 - Appealability of non-adjudicatory orders - Statutory mandate of appeal

Appeal to Appellate Tribunal under Section 129A - Adjudicating authority - Customs Brokers Licensing Regulations, 2013 - Regulation 21 - Appealability of non-adjudicatory orders - Statutory mandate of appeal - Maintainability of an appeal to CESTAT against an order of the Commissioner granting a Customs Broker licence under the Customs Brokers Licensing Regulations, 2013 - HELD THAT: - The Court examined whether an order of the Commissioner granting a customs broker licence, styled as an "order-in-original", is appealable to the Customs, Excise and Service Tax Appellate Tribunal under Section 129A of the Customs Act read with Regulation 21 of the CBLR 2013. Section 129A confines appeals to orders passed by the Principal Commissioner or Commissioner in their capacity as an adjudicating authority. Regulation 21 purports to permit appeals by customs brokers against any order of the Commissioner under the Regulations and thereby creates a wider remedy than Section 129A. The Court observed that appealability is a creature of statute and cannot be claimed as of right unless the parent enactment so provides or implies it. The mere styling of the Commissioner's decision as an order-in-original and the reference in that order to an appellate remedy does not render a non-adjudicatory regulatory licence decision appealable under Section 129A. While noting that Regulation 21 may exceed Section 129A, the Court did not undertake a validity challenge to the Regulation; instead it held that the Tribunal correctly rejected the appeal on maintainability grounds because Section 129A is strictly confined to adjudicatory orders and the impugned licence order was not such an order for the purposes of Section 129A.

The CESTAT's decision rejecting the appeal as not maintainable is upheld; the appeal is dismissed.

Final Conclusion: The High Court dismissed the appeal, holding that appeals under Section 129A lie only against adjudicatory orders of the Principal Commissioner/Commissioner and that the Commissioner's licence order was not appealable to CESTAT; Regulation 21 of CBLR 2013, which purports to confer such a right, was noted but not adjudicated on for validity.

Customs valuation-application of contemporaneous import prices - Customs Valuation Rules-Rule 5(3) and selection of lowest contemporaneous price - Remand for fresh consideration of valuation - Rectification/Review of Tribunal order and limitation-effect of withdrawal of Supreme Court appeal on exclusion of period

Customs valuation-application of contemporaneous import prices - Customs Valuation Rules-Rule 5(3) - Remand for fresh consideration - Impugned valuation order set aside and remitted for re-consideration for failure to consider other contemporaneous imports and Rule 5(3) of the Customs Valuation Rules. - HELD THAT: - The Tribunal accepted enhancement of value based on a contemporaneous import price (Overseas Polymer at USD 1350 PMT) without addressing undisputed contemporaneous imports at lower prices (notably C.G. Shah & Co at USD 1095 PMT) and without any finding under Rule 5(3) which governs selection when multiple contemporaneous prices exist. The adjudicating authority also did not account for differences in import quantities which the Tribunal regarded as material to valuation. Because the Tribunal upheld the First Appellate Authority's order in toto and omitted examination of these vital facts and Rule 5(3), there is an apparent error requiring fresh consideration of valuation by the assessing authority. The matter is therefore remanded for re-consideration of valuation and application of Rule 5(3), with all issues kept open. [Paras 4]

Valuation order set aside in part; matter remitted to the assessing authority for fresh consideration of contemporaneous imports, application of Rule 5(3), and relevant factual factors.

Rectification/Review of Tribunal order and limitation-effect of withdrawal of Supreme Court appeal on exclusion of period - Review/rectification application (ROM) held maintainable; period of pendency of the Civil Appeal before the Supreme Court excluded for limitation purposes where the appellant withdrew the appeal after informing the Court of intention to file ROM. - HELD THAT: - The appellant had filed a Civil Appeal to the Supreme Court after the Tribunal's final order but subsequently withdrew that appeal upon deciding to seek rectification from the Tribunal, having made a clear submission to the Supreme Court about that intention. In these circumstances the Tribunal held that the period during which the matter was pending before the Supreme Court stands excluded from limitation for filing the ROM. The Tribunal therefore found no delay in filing the ROM and allowed the rectification applications on this basis. [Paras 2, 4]

ROM applications held maintainable and allowed insofar as the limitation objection is concerned; period of pendency before the Supreme Court excluded.

Final Conclusion: The Tribunal allowed the rectification applications: it excluded the period of pendency of the withdrawn Supreme Court appeal for limitation purposes and remitted the valuation issue to the assessing authority for fresh consideration (application of Rule 5(3), other contemporaneous imports and quantity differences), keeping all issues open.

Refund under Section 27 - amendment of IGM under Section 30(3) - valuation for customs duty - transaction value as basis of customs valuation - finality of unchallenged customs order - pre-maturity of refund claim where valuation order remains unchallenged - principles of natural justice

Refund under Section 27 - amendment of IGM under Section 30(3) - valuation for customs duty - finality of unchallenged customs order - pre-maturity of refund claim where valuation order remains unchallenged - Whether the appellant's refund claim is maintainable without first challenging the amendment of the IGM which fixed the value for customs duty - HELD THAT: - The Deputy Commissioner, when amending the IGM, had raised an objection on valuation and passed a speaking order maintaining the original value for the purpose of customs duty. That order created a lis between the department and the earlier importer and determined the value to be applied on import. Once such a speaking order fixing valuation stands unchallenged and final, the subsequent importer cannot, without first seeking appropriate recourse to contest that valuation, unilaterally declare a different value and claim refund. The appellant, having paid duty on the value declared after the IGM amendment, was under a legal obligation to challenge the IGM amendment order if dissatisfied. A refund claim made without first challenging or obtaining reversal of the valuation order is premature and not sanctionable.

Refund claim held premature in absence of challenge to the IGM amendment order; impugned order upheld and appeal dismissed.

Final Conclusion: The Tribunal upholds the lower authorities: a refund claim is not maintainable while an unchallenged speaking order on IGM amendment fixing customs valuation remains in force; appeal dismissed.

Varietal identification of export goods - reliability of laboratory test reports - AGMARK approved laboratories - representative sample requirement for analysis - admissibility and evidentiary value of confession/concession - remand for fresh adjudication - setting aside of adjudication for want of cogent evidence - consequential benefits and refund of pre-deposit

Varietal identification of export goods - reliability of laboratory test reports - AGMARK approved laboratories - representative sample requirement for analysis - admissibility and evidentiary value of confession/concession - Whether the appellants exported non Basmati rice and whether the re adjudication order finding non Basmati export is supported by cogent and admissible evidence. - HELD THAT: - The Tribunal found no reliable test report on record capable of conclusively establishing that the exported rice was non Basmati. Initial reports from CRCL/SGS were incomplete or indicated need for further testing by AGMARK approved laboratories; SGS was not a qualified AGMARK laboratory for the purpose and reliance on its report was misplaced. Subsequent testing by RAL noted insufficiency of sample for complete analysis (remnants varied between 37 gms to 142 gms; minimum representative quantity was stated to be larger), and BEDF's adverse finding could not cure defects in the chain of evidence given deterioration/infestation of samples and limitations of small samples. The earlier purported concession by the directors lost evidentiary value after this Tribunal's remand direction to obtain fresh testing; consequently the Commissioner's reliance on defective/incomplete reports and on the earlier concession was unsustainable. In absence of cogent, reliable laboratory evidence meeting representative sample and approved laboratory requirements, the finding of export of non Basmati rice was held to be presumptive and vague and could not support the penalties and adjudication imposed. [Paras 7]

Impugned re adjudication order holding the exports to be non Basmati rice is set aside for want of cogent and reliable evidence.

Remand for fresh adjudication - setting aside of adjudication for want of cogent evidence - consequential benefits and refund of pre deposit - Relief to be granted consequent upon setting aside the adjudication. - HELD THAT: - Having set aside the impugned order for lack of reliable evidence, the Tribunal directed that consequential benefits flowing from the decision be granted to the appellants. This includes return of pre deposits and other attendant reliefs; the respondent authorities were directed to effect such returns forthwith, within a specified reasonable period. [Paras 8]

Appeals allowed; consequential benefits including refund of pre deposit to be granted within 60 days from date of receipt of the order.

Final Conclusion: The Tribunal set aside the Commissioner's re adjudication order finding the exports to be non Basmati rice for want of cogent and reliable laboratory evidence and directed grant of consequential benefits, including refund of pre deposits, within 60 days.

