TaxTMI Updates e-Newsletter
Nov 09,2018

Summary order. Application withdrawn by the applicant before personal hearing; the application is dismissed and disposed of.

Summary order. Application for advance ruling withdrawn by the applicant before personal hearing and accordingly dismissed; application stands disposed of.

Classification of goods - HSN 7320 - springs and leaves for springs of iron and steel - applicability of GST rate - entry 234 of Schedule III of Notification No. 01/2017-Central Tax (Rate)

Classification of goods - HSN 7320 - springs and leaves for springs of iron and steel - entry 234 of Schedule III of Notification No. 01/2017-Central Tax (Rate) - applicability of GST rate - Whether the leaf springs manufactured for tractor trailers are classifiable as 'springs and leaves for springs of iron and steel' under HSN 7320 and taxable under entry 234 of Schedule III at 9% CGST and 9% SGST. - HELD THAT: - The applicant had sought classification under HSN 8433.59.00 (tractors, threshers, harvesters and attachments and parts thereof), but on examination of the product description and photographs filed by the applicant, the Authority concluded that the HSN 8433.59.00 is not relevant. The commodity manufactured by the applicant is correctly classifiable as 'springs and leaves for springs, of iron and steel' falling under HSN 7320. Entry number 234 of Schedule III to Notification No. 01/2017-Central Tax (Rate) lists this commodity and prescribes the applicable tax rate. Accordingly, the Authority applied that entry to determine the GST incidence on the goods described by the applicant.

Leaf springs manufactured for tractor trailers are classifiable under HSN 7320 as 'springs and leaves for springs of iron and steel' and taxable under entry 234 of Schedule III at 9% CGST and 9% SGST.

Final Conclusion: The Authority rules that the applicant's leaf springs for tractor trailers fall under HSN 7320 and are taxable at 9% CGST and 9% SGST as per entry 234 of Schedule III to Notification No. 01/2017-Central Tax (Rate).

Taxability of job work services - manufacturing services on physical inputs owned by others - place of supply of services - services supplied in respect of goods physically made available by the recipient - location of service where actually performed - subsummation of Service Tax into GST

Taxability of job work services - manufacturing services on physical inputs owned by others - Whether the job work of removing caffeine from tea powder supplied by a foreign principal and performed in India is taxable under GST. - HELD THAT: - The Authority held that the activity is a manufacturing/service activity performed on physical inputs owned by another and falls within the scope of manufacturing services on physical inputs owned by others (HSN Heading 9988). The process undertaken by the applicant at its premises pursuant to the principal's specifications is therefore taxable under the APGST/CGST framework and is leviable to tax under Entry No.26 (HSN 9988) by operation of the GST law. The ruling rejects the contention that the activity is outside the GST net and treats the consideration as a service fee (value based on service fee, not value of goods).

The job work service is taxable under APGST/CGST as manufacturing services on physical inputs owned by others (HSN 9988) and taxable at the applicable rate.

Place of supply of services - services supplied in respect of goods physically made available by the recipient - location of service where actually performed - Whether IGST or SGST+CGST is payable on the job work service where the principal is a foreign entity and the processed goods are exported back to the foreign principal. - HELD THAT: - Applying clause (a) of sub section (3) of section 13 of the IGST Act, the Authority concluded that where services are supplied in respect of goods required to be made physically available by the recipient to the supplier, the place of supply is the location where the services are actually performed. Here the services are performed at the applicant's business premises in Andhra Pradesh. Consequently, the supply's place is in India and the transaction is subject to state and central GST (SGST and CGST) rather than IGST, despite the foreign ownership of the goods and eventual export of the processed product.

The place of supply is the applicant's premises in Andhra Pradesh; therefore SGST and CGST apply rather than IGST.

Subsummation of Service Tax into GST - Whether Notification No.25/2012 (Mega Exemption List under Service Tax) continues to apply to the job work service. - HELD THAT: - The Authority recorded that the earlier Service Tax regime has been subsumed by the GST Act. Consequently, notifications under the Service Tax regime, including the cited mega exemption Notification No.25/2012, do not remain applicable for determining taxability under GST. The Authority therefore disavowed reliance on that Service Tax notification for exemption under the GST regime.

Notification No.25/2012 is not applicable; the Service Tax exemptions thereunder do not govern GST liability.

Final Conclusion: The Authority ruled that the applicant's job work of de caffeination is taxable under APGST/CGST as manufacturing services on physical inputs owned by others (HSN 9988), the place of supply is the applicant's premises in Andhra Pradesh making SGST and CGST applicable (not IGST), and prior Service Tax exemptions (Notification No.25/2012) are not operative under GST.

Summary order. Application withdrawn by the applicant before personal hearing and accordingly dismissed; application disposed of.

Part for manufacture - Substantial independent physical identity - Classification preference under Rule 3(a) of the Customs Tariff Act - Interpretation of Entry 234 of Schedule I of Notification No. 1/2017 Integrated Tax (Rate) - Advance Ruling under section 97/98

Part for manufacture - Substantial independent physical identity - Classification preference under Rule 3(a) of the Customs Tariff Act - Interpretation of Entry 234 of Schedule I of Notification No. 1/2017 Integrated Tax (Rate) - Whether the items listed in Table A procured for manufacture of photovoltaic/solar cells qualify as 'parts for manufacture of Photovoltaic/Solar cells' and thereby attract the rate under Entry 234 of Schedule I of Notification No. 1/2017 Integrated Tax (Rate). - HELD THAT: - The Authority examined the manufacturing process and composition of photovoltaic cells and the role of each listed input. Silicon wafers are the principal input and remain physically identifiable as the core material of the finished cell, whereas the various chemicals and ancillary materials used in processing are consumed in manufacturing and lose independent identity. To qualify as a 'part for manufacture' under Entry 234, an item must retain substantial independent physical identity when incorporated into the final product; consumed chemicals and materials that are merely inputs do not satisfy this test. The Authority further noted that undiffused silicon wafers are specifically classifiable under chapter heading 3818 of the Customs Tariff and, applying Rule 3(a), a specific heading for wafers is to be preferred over a more general heading for photovoltaic cells, supporting the distinct treatment of wafers. On the combined basis that most items listed (Sr. Nos. 2-13) are consumed inputs lacking independent identity and that the silicon wafer, though the primary constituent, cannot be regarded as a 'part' of a photovoltaic cell for the purpose of Entry 234 in light of its treatment and the nature of the final product, the items do not qualify as 'parts for manufacture' under the said entry. [Paras 6, 7]

The items listed in Table A do not qualify as 'parts for the manufacture of Photovoltaic/Solar cells' for the purpose of Entry 234 of Schedule I of Notification No. 1/2017 Integrated Tax (Rate).

Final Conclusion: Advance Ruling: the inputs procured by the applicant as listed in Table A are not 'parts for manufacture' under Entry 234 of Schedule I of Notification No. 1/2017 Integrated Tax (Rate) and therefore do not attract the concessional rate under that entry.

Governmental authority - Functions of Municipality under Article 243W read with Twelfth Schedule - Urban transportation as part of urban planning - Exemption under Notification No. 12/2017-Central Tax (Rate)

Governmental authority - Exemption under Notification No. 12/2017-Central Tax (Rate) - Whether AMARAVATHI METRO RAIL CORPORATION LIMITED is a Governmental Authority for the purpose of Notification No. 12/2017-Central Tax (Rate). - HELD THAT: - The Authority applied the statutory definition of "governmental authority" as given in the Explanation to clause (16) of section 2 of the IGST Act (as adopted by the notification), which requires an authority, board or body either set up by an Act of Parliament or a State Legislature or established by any Government with ninety per cent or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W. The facts on record show that AMRCL is a special purpose vehicle constituted by the State Government (G.O. Ms. 141 and G.O. Rt.No. 599) and is 100% owned and answerable to the Government of Andhra Pradesh, with its chairman being the Principal Secretary. On these findings the Authority concluded that AMRCL satisfies the statutory criteria and is a Governmental Authority within the meaning of the notification and hence eligible for the exemption insofar as covered activities are concerned. [Paras 4, 5]

AMRCL is a Governmental Authority as per Notification No. 12/2017-Central Tax (Rate).

Functions of Municipality under Article 243W read with Twelfth Schedule - Urban transportation as part of urban planning - Exemption under Notification No. 12/2017-Central Tax (Rate) - Whether consultancy services for preparation of transport studies and related DPR/transaction advisory services fall within functions of a Municipality under Article 243W read with the Twelfth Schedule and thereby within the exemption notification. - HELD THAT: - The Authority examined Article 243W and the Twelfth Schedule, noting that urban planning (including town planning) and related items such as public amenities (bus stops, parking spaces) are entrusted functions. It accepted the applicant's submission and the Ministry of Urban Development communication that urban transport is integral to urban planning and that urban transportation activities form part of urban planning. The Authority catalogued the transport studies and advisory/DPR services commissioned by AMRCL (CMPs, TOD plans, IPT & NMT plans, transaction advisory services and DPRs including circular rail) and held that these activities are urban transport/urban planning functions covered by the Twelfth Schedule. Consequently, such consultancy services fall within the scope of functions entrusted to municipalities and are covered by the exemption in Notification No. 12/2017-Central Tax (Rate). [Paras 4, 5]

The consultancy services for preparation of transport studies, transaction advisory services and preparation of DPRs for metro/circular rail projects fall within municipal functions under Article 243W read with the Twelfth Schedule and are covered by Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The Authority ruled that AMRCL is a Governmental Authority for the purposes of Notification No. 12/2017-Central Tax (Rate) and that the consultancy services for transport studies, transaction advisory services and DPR preparation for metro and related urban transport projects constitute municipal functions under Article 243W/Twelfth Schedule and are therefore covered by the exemption notification.

Agency - aggregate turnover - registration requirement for agents making taxable supplies on behalf of others - exemption for services of commission agents in relation to agricultural produce - reverse charge on supplies from agriculturists - value of supply inclusive of commission - reference to Appellate Authority where the Authority for Advance Ruling lacks consensus

Reference to Appellate Authority where the Authority for Advance Ruling lacks consensus - exemption for services of commission agents in relation to agricultural produce - reverse charge on supplies from agriculturists - registration requirement for agents making taxable supplies on behalf of others - aggregate turnover - value of supply inclusive of commission - Application referred to the Appellate Authority for Advance Ruling; no ruling issued by this Authority on the questions framed by the applicant. - HELD THAT: - The members of the Authority examined the applicant's questions concerning (a) applicability of GST on sale of tobacco leaves received from farmers when acted upon by a commission agent with turnover below the threshold; (b) incidence and payability of tax; (c) applicability of reverse charge; (d) liability when tobacco received from traders is sold by the commission agent and ability to collect GST from buyers; and (e) registration and collection obligation where aggregate turnover (including value of tobacco plus commission) is below or above the threshold. The two members recorded differing views on these questions. In the absence of a consensus, and in accordance with the procedure adopted by the Authority, the application has been referred to the Appellate Authority for Advance Ruling for further action; consequently this Authority has treated the matter as one where a ruling is not issued.

Application referred to the Appellate Authority for Advance Ruling under the Authority's internal procedural provision; ruling not issued by this Authority and the application is disposed of by reference.