Claim under Section 3(6) - operational debt - breach of contract versus right to payment - damages not constituting a claim - approval of resolution plan under Section 31 - requirements of Section 30(2) - compliance certificate in Form H - commercial wisdom of the Committee of Creditors

Claim under Section 3(6) - operational debt - breach of contract versus right to payment - damages not constituting a claim - Whether the applicant's asserted operational claim of Rs.35,42,18,964/- (comprising withheld unsupplied material and various heads of alleged losses) constitutes a 'claim' under Section 3(6) of the Code and is admissible for verification and admission by the Resolution Professional. - HELD THAT: - The Tribunal examined the two-part claim as presented in Form B. The first part-claimed outstanding in respect of items withheld (Rs.6,94,22,164/-)-concerns goods allegedly manufactured and retained by the applicant and not delivered; the record contains no averment that ownership passed to the corporate debtor under the contract. Section 3(6)(a) requires a right to payment, which is not established here. Section 3(6)(b) covers remedy for breach of contract only where such breach gives rise to a right to payment; no averment or material demonstrates that any alleged breach resulted in a right to payment in favour of the applicant. The balance heads (material inventory, escalation, overstay, watch and ward) are in the nature of damages and not shown to give rise to a right to payment under the definition of 'claim'. Consequently the RP's conclusion that the applicant has not established entitlement to the claimed amounts was sustained and the application seeking admission of the total claim was rejected. [Paras 7, 8, 9, 10, 11]

The operational claim is not maintainable as a 'claim' under Section 3(6); the application is rejected.

Approval of resolution plan under Section 31 - requirements of Section 30(2) - compliance certificate in Form H - commercial wisdom of the Committee of Creditors - Whether the resolution plan submitted by Dolphin Energy Enterprises meets the statutory requirements laid down in Section 30(2) and may be approved under Section 31 of the Code. - HELD THAT: - The Tribunal reviewed the process of solicitation, receipt and evaluation of resolution plans, the voting by the Committee of Creditors (COC) and the certificates filed by the Resolution Professional. The RP filed the requisite certificate under Regulation 39(4) and subsequently Form H certifying compliance with the Code and Regulations and confirming that the resolution plan addressed the matters enumerated in Section 30(2) (payment of insolvency costs, treatment of operational creditors as addressed in the plan, management and implementation arrangements, conformity with law, sources of funds and other requirements). The liquidation value as on the insolvency commencement date (11.07.2017) was noted to be materially higher than amounts proposed to stakeholders under the plan, but both financial creditors who constitute the COC (together 100% voting share, PTC India Financial Services Ltd. 99.67% and Seashells Infrastructure Pvt. Ltd. 0.33%) voted in favour of the plan after due consideration. The Tribunal observed that the decision of the COC is founded on commercial wisdom and is not open to interference where statutory compliance is demonstrated. The RP's certification and the absence of substantive objections persuaded the Tribunal that the plan meets the requirements of Section 30(2) and is fit for approval under Section 31(1), subject to the Tribunal's directions on cessation of moratorium and transmission of records to the Board. [Paras 25, 26, 27, 28, 29]

The resolution plan of Dolphin Energy Enterprises is approved under Section 31(1); moratorium ceases and the RP shall forward records to the Board.

Final Conclusion: The application challenging non-admission of the applicant's operational claim is dismissed as the asserted amounts do not qualify as a 'claim' under Section 3(6). Separately, the resolution plan submitted by Dolphin Energy Enterprises was held to satisfy the requirements of Section 30(2) as certified by the RP and, being approved by the COC, was sanctioned under Section 31; the moratorium is lifted and related records are to be forwarded to the Board.

Conversion of writ petition into statutory appeal - Appeal under Section 35 of the FEMA - Time limit for filing appeal - 120 days - Condonation of delay

Leave to amend pleadings - Conversion of writ petition into statutory appeal - Petitioners permitted to amend and convert the writ petitions into appeals under Section 35 of the FEMA - HELD THAT: - The Court granted leave to amend the prayer clauses in Writ Petition No.392 of 2018 to specify the date of the impugned Tribunal order and dispensed with reverification. Relying on Raj Kumar Shivhare [as counsel drew attention to that decision], the Court recognised that the appropriate remedy to challenge the Appellate Tribunal's orders dismissing applications for condonation of delay is by way of an appeal under Section 35 of the FEMA. It was noted that both petitions were filed within 120 days from the respective impugned Tribunal orders. With the respondent's consent, the petitioners were permitted to convert both writ petitions into appeals and directed to take necessary steps, including payment of court fees and completing service, on or before 30th November, 2018. [Paras 1, 3, 5]

Leave to amend granted; petitioners allowed to convert both writ petitions into appeals under Section 35 of the FEMA subject to completing formal steps by 30th November, 2018.

Dismissal for non-compliance with court direction - Consequence of failure to comply with the conversion directions - HELD THAT: - The Court directed that if the petitioners do not complete the conversion formalities, including payment of court fees and service, by the specified date, both petitions shall stand dismissed without reference to the Court. This order prescribes a final consequence for non compliance with the time bound direction. [Paras 6]

Non-compliance with the direction to convert by 30th November, 2018 will result in dismissal of both petitions without further reference to the Court.

Final Conclusion: The High Court allowed amendment and conversion of the two writ petitions into appeals under Section 35 of FEMA (being filed within 120 days), subject to completion of formalities by 30th November, 2018, and ordered that failure to comply would entail dismissal of the petitions without further reference to the Court.

Provisional attachment - Proviso to Section 8(2) PMLA - opportunity of being heard for a claimant - equivalent value / proceeds of crime - attachment of property held by a bona fide purchaser - requirement under Section 5(1) PMLA - apprehension of concealment/transfer - agreement to sell - proprietary rights acquired prior to attachment

Proviso to Section 8(2) PMLA - opportunity of being heard for a claimant - Provisional attachment - Failure to issue notice and afford hearing to the claimant in terms of the proviso to Section 8(2) PMLA vitiates the confirmation of provisional attachment - HELD THAT: - The record and confirmation order show that the Enforcement Directorate and the Adjudicating Authority were aware that the appellant was a claimant to the property but did not serve the mandatory notice nor afford an opportunity of being heard as required by the proviso to Section 8(2). Section 8(2) mandates that a person claiming the property, other than the person to whom notice was issued, must be given an opportunity to prove that the property is not involved in money-laundering. The Tribunal finds that no further investigation was conducted after recording the statement of a UB Group employee and that the statutory obligation to supply the Provisional Attachment Order and to hear the claimant was not complied with. The failure to follow the mandatory proviso and the related Rule obligation renders the confirmation unsustainable as regards the flats claimed by the appellant. [Paras 31, 32, 33]

The confirmation of the provisional attachment is set aside insofar as it relates to the flats claimed by the appellant for non-compliance with the proviso to Section 8(2) PMLA.

Equivalent value / proceeds of crime - attachment of property held by a bona fide purchaser - No prima facie material to show that the appellant was involved in the scheduled offence or that the consideration paid by the appellant constituted proceeds of crime - HELD THAT: - The Enforcement Directorate failed to establish a prima facie nexus between the appellant and the accused; the appellant was neither named in the FIR/ECIR nor charge-sheeted. Payments for the purchase were made through bank channels before registration of the ECIR/FIR and there is no material to suggest that the amounts paid were tainted or derived from the proceeds of crime. On these facts, and in the absence of evidence of connivance or taint in the purchase consideration, the property could not be treated as 'proceeds of crime' or as property equivalent in value to proceeds of crime vis-a -vis the appellant's interest. [Paras 19, 20, 25]

There was no prima facie case that the appellant was involved in money-laundering or that the consideration paid by him was proceeds of crime; the attachment insofar as it related to the appellant's claim is unsustainable.

Agreement to sell - proprietary rights acquired prior to attachment - Provisional attachment - Rights acquired under an agreement to sell and full payment made prior to attachment support the claimant's proprietary interest and weigh against the attachment - HELD THAT: - The appellant entered into the Agreement to Sell and Construction Agreement in 2012 and paid the entire consideration by 07.06.2015, prior to the provisional attachment. The Tribunal notes settled principle that rights acquired before attachment (including under agreements of sale where consideration is paid and obligations performed) prevail over subsequent attachments. Given that the appellant had performed the contractual terms and paid by banking channels, the claimant had a legitimate/stakeholder interest which the Adjudicating Authority was required to recognise and test only after giving notice and an opportunity to be heard. [Paras 37, 38, 43]

The appellant had acquired a legitimate interest in the property prior to attachment; that interest supports setting aside the attachment insofar as it affects the appellant.

Requirement under Section 5(1) PMLA - apprehension of concealment/transfer - priority of DRT decree over ED claim - Proceedings or decrees before other fora (such as DRT) do not bar adjudication by this Tribunal on the legality of provisional attachment; absence of real risk of concealment/transfer at time of PAO is a relevant consideration - HELD THAT: - The respondent's plea that the appeal is not maintainable because of a DRT decree is rejected for purposes of this adjudication; the Tribunal's remit is limited to legality of the attachment order under the Act. The material relied upon shows that interim orders restraining transfer were already in place before the PAO, undermining the asserted apprehension of concealment or transfer required by Section 5(1). Accordingly, the statutory precondition of apprehension of concealment/transfer was not established for the property in question at the time of provisional attachment. [Paras 23, 28, 48]

The existence of other proceedings or decrees did not preclude this Tribunal from examining the validity of the PAO; the statutory requirement under Section 5(1) was not satisfied for the attachment of the appellant's flats.

Final Conclusion: The Tribunal allows the appeal and sets aside and quashes the provisional attachment and its confirmation insofar as they relate to the appellant's flats (apartment No. 9A on 9th floor), on the grounds that the mandatory proviso to Section 8(2) PMLA was not complied with, there was no prima facie material that the appellant or the purchase consideration were tainted, and the appellant had acquired a legitimate interest prior to attachment; the findings do not affect other proceedings against the accused and no costs are awarded.

Summary order. Civil Appeals dismissed both on the ground of delay and on merits; pending applications, if any, disposed of.

Erection, Commissioning and Installation of structures - Works Contract service - taxability from 01/05/2006 - taxability from 01/06/2007 - continuing protest and time bar of refund - unjust enrichment and proof under section 11B

Erection, Commissioning and Installation of structures - taxability from 01/05/2006 - Erection of transmission towers at site is not taxable under Erection, Commissioning and Installation service prior to 01/05/2006. - HELD THAT: - The Tribunal examined the statutory definition as amended on 01/05/2006 which specifically incorporated Erection, Commissioning or Installation of structures, whether prefabricated or otherwise. Because that express inclusion was introduced only with effect from 01/05/2006, the Court held that services of erection of transmission towers (being structures) were not covered by the definition of Erection, Commissioning and Installation prior to that date and therefore were not taxable under that head before 01/05/2006.

Service of erection of transmission towers was not taxable as Erection, Commissioning and Installation service prior to 01/05/2006.

Works Contract service - taxability from 01/06/2007 - Classification as Works Contract service could not be finally determined on the record and requires verification of material facts; remand directed. - HELD THAT: - The Tribunal observed that the appellant performed composite contracts involving supply of services together with materials, which prima facie fall within the concept of works contracts. However, conclusive classification depends on factual matters such as whether materials were actually supplied and whether VAT/WCT was discharged to the State Government. If established as works contract, the service would not be taxable prior to 01/06/2007 as indicated by Supreme Court precedent relied upon by the Tribunal. Because these factual aspects were not verified by the lower authority, the matter is remanded to the Adjudicating Authority for determination on these specific facts.

Matter remanded to Adjudicating Authority to verify whether the service was a works contract (material supply and VAT/WCT discharge) and to decide taxability accordingly.

Continuing protest and time bar of refund - The refund claim is not time-barred because the appellant's protest dated 14/10/2005 is operative and maintains the claim. - HELD THAT: - The Tribunal rejected the lower authority's view that the protest applied only to amounts covered by deposited cheques and ceased thereafter. It held that a protest communicated on a particular issue continues until the dispute is settled; therefore the letter dated 14/10/2005 lodging protest against Service Tax on Erection, Commissioning or Installation services sufficed to preserve the appellant's right to seek refund and the claim could not be barred by time.

Refund claim is not time-barred in view of the continuing protest dated 14/10/2005.

Unjust enrichment and proof under section 11B - Claim of refund is subject to proof that the incidence of Service Tax was not passed on to any other person; adjudication on unjust enrichment requires evidential verification. - HELD THAT: - The Tribunal held that the appellant's bare assertion that the service tax was not paid by the service recipient is insufficient. Under section 11B the assessee must demonstrate that the incidence of duty/service tax paid was not passed on to any other person; this requires supporting evidence from books of account or other records. Accordingly, the Adjudicating Authority must examine the appellant's evidence to determine whether unjust enrichment is established before granting refund.

Adjudicating Authority to verify from documents whether incidence of service tax was not passed on to any other person and decide unjust enrichment issue.

Final Conclusion: Impugned order set aside; appeal allowed by way of remand to the Adjudicating Authority to decide afresh the works-contract classification and unjust enrichment on the factual and evidential points indicated, and to grant or refuse refund in accordance with these findings; finding that Erection, Commissioning and Installation of structures was not taxable prior to 01/05/2006 and that the refund claim is not time-barred.

Taxability of hire of vehicles with driver as 'rent-a-cab' service - extended period of limitation - exemption under Mega Exemption Notification No.25/2012 Clause 23(b) - amendment by Notification No.6/2014 restricting exemption to non-air-conditioned vehicles - penalty under section 78 of Finance Act, 1994

Extended period of limitation - penalty under section 78 of Finance Act, 1994 - invocability of the extended period of limitation and validity of penalty for the disputed tax demand - HELD THAT: - The Tribunal found that the taxability question was the subject of genuine litigation and divergent decisions (including High Court authority relied upon by the appellant), and there was no element of suppression by the appellant. In those circumstances the extended period of limitation could not be invoked to sustain the demand for the earlier years and the penalty imposed under section 78 was accordingly set aside. The Tribunal therefore allowed the challenge to the extended period demand and quashed the penalty because the demand arose from an issue which was bona fide disputed.

Demand for the extended period set aside and penalty under section 78 deleted.

Exemption under Mega Exemption Notification No.25/2012 Clause 23(b) - applicability of the exemption in Clause 23(b) of Notification No.25/2012 for the period 20.03.2014 to 10.07.2014 - HELD THAT: - The Tribunal held that the activity of providing air-conditioned cars on hire with drivers was covered by the exemption in Clause 23(b) of Notification No.25/2012 for the period 20.03.2014 to 10.07.2014. Consequently, service tax could not be levied for that specified period as the exemption was in force until it was amended.

Activity held exempt for the period 20.03.2014 to 10.07.2014.

Amendment by Notification No.6/2014 restricting exemption to non-air-conditioned vehicles - taxability of hire of vehicles with driver as 'rent-a-cab' service - tax liability for providing air-conditioned vehicles on hire with drivers from 11.07.2014 - HELD THAT: - The Tribunal observed that Notification No.6/2014 amended the exemption so as to restrict it to non-air-conditioned vehicles. As a result, from 11.07.2014 the appellant's provision of air-conditioned vehicles on hire attracted service tax. The demand for the period from 11.07.2014 was therefore held sustainable.

Demand sustained for the period from 11.07.2014.

Final Conclusion: The appeal is allowed: demands for the extended period and the penalty under section 78 are set aside; the appellant is held exempt for 20.03.2014 to 10.07.2014 under Notification No.25/2012 Clause 23(b); service tax liability from 11.07.2014 is sustained; appellant entitled to consequential relief.

Imposition of penalty under Section 77 and Section 78 of the Finance Act, 1994 - Effect of payment of service tax before issue of show cause notice under Section 73(3) of the Finance Act, 1994 - Invocation of extended period of limitation - Rule 15(2) of the Cenvat Credit Rules, 2004 - penalty for irregular availment/reversal

Effect of payment of service tax before issue of show cause notice under Section 73(3) of the Finance Act, 1994 - Imposition of penalty under Section 77 and Section 78 of the Finance Act, 1994 - Rule 15(2) of the Cenvat Credit Rules, 2004 - penalty for irregular availment/reversal - Whether penalties under Section 77 and Section 78 of the Finance Act, 1994 read with Rule 15(2) of the Cenvat Credit Rules, 2004 could be sustained where the service tax demand confirmed had been paid before issuance of the show cause notice. - HELD THAT: - Tribunal found on record and on concession by the Revenue that the entire amount confirmed as due had been paid by the appellant prior to issuance of the show cause notice and that the same amount had been appropriated in the Order-in-Original. The original adjudicating authority did not address the appellant's contention that payment prior to issuance of the show cause notice precluded initiation of proceedings. Sub-section (3) of Section 73 of the Finance Act, 1994 provides that where service tax is paid before the issue of a show cause notice, the proceedings stand concluded. In view of the admitted pre-notice payment, initiation of penalty proceedings under Section 77 and Section 78 and Rule 15(2) was unwarranted. The Tribunal therefore concluded that the penalties imposed could not be sustained and set them aside. [Paras 3]

Penalties imposed under Section 77 and Section 78 of the Finance Act, 1994 read with Rule 15 of the Cenvat Credit Rules are set aside because the confirmed demand had been paid before issuance of the show cause notice, concluding proceedings under Section 73(3).

Final Conclusion: Appeal allowed; penalties under Section 77 and Section 78 of the Finance Act, 1994 read with Rule 15 of the Cenvat Credit Rules are set aside as the service tax demand confirmed had been paid prior to issuance of the show cause notice, thereby concluding proceedings under Section 73(3).