Final Conclusion: The Authority for Advance Ruling did not pronounce a ruling due to lack of consensus between its members and has referred the applicant's questions to the Appellate Authority for Advance Ruling; the application is disposed of as 'ruling is not issued.'

Release of detained goods under Section 129 of the GST Act - security for release in the form of bond and bank guarantee - vires of Rule 140 of the CGST/SGST Rules - Article 301 - freedom of trade and commerce - application of precedent / stare decisis - writ jurisdiction to quash executive orders

Vires of Rule 140 of the CGST/SGST Rules - security for release in the form of bond and bank guarantee - release of detained goods under Section 129 of the GST Act - Article 301 - freedom of trade and commerce - application of precedent / stare decisis - Whether the challenge to Rule 140 insofar as it mandates security (simple bond for value of goods and bank guarantee for tax, interest and penalty) as a condition for release of goods detained under Section 129(3) can be sustained in this petition. - HELD THAT: - The petition sought declaration that Rule 140, to the extent it directs collection of security by way of a simple bond for the value of goods and a bank guarantee equivalent to tax, interest and penalty as a mandatory condition for release of goods detained under Section 129(3), is violative of Article 301 and prayed for quashing of the detention order and related notice and for release of goods without such security. The Court observed that the legal question raised is squarely covered by the ratio in the earlier judgment dated 9th August 2018 in WPC No.26986 of 2018. In view of that binding precedent, the Court applied the same ratio and declined to reopen or re-adjudicate the issue in this petition.

Writ petition dismissed as the challenge is covered by the earlier judgment; no separate adjudication on merits undertaken.

Final Conclusion: The writ petition is dismissed by applying the ratio of the earlier decision dated 9th August 2018 in WPC No.26986 of 2018; no further relief granted in respect of release of detained goods or quashing of the impugned orders.

Summary order. Permission to withdraw the special leave petition granted and the special leave petition dismissed as withdrawn.

Summary order. Special Leave Petition dismissed; delay condoned; pending application disposed of.

Summary order. Special Leave Petition dismissed on the ground of low tax effect; question of law left open; delay condoned and pending applications disposed of.

Fair market value as on April 1, 1981 - reference to the District Valuation Officer - registered valuer's report - applicability of clause (a) and clause (b) of section 55A prior to amendment with effect from July 1, 2012

Reference to the District Valuation Officer - registered valuer's report - fair market value as on April 1, 1981 - Assessing Officer's competence to refer valuation to the District Valuation Officer where the assessee's value is supported by a registered valuer's report for determining fair market value as on April 1, 1981. - HELD THAT: - The Tribunal's deletion of the addition was upheld on the basis of this Court's earlier decision in Commissioner of Income-Tax v. Gauranginiben S. Shodhan. Prior to the amendment to section 55A effective July 1, 2012, where an assessee's claimed value was supported by a report of a registered valuer, clause (a) governed the Assessing Officer's power and did not permit a reference to the DVO to reassess the fair market value as on April 1, 1981. Clause (b), which permits reference to the DVO in other cases, does not apply where clause (a) is attracted; consequently clause (b)(i) also had no bearing on valuation as on April 1, 1981 for the period in question. The Tribunal correctly applied this principle to hold that the reference to the DVO for valuation as on April 1, 1981 was not competent, and therefore the addition on account of long-term capital gains based on such reference could not be sustained.

The addition made on account of long-term capital gains based on a DVO reference for valuation as on April 1, 1981 was rightly deleted; the Assessing Officer's reference to the DVO was not competent for the period concerned.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's deletion of the addition relating to long-term capital gains for Assessment Year 2011-12 is affirmed on the ground that, for the period prior to the July 1, 2012 amendment, an Assessing Officer could not refer valuation to the DVO where the assessee relied upon a registered valuer's report.

Income from House Property - Income from Business - dominant object test - role of memorandum of association in classification of receipts - ownership and section 22 primary ingredient

Income from House Property - Income from Business - dominant object test - role of memorandum of association in classification of receipts - Raj Dadarakar and Associates - Classification of income from leasing of the warehouse as taxable under the head Income from House Property and not as Income from Business for assessment year 2014-15. - HELD THAT: - The Tribunal upheld the conclusion of the AO and the CIT(A) that income from leasing the warehouse falls under Income from House Property. Relying on the authoritative decision in Raj Dadarakar and Associates, the Tribunal observed that where leasing out premises and collecting rent satisfy the provisions of section 22 with the assessee being the owner, such receipts are normally to be treated as income from house property. The presence of an object in the memorandum of association referring to warehousing business is not determinative; change of ownership from the earlier owner (who received rent as rental income) to the assessee did not alter the nature of the receipts. Applying this principle to the material facts, the Tribunal concluded that the dominant object of the transaction is enjoyment of rent and not business income, and therefore the CIT(A)'s classification was rightly upheld. [Paras 5, 6]

Assessee's claim that rental receipts should be treated as business income was rejected; income from the warehouse is assessed as Income from House Property.

Income from House Property - disallowance of business expenses - computation under head-wise treatment - Validity of disallowance of expenses claimed under business income consequent to treating receipts as Income from House Property. - HELD THAT: - Because the receipts from the warehouse were held to be income from house property, the AO disallowed expenses claimed under the head of business income and computed the net results accordingly. The Tribunal found no error in the AO's computation of income under Income from House Property (which yielded a net loss under that head after statutory deductions) and in the consequent disallowance of the business expenses claimed against those receipts. The CIT(A)'s confirmation of the AO's computations and disallowance was therefore sustained. [Paras 5, 6]

Disallowance of the expenses claimed under business income, consequent to classification of the receipts as Income from House Property, is upheld.

Final Conclusion: The appeal is dismissed; the orders of the AO and the CIT(A) are upheld insofar as the income from leasing the warehouse for assessment year 2014-15 is assessed as Income from House Property and the related expense claims/disallowances and computations are sustained.

Treatment of receipts already offered to tax and consequence of re addition - treatment of unexplained cash deposits as income where books are regularly maintained - treatment of unexplained share premium where no fresh receipt during the year - disallowance as alleged bogus expenses versus evidentiary requirement to reject books

Treatment of receipts already offered to tax and consequence of re addition - Deletion of addition of Rs. 33,09,000 made by AO in respect of service charges received from M/s ESAJV which CIT(A) reduced by 50% and AO had treated as bogus receipts. - HELD THAT: - The Tribunal held that the entire amount formed part of the assessee's declared receipts in the profit and loss account and, therefore, could not be re added by the Assessing Officer. The facts were identical to those in the Tribunal's earlier decision in the sister concern and the parties agreed identity of facts; following that reasoning the whole addition was deleted rather than sustaining a part addition. The CIT(A)'s interim allowance of 50% was extended to full deletion on the basis that double inclusion cannot be sustained. [Paras 5]

Addition deleted in full; Revenue's ground dismissed and assessee's cross objection in respect allowed.

Treatment of unexplained cash deposits as income where books are regularly maintained - Deletion of addition of Rs. 24,37,500 made by AO on account of unexplained cash deposits u/s 68. - HELD THAT: - The Tribunal found the issue identical to that decided in the sister concern: the cash deposits were reflected in the books regularly maintained by the assessee and there was no basis to treat them as unexplained credits. Relying on the identical factual matrix and the earlier reasoning, the Tribunal upheld the CIT(A)'s deletion of the addition. [Paras 6]

Deletion upheld; Revenue's ground dismissed.

Treatment of unexplained share premium where no fresh receipt during the year - Deletion of addition of Rs. 19,75,000 made by AO treating share premium as unaccounted income. - HELD THAT: - The Tribunal observed that the balance sheet showed no increase in share capital or share premium during the year and that the alleged premium was an opening balance from earlier years. Since no amount was received in the year under consideration, the provisions for treating unexplained credits were not attracted. The Assessing Officer had not examined the balance sheet properly and had not rebutted the factual position; therefore the CIT(A)'s deletion was upheld. [Paras 7]

Deletion upheld; Revenue's ground dismissed.

Disallowance as alleged bogus expenses versus evidentiary requirement to reject books - Deletion of addition of Rs. 36,30,143 made by AO on account of alleged bogus expenses and unaccounted income u/s 69C. - HELD THAT: - The Tribunal found that the Assessing Officer's allegations were generic and contradicted by evidence placed on record: the assessee produced lists of faculty, training programmes, course material, supporting bills and other details, and the books of account were not rejected. No specific infirmity or incriminating material was pointed out by the AO. In view of the documentary evidence and absence of any finding that the assessee was not carrying on business or that expenses were not actually incurred, the CIT(A)'s deletion was sustained. [Paras 8]

Deletion upheld; Revenue's ground dismissed.

Final Conclusion: The Revenue's appeal is dismissed in entirety and the assessee's cross objection is allowed; the additions challenged were deleted on the facts and reasoning recorded by the Tribunal.

Reliability of seized/impounded documents - onus to explain seized documents - addition as unexplained rental income - assessment under section 153C of the Income-tax Act - admission in statement of the tenant

Reliability of seized/impounded documents - onus to explain seized documents - addition as unexplained rental income - admission in statement of the tenant - Validity of addition of undisclosed cash rent/security as income of the assessee based on impounded document and related material - HELD THAT: - The seized paper relied upon by the Assessing Officer was found to belong to the tenant company, and the director of that company in his statement admitted that the impounded document belonged to the tenant and bore his signature. He stated the agreed rent was Rs. 2,50,000 per month and did not affirm that cash of Rs. 33 lakhs was paid to the assessee; he could not explain the alleged cash entry and no further corroboration was recorded. The Assessing Officer did not establish that the cash amount shown in the impounded paper was actually received by the assessee, nor did the document contain the assessee's handwriting or signature. On this record the impounded paper was not a reliable basis to fasten unexplained rental income on the assessee; the evidentiary onus to explain the impounded document lay on the tenant company which had admitted ownership of the paper. In the absence of material connecting the alleged cash receipt to the assessee, the addition confirmed by the authorities below could not be sustained. [Paras 6]

Deletion of the entire addition of undisclosed rental income made by the authorities; appeal allowed on this ground.

Final Conclusion: The addition of unexplained rental/security amount was deleted and the assessee's appeal is allowed. The challenge to initiation of proceedings under section 153C was not adjudicated as the question was rendered academic by deletion of additions.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - bonafide belief - Chapter XII G tonnage tax scheme - treatment of common costs under section 115VJ - income from other sources versus core shipping income - debatable question / substantial question of law

Treatment of common costs under section 115VJ - income from other sources versus core shipping income - bonafide belief - penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - Whether penalty under section 271(1)(c) was exigible for allocation of administrative/common costs against interest and dividend income - HELD THAT: - The Tribunal found that the assessee, a tonnage tax company operating under Chapter XII G, had claimed allocation of administrative expenses against interest on deposits and dividend income relying on section 115VJ and a bona fide interpretation of the newly introduced tonnage tax regime. Although the AO, CIT(A) and the Tribunal on quantum rejected the claim and held the receipts taxable as "income from other sources" and not incidental business income, the appellate bench observed that the explanation proffered by the assessee was not ex facie illegal, was supported by statutory features of the tonnage scheme (including statutory reserves under section 115VT) and that substantial questions of law had been admitted by the High Court, indicating the issues were debatable. Applying Explanation 1 to section 271(1)(c) and the Supreme Court precedent cited, the Tribunal concluded that the assessee's explanation was bona fide and therefore penalty could not be sustained on that ground. [Paras 7, 8, 9]

Penalty under section 271(1)(c) deleted insofar as it related to the claim of administrative/common costs allocated against interest and dividend income.