Exemption under Notification No.3/94-ST for Janta Personal Accident Policy - customized group Janta Personal Accident schemes - Board clarification of coverage for state specified schemes - IRDA approval requirement for modified policy terms - scope of adjudicator to examine implementation of an insured scheme - set aside of service tax demand

Exemption under Notification No.3/94-ST for Janta Personal Accident Policy - customized group Janta Personal Accident schemes - Board clarification of coverage for state specified schemes - IRDA approval requirement for modified policy terms - scope of adjudicator to examine implementation of an insured scheme - The insurance cover issued to 2,50,00,000 farmers pursuant to the agreement with the Government of Uttar Pradesh is a Janta Personal Accident Policy within the exemption under Notification No.3/94-ST and the service tax demand is unsustainable. - HELD THAT: - The Tribunal held that Notification No.3/94 ST does not prescribe a single standard format for the Janta Personal Accident Policy; consequential or additional contractual clauses (such as exclusions for self exposure to needless peril and time bar for claim intimation) do not, by themselves, disqualify a scheme from being a Janta Personal Accident Policy. The Board's letter dated 18.01.2011 was relied on to clarify that customized group JPAP schemes tailored to state specifications to extend cover to target rural/social populations are covered by the exemption. There is no requirement in the notification that modified or customized JPAPs be submitted to or approved by the IRDA for the exemption to apply. Further, it is not within the Commissioner's remit, for the purpose of denying the exemption, to probe whether the State executed JPAP was being implemented properly; such an inquiry does not convert the policy into an ineligible instrument. On these bases the Tribunal found the Commissioner's demand unsustainable and set aside the tax demand confirmed in the impugned order. [Paras 6, 7]

Demand of service tax set aside and assessee's appeal allowed; revenue's appeal dismissed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the state awarded, customized group Janta Personal Accident scheme falls within the exemption under Notification No.3/94 ST (as clarified by the Board) and that the service tax demand confirmed by the Commissioner is unsustainable.

Remand to Adjudicating Authority - Delay in adjudication and responsibility - Discretion of appellate tribunal to restore matters for fresh adjudication - Binding effect of coordinate bench decision / precedent - Inapplicability of a prior decision where distinguishing facts are shown

Remand to Adjudicating Authority - Discretion of appellate tribunal to restore matters for fresh adjudication - The Tribunal was justified in remanding the matters to the Adjudicating Authority even though the appeals had been pending for a long period before the Tribunal. - HELD THAT: - The Court held that the Tribunal's order remanding the common adjudication to the Commissioner (Adjudication) followed from the coordinate-bench decision which had set aside the common adjudicating order in respect of two similarly placed assessees and restored those matters for fresh disposal. The delay in adjudication before the Tribunal arose from the appeals awaiting their turn and not from deliberate or inexcusable conduct by the Tribunal; no application for early hearing was made by the appellant pointing out the earlier decision. In these circumstances the Tribunal did not err in remanding the matters for re-adjudication. [Paras 6, 7, 8]

Remand upheld; grievance of delay and remand rejected.

Binding effect of coordinate bench decision / precedent - Inapplicability of a prior decision where distinguishing facts are shown - The Tribunal's remand was not contrary to the binding decision relied upon by the appellant and the decision in Syntel International (P) Ltd. was not applicable in the present facts. - HELD THAT: - The Court observed that a coordinate bench of the Tribunal, when considering the same adjudicating order, had set it aside in respect of two assessees and restored the matters to the adjudicating authority. Consistency and the law of precedent required the Tribunal to follow that course unless the earlier order had been stayed by a higher forum or distinguishing facts or law were pointed out. Given no such distinction was shown, the decision in Syntel relied upon by the appellant did not apply to these facts. [Paras 8]

Tribunal's reliance on the coordinate-bench outcome and consequent remand was correct; Syntel not applicable.

Delay in adjudication and responsibility - Administrative direction for expeditious re-adjudication - The Court directed prompt administrative action to enable re-adjudication and accepted the Revenue's undertaking to appoint a common adjudicator within a specified timeframe. - HELD THAT: - Noting that the original show cause notice dated from 2001 and that re-adjudication had not commenced, the Court asked for a timeline. On instruction, counsel for the Revenue stated that a common Adjudicating Authority would be appointed within eight weeks. The Court accepted this statement and recorded the expectation that re-adjudication proceed expeditiously in accordance with the Tribunal's direction. [Paras 10]

Revenue directed to appoint a common adjudicator within eight weeks; expectation of expeditious re-adjudication recorded.

Final Conclusion: Appeal dismissed; no substantial question of law arises; Tribunal's remand to the adjudicating authority sustained and the Revenue directed to appoint a common adjudicator within eight weeks to enable expeditious re-adjudication.

CENVAT credit on capital goods - capital goods received and used in the factory - inputs used in or in relation to manufacture of final products - loss of identity of goods on incorporation into immovable plant - purpose of CENVAT scheme to avoid cascading of taxes - precedent value of MODVAT / Rule 57Q decisions to CENVAT Rules - administrative acceptance by the Central Board of Indirect Taxes and Customs

CENVAT credit on capital goods - capital goods received and used in the factory - inputs used in or in relation to manufacture of final products - loss of identity of goods on incorporation into immovable plant - Respondent entitled to avail CENVAT credit on duty paid on machines/equipment received and used in its factory to set up a sugar plant and to utilise that credit for duty on final products. - HELD THAT: - On the plain language of Rule 2(b) and Rule 3 of the CENVAT Credit Rules, 2002, credit is admissible where capital goods are received in the factory and used in or in relation to manufacture of final products. The machines and equipment in question were received under cenvatable invoices in the Respondent's factory, were covered by the definition of capital goods in Rule 2(b), and were used in the factory to set up plant used for manufacture. The Revenue's contention that such goods lose their identity on incorporation into an immovable plant and therefore the credit cannot be availed by the recipient is inconsistent with the show cause notice itself (which treated them as capital goods and restricted credit to 50% per year) and with the literal statutory scheme which permits credit where capital goods are received for use in the factory. Decisions addressing whether the assembled plant is excisable as 'goods' do not decide the distinct question whether duty paid on component capital goods received and used in the factory can be taken as CENVAT credit by the factory-owner; hence the S.S. Engineers and Triveni decisions on excisability of immovable plant are not applicable to deny credit here. Further, an identical view by the Tribunal in JSW Ispat allowing such credit, accepted by the Central Board of Indirect Taxes and Customs, reinforces that the legal position favours allowing credit to the recipient-manufacturer and militates against reopening identical demands by Revenue. [Paras 18, 19, 21, 23]

CENVAT credit allowed to the Respondent on duty paid on the machines/equipment received and used in its factory; substantial question answered in favour of the Respondent.

Final Conclusion: Appeal dismissed. The Tribunal was justified in allowing CENVAT credit to the assessee on the duty paid capital goods received and used in its factory to set up the plant; the substantial question of law is answered in favour of the assessee and against the Revenue.

Pre-deposit requirement - interim deposit as condition for interim relief - admission of appeal despite non-deposit - remand for fresh consideration - dropping of proceedings - return of court deposit - without prejudice reservation

Remand for fresh consideration - dropping of proceedings - admission of appeal despite non-deposit - Whether the appeal became infructuous because the Tribunal remitted the matter and the departmental authority subsequently dropped the proceedings, thereby affecting the lis before the Court. - HELD THAT: - The appellant had been permitted by this Court to deposit fifty percent of the duty as an interim measure and filed the deposit in Court. The Tribunal allowed the appeal by way of remand to the adjudicating authority which, after reconsideration, concluded that the proceedings were not sustainable and directed that the proceedings be dropped, while making a without prejudice reservation as to other actions. The respondents accepted the consequence of that subsequent order. In those circumstances the statutory and factual basis of the departmental demand that formed the subject-matter of the appeal no longer subsisted and the appeal was rendered infructuous. The Court, in light of these developments and the parties' positions, disposed of the civil application and the central excise appeal accordingly. [Paras 3, 6]

Appeal held to be infructuous in view of remand and subsequent dropping of proceedings; civil application and central excise appeal disposed of and the deposit placed in Court to be returned in consequence.

Return of court deposit - interim deposit as condition for interim relief - Whether the amount deposited in Court pursuant to the interim direction should be returned following the dropping of the departmental proceedings. - HELD THAT: - The appellant produced the receipt evidencing the deposit made pursuant to this Court's interim order. On the department's reconsideration pursuant to the Tribunal's remand, the demand proceedings were dropped and the respondents did not contest the consequence that this event had for the pending appeal and associated deposits. Given that the underlying proceedings no longer subsist, the deposit made in compliance with the interim direction is no longer required for maintaining the appeal and the applicant's prayer for refund was accepted by the Court in disposing the matters. [Paras 2, 3, 6]

Prayer for return of the deposit accepted; amount deposited in Court to be returned in view of proceedings being dropped and appeals disposed.

Final Conclusion: The Court disposed of the civil application and the central excise appeal as infructuous because the Tribunal's remand led to the departmental authority dropping the proceedings; consequential order made for return of the deposit placed in Court.