Income from other sources versus core shipping income - Chapter XII G tonnage tax scheme - bonafide belief - penalty under section 271(1)(c) - debatable question / substantial question of law - Whether penalty under section 271(1)(c) was exigible for treating profits on sale of ships and other fixed assets as turnover of core shipping activities - HELD THAT: - The Tribunal noted that the assessee treated profits on sale of ships and certain fixed assets as part of core shipping turnover under its interpretation of Chapter XII G. Although all authorities in the quantum proceedings rejected that view, the appellate bench held that the claim was not an ex facie sham or wholly baseless: the tonnage scheme was newly inserted, the assessee had made full disclosures in the return, and the High Court had admitted substantial questions of law arising from the tribunal's adverse decision. Given the bona fide nature of the legal position taken by the assessee and the debatable character of the issues, the Tribunal concluded that Explanation 1 to section 271(1)(c) applied and penalty could not be sustained. [Paras 7, 22, 23]

Penalty under section 271(1)(c) deleted insofar as it related to treating profits on sale of ships and other fixed assets as core shipping turnover.

Final Conclusion: Both appeals are allowed: the penalties levied under section 271(1)(c) for assessment years 2006 07 and 2005 06 are deleted, the Tribunal holding that the assessee's explanations were bona fide and the issues were debatable under the newly introduced tonnage tax scheme.

Revenue expenditure versus capital expenditure - capitalization of expenditure relating to under-construction building - apportionment of common expenses on gross value of assets - disallowance of interest under section 36(1)(iii) - deduction for loss on discarded livestock under section 36(1)(vi) - remand for factual re-appreciation and verification

Revenue expenditure versus capital expenditure - capitalization of expenditure relating to under-construction building - apportionment of common expenses on gross value of assets - Treatment of repair, maintenance and project expenses - extent to be disallowed and extent to be allowed as revenue expenditure or required to be capitalized - HELD THAT: - The Tribunal held that expenditure of Rs. 12,88,610 incurred on Building No.3, which was under construction during the year, is required to be capitalized irrespective of its nature and therefore disallowed as revenue expenditure for the assessment year. Expenditure relating to buildings already completed and capitalized in earlier years (Rs. 17,60,401 and Rs. 1,31,766) are revenue in nature and allowable. The remaining aggregate expenditure (Rs. 60,32,408, being Rs.18,92,167 plus Rs.41,40,241) is to be apportioned between building and other assets on the basis of the gross value of assets, following the Tribunal's approach in the assessee's own case for AY 2006-07; applying the building proportion of 45.56% results in a restricted disallowance of Rs. 27,48,365 subject to verification of the asset proportions by the Assessing Officer and provision of working by the assessee. [Paras 5]

Partly allowed - Rs.12,88,610 to be capitalized; balance apportionment to be recomputed and restricted to Rs.27,48,365 subject to verification.

Disallowance of interest under section 36(1)(iii) - remand for factual re-appreciation and verification - Validity of addition by way of disallowance of interest claimed under section 36(1)(iii) - HELD THAT: - The Tribunal found that the Assessing Officer's disallowance was founded on an erroneous assumption of fact and that the assessee was not furnished with the working of the disallowance. The Tribunal upheld the first appellate authority's direction to restore the issue to the file of the Assessing Officer for re-appreciation of the factual matrix and directed the Assessing Officer to consider the claim afresh in accordance with law after allowing the assessee to substantiate its claim. [Paras 5]

Allowed for statistical purposes - issue restored to the Assessing Officer for fresh adjudication after re-appreciation of facts and verification.

Deduction for loss on discarded livestock under section 36(1)(vi) - remand for factual re-appreciation and verification - Allowability of claimed loss on discarded livestock - HELD THAT: - The Tribunal noted discrepancies in the Assessing Officer's computation and that the assessee claimed a larger loss than adopted by the AO. As the assessee failed to substantiate the claim to the AO's satisfaction, the Tribunal directed restoration of the matter to the Assessing Officer to re-appreciate the factual matrix and re-adjudicate the claim in accordance with law, subject to the assessee furnishing supporting evidence. [Paras 5]

Allowed for statistical purposes - matter restored to the Assessing Officer for fresh consideration and verification.

Final Conclusion: The Revenue's appeal is dismissed. The assessee's appeal is partly allowed: expenditure of Rs.12,88,610 on an under-construction building is to be capitalized and the remaining common expenditure is to be apportioned on the basis of gross asset values (restricted to Rs.27,48,365 subject to verification). The additions by way of interest disallowance under section 36(1)(iii) and loss on discarded livestock are remitted to the Assessing Officer for fresh factual re-appreciation and adjudication after giving the assessee opportunity to substantiate its claims.

Depreciation on demutualised exchange trading/membership rights - disallowance under Section 14A read with Rule 8D - treatment of dealing/punching errors - business loss versus speculation loss - verification and grant of TDS credit - deduction under Chapter VIA (section 80G) - verification and allowance - re-computation of interest under sections 234B and 234C

Depreciation on demutualised exchange trading/membership rights - Allowability of depreciation claimed on BSE trading/membership rights - HELD THAT: - The assessee claimed depreciation treating BSE trading right as an intangible asset. The Tribunal recorded the assessee's concession that the issue is covered against it by the Tribunal's earlier decision in Sino Securities (P.) Ltd. Vs ITO and, on that basis, dismissed the ground. No fresh adjudication on merits was undertaken because the binding precedential position was adverse to the assessee. [Paras 3, 6]

Ground dismissed as covered against the assessee by the cited Tribunal decision.

Disallowance under Section 14A read with Rule 8D - Computation basis for disallowance under Section 14A read with Rule 8D - whether all investments or only those yielding exempt income in the year are to be considered - HELD THAT: - The assessee excluded investments which did not yield exempt income during the year when computing disallowance under Rule 8D; the AO had applied Rule 8D on gross investments irrespective of whether they yielded exempt income. The Tribunal found the assessee's approach consistent with the Delhi Tribunal (Special Bench) decision in ACIT Vs. Vireet Investment (P.) Ltd. and remitted the matter to the AO to verify the assessee's computations. The AO was directed to consider only those investments which yielded exempt income during the impugned year, and the assessee was directed to furnish necessary computations. [Paras 2, 4, 6]

Matter remitted to AO for verification; AO to compute disallowance considering only investments that yielded exempt income during the year; ground allowed for statistical purposes.

Treatment of dealing/punching errors - business loss versus speculation loss - Whether losses arising from punching/dealing errors in trades are speculation losses or business losses - HELD THAT: - The AO treated the punching/dealing error losses as speculation loss invoking the explanation to Section 73; the Tribunal examined the nature of the transactions, noting they arose from execution/punching errors in the normal course of the assessee's brokerage business, were supported by details on record, and were negligible relative to overall business volume. The Tribunal held that such losses are inherent business risks of brokerage operations and cannot be characterised as speculation business losses, and consequently deleted the disallowance. [Paras 6]

Dealing error losses deleted and allowed as business loss.

Verification and grant of TDS credit - deduction under Chapter VIA (section 80G) - verification and allowance - re-computation of interest under sections 234B and 234C - Directions to AO to verify and give effect to CIT(A)'s directions on TDS credit, section 80G deduction and re-computation of interest under sections 234B/234C - HELD THAT: - The first appellate authority had directed the AO to verify the assessee's claims on (a) short TDS credit and allow it if substantiated, (b) deduction under section 80G to be allowed at 50% as per law upon verification, and (c) re-compute interest under sections 234B and 234C. The Tribunal endorsed those directions and directed the AO to comply forthwith, treating these grounds as allowed for statistical purposes. [Paras 6]

AO directed to verify and allow TDS credit and section 80G deduction as per law and to re-compute interest under sections 234B and 234C in accordance with CIT(A)'s directions; grounds allowed for statistical purposes.

Final Conclusion: Appeals partly allowed: depreciation ground dismissed as covered by prior Tribunal decision; Section 14A/Rule 8D disallowance remitted to AO for recomputation considering only investments yielding exempt income; dealing error losses restored as business loss; AO directed to verify and give effect to CIT(A)'s directions on TDS credit, section 80G deduction and re-computation of interest.

Capital Gains - Income from Business and Profession - Permanent Establishment - Consistency of tax treatment / estoppel by prior acceptance - Taxation under Double Taxation Avoidance Agreement

Capital Gains - Income from Business and Profession - Characterisation of profit from frequent purchase and sale of shares for A.Y. 2010-11 - HELD THAT: - The Tribunal examined whether gains arising from the assessee's transactions in equity and mutual funds during A.Y. 2010-11 should be assessed as business income or as capital gains. The Tribunal noted that the assessee, an NRI, had consistently declared such receipts as capital gains in earlier and subsequent years and that revenue had accepted that characterisation until A.Y. 2007-08 and again for years after the year under appeal. No new material was produced to justify a departure from the consistent treatment. In view of the steadiness of the assessee's treatment and the absence of distinguishing facts establishing a trading business in securities for the year under consideration, the Tribunal upheld the view of the CIT(A) that the receipts were rightly held to be capital gains and not income from business or profession.

Addition treating the gains as business income was deleted; gains to be taxed as capital gains.

Permanent Establishment - Taxation under Double Taxation Avoidance Agreement - Whether the assessee had a Permanent Establishment in India attracting business profits to tax in India - HELD THAT: - The Tribunal rejected the Assessing Officer's contention that the assessee's visits to India gave rise to a Permanent Establishment. It accepted the assessee's case that she was resident and employed in Bahrain and visited India for limited periods (43 days in the year in question) and that no business connection or PE as contemplated by the Act or the India Bahrain DTAA was established by the revenue. Consequently, the Tribunal did not treat the income as taxable in India as business profits attributable to a PE.

The AO's finding of a Permanent Establishment and consequent taxation of business profits in India was not sustained.

Consistency of tax treatment / estoppel by prior acceptance - Reliance on prior years' treatment and absence of fresh material to alter characterisation for the year under appeal - HELD THAT: - The Tribunal placed weight on the prior and subsequent years' acceptance of the assessee's classification of the receipts as capital gains and observed that revenue had not appealed earlier appellate orders for A.Y. 2008-09 and 2009-10. In the absence of any new facts or evidence warranting a different conclusion for A.Y. 2010-11, the Tribunal declined to depart from the established treatment and upheld the CIT(A)'s deletion of the business income addition.

Revenue's attempt to revisit the long standing characterisation was rejected for lack of new material and in view of consistent acceptance by revenue.

Final Conclusion: The Revenue appeal is dismissed; the CIT(A)'s deletion of the addition and the characterisation of the assessee's securities transactions as capital gains for A.Y. 2010-11 is upheld, and the Assessing Officer's finding of a Permanent Establishment is not sustained.

Stay of demand - tribunal non-interference with sub judice refund proceedings - recovery under section 266(3) of the Income-tax Act - conditional stay subject to change on refund - adjournment prophylaxis for maintenance of stay

Tribunal non-interference with sub judice refund proceedings - recovery under section 266(3) of the Income-tax Act - Whether the Tribunal can direct refund of amounts recovered by the AO where the matter is sub judice before the High Court - HELD THAT: - The Tribunal noted that a single judge of the High Court had directed refund of a specified portion of the amount recovered by the AO under section 266(3) and that the revenue has filed an appeal before the Division Bench which is pending. Given that the refund issue is sub judice before the Division Bench and that the Division Bench had restrained the assessee from initiating contempt proceedings, the Tribunal held that it cannot interfere with the refund direction of the High Court or order the AO to refund the amount which is the subject matter of pending proceedings before the higher court. The Tribunal therefore declined to entertain any prayer for directing immediate refund of the amount already collected where that issue is pending adjudication before the High Court. [Paras 4]

The Tribunal will not interfere with the refund matter which is sub judice before the Division Bench of the High Court.

Stay of demand - conditional stay subject to change on refund - adjournment prophylaxis for maintenance of stay - Whether stay of the outstanding disputed demand should be granted and on what terms - HELD THAT: - The Tribunal recorded that of the gross disputed demand for the four Assessment Years the AO had already recovered a substantial portion (about 66%) under section 266(3). Proceeding on that factual basis, the Tribunal considered it appropriate to grant a stay of the disputed outstanding demand for a limited period. The stay is granted for six months from the date of the order or until disposal of the appeals, whichever is earlier. The Tribunal also made express provision that if the factual position changes because of any refund by the AO, either party may seek amendment of the stay order. Further, to ensure expeditious disposal the Tribunal preponed the hearing date and cautioned that the assessee should not seek adjournments without justifiable reasons, failing which the stay shall stand vacated automatically. [Paras 5, 6]

Stay of the disputed outstanding demand granted for six months from the date of the order or until disposal of the appeals earlier, subject to amendment if the AO refunds amounts; stay to stand vacated on unjustified adjournment by the assessee.

Final Conclusion: All four stay petitions are allowed: the Tribunal declined to direct refund of amounts that are sub judice before the High Court and granted a limited stay of the disputed demands for six months or till disposal of the appeals, subject to modification if refunds occur and subject to the condition that unjustified adjournment by the assessee will vacate the stay.

Transfer pricing comparability filters - application of new filter uniformly - remand for fresh transfer pricing determination - treatment of export-related deductions in total turnover

Transfer pricing comparability filters - application of new filter uniformly - remand for fresh transfer pricing determination - Whether the DRP's application of an "onsite revenue" filter for selecting comparables, when introduced by the DRP after the TPO's selection, must be applied to all comparables and whether the matter should be remanded for fresh decision. - HELD THAT: - The Tribunal held that the "onsite revenue" filter was not applied by the TPO and was introduced by the DRP. A filter that affects selection of comparables determines the universe of comparables and therefore must be applied at the stage of selecting comparables, not selectively after selection. Even though DRP applied the filter to three comparables in this case, the principle in the Tribunal's earlier decision in ACIT v. Broadcom Communication Technologies (P.) Ltd. requires that where a new filter is applied, it must be applied to all comparables so that the final list is drawn consistently. The Tribunal restored the entire transfer pricing matter to the DRP for fresh decision, directing that the onsite filter be applied to all comparables and that thereafter other relevant filters and objections (including functional similarity/dissimilarity) be considered, with adequate opportunity of being heard and remand reports from AO/TPO if required. [Paras 8, 12]

TP matter restored to DRP for fresh decision; onsite filter to be applied to all comparables and final list to be drawn after considering other filters and objections.

Treatment of export-related deductions in total turnover - Whether amounts reduced from export turnover (expenditure in foreign currency) should also reduce total turnover for purposes of the corporate tax computation. - HELD THAT: - The Tribunal accepted the view of the Karnataka High Court in CIT v. Tata Elxsi Ltd. that total turnover is the sum of export turnover and domestic turnover; consequently, if an amount is reduced from export turnover, the total turnover correspondingly reduces. The DRP's directions on this point were in conformity with that precedent and hence were upheld. The Tribunal declined to interfere with the DRP's direction on this issue and decided it against the revenue. [Paras 9]

Direction of DRP upheld: deduction from export turnover reduces total turnover; issue decided against the revenue.

Remand for fresh transfer pricing determination - Whether the assessee's cross-objections concerning selection/exclusion of various comparables should also be remitted to the DRP in view of the remand of the transfer pricing matter. - HELD THAT: - The Tribunal accepted the assessee's submission that the assessee's contentions on various comparables arise from the same transfer pricing controversy now being remitted to the DRP. Consequently, no separate adjudication of the assessee's cross-objections was necessary at this stage because the entire TP matter is being restored to the DRP for fresh decision; the cross-objections are therefore to be considered by the DRP in that fresh proceeding. [Paras 11, 12, 13]

Assessee's cross-objections restored to DRP for fresh decision; CO allowed for statistical purposes.

Final Conclusion: The Tribunal partly allowed the revenue's appeal for statistical purposes by restoring the transfer pricing matter to the DRP for fresh decision (directing uniform application of the onsite filter to all comparables and reconsideration of other filters/objections), upheld the DRP's direction that export-related deductions reduce total turnover (against the revenue), and allowed the assessee's cross-objections for statistical purposes by remitting them to the DRP.

Commission paid to foreign agents - shortage in realisation as normal business deduction - failure to deduct tax at source under section 195 - disallowance under section 40(a)(i) where payment is not chargeable to tax in India

Commission paid to foreign agents - shortage in realisation as normal business deduction - disallowance under section 40(a)(i) where payment is not chargeable to tax in India - failure to deduct tax at source under section 195 - Deletion of addition of commission paid to foreign agents claimed as business expenditure - HELD THAT: - The Tribunal examined the nature of the claimed commission and the documentary matrix including invoices and Letter of Credit which showed that the foreign customers withheld 2% as commission, resulting in the assessee realising 98% of the invoice value. Applying the reasoning in the Tribunal's decisions in the assessee's own earlier years, the shortage in realisation was held to be an allowable business deduction as it reflected the commercial terms agreed with foreign customers. Further, since the impugned payments were not chargeable to tax in India in the hands of the recipients, the disallowance under the proviso to section 40(a)(i) (for failure to deduct tax at source) was held inapplicable. The Tribunal therefore set aside the Assessing Officer's addition which was premised both on inability to substantiate the services and on non-deduction of tax at source under section 195. [Paras 7, 8]

Addition of Rs.27,13,195 towards commission deleted and the appeal allowed.

Final Conclusion: Following its decisions in the assessee's own earlier years, the Tribunal held that the 2% withheld by foreign purchasers represented an allowable shortage in realisation and, being not taxable in India in the hands of recipients, could not be disallowed under the TDS provisions; the assessment addition was deleted and the appeal allowed.

Disallowance under section 14A - Computation under Rule 8D - Assessments under section 153A - Effect of absence of incriminating material recovered in search - Consideration of only investments yielding exempt income for Rule 8D - Suomotu disallowance

Disallowance under section 14A - Assessments under section 153A - Effect of absence of incriminating material recovered in search - Suomotu disallowance - Validity of disallowance under section 14A in assessments completed under section 153A where no incriminating material was recovered in the search - HELD THAT: - The Tribunal found as an undisputed factual position that no incriminating material was seized in the search. The assessee had filed returns and made a suomotu disallowance prior to the search, and earlier assessments under section 143 had been completed. Relying on the reasoning of the jurisdictional authorities cited by the appellate authority, the Tribunal held that in the absence of any incriminating material recovered during the search, assessment under section 153A cannot be used to make fresh additions or disallowances beyond the originally assessed income. The Revenue failed to rebut the findings of the CIT(A), and consequently the deletion of the section 14A disallowance by the CIT(A) was sustained for the Assessment Years 2008-09, 2010-11 and 2011-12. [Paras 7]

Deletion of the disallowance under section 14A sustained for AYs 2008-09, 2010-11 and 2011-12

Computation under Rule 8D - Disallowance under section 14A - Consideration of only investments yielding exempt income for Rule 8D - Proper basis for computing disallowance under Rule 8D(2)(ii) and 8D(2)(iii): whether only investments that yielded exempt dividend income in the relevant year should be taken into account - HELD THAT: - For the Assessment Years 2012-13, 2013-14 and 2014-15 the Assessing Officer applied Rule 8D to compute disallowance. The CIT(A) accepted the assessee's alternate contention, following the ratio of the authority relied upon, that for the purposes of Rule 8D(2)(ii) and (iii) the average value of investments should be computed by considering only those investments which actually yielded dividend (exempt) income in the relevant assessment year. The Tribunal found no infirmity in this approach and sustained the CIT(A)'s direction. In respect of AY 2013-14, where the exempt dividend received in the year was nominal and the assessee had made a suomotu disallowance, the Tribunal directed the Assessing Officer to restrict the section 14A disallowance to the amount of exempt income actually received in that year. The Tribunal therefore dismissed the Revenue's grounds and partly allowed the assessee's appeal as to computation for the stated years. [Paras 11, 13, 16, 17]

Rule 8D computation to consider only investments yielding exempt dividend income; disallowance under section 14A to be computed accordingly, and for AY 2013-14 restricted to the amount of exempt income actually received

Final Conclusion: Revenue appeals dismissed; CIT(A)'s orders sustained. Section 14A disallowance deleted for AYs 2008-09, 2010-11 and 2011-12 for want of incriminating material from the search; for AYs 2012-13, 2013-14 and 2014-15 Rule 8D disallowance upheld subject to computing average investments by reference only to investments yielding exempt dividend income, and for AY 2013-14 the disallowance limited to the exempt income actually received.

Fiduciary relationship - trustee - benami transaction - Section 4(3)(b) of the Prohibition of Benami Transactions (Prohibition) Act, 1988 - cause of action and limitation - declaration of title - possession and equitable relief where joint occupation exists - cancellation of mutation and conveyance

Fiduciary relationship - trustee - Section 4(3)(b) of the Prohibition of Benami Transactions (Prohibition) Act, 1988 - benami transaction - Whether the daughter-in-law, Smt. Sudha Dayal, stood in a fiduciary capacity and held the suit property in trust for her mother-in-law, Smt. Shakuntala Devi, so as to bring the transaction outside the prohibition under Section 4(1) of the Benami Transaction Act by virtue of Section 4(3)(b). - HELD THAT: - The Court found that the documentary and contemporaneous material on record - including payments from a joint bank account, original bank passbooks, correspondence recording receipt of part payment, receipts of payments to DDA, letters authorising family members to deal with authorities, and a letter by Smt. Sudha Dayal expressing intention to gift the plot to her mother in law - demonstrate that the purchase monies and relevant acts were done for the benefit of the family and that Smt. Sudha Dayal reposed trust in her mother in law. Having regard to authorities on fiduciary relationships and the factual matrix, the Court held that the mother in law/daughter in law relationship in the present case gave rise to a fiduciary relationship and that the property stood in trust for the benefit of Smt. Shakuntala Devi and the family. Consequently the bar under Section 4(1) would not apply and Section 4(3)(b) protects the transaction from being treated as benami. [Paras 32, 36]

Smt. Sudha Dayal was in a fiduciary relationship with her mother in law and held the property in trust for the benefit of Smt. Shakuntala Devi/family; the transaction is protected by Section 4(3)(b).