Exemption for inputs captively used in manufacture of final products - proviso exception for manufacturers discharging Rule 6 obligation (clause (vi) to Notification No.67/95-CE) - Rule 6(6)(vii) of the CENVAT Credit Rules - treatment of supplies against International Competitive Bidding - effect of final product clearance at nil rate under supply against International Competitive Bidding on intermediate inputs

Exemption for inputs captively used in manufacture of final products - proviso exception for manufacturers discharging Rule 6 obligation (clause (vi) to Notification No.67/95-CE) - Rule 6(6)(vii) of the CENVAT Credit Rules - treatment of supplies against International Competitive Bidding - Exemption Notification No.67/95-CE applies to intermediate goods manufactured and used captively (Clinker) even where the final product (Cement) is cleared under Notification No.6/2006-CE against International Competitive Bidding, provided the manufacturer satisfies the proviso exception by operation of Rule 6(6)(vii). - HELD THAT: - The Tribunal held that Notification No.67/95-CE grants exemption to inputs manufactured and used within the factory in relation to manufacture of final products, but the proviso bars the benefit where the final products are exempt or charged to nil rate. That bar contains exceptions (clauses i-vi). Clause (vi) preserves the exemption for a manufacturer of dutiable and exempted final products who has discharged the obligation prescribed in Rule 6 of the CENVAT Credit Rules. Where final products are cleared without payment of duty under supply against International Competitive Bidding, sub-rule (6) of Rule 6(6)(vii) makes sub-rules (1)-(4) inapplicable, i.e., the manufacturer need not maintain separate accounts or pay the alternative 10% liability, and thus is treated as having discharged the obligation for the purpose of clause (vi). A conjoint reading of Rule 6(6)(vii) and clause (vi) of the proviso to Notification No.67/95-CE therefore leaves the exemption on inputs (here, Clinker) intact even though the final product is cleared at nil rate under Notification No.6/2006-CE. The Tribunal applied the reasoning in Thermo Cables Ltd and Kei Industries Ltd, held the impugned demands unsustainable, and set aside the orders. [Paras 4, 5, 6, 9, 10]

The impugned orders are set aside; the appellant is entitled to exemption under Notification No.67/95-CE on the intermediate product (Clinker) used in manufacture of Cement cleared under Notification No.6/2006-CE against International Competitive Bidding; appeals allowed.

Final Conclusion: Following the Tribunal's precedents and on a conjoint reading of Rule 6(6)(vii) and clause (vi) of the proviso to Notification No.67/95-CE, exemption on inputs manufactured and captively used is available despite the final product being cleared at nil rate under International Competitive Bidding; the impugned orders are set aside and the appeals are allowed.

Rebate of duty under Rule 18 of the Central Excise Rules - Notification No. 21/2004-CE (N.T.) - procedure for rebate - Advance Authorisation - condition (viii) of Notification No.96/2009-Cus - Non-applicability of extraneous conditions to rebate sanction - Finality of permission/sanction granted by Deputy Commissioner

Rebate of duty under Rule 18 of the Central Excise Rules - Notification No. 21/2004-CE (N.T.) - procedure for rebate - Advance Authorisation - condition (viii) of Notification No.96/2009-Cus - Non-applicability of extraneous conditions to rebate sanction - Entitlement to rebate sanctioned under Rule 18/Notification No.21/2004-CE (N.T.) is not defeated by alleged contravention of condition (viii) of Customs Notification No.96/2009-Cus. - HELD THAT: - The Tribunal examined Rule 18 and Notification No.21/2004-CE (N.T.) and found that the rebate scheme under Rule 18 is a self-contained statutory provision prescribing its own conditions and procedure for grant of input-stage rebate. There is no stipulation in the rebate provision that a contravention of conditions of a separate Customs notification (Notification No.96/2009-Cus) will render an assessee ineligible for rebate. The appellant had followed the prescribed procedure, obtained the requisite permission from the Deputy Commissioner and was sanctioned rebate accordingly. The tribunal held that it is not permissible to import extraneous conditions from Notification No.96/2009-Cus into the rebate provisions; hence recovery of sanctioned rebate on the ground of alleged breach of condition (viii) of Notification No.96/2009-Cus was without authority of law and unsustainable. [Paras 4, 5]

Recovery of sanctioned rebate on the basis of alleged violation of condition (viii) of Notification No.96/2009-Cus is illegal; the rebate sanction under Rule 18/Notification No.21/2004-CE (N.T.) cannot be negated on that ground.

Finality of permission/sanction granted by Deputy Commissioner - Rebate of duty under Rule 18 of the Central Excise Rules - Where the Deputy Commissioner granted permission and sanctioned rebate and those sanction orders were not appealed by the Department, the sanction stands final and cannot be reopened by the Commissioner by way of a recovery order. - HELD THAT: - The Tribunal noted that the appellant had obtained permission from the jurisdictional Deputy Commissioner after verification and the rebate sanction orders issued on that basis had not been challenged or set aside by the appropriate appellate authority in respect of certain claims. The Commissioner's attempt to recover sanctioned rebate amounts in respect of orders which the Department itself had not appealed was effectively a review of the Deputy Commissioner's sanction, which is not permissible. Consequently the impugned recovery insofar as it seeks to reopen unchallenged sanction orders lacks jurisdiction and authority. [Paras 4]

Sanction/permission granted by the Deputy Commissioner that has attained finality cannot be reopened by the Commissioner by issuing recovery for those claims which the Department did not appeal; such recovery is unsustainable.

Final Conclusion: The Tribunal set aside the impugned order of recovery and allowed the appeal: sanctioned rebates under Rule 18/Notification No.21/2004-CE (N.T.) could not be recovered on the basis of alleged contravention of condition (viii) of Notification No.96/2009-Cus, and sanction orders of the Deputy Commissioner which were not appealed by the Department could not be reopened by the Commissioner.

Requirement of duty-paying documents for availment of Cenvat credit - utilisation of Cenvat credit only to the extent available on the last day of the month - reversal of wrongly taken Cenvat credit - imposition of interest for misuse or wrongful availment of Cenvat credit - duress or coercion as a defence to substantiate availment of credit

Requirement of duty-paying documents for availment of Cenvat credit - utilisation of Cenvat credit only to the extent available on the last day of the month - reversal of wrongly taken Cenvat credit - Whether the appellant was entitled to Cenvat credit of Rs. 2,04,74,204/- (claimed balance as per ER-1) or whether such credit was wrongly taken and properly disallowed and reversed by the department. - HELD THAT: - The Tribunal examined the RG 23A Part-II and the ER-1 return and found that the appellant failed to produce duty-paying documents to substantiate the large credit claim shown in ER-1 for the period ending December 2008. The Cenvat scheme requires availment of credit only on receipt of inputs and on the strength of prescribed documents; utilisation is permissible only to the extent of credit available on the last day of the month. In the absence of supporting documents and given that the authorised representative had himself effected the reversal entries, the adjudicating authority correctly held that the impugned credit was taken without compliance with Rules 3 and 9 of the Cenvat Credit Rules, 2004 and therefore was liable to be denied. The claim that the reversal was effected under duress was not accepted where the authorised signatory had made the reversal suo moto and no documentary basis for the claimed credit was placed before the adjudicating authority. [Paras 7, 8, 9]

Claimed credit shown in ER-1 was not sustainable for want of duty-paying documents and the departmental reversal/denial of credit was upheld.

Imposition of interest for misuse or wrongful availment of Cenvat credit - duress or coercion as a defence to substantiate availment of credit - Whether interest pointed out during scrutiny (including amount identified by Audit) could be imposed in respect of the wrongly availed/ utilised Cenvat credit. - HELD THAT: - The Tribunal concurred with the adjudicating authority that, having found that credit was taken and utilised without being available under the Cenvat rules and without requisite documents, the department was entitled to proceed against the appellant for recovery including imposition of interest. The fact that the appellant alleged coercion or duress in effecting reversals did not absolve it of compliance with the statutory procedure for availment of credit or preclude the adjudication and imposition of interest where use of unavailable credit was established. [Paras 7, 9]

Imposition of interest in respect of the wrongly availed/ utilised Cenvat credit was sustained.

Final Conclusion: The Tribunal affirmed the adjudicating authority's denial of the disputed Cenvat credit for December 2008 for want of duty paying documents and upheld the consequential imposition of interest; the appellant's appeal was dismissed.

Principle of natural justice - reliability of departmental records - requirement of proof of source for produced documents - cross-examination before relying on statements under Section 9D - remand for de novo adjudication - eligibility for exemption under Notification No.4/1997-CE

Requirement of proof of source for produced documents - reliability of departmental records - Adjudicating Authority must establish and produce proof of the covering letter dated 12/13.08.1997 and thereby the source of the documents relied upon before confirming demand. - HELD THAT: - The Tribunal found that the departmental case rested heavily on documents said to have been submitted under a covering letter dated 12/13.08.1997. The covering letter was not placed on record for the appellants and, in its absence, the claim that the documents were received under that covering letter could not be accepted. When the provenance of documents relied upon is in serious doubt, the Adjudicating Authority cannot base a demand on those documents without first establishing their source. Given this defect, the Tribunal concluded that the impugned order could not stand and remanded the matter for fresh consideration after production of proof of receipt of the relied-upon documents under the stated covering letter.

Impugned order set aside and matter remanded to the original authority to establish proof of receipt of the documents under the covering letter dated 12/13.08.1997 and to decide the matter afresh.