Cause of action and limitation - Whether the suits are barred by limitation given the dates of the original transfer and subsequent events. - HELD THAT: - The Court observed that no dispute arose while Smt. Sudha Dayal was alive and that Smt. Shakuntala Devi continued to act under the belief that the property was for the family's benefit. The cause of action to challenge the arrangements arose only when the family dispute manifested in 2014 and when conveyance in favour of Mr. Mayank Dayal was executed. On these facts the Court held that the claims were not barred by limitation. [Paras 33, 34]

The suits are not barred by limitation; cause of action for asserting the rights arose on the family dispute and later conveyance, not at the time of the original transfer.

Declaration of title - possession and equitable relief where joint occupation exists - mesne profits - Reliefs consequential to the finding on fiduciary relationship - in particular, declaration of ownership, claim for possession, injunctions and mesne profits. - HELD THAT: - On finding that Smt. Shakuntala Devi was the real beneficiary, the Court granted a declaratory judgment to that effect which will enure to her legal heirs. However, in exercise of equitable consideration the Court declined to grant a decree for exclusive possession because both branches of the family had been in long standing, separate occupation of different portions of the premises; the Court therefore refused possession and mesne profits. A permanent injunction was granted restraining alienation or encumbrance of the property pending resolution of inter se rights among heirs, and issues relating to a later will were left open for independent proof. [Paras 35, 38]

Declaration of title in favour of Smt. Shakuntala Devi (to enure to her legal heirs) and a permanent injunction against alienation; possession and mesne profits refused because of concurrent long standing occupation and unresolved heirship issues.

Cancellation of mutation and conveyance - declaration of title - Whether the mutation and subsequent conveyance in favour of Mr. Mayank Dayal should be set aside. - HELD THAT: - Having held that the property was held in trust for Smt. Shakuntala Devi, the Court directed cancellation of the mutation and the conveyance in favour of Mr. Mayank Dayal insofar as they are inconsistent with the declaration of beneficial ownership. The Court nonetheless observed that the relinquishment deed would continue to operate for Mr. Mayank Dayal's benefit and accordingly rejected that limb of relief which would nullify any effective relinquishment already executed. [Paras 39]

Mutation and the 2014 conveyance in favour of Mr. Mayank Dayal cancelled; declaration of Smt. Shakuntala Devi as the beneficial owner, but the relinquishment deed continues to enure to Mr. Mayank Dayal's benefit.

Final Conclusion: The Court held that on the admitted facts and documentary evidence Smt. Sudha Dayal stood in a fiduciary capacity and held the suit property in trust for Smt. Shakuntala Devi and the family (thus attracting protection of Section 4(3)(b) of the Benami Transactions Act); the suits were not barred by limitation; declaration of beneficial ownership was granted in favour of Smt. Shakuntala Devi (to enure to her heirs), possession and mesne profits were refused because of co occupation, a permanent injunction against alienation was granted, and mutation and the 2014 conveyance in favour of Mr. Mayank Dayal were cancelled while leaving certain inter se heirship and will related issues open.

Summary order. Application for early hearing disposed of; matters directed to be listed in February, 2019.

Availability of appeal under Section 9C of the Customs Tariff Act against termination/negative final findings - jurisdiction of High Court under Article 226 where efficacious alternative remedy exists - condonation of delay in filing appeal and limitation

Availability of appeal under Section 9C of the Customs Tariff Act against termination/negative final findings - An appeal under Section 9C of the Tariff Act is available against a Designated Authority's negative final finding terminating an anti dumping investigation. - HELD THAT: - The Court accepted and followed the reasoning in Jindal Poly Film Ltd. (Delhi High Court) that the phrase "order of determination" in Section 9C must be interpreted purposively to include negative final findings terminating proceedings, so that an applicant whose petition for imposition of anti dumping duty is rejected has a right of appeal. The Court observed that to hold otherwise would be incongruous because the Designated Authority's final order addresses existence, degree and effect of dumping irrespective of whether the finding is affirmative or negative. [Paras 3, 4]

Appeal under Section 9C lies against the impugned order of termination/negative final finding.

Jurisdiction of High Court under Article 226 where efficacious alternative remedy exists - Writ jurisdiction under Article 226 is not entertained where an efficacious alternative remedy in the nature of an appeal to the Tribunal is available. - HELD THAT: - Relying on the availability of an appeal under Section 9C, the Court declined to entertain the petition and refrained from examining the merits. The existence of the statutory appellate remedy to the Customs, Excise and Service Tax Appellate Tribunal displaced the need for extraordinary relief by way of writ in this case. [Paras 4]

Petition under Article 226 dismissed for want of alternative remedy; petitioner directed to approach the Tribunal.

Condonation of delay in filing appeal and limitation - The Court directed that delay will be condoned by the Tribunal if the petitioner files an appeal within a specified short period, and thus the Tribunal shall not raise limitation as a bar. - HELD THAT: - Acknowledging that the petitioner filed the writ within 90 days under a bona fide belief that no appeal lay, the Court exercised equitable discretion to mitigate hardship. The Court ordered that if an appeal under Section 9C is filed within three weeks from the date of the order, the Tribunal shall entertain it on merits without raising limitation objections, effectively condoning any delay occasioned by the petitioner's prior recourse to the High Court. [Paras 5]

If appeal is filed to the Tribunal within three weeks, the Tribunal shall entertain it on merits without raising limitation.

Final Conclusion: The petition is disposed of: the High Court declines to entertain the writ because an appeal under Section 9C is available against the negative final finding; the petitioner may file that appeal to the Tribunal, and if filed within three weeks the Tribunal is directed not to raise limitation objections; other contentions are kept open.

Classification under Chapter heading 8905 (dredgers) - General Rules of Interpretation Rule 2(a) - essential character - accessories and parts - Accessories (Condition) Rules, 1963 - HSN Explanatory Notes and Chapter Note (Chapter 89) - confiscation and penalties under the Customs Act

Classification under Chapter heading 8905 (dredgers) - General Rules of Interpretation Rule 2(a) - essential character - HSN Explanatory Notes and Chapter Note (Chapter 89) - Whether pontoons, pipelines and other parts imported separately on 07.02.2017 form integral parts of the dredgers imported earlier and are classifiable as dredgers under CTH 89051000. - HELD THAT: - The Tribunal held that the goods imported in the second consignment are of identical nature to parts imported with the dredgers and were imported for use together for the same single project. Applying GRI 2(a), an article presented disassembled or unassembled which, as presented, has the essential character of the finished article must be taken to include the complete article. The Tribunal accepted technical material (including British Standard BS-6349) and earlier decisions (notably Boskalis) establishing that pipelines, pontoons and allied components are indispensable to a Cutter Suction Dredger and give it its operational character. The HSN Chapter Note for Chapter 89 does not exclude such floating pipes and pontoons from classification with dredgers. Consequently, time-gap or separate invoicing/imports did not prevent treating the consignments together for classification, and the parts were therefore classifiable under CTH 89051000 as dredgers. [Paras 5, 6, 9, 10, 12]

Goods of bills of entry Nos. 8465433 and 8465442 dated 07.02.2017 are correctly classifiable under CTH 89051000 (dredgers).

Accessories and parts - Accessories (Condition) Rules, 1963 - HSN Explanatory Notes and Chapter Note (Chapter 89) - confiscation and penalties under the Customs Act - Whether the Accessories (Condition) Rules, 1963 or General Note III to Section XVII/Chapter 89 require separate classification of the second consignment and whether consequential demand, confiscation and penalties survive. - HELD THAT: - The Tribunal rejected the Revenue's narrow construction that 'along with' requires physical contemporaneous import and that Accessories (Condition) Rules, 1963 oust classification as dredgers merely because parts arrived later. Given that the consignments were imported by the same importer for the same project and no separate price/ sale of parts was involved, the accessories were treated as imported 'along with' the dredgers for classification purposes through the operation of GRI 2(a). The Tribunal held General Note III (to the extent invoked) does not override the statutory classification under the Customs Tariff Act where the parts have the essential character of the dredger. Because classification in favour of the appellant removes the duty liability, the Tribunal set aside the adjudicated demand, confiscation and penalties being consequential thereto. [Paras 7, 8, 11, 13]

Accessories (Condition) Rules, 1963 and General Note III do not mandate separate classification in the facts; consequential demand, confiscation and penalties confirmed by the adjudicating authority are set aside.

Final Conclusion: The Tribunal allowed the appeals: pontoons, pipelines and allied parts imported subsequently were held to be integral to the dredgers and classifiable under CTH 89051000; consequently the demand of differential duty, confiscation, redemption fine, interest and penalties confirmed by the adjudicating authority were set aside.

Enhancement of assessable value - Rejection of transaction value - Customs Valuation Rules

Enhancement of assessable value - Rejection of transaction value - Customs Valuation Rules - Enhancement of the value of imported ball bearings merely on the basis of the Commissioner of Customs (Import), Mumbai guidelines and prior assessed values was not sustainable in the absence of rejection of the declared transaction value and determination in accordance with the Valuation Rules. - HELD THAT: - The Tribunal held that the earlier decisions in Singal Bearing co. and the appellant's own case were inapplicable since the question of rejection of transaction value had not been considered therein. It followed Sedna Impex India Pvt. Ltd. and M/s Sanjivani Non Ferrous Trading Pvt. Ltd. , and reiterated that valuation of imported goods can be enhanced only in accordance with the Customs Valuation Rules. DRI alerts or administrative guidelines could not, by themselves, justify enhancement, and the Revenue had also produced no evidence from NIBD data to establish the benchmark value adopted. Reliance on earlier assessments at the enhanced rate was likewise insufficient to displace the declared value. [Paras 5, 6, 7]

The enhancement of value was set aside and the appeals were allowed.

Final Conclusion: The Tribunal held that the declared value of the imported ball bearings could not be enhanced merely on the basis of departmental guidelines, alerts, or prior assessments, without rejecting the transaction value and applying the Valuation Rules. The impugned orders were therefore set aside and the appeals were allowed.

Requirement of a reasoned/speaking order under Section 17 of the Customs Act - speaking order - appealable order - remand for passing of a reasoned order

Requirement of a reasoned/speaking order under Section 17 of the Customs Act - appealable order - speaking order - Validity of the Commissioner (Appeals) order where the adjudicating authority did not pass a speaking/reasoned order and whether there was an appealable order. - HELD THAT: - The Tribunal found that the Deputy Commissioner/Customs processed the bill of entry but failed to pass a speaking or reasoned order as mandated by law embodied in Section 17 of the Customs Act. Because no reasoned order was recorded, there was in practical terms no appealable order before the Commissioner (Appeals). The Commissioner (Appeals) therefore erred in dismissing the appellant's appeal on limitation grounds, since the underlying adjudication by the Customs authority had not produced a determinative, reasoned order which could validly give rise to the impugned appellate proceedings. The absence of a speaking order rendered the impugned appellate order a nullity, requiring corrective measures rather than affirmation on procedural grounds. [Paras 3]

Impugned order of the Commissioner (Appeals) is a nullity because the original authority failed to pass a speaking/reasoned order; matter remanded for fresh reasoned decision.