Cross-examination before relying on statements under Section 9D - principle of natural justice - Statements relied upon by the department could not be acted upon without affording the appellants the opportunity to cross-examine the witnesses, particularly where the documentary foundation for the statements was disputed. - HELD THAT: - The Tribunal observed that appellants had specifically sought cross-examination of persons whose statements were relied upon and had challenged the veracity of the documents said to have accompanied those statements. Under Section 9D the Adjudicating Authority must examine witnesses before relying on their statements; accordingly, when the documents forming the basis of the statements are in doubt, the obligation to grant cross-examination is heightened. Failure to allow cross-examination amounted to a breach of natural justice requiring reconsideration.

Order set aside insofar as it relies on untested statements; original authority directed to permit cross-examination of the witnesses and then proceed to de novo adjudication.

Eligibility for exemption under Notification No.4/1997-CE - remand for de novo adjudication - The original authority is to examine afresh the appellants' entitlement to exemption under Notification No.4/1997-CE dated 01.03.1997 while conducting the de novo adjudication. - HELD THAT: - The Tribunal noted that the question of applicability of Notification No.4/1997-CE to twisted and dyed yarn as claimed by the parties was an important issue that required to be tested by the Adjudicating Authority in the course of the remand. The Adjudicating Authority must consider and decide the appellants' eligibility for the exemption as part of the fresh adjudication after addressing defects in proof and permitting cross-examination.

Matter remanded to the original authority to examine and decide the appellants' entitlement to exemption under Notification No.4/1997-CE in the de novo adjudication.

Final Conclusion: Impugned adjudication set aside for breach of natural justice and defective proof; appeals allowed by remanding the matter to the original authority for production of proof of receipt of relied documents, grant of cross-examination, fresh consideration of the statements and records, and a de novo adjudication including examination of entitlement to Notification No.4/1997-CE.

Exemption for captive consumption of inputs - intermediate products vis-a -vis final products - Proviso excluding inputs used in relation to manufacture of exempt final products - concurrent application of exemption notifications for intermediate goods and for goods used in repair/maintenance - benefit of exemption to multiple stages of captive intermediate manufacture - Cenvat/Modvat credit and revenue neutrality - interpretation of exemption notifications in integrated manufacturing units

Exemption for captive consumption of inputs - intermediate products vis-a -vis final products - concurrent application of exemption notifications for intermediate goods and for goods used in repair/maintenance - benefit of exemption to multiple stages of captive intermediate manufacture - Validity of claim of exemption under Notification No.67/95 (and predecessor) read with Notification No.65/95 for inputs (pig iron/steel scrap) used to produce intermediate products that were captively consumed for repair/maintenance or as parts in the factory - HELD THAT: - The Tribunal held that in an integrated plant where pig iron and scrap are the starting inputs used to manufacture a series of connected intermediate products, products consumed within the factory remain intermediate products until finally cleared. The proviso to the captive-consumption notification does not disentitle the manufacturer where duty is ultimately paid on final products cleared from the factory. The ratio in the Tribunal and Supreme Court precedents relied upon by the respondents (Escorts Ltd. and Rastriva Ispat Nigam Limited ) supports permitting exemption across successive stages of captive consumption of intermediate products. The CBEC Circular dated 06.12.1993 also clarifies that exemption benefit may be allowed to intermediate products used captively in manufacture of other intermediate products. Given these principles, the adjudicating authority rightly dropped the demands under the show-cause notices concerning captive use for repair/maintenance and related intermediate usages. [Paras 12, 13, 14]

Demand for duty on pig iron and steel scrap used to produce intermediate products consumed captively for repair/maintenance or as parts is not sustainable; exemption benefit rightly allowed and demands dropped.

Proviso excluding inputs used in relation to manufacture of exempt final products - exemption for captive consumption of inputs - Cenvat/Modvat credit and revenue neutrality - interpretation of exemption notifications in integrated manufacturing units - Sustainability of demand for duty on pig iron captively consumed in manufacture of fluted moulds/bottom plates etc. which were claimed to be exempt final products under specific notifications - HELD THAT: - The Tribunal examined the proviso excluding inputs used in manufacture of final products that are wholly exempt or nil-rated and found that in the integrated manufacturing chain at DSP the relevant moulds and plates formed part of intermediate processes leading to final dutiable clearances in other cases. Moreover, even if duty were held payable on the pig iron used for such intermediate/ancillary items, the amount would be available as Cenvat/Modvat credit, producing a revenue-neutral outcome. Relying on the principle of revenue neutrality as applied in Anglo French Textiles , the Tribunal concluded there was no justification to sustain the duty demands or penalties raised in the show-cause notices. [Paras 12, 15]

Demand for duty on pig iron used in manufacture of fluted moulds/bottom plates is not sustainable for the reasons stated; adjudicating authority correctly dropped the demands.

Final Conclusion: Both appeals by the Revenue are dismissed; the Commissioner's orders dropping the duty demands are upheld.

Valuation of goods sold through consignment agents - Limitation - longer period not available where facts were disclosed in an earlier show cause notice - Suppression of facts and extended limitation - Quantification of demand confined to the period within limitation - Penalty not leviable for bona fide legal interpretational issue

Limitation - longer period not available where facts were disclosed in an earlier show cause notice - Suppression of facts and extended limitation - Valuation of goods sold through consignment agents - Whether demands raised by invoking the extended/longer period are sustainable where an earlier show cause notice had disclosed the same facts - HELD THAT: - The Tribunal applied the principle in Nizam Sugar Factory v. Commissioner that issuance of the first show cause notice brings all relevant facts to the notice of authorities, and consequently subsequent show cause notices cannot treat the same facts as suppression to invoke the longer period. The parties did not dispute that the appellant sold through consignment agents and that valuation should be at the consignment-agent sale price; the Revenue conceded that an earlier show cause notice dated 27.04.2010, raising identical demands, had been issued. In view of the earlier notice, demands based on invoking the extended period are unsustainable and must be set aside to the extent they relate to periods outside limitation. [Paras 6, 7]

Demands raised for the longer period by invoking the extended limitation are set aside because the same facts were already disclosed by the earlier show cause notice.

Quantification of demand confined to the period within limitation - Penalty not leviable for bona fide legal interpretational issue - Determination and quantification of the demand falling within the limitation period and the fate of penalties imposed - HELD THAT: - The Tribunal found that part of the demand in the show cause notice dated 26.03.2012 and the entire demand under the second show cause notice dated 08.05.2012 fall within the limitation period and therefore require adjudication. The matter was remitted to the original adjudicating authority to quantify only that portion of the demand which is within limitation. Regarding penalties, the Tribunal treated the controversy as a bona fide legal-interpretational issue and, on that basis, found no justification for imposing penalties; consequently, penalties were set aside. [Paras 7]

Matter remitted to original authority to quantify demand within limitation; imposed penalties set aside on the ground that the issue was a bona fide legal-interpretational dispute.

Final Conclusion: Appeal allowed in part: demands based on extended limitation set aside; adjudicating authority directed to quantify demands falling within the limitation period; penalties imposed set aside.

Reversal of Cenvat credit of written-off inputs - applicability of Rule 3(5B) of Cenvat Credit Rules w.e.f. 11 May 2007 - invocation of extended period of limitation - malafide intention to evade duty - public sector undertaking and presumption against malafide

Invocation of extended period of limitation - malafide intention to evade duty - public sector undertaking and presumption against malafide - Whether demand confirmed by invoking the longer period of limitation could be sustained against the appellant - HELD THAT: - The Tribunal found that the show cause notice dated 04.06.2012 (covering 2009-10) was issued despite an earlier audit of the factory in 2007 which had recorded the objection regarding written-off inputs, thereby notifying the revenue of the appellant's practice of writing off such inputs. The appellant being a public sector undertaking, and in absence of any evidence establishing beyond doubt that the activity was undertaken with an intent to evade duty, malafide could not be attributed. Reliance was placed on earlier Tribunal decisions holding that mere possibility of reversal does not establish malafide against a public sector undertaking. On these grounds the Tribunal held that invocation of the extended period of limitation was not justified and the demand could not be sustained on that basis.

Impugned order set aside and appeal allowed on the ground of limitation.

Final Conclusion: The appeal is allowed on limitation grounds and the order confirming the demand by invoking the longer period of limitation is set aside.

Definition of manufacture - excisability of printing and lamination - classification under Tariff Item No.4911 - NIL rate of duty - precedential effect of tribunal decision

Definition of manufacture - excisability of printing and lamination - Whether mere printing of polyfilms amounts to manufacture and is liable to Central Excise duty for the period covered by the show cause notice. - HELD THAT: - Relying on the Tribunal's earlier decision in M/s Essar Packaging Pvt. Ltd. (reproduced in the order) and on agreement by the Revenue, the Tribunal held that mere printing of polyfilms does not constitute 'manufacture' and therefore does not attract Central Excise duty. The show cause notice failed to establish that printing alone amounted to manufacture. Consequently, activities limited to printing are not excisable for the period under adjudication.