Remand for passing of a reasoned order - opportunity of hearing - Relief to be granted and procedural directions following the absence of a speaking order. - HELD THAT: - The Tribunal allowed the appeal by way of remand and directed the Deputy Commissioner, Custom House, to pass a reasoned order as required under the statutory provision within 45 days from receipt of the Tribunal's order. The appellant was directed to appear before the concerned Customs Authority and seek an opportunity of hearing. The condonation of delay application was disposed of in accordance with this remand, since the appellate proceedings were vitiated by absence of a speaking order. [Paras 3, 4]

Appeal allowed by remand; Deputy Commissioner to pass a reasoned/speaking order within 45 days and appellant to appear and seek hearing; condonation application disposed accordingly.

Final Conclusion: The Tribunal set aside the appellate order as a nullity for want of a speaking/reasoned order by the Customs authority, remanded the matter for a reasoned decision within 45 days with an opportunity of hearing to the appellant, and disposed of the delay application in consonance with the remand.

Extension of interim relief - pro tem benefit / interim relief till a Division Bench decides - availability of an appropriate Bench and duty to prosecute - laches / failure to avail available opportunity - vicarious liability pleaded but not adjudicated on interim application

Extension of interim relief - pro tem benefit / interim relief till a Division Bench decides - availability of an appropriate Bench and duty to prosecute - laches / failure to avail available opportunity - Application for further extension of interim relief granted earlier by the Appellate Tribunal was dismissed. - HELD THAT: - The Appellate Tribunal's order dated 15.02.2018 granted only a provisional benefit permitting the appellants to continue audit work of existing clients till 31.03.2019 or until a newly constituted Division Bench takes an appropriate final decision. An 'appropriate Bench' was available from 23.03.2018 (and by consent from 06.04.2018) until the then Presiding Officer demitted office on 11.07.2018. The parties had given written consent for the Bench to hear the appeals and were directed to intimate convenient dates, but the appellants failed to fix or communicate dates despite the Registry's administrative directions and the existence of working days during court vacations. The Tribunal found that no new grounds were advanced in the miscellaneous application: the urgency asserted (calendar-year clients and procedural time for auditor appointment) had been the very basis for the interim relief earlier granted and therefore warranted detailed hearing of the appeals rather than further extension. In these circumstances the appellants' unexplained failure to avail the available window to obtain a final decision disentitles them to extend the pro tem relief; the question of vicarious liability raised remains a substantive matter for hearing on merits and was not the basis to enlarge interim relief. Accordingly, the miscellaneous application seeking extension to 31.03.2020 was held to be without merit and dismissed. [Paras 8, 9, 10, 11, 12]

Miscellaneous Application dismissed; no extension of the interim relief and no order as to costs.

Final Conclusion: The Appellate Tribunal refused to extend the interim relief previously granted; the pro tem benefit remained limited to the period prescribed in the earlier order and the appellants' failure to avail the available appropriate Bench warranted dismissal of the extension application.

Corporate Insolvency Resolution Process - Operational Creditor - Operational Debt - Demand Notice under Section 8 of the Insolvency & Bankruptcy Code, 2016 - Pre-existing dispute - Maintainability of application by sole proprietor/proprietorship firm - Default - Admission under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Moratorium - Interim Resolution Professional

Maintainability of application by sole proprietor/proprietorship firm - Application by M/s. Kishore and Company represented by its sole proprietor is maintainable. - HELD THAT: - The Corporate Debtor contended that the applicant is not a person within the meaning of the Code and that the application filed by the sole proprietor was incompetent. The Tribunal examined the nature of the applicant (a proprietorship firm represented by its sole proprietor) and held that filing an application of this nature by the proprietorship through its sole proprietor is permissible and the objection as to maintainability is not sustainable. [Paras 11]

Objection to maintainability on the ground that the application was filed by the sole proprietor of a proprietorship firm is rejected and the application is held maintainable.

Demand Notice under Section 8 of the Insolvency & Bankruptcy Code, 2016 - Default - Demand notice was delivered to the Corporate Debtor and default in payment of the claimed operational debt was established. - HELD THAT: - The Operational Creditor produced the demand notice dated 07-01-2018 and submitted consignment tracking showing delivery on 10-01-2018. The Corporate Debtor's assertion that the demand notice was not delivered was negatived by the tracking evidence. Having found delivery of the demand notice and having regard to undisputed portions of payments made and outstanding invoices, the Tribunal concluded that the Corporate Debtor failed to discharge the debt and that a default for the purposes of Section 9 is established. [Paras 14, 15, 21]

The demand notice is proved to have been delivered and the Corporate Debtor is in default of the operational debt claimed.

Pre-existing dispute - Operational Debt - Alleged pre-existing dispute as to quality and quantity of coal was not proved and did not constitute a bar to admission. - HELD THAT: - The Corporate Debtor averred verbal and hand-delivered notices of dispute regarding quantity and quality of coal transported. The Tribunal found no supporting proof for those averments and observed that the Corporate Debtor did not appear to substantiate the contention. Ledger entries and TDS deductions indicated acceptance of the transactions and did not establish a pre-existing bona fide dispute. In the absence of proof, the claimed dispute was held not to vitiate the demand or prevent admission. [Paras 16, 17, 19, 20]

The plea of a pre-existing dispute is rejected for want of supporting evidence and does not prevent admission under Section 9.

Admission under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Moratorium - Interim Resolution Professional - Application under Section 9 is admitted despite non-compliance of certain procedural particulars; moratorium declared and an Interim Resolution Professional appointed. - HELD THAT: - The Tribunal considered the requirements under Section 9 and noted that the applicant filed the affidavit under Section 9(3)(b) and produced invoices, demand notice and account statements. Although a certificate from a financial institution under Section 9(3)(c) was not produced and the requirement of proposing an Insolvency Professional as per Section 9(5)(e) was not met, the Tribunal found the material sufficient to establish default and the absence of a pre-existing dispute. Consequently, the Tribunal admitted the application, declared moratorium as required under the Code, directed public announcement and appointed an Interim Resolution Professional to perform the statutory functions and convene the Committee of Creditors within the prescribed timeframe. [Paras 22, 23]

The Section 9 application is admitted; moratorium is declared; public announcement is directed; and an Interim Resolution Professional is appointed with directions to convene the Committee of Creditors and carry out statutory steps.

Final Conclusion: The Tribunal admitted the Section 9 application by M/s. Kishore and Company against M/s. Sri Balaji Metallics Pvt. Ltd., held that the demand notice was duly delivered and default established, rejected the plea of a pre-existing dispute for want of proof, declared moratorium, directed public announcement and appointed an Interim Resolution Professional to proceed with the CIRP and convene the Committee of Creditors within the prescribed time.

Natural justice - supply of relied upon documents and opportunity of personal hearing - voluntariness and admissibility of statements recorded by enforcement/customs authorities - reliance on Customs investigation/materials in FERA/FEMA adjudication - remand compliance - jurisdiction of appellate forum to entertain the appeal - delay and abuse of process - receiving payment from abroad in contravention of FERA

Natural justice - supply of relied upon documents and opportunity of personal hearing - remand compliance - Whether principles of natural justice were complied with by supplying the relied upon documents and affording opportunity of personal hearing as directed on remand. - HELD THAT: - The Tribunal found that a fresh set of documents was sent to the appellant in April 2008 and again on 06.12.2013, facts which the appellant did not meaningfully dispute. The adjudicating authority's chronology of repeated hearing dates (including adjournments sought by the appellant) demonstrates that opportunities for personal hearing were afforded but not availed. The Tribunal held that the remand direction of the earlier order had been complied with in 2008 and there was no obligation on the authority to keep re-forwarding the same documents; the appellant's reliance on a single notice of 06.12.2013 and on non-identification of the exact time on 16.12.2013 did not establish denial of natural justice when earlier notices and hearings remained unutilised by him. [Paras 6]

Principles of natural justice were observed; remand directions were complied with and the appellant failed to avail the opportunities given.

Voluntariness and admissibility of statements recorded by enforcement/customs authorities - reliance on Customs investigation/materials in FERA/FEMA adjudication - receiving payment from abroad in contravention of FERA - Whether the statements recorded from the appellant were voluntary and admissible and whether Customs investigation material could be relied upon in the FERA proceedings to establish offence and involvement. - HELD THAT: - The Tribunal recorded that the appellant gave three statements admitting non-occurrence of exports and receipt of foreign remittances, and that he was unable to produce any certified copy of any alleged retraction despite being granted time to do so; counsel conceded inability to rely on the retraction. On these facts the Tribunal held the statements to be voluntary and probative of involvement. The Tribunal further accepted the appellate court authority reasoning that statements and materials gathered under the Customs/DRI investigation relating to the same transaction can be utilised in FERA/FEMA adjudication, and that clandestine transactions may require assessment from a practical common-sense perspective rather than imposing an unrealistically rigid burden of proof. [Paras 5, 7]

The statements were voluntary and admissible; Customs investigation material was rightly relied upon to establish the offence and appellant's involvement.

Jurisdiction of appellate forum to entertain the appeal - Whether the Appellate Tribunal before which this appeal was heard had jurisdiction to entertain the appeal despite the respondent's preliminary objection. - HELD THAT: - The Tribunal noted the respondent's preliminary objection regarding the proper appellate forum but recorded that an earlier bench of the erstwhile Tribunal for Foreign Exchange had allowed the present appeal to be heard by this Tribunal by order dated 05.10.2016. The Tribunal therefore proceeded to hear and dispose of the appeal here, observing that that decision would not have precedent value. [Paras 6]

The appeal was properly heard by this Tribunal in view of the earlier order permitting hearing here; the objection was not sustained.

Final Conclusion: The appeal is without merit: natural justice requirements and remand compliance were satisfied, the appellant's statements and Customs investigation material were rightly relied upon to establish the offence and involvement, the Tribunal had jurisdiction to hear the appeal, and the appeal is dismissed.

Penalty for failure to pay service tax (Sections 77 and 78) - Mandatory interest on delayed service tax - Bona fide litigation as defence to levy of penalty - Appropriation of payments against demand - Remand for verification of payment and computation of interest

Penalty for failure to pay service tax (Sections 77 and 78) - Bona fide litigation as defence to levy of penalty - Validity of penalty imposed on renting of immovable property services - HELD THAT: - The Tribunal examined the appellant's contention that tax liability was discharged by 31.03.2012 and that the subsequent litigation and lack of finality until the Apex Court's decision demonstrated bona fides. The Commissioner (Appeals) was found to have erred in treating a portion of the payments as not covered by earlier proceedings. Having regard to the directions of the Hon'ble High Court and the litigative history, the Tribunal held that penalty could not be exigible against the appellant. The Tribunal therefore set aside the penalty imposed under Sections 77 and 78 insofar as it related to the renting of immovable property services. [Paras 5, 8]

Penalty levied under Sections 77 and 78 set aside.

Mandatory interest on delayed service tax - Appropriation of payments against demand - Remand for verification of payment and computation of interest - Liability for interest and verification of payments, including balance appropriation - HELD THAT: - The Tribunal found that, although payments shown by the taxpayer predated the show cause notice, there was delay in remittance such that interest on the delayed service tax is mandatory. The assessing officer had appropriated a sum against the demand leaving a residual balance (noted as a small sum) if unpaid. The appellant was directed to satisfy the adjudicating authority with evidence of payment towards duty liability and interest; the adjudicating authority is required to work out interest on the delayed payments and verify whether the balance remains payable. Accordingly, the matter of computation/verification of interest and the residual balance was remanded to the adjudicating authority for determination. [Paras 6, 7]

Adjudicating authority to verify payments and compute mandatory interest; residual balance to be ascertained and recovered if due.