Mere printing of polyfilms is not manufacture and does not attract Central Excise duty for the period 2006-07 to 2010-11 (up to September, 2010).

Definition of manufacture - classification under Tariff Item No.4911 - NIL rate of duty - Whether printed laminated plastic films are excisable and, if so, their classification and rate of duty for periods before and after 10.05.2008. - HELD THAT: - Applying the precedent, the Tribunal held that lamination after printing was not covered by the definition of manufacture until 9-5-2008; therefore printed laminated films did not attract Central Excise duty up to that date. With effect from 10-5-2008, lamination after printing fell within the definition of manufacture and such goods are classifiable under Tariff Item No.4911. However, Tariff Item No.4911 carries a nil rate of duty, so although the activity amounted to manufacture w.e.f. 10-5-2008, no duty was payable. The Tribunal accepted these legal conclusions and set aside the demand and associated penalties/confiscation accordingly.

Printed laminated plastic films are not excisable up to 9-5-2008; w.e.f. 10-5-2008 they amount to manufacture, are classifiable under Tariff Item No.4911 and attract NIL Central Excise duty.

Final Conclusion: The Tribunal, following its precedent and on the Revenue's concession, allowed the appeal, set aside the impugned Order in Original, held that printing alone is not excisable and that printed laminated films are non excisable till 9 5 2008 and, from 10 5 2008, are classifiable under Tariff Item No.4911 at NIL rate; consequential penalties and confiscation were also set aside.

Cenvat credit entitlement for input goods used in manufacture of final product - Credit on iron and steel items, paint and cement used in supporting structural - Effect of precedent where a High Court declares a Tribunal Larger Bench decision not to be good law - Limitation - longer period invocation requires mala fide; bona fide doubt bars extended limitation

Cenvat credit entitlement for input goods used in manufacture of final product - Credit on iron and steel items, paint and cement used in supporting structural - Effect of precedent where a High Court declares a Tribunal Larger Bench decision not to be good law - Assessee entitled to Cenvat credit on various iron & steel items, paint and cement used in manufacture of Supporting Structural. - HELD THAT: - The Tribunal allowed the appeal on merits because the Larger Bench decision relied upon by the authorities was subsequently held not to be good law by the Gujarat High Court in M/s Mundra Ports & Special Economic Zone Ltd., and that exposition was followed by the Tribunal in the assessee's own earlier decision. In view of the High Court's disapproval of the Larger Bench view and the subsequent tribunal practice including the assessee's earlier favourable order, the Bench upheld the assessee's entitlement to credit of duty paid on the specified inputs used in manufacture of Supporting Structural.

Impugned order set aside on merits and Cenvat credit allowed in respect of the specified inputs.

Limitation - longer period invocation requires mala fide; bona fide doubt bars extended limitation - Demand is barred by limitation; invocation of extended limitation period was not justified. - HELD THAT: - The Tribunal found that the issue was not free from doubt and that prior precedents before the Larger Bench decision favoured the assessee. Given that the matter was previously decided in the assessee's favour and was later referred to a Larger Bench, no mala fide could be attributed to the assessee to justify invoking the extended limitation period. Accordingly, the demand raised by invoking the longer period was held to be barred by limitation.

Extended period of limitation not invoked; demand held time-barred.

Final Conclusion: Appeal allowed; impugned order set aside, Cenvat credit granted on the specified inputs and consequential relief directed.

Valuation for excise duty - Captive consumption - Assessable value - Comparable market sale price - Adoption of average market price

Valuation for excise duty - Captive consumption - Comparable market sale price - Adoption of average market price - Proper assessable value of molasses for payment of excise duty for the period August 1994 to June 1995 - HELD THAT: - The appellants, manufacturers of cane sugar and molasses using molasses captively, declared assessable value at Rs. 40 per quintal. Revenue proceedings, based on market inquiries, led to enhancement to Rs. 225 per quintal which was reduced by Commissioner (Appeals) to Rs. 185 per quintal by adopting the average of market prices shown by M/s Seksana Biswana Sugar Factory Ltd. The Tribunal earlier remanded for reconsideration of the average price for the relevant period. On de novo reconsideration Commissioner (Appeals) asked the appellants to produce evidence of lower market prices; the appellants failed to do so. The only letter relied on by the appellants showed Rs. 150 per quintal (covering the relevant period) and Rs. 75 per quintal (for a subsequent period not germane to the appeal). There was no evidence to impeach the higher market figure relied upon by Revenue (about Rs. 220 per quintal). In the absence of evidence demonstrating that the two market prices relied upon by Commissioner (Appeals) were incorrect, the adoption of their average to fix the assessable value was held to be reasonable and sustainable. [Paras 6, 7]

Appeal rejected; impugned order upholding the assessable value at the average market rate (Rs. 185 per quintal) is sustained.

Final Conclusion: The tribunal affirms the assessable value fixed by Commissioner (Appeals) by average of comparable market sale prices and dismisses the appellant's challenge for the period August 1994 to June 1995.

Principles of natural justice - right to cross-examination - compliance with tribunal directions on remand - application of mind - double imposition of penalty

Right to cross-examination - principles of natural justice - compliance with tribunal directions on remand - application of mind - Whether the impugned re-adjudication complied with the Tribunal's remand directions and afforded the appellants opportunity to cross-examine witnesses in accordance with principles of natural justice, and whether the adjudicating authority applied its mind. - HELD THAT: - The Tribunal found that the earlier final order had remanded the matter for re-adjudication expressly permitting the appellants to reiterate their request for cross-examination and directing the Commissioner to decide the same in accordance with law. The record shows the appellants appeared for cross-examination on the date fixed but the adjudicating authority was not available and, after transfer of officers, the new authority passed the impugned order without offering the opportunity to cross-examine. The impugned order contains observations characterising the cross-examination request as irrelevant and a dilatory tactic, but records no application of mind to the appellants' entitlement under the remand directions. On these findings the Tribunal concluded that the impugned order violated the remand directions and principles of natural justice and was passed without proper application of mind. [Paras 3, 6]

Impugned order set aside for failure to comply with remand directions and for breach of principles of natural justice by denying opportunity for cross-examination; appeals allowed with consequential relief.

Double imposition of penalty - compliance with tribunal directions on remand - Whether penalties already imposed and paid under the earlier order were erroneously imposed again in the impugned order and what remedy is required. - HELD THAT: - The Tribunal noted that personal penalties had been imposed on certain appellants by the earlier order dated 25.03.2010 and that those penalties had been paid and no appeal against that earlier order was prosecuted. The impugned order nevertheless imposed penalties again. The Revenue requested a remand to the original authority to rectify the mistake of double imposition. Having found the impugned order unsustainable on grounds of non-compliance with remand directions and denial of natural justice, the Tribunal set aside the impugned order, thereby addressing the erroneous re-imposition of penalty and permitting consequential relief to the appellants. [Paras 4, 5, 6]

Findings of double imposition noted; impugned order set aside and appeals allowed, enabling correction of the erroneous re-imposition of penalties and granting consequential relief.

Final Conclusion: The Tribunal set aside the impugned Order-in-Original as it failed to comply with the Tribunal's remand directions, denied the appellants the opportunity of cross-examination in breach of principles of natural justice and was passed without application of mind; appeals are allowed and appellants are entitled to consequential relief, including rectification of the erroneous re-imposition of penalties.

Physical control of factory by Central Excise officers - clandestine removal of excisable goods - extended period of limitation under proviso to Section 11A(1) of the Central Excise Act, 1944 - assessment of duty by Superintendent/Inspector under Rule 6 of the Central Excise Rules, 2002 - penal liability of directors under Rule 26/Rule 25 of the Central Excise Rules, 2002 - reliance on third party documents and uncorroborated entries ('kachchi parchis') to prove clandestine removals

Physical control of factory by Central Excise officers - assessment of duty by Superintendent/Inspector under Rule 6 of the Central Excise Rules, 2002 - Whether the manufacturing unit of the appellant was under physical control of Central Excise officers throughout the relevant period - HELD THAT: - The Tribunal examined the record including the Original Authority's reference to Para 2.2 of Chapter IV of CBEC's supplementary instructions and the cross examination of departmental officers posted at the factory. It accepted that machines were sealed and de sealed by posted officers, invoices were countersigned and assessment before removal was carried out by officers as envisaged by Rule 6. The Tribunal found that the Original Authority erred in dismissing the detailed supervisory regime without referring to the cigarette manual and the full scope of supervisory checks. On the materials the Tribunal concluded that the unit was throughout under physical control of Central Excise officers and that production and removal occurred only after departmental de sealing and with departmental assessment before removal. [Paras 10]

Unit held to have been under physical control of Central Excise officers; finding of Original Authority to the contrary unsustainable