Final Conclusion: The appeal is partly allowed: the penalty under Sections 77 and 78 is set aside in view of bona fide litigation and High Court directions, while liability for mandatory interest and verification of payments (including a small residual balance) is remanded to the adjudicating authority for computation and determination.

Service tax not leviable on maintenance charges collected by State Industrial Development Corporations - Taxability of maintenance charges - Precedential effect of High Court and Tribunal decisions

Service tax not leviable on maintenance charges collected by State Industrial Development Corporations - Taxability of maintenance charges - Maintenance Charges collected by Gujarat Industrial Development Corporation from industrial plot owners are not liable to service tax. - HELD THAT: - The Tribunal considered the submissions of both parties and relied upon binding and persuasive precedents, including the decision of the Hon'ble Bombay High Court in Maharashtra Industrial Development Corporation and prior Tribunal orders. In light of those authorities, the question of taxability of maintenance charges was held no longer res integra. Applying the precedents, the Tribunal concluded that maintenance charges collected by a State Industrial Development Corporation do not attract service tax and that the impugned order sustaining taxability could not be sustained.

Impugned order set aside; appeal allowed and maintenance charges held not taxable to service tax.

Final Conclusion: The appeal succeeds: maintenance charges collected by the State Industrial Development Corporation from industrial plot owners are not exigible to service tax; the impugned order is set aside.

Composite works contract - Works Contract Service - Construction of Residential Complex Service - classification of service by specific description under Section 65A - no vivisection of works contract for isolating service component - non-levy of service tax on composite contracts prior to 1.6.2007 (Larsen & Toubro ratio)

Composite works contract - Works Contract Service - Construction of Residential Complex Service - no vivisection of works contract for isolating service component - non-levy of service tax on composite contracts prior to 1.6.2007 (Larsen & Toubro ratio) - classification of service by specific description under Section 65A - Whether the appellant's construction activity is exigible to service tax as Construction of Residential Complex Service / Commercial or Industrial Construction Service or must be treated as Works Contract Service (composite works contract) for the periods in dispute. - HELD THAT: - The Tribunal applied its earlier considered ratio in M/s. Real Value Promoters Pvt. Ltd. and decisions of higher fora including Larsen & Toubro to hold that the appellant's construction activities are composite works contracts (involving both supply of goods and service) and therefore cannot be taxed as Construction of Residential Complex Service or Commercial/Industrial Construction Service where the activity is service simpliciter. The court observed that composite contracts prior to 1.6.2007 are not subject to service tax as per Larsen & Toubro, and that the statutory and budgetary history demonstrates that composite works contracts were brought within the service-tax net only with the specific introduction of the Works Contract Service entry effective 1.6.2007. Even for periods after 1.6.2007, only contracts which are service simpliciter fall within CICS/CCS/RCS; indivisible composite contracts must be classified under Works Contract Service. The Tribunal relied on the principle that a more specific classification (works contract) prevails over a general description and rejected the attempt to vivisect composite contracts to tax the service component under construction-service entries. Applying that reasoning to the facts and the show cause notice (which sought classification under construction services), the impugned demand and classification were held unsustainable and set aside.

The impugned order confirming classification and demand under Construction of Residential Complex / Commercial or Industrial Construction Service is set aside; the appellant's activities are composite works contracts and the Revenue's demand under those construction-service entries for the periods in dispute cannot be sustained.

Final Conclusion: The appeal is allowed: the Tribunal followed its earlier ratio and Larsen & Toubro to hold the appellant's construction activity to be composite works contract; demands and classification under Construction of Residential Complex / Commercial or Industrial Construction Service for the periods in dispute are unsustainable and the impugned order is set aside, with consequential benefits, if any.

Entitlement to cenvat credit on service tax paid on lease rent - requirement of proper documents for availment of cenvat credit - verification from service provider/registrant as proof of tax having been charged and deposited

Entitlement to cenvat credit on service tax paid on lease rent - requirement of proper documents for availment of cenvat credit - verification from service provider/registrant as proof of tax having been charged and deposited - Whether the appellant was entitled to avail cenvat credit of service tax paid on lease rent to the Estate Office, UT, Chandigarh despite initial deficiency of documents. - HELD THAT: - The Tribunal found that the appellant produced a letter from the Estate Office, UT, Chandigarh answering the Revenue's queries and certifying that the Estate Office was registered with the Service Tax Department, had charged service tax from the appellant on lease rent and had deposited the same with the Revenue Department. In light of that verification from the service-provider/registrant, the Tribunal concluded that the appellant had paid service tax on the lease rent and was therefore entitled to avail cenvat credit. The earlier denial was based on absence/deficiency of documents, but the subsequent authenticated response from the Estate Office cured that deficiency and established the factual prerequisites for credit. [Paras 6, 7, 8, 9]

The impugned denial of cenvat credit is set aside and the appellant is held entitled to avail cenvat credit of service tax paid on lease rent; the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that production of the Estate Office's letter verifying registration and deposit of service tax established the appellant's entitlement to cenvat credit on the lease rent and therefore the denial of credit was set aside.

Payment of tax by third party treated as payment by assessee - deemed discharge of service tax liability where service provider pays on behalf of recipient - liability to pay 50% service tax under Notification No. 30/2012 in respect of works contract when service provider has paid full tax

Payment of tax by third party treated as payment by assessee - deemed discharge of service tax liability where service provider pays on behalf of recipient - liability to pay 50% service tax under Notification No. 30/2012 in respect of works contract when service provider has paid full tax - Whether the appellant remains liable to pay service tax under the impugned order where the service provider paid the entire service tax and the appellant reimbursed that payment notwithstanding Notification No. 30/2012 requiring the recipient to bear 50% of the tax. - HELD THAT: - The Tribunal found it undisputed that the service provider paid the whole service tax on the services received by the appellant, and that the appellant reimbursed the service provider for that payment. Relying on the principle that a payment of service tax made on behalf of an assessee by a third party is to be treated as payment by the assessee himself, as applied in Katrina R. Turcottee , the Tribunal held that the appellant must be deemed to have discharged its service tax liability through the service provider. Consequently, although Notification No. 30/2012 apportioned the liability at 50% to the recipient, the factual circumstance that the provider paid the entire tax and was reimbursed by the appellant meant there remained no outstanding service tax liability against the appellant. The Tribunal therefore set aside the demand and penalty confirmation against the appellant.

Appeal allowed; impugned order confirming demand and penalty set aside as appellant's tax liability deemed discharged by payment through the service provider.

Final Conclusion: The appeal is allowed and the impugned order confirming demand of service tax and penalty against the appellant is set aside on the ground that the service tax liability stood discharged where the service provider paid the tax on behalf of the appellant.

Exempted services - service tax demand - verification of accounting entries / reconciliation by adjudicating authority - penalty set aside

Exempted services - service tax demand - verification of accounting entries / reconciliation by adjudicating authority - Application of service tax demand in respect of services claimed to be exempt and the appellate direction for verification of payments/statements by the original adjudicating authority - HELD THAT: - The appeal challenged Commissioner (Appeals)'s direction setting aside the demand insofar as it related to services claimed to be exempt, subject to verification of the statement of payments and reconciliations submitted by the assessee. The Tribunal noted that the Original Adjudicating Authority had not considered the assessee's categorical stand and the reconciliation produced during adjudication. Since, if services are genuinely exempt, no service tax can be levied, the Appellate Authority correctly required verification of the balance-sheet entries and the reconciliation by the Adjudicating Authority before sustaining any demand. Revenue cannot be said to be aggrieved by setting aside a demand which relates to exempted services where that relief is made conditional on verification by the adjudicating authority. [Paras 5]

Demand in respect of services claimed to be exempt is set aside subject to verification by the Original Adjudicating Authority; Revenue's challenge to that part is rejected.

Penalty set aside - Validity of setting aside of penalties by Commissioner (Appeals) - HELD THAT: - The Tribunal examined the appellate order which annulled the penalties imposed by the Original Adjudicating Authority. Having considered the matter and finding no justifiable reason to interfere with the Appellate Authority's exercise of discretion in setting aside penalties, the Tribunal declined to disturb that part of the order. [Paras 6]

Penalties imposed in the impugned order are set aside; Revenue's challenge to this relief is dismissed.

Final Conclusion: Revenue's appeal is rejected; the demand relating to services claimed to be exempt remains set aside subject to verification by the Original Adjudicating Authority, and the penalties imposed below are affirmed as having been correctly set aside by Commissioner (Appeals).

Service tax liability - Business auxiliary service - Advertisement service - Recovery under Section 73 of the Finance Act, 1994 - Limitation for demand under Section 73A of the Finance Act, 1994

Service tax liability - Business auxiliary service - Advertisement service - Recovery under Section 73 of the Finance Act, 1994 - Validity of the demand and penalties confirmed in the impugned Order in Original for alleged taxable services and whether the appellant was liable to service tax on the activities in question - HELD THAT: - On consideration of the record and submissions, the Tribunal accepted the appellant's certified statement of income showing four distinct sources: printing jobs, sale of computers, commission from newspapers for forwarding advertisements, and printing of flex. The Tribunal found that printing and sale of goods did not attract service tax. The commission received for forwarding advertisements was treated as an incentive from customers and not commission for sale of goods falling within Business auxiliary service. The printing of flex, lacking conceptualization or visualization, did not constitute an advertising service within the chargeable category. Although the show cause notice referred to collection of service tax by the appellant, the facts indicate customers informed the appellant that service tax did not apply and did not pay tax to the appellant. The appellant also contended that even if tax had been collected, recovery should proceed under Section 73 of the Finance Act, 1994, and noted the show cause notice did not invoke Section 73A of the Finance Act, 1994; the Department's representative conceded that there is no time limit under Section 73A for demand. Having considered these contentions, the Tribunal concluded that the appellant's submissions were sustainable and that the impugned demand and penalties could not be upheld.

Impugned Order in Original dated 13.01.2015 is set aside; appeal allowed and appellant entitled to consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, set aside the demand and penalties confirmed by the impugned order, and granted consequential relief to the appellant after holding that the activities in question did not attract service tax and that the appellant's factual and legal contentions were sustainable.

One Commissioner holding charge of two Commissionerates constituting a Reviewing Committee - review by a Committee of Commissioners of Central Excise under Section 35B(2) read with Notification No.25/2005-CE(NT) dt.13-5-2005 - admission by the authorised signatory regarding non-maintenance of accounts - grounds raised for the first time before the Tribunal and remand

One Commissioner holding charge of two Commissionerates constituting a Reviewing Committee - review by a Committee of Commissioners of Central Excise under Section 35B(2) read with Notification No.25/2005-CE(NT) dt.13-5-2005 - Validity of a Reviewing Committee where a single Commissioner is in full additional charge of another equivalent post and thereby constitutes the Committee for review - HELD THAT: - The Court accepted the respondent's submission that the question is governed by the decision in Commissioner of Central Excise v. Coromandel Fertilizers Ltd., on identical facts. Applying that precedent, where one Commissioner holds charge of two Commissionerates and the Commissioners constituting the Reviewing Committee are the same individual in charge of both Commissionerates, that single Commissioner is competent to act as the Reviewing Committee. The Court therefore upheld the legality of the review process conducted in such circumstances, answering the substantial question in favour of the Revenue.