Clandestine removal of excisable goods - extended period of limitation under proviso to Section 11A(1) of the Central Excise Act, 1944 - reliance on third party documents and uncorroborated entries ('kachchi parchis') to prove clandestine removals - Whether the demand of Central Excise duty (invoking extended limitation) for clandestine manufacture and clandestine removals was sustainable - HELD THAT: - The Tribunal analysed the evidentiary basis for the demand and observed that the Department's case rested largely on third party documents, vague handwritten notings and alleged unaccounted inward of certain packing material (CT paper) without adequate corroboration for receipt, consumption and onward clearance. Given the accepted fact of physical departmental control at the factory, the Tribunal held clandestine manufacture and clandestine removals could not be established; the investigation failed to prove source of raw materials, buyers, or realization of sale proceeds, and relied on incomplete/unverified documents. Accordingly the Tribunal concluded there were no grounds to sustain the extended period demand asserted for the period in issue. [Paras 10, 11]

Demand under extended period set aside for lack of proven clandestine manufacture/removal and inadequate corroborative evidence

Penal liability of directors under Rule 26/Rule 25 of the Central Excise Rules, 2002 - Whether the personal penalties imposed on the directors were sustainable once the demand was unsustained - HELD THAT: - The Tribunal treated liability of the directors as consequential upon the foundational finding of clandestine removal and suppression. Having concluded that clandestine manufacture and removal were not established and setting aside the demand, the Tribunal found there was no basis to uphold the penalties imposed on the directors under the Rules. The Tribunal therefore allowed the appeals and granted consequential relief. [Paras 11]

Penalties on directors set aside as consequential to quashing of the demand

Final Conclusion: Impugned adjudication set aside; appeals allowed - demand of Central Excise duty under the extended period and penalties on the directors quashed, with consequential relief as per law.

Classification of goods - industrial input vs consumer product - construction of Schedule IV, Part-B, Entry 119 (classification as industrial input) - pari materia - precedent reliance and binding precedent

Classification of goods - industrial input vs consumer product - construction of Schedule IV, Part-B, Entry 119 (classification as industrial input) - pari materia - precedent reliance and binding precedent - Whether the product 'Ujala Supreme' is to be treated as an industrial input covered by Schedule IV, Part-B, Entry 119 of the Rajasthan Value Added Tax Act, 2003, or as a consumer product falling under Schedule V. - HELD THAT: - The Court rejected the Revenue's contention that 'Ujala Supreme' is a consumer product covered by Schedule V. It followed the decision in M.P. Agencies v. State of Kerala , which, while construing the pari materia provisions of the Kerala Value Added Tax Act, held the same product to be an industrial input under the corresponding schedule and entry. Given the parity of the statutory provisions (pari materia) between the Kerala Act and the Rajasthan Act, the Court treated the earlier decision as determinative and applied that classification to Schedule IV, Part-B, Entry 119 of the Rajasthan Value Added Tax Act, 2003.

The product 'Ujala Supreme' is an industrial input within Schedule IV, Part-B, Entry 119 of the Rajasthan VAT Act and not a consumer product under Schedule V; the Special Leave Petitions are dismissed.

Final Conclusion: The Special Leave Petitions filed by the Revenue were dismissed because the Supreme Court, following its earlier decision in M.P. Agencies v. State of Kerala , held that 'Ujala Supreme' is an industrial input covered by the corresponding schedule entry and not a consumer product.

Legislative competence - lotteries as betting and gambling - Entry 62 List II - power to tax betting and gambling - Lotteries (Regulation) Act, 1998 - power to prohibit sale under Section 5 - residuary power and Entry 97 List I - sale of lottery tickets not goods

Legislative competence - Entry 62 List II - power to tax betting and gambling - residuary power and Entry 97 List I - Validity of the Maharashtra Tax on Lotteries Act, 2006 as intra vires the State Legislature under the Seventh Schedule - HELD THAT: - The Court upheld the Division Bench conclusion that lotteries fall within the ambit of betting and gambling and that Entry 62 of List II (taxes on luxuries including taxes on betting and gambling) empowers State legislatures to impose a tax in relation to betting and gambling. Relying on the scheme of the Seventh Schedule and the reasoning in State of W.B. v. Kesoram Industries Ltd., the Court held that where power to tax is clearly conferred by a State List entry Parliament cannot invoke residuary Entry 97 of List I to oust the State's taxing power. The Court accepted the Division Bench's construction that Entry 40 of List I (lotteries organized by State) does not denude the State of its power under Entry 62 to tax lotteries treated as betting, and that the Maharashtra enactment is a taxation law imposing tax in the field of betting and gambling rather than a regulatory intrusion into a Union entry. The Court declined to re examine the Division Bench judgment, observing it was not sitting on appeal over that judgment, and found no error in the reasoning sustaining legislative competence. [Paras 16, 17, 18, 19, 20]

Maharashtra Tax on Lotteries Act, 2006 is within the legislative competence of the State Legislature and valid as a taxing enactment under Entry 62 of List II.

Lotteries as betting and gambling - Lotteries (Regulation) Act, 1998 - power to prohibit sale under Section 5 - sale of lottery tickets not goods - Respondent State's other challenges to the impugned Act (colorable legislation, absence of nexus with charging event, arbitrariness, discrimination and conflict with Lotteries (Regulation) Act, 1998) - HELD THAT: - The Court considered submissions that the Act was a colourable exercise designed to prohibit sale of other States' lotteries, that the tax lacked nexus to any State service or expenditure and was therefore arbitrary, and that taxation intruded upon Parliament's field under the Lotteries (Regulation) Act, 1998. The Court relied on authoritative characterizations of lottery as gambling (and the Lotteries (Regulation) Act's scheme, including Section 5 which permits States to prohibit sale of other States' lotteries) and accepted the Division Bench's analysis that the Maharashtra law taxes betting/gambling (the activity of lotteries) rather than attempting to exercise regulatory control reserved to Parliament. The Court found no merit in arguments of discrimination, colorable legislation or absence of nexus sufficient to invalidate the statute, and rejected the petitioner's invitation to depart from the Division Bench's reasoning or the Karnataka High Court view. [Paras 3, 4, 5, 18, 20]

Challenges alleging colorable legislation, arbitrariness, lack of nexus, discrimination and conflict with the Lotteries (Regulation) Act, 1998 were rejected and do not invalidate the Maharashtra Tax on Lotteries Act, 2006.

Final Conclusion: The writ petition challenging the Maharashtra Tax on Lotteries Act, 2006 was dismissed. The High Court held the Act to be within State legislative competence under Entry 62 of List II (taxation of betting and gambling), and rejected the petitioner's additional grounds attacking the Act as colourable, arbitrary or in conflict with the Lotteries (Regulation) Act, 1998.

Benefit of 'C' Form - concessional rate of Central Sales Tax - use of inputs in generation of electricity - registered dealer's entitlement to 'C' Form - interim relief pending final adjudication - invocation of penal provisions for misuse of concessional benefit

Benefit of 'C' Form - use of inputs in generation of electricity - interim relief pending final adjudication - Grant of interim relief permitting issuance of 'C' Form to the extent natural gas purchased from Gujarat is used in generation of electricity. - HELD THAT: - On the material placed before the Court it is not disputed that part of the natural gas purchased from dealers in Gujarat is used for generation of electricity. An officer of the Respondent (Deputy Commissioner of Sales Tax) examined the use and proposed that 'C' Form be issued to the extent the gas is so used. The Court found prima facie that where it is possible to bifurcate and measure the use of natural gas in power generation, the benefit of 'C' Form to that extent should be granted. No provision in the Act or Rules was shown to the Court that would preclude a dealer from claiming the concessional benefit pro rata for permitted use. The Court therefore granted ad interim relief in terms of the petitioner's prayer clause, subject to filing of supporting affidavits and undertakings and without precluding the Respondents from conducting enquiries or seeking variation of the order.

Ad interim relief granted: Respondents to issue 'C' Form to the petitioner to the extent natural gas is used in generation of electricity, pending final disposal, subject to conditions and verification.

Registered dealer's entitlement to 'C' Form - invocation of penal provisions for misuse of concessional benefit - Whether adjudication is required at the stage of application for 'C' Form by a registered dealer and the consequences of subsequent misuse. - HELD THAT: - The Court observed that a dealer registered under the Act is entitled to purchase specified goods from outside the State and apply for concessional tax treatment by seeking issue of a 'C' Form. Prima facie, Respondents are obliged to grant the 'C' Form on such applications. However, if it is later found that the goods obtained from outside the State were not used for the declared purpose (for example, to the extent of power generation as declared), the Respondents remain entitled to invoke statutory provisions and Rules to impose penalties or take other corrective action. Thus, the entitlement to issue a 'C' Form at the application stage is not defeated by later adjudicatory proceedings for misuse.

A registered dealer may be granted 'C' Form on application; subsequent enquiries and penal action remain available if the concessional benefit is misused.

Final Conclusion: Pending final disposal, the Court granted ad interim relief directing issue of 'C' Form to the petitioner to the extent natural gas purchased from Gujarat is used in generation of electricity, subject to the petitioner filing affidavits and undertakings and subject to verification by Respondents who remain free to enquire, invoke penal provisions, and seek variation of the order if misuse is found.