Question answered in the affirmative in favour of the Revenue and against the Appellant.

Final Conclusion: Appeal dismissed. The substantial questions regarding lack of discussion about admission by the authorised signatory and grounds raised first before the Tribunal were not pressed and are dismissed as not pressed. No order as to costs.

Revenue neutrality - Extended period of limitation - Cenvat Credit Rules - reversal on removal "as such" to sister units - Public sector undertaking - absence of malafide - Penalty for technical contraventions

Revenue neutrality - Extended period of limitation - Public sector undertaking - absence of malafide - Cenvat Credit Rules - reversal on removal "as such" to sister units - Extended period of limitation could not be invoked where credit availed on inputs removed "as such" to sister units resulted in a revenue neutral position and the assessee was a public sector undertaking. - HELD THAT: - The Tribunal found that the appellant, a 100% subsidiary PSU, had transferred inputs "as such" to sister units which utilised the same for manufacture of dutiable coal, so that the tax liability effectively remained discharged within the group and the transaction was revenue neutral. In these circumstances and having regard to the appellant's status as a public sector undertaking, the Tribunal held that malafide suppression or intent to evade duty could not be attributed to the appellant and therefore the extended period of limitation was not invokable. The Tribunal relied on precedent which treats non reversal of credit on removal "as such" to sister units as involving the doctrine of revenue neutrality and, in comparable cases, declines to sustain extended period demands where revenue neutrality and absence of mala fides are shown. Applying that reasoning to the facts, the Tribunal set aside the impugned demand made invoking the longer period of limitation. [Paras 4, 5, 6]

Demand confirmed under the extended period of limitation set aside; appeal allowed on limitation ground with consequential relief.

Penalty for technical contraventions - Revenue neutrality - Penalties imposed for non reversal of credit were not sustained where the Tribunal found revenue neutrality and absence of malafide. - HELD THAT: - The Tribunal noted precedents in which demands set aside on the ground of revenue neutrality also resulted in the rejection of penalties for technical contraventions. Taking the same view, and because the appellant's conduct did not exhibit mala fide intent (being a PSU and the credits being available to sister units for discharge of excise liability), the Tribunal held that penalties could not be imposed in the present case and consequently set aside the impugned order in its entirety. [Paras 5, 6]

Penalties relating to the non reversal of credit set aside.

Final Conclusion: The appeals are allowed: demands confirmed under the extended period of limitation and penalties imposed for non reversal of Cenvat credit on transfers "as such" to sister units are set aside on the grounds of revenue neutrality and absence of mala fides in the case of the public sector appellant, with consequential relief.

Time-bar / limitation and proviso to Section 11A(1) - exemption under Notification No. 23/2003-CE (Serial No. 3) - deeming of supplies as imported goods (explanation (II)) - B-17 bond enforcement and recovery - bona fide belief / absence of suppression or mis-declaration

Time-bar / limitation and proviso to Section 11A(1) - exemption under Notification No. 23/2003-CE (Serial No. 3) - Whether the demand raised for DTA clearances for the period 01.04.2006 to 31.03.2008 is time barred - HELD THAT: - The Tribunal held that the show cause notice issued on 01.04.2011 invoking the extended period could not be sustained because the ingredients for invoking the proviso to Section 11A(1) (to extend limitation beyond the normal period) were not established. The appellant, a 100% EOU, had disclosed procurement from EOUs/Advance Licence holders by obtaining departmental permissions (CT3), had declared the claimed exemption in ER-2 returns, and had its excise records audited; therefore there was no suppression or concealment to warrant invocation of extended limitation. Reliance on precedents dealing with similar facts was accepted to support the view that mere execution of a B-17 bond or self-removal procedure does not ipso facto remove the applicability of Section 11A limitation; the Revenue must satisfy the specific factual ingredients for extension of time. On these findings the demand was set aside as time barred and the appeal allowed on limitation without adjudicating merits.

Demand for the period 01.04.2006 to 31.03.2008 held time barred; impugned order set aside on limitation and appeal allowed.

B-17 bond enforcement and recovery - time-bar / limitation and proviso to Section 11A(1) - Whether execution of a general B-17 bond precludes application of limitation and permits recovery by simple enforcement of the bond without adjudication - HELD THAT: - The Tribunal rejected the contention that execution of B-17 bond removes the limitation bar and allows recovery without following adjudicatory process. It observed that enforcement of B-17 bond for recovery is permissible only where duty is determined in accordance with law; the statutory adjudication process (SCN, adjudication, appeals) cannot be bypassed by straight enforcement of bond. The Bench relied on precedents holding that B-17 bonds do not operate as a blanket waiver of limitation and that Section 11A remains applicable unless the factual ingredients for extended period are proven.

Execution of B-17 bond does not, by itself, oust the operation of Section 11A limitation or justify recovery by direct enforcement of the bond in the absence of proper adjudication.

Bona fide belief / absence of suppression or mis-declaration - deeming of supplies as imported goods (explanation (II)) - Whether the appellant suppressed material facts or acted with mala fide so as to attract extended limitation and penalty - HELD THAT: - On the undisputed record the appellant had disclosed procurement permissions (CT3), had filed ER-2 returns declaring the exemption claimed under Serial No. 3, and had its records audited; further the appellant relied on a bona fide legal position supported by higher court decisions interpreting the same exemption. In these circumstances the Tribunal found no evidence of deliberate suppression or wilful mis-statement to evade duty. The change effected by explanation (II) (treating certain supplies as imported) and later amendments did not establish prior knowledge or concealment by the appellant for the relevant period. Consequently, extended limitation and penalties premised on suppression were unsustainable.

No suppression or mala fide established; extended limitation and penalty could not be invoked on that ground.

Final Conclusion: The appeal was allowed and the adjudication order set aside solely on limitation grounds for the period 01.04.2006 to 31.03.2008; the Tribunal held that execution of B-17 bond did not negate Section 11A limitation and that no suppression or mala fide was shown to justify invocation of the extended period or penalties.

Exemption for clearances by a 100% EOU to holders of Advance Licence - Requirement of Development Commissioner's permission for availing exemption - Deemed exports treated as exports for fulfilment of export-linked conditions - Computation of 50% of FOB value for DTA clearances including deemed exports - Limitation for extended period demands and requirement of suppression or wilful misstatement

Exemption for clearances by a 100% EOU to holders of Advance Licence - Requirement of Development Commissioner's permission for availing exemption - Whether Notification No. 23/2003-CE exempts clearances by a 100% EOU to Advance Licence holders only upon obtaining permission of the Development Commissioner - HELD THAT: - The Tribunal held that condition No. 11 of Serial No. 22 of Notification No. 23/2003-CE contains no requirement of obtaining permission of the Development Commissioner; consequently no such condition can be read into the notification. The factual record that the appellant had declared deemed-export supplies in returns to the Development Commissioner and that no objection was raised reinforced that there was no statutory requirement of prior permission. The Tribunal relied on earlier decisions of this Tribunal and higher courts to the effect that conditions not expressly stipulated in an exemption notification cannot be imported into it, and held that the lower authority erred in denying the exemption for lack of Development Commissioner's permission. [Paras 5]

Benefit of Notification No. 23/2003-CE cannot be denied for want of Development Commissioner's permission; impugned denial on this ground set aside.

Deemed exports treated as exports for fulfilment of export-linked conditions - Computation of 50% of FOB value for DTA clearances including deemed exports - Whether supplies to Advance Licence holders (deemed exports) must be included along with physical exports for computing the 50% of FOB value threshold applicable to DTA clearances - HELD THAT: - The Tribunal held that supplies to Advance Licence holders are to be treated as deemed exports and, for the purpose of computing eligibility to clear goods into DTA up to 50% of FOB value of exports, the value of deemed exports must be included along with physical exports. The Tribunal noted consistent judicial pronouncements of this Tribunal and higher courts establishing parity between deemed and physical exports for export-linked statutory thresholds and followed those precedents to conclude that the departmental demand based on excluding deemed exports from the 50% computation was unsustainable on merits. [Paras 6, 7]

Deemed exports are to be counted for computing the 50% FOB value limit for DTA clearances; departmental demand on this ground set aside.

Limitation for extended period demands and requirement of suppression or wilful misstatement - Whether demands raised for extended/superceding limitation periods are sustainable where there was no suppression or wilful misstatement by the assessee - HELD THAT: - The Tribunal found that the appellant had disclosed the supplies to Advance Licence holders in quarterly and annual returns and produced Advance Licences/Advance Release Orders before excise authorities, and that the Department had made corresponding debit entries. Given these facts and the existence of judicial views supporting the appellant's position (which the appellant reasonably relied upon), there was no concealment or wilful suppression warranting invocation of an extended limitation period. Accordingly, the extended-period demands were time-barred and unsustainable. [Paras 5, 7]

Demands raised for the extended period are time-barred for want of suppression or wilful misstatement; extended-period demands set aside.

Final Conclusion: The appeals are allowed: the exemption under Notification No. 23/2003-CE is available without Development Commissioner's permission; deemed exports count towards the 50% FOB export threshold for DTA clearances; and the extended-period demands are time-barred and unsustainable. The impugned orders are set aside.

Extended period of limitation - Cenvat credit availed on the strength of invoices of fake/non-existent suppliers - Holder in due course / transferee not party to fraud - Deeming provisions of Rule 7(2) CCR-2002 as amended by Notification 28/2003-CE(NT) - Reliance on alert circulars for raising demand - Penalty under Section 11AC read with Rule 15(2) of the Cenvat Credit Rules, 2004

Extended period of limitation - Cenvat credit availed on the strength of invoices of fake/non-existent suppliers - Holder in due course / transferee not party to fraud - Reliance on alert circulars for raising demand - Whether demand of reversal of Cenvat credit (raised invoking extended period of limitation) on the basis of alert circulars listing purportedly bogus suppliers is sustainable against the job worker assessee. - HELD THAT: - The appellants were job workers who processed grey fabrics supplied by principal manufacturers by way of endorsed invoices and did not directly purchase from the suppliers. The SCN invoked the extended period but did not point to any specific suppression, mis-declaration or fraud on the part of the appellants. Applying the principle that a transferee or holder in due course who is not shown to be a party to any fraud cannot be proceeded against by invoking the larger period of limitation, the Tribunal relied on the Gujarat High Court decision in Prayagraj Dyeing & Printing Mills and the Tribunal decision in Shri Labdhi Prints to hold that demands confirmed by invoking the extended period are barred. The Tribunal distinguished the Revenue reliance on Diwan Brothers on the ground that in Diwan Brothers the purchasers were direct buyers from the fraudulent parties, unlike the present job-worker situation. In these circumstances and on the authorities relied upon, the demand raised for the extended period was set aside on limitation grounds. [Paras 7, 8]

Demand of Cenvat credit raised invoking the extended period of limitation is set aside.

Penalty under Section 11AC read with Rule 15(2) of the Cenvat Credit Rules, 2004 - Reliance on alert circulars for raising demand - Whether penalty under Section 11AC read with Rule 15(2) of the Cenvat Credit Rules, 2004 is sustainable against the appellant in respect of a rebate claim where the SCN does not furnish evidence and no demand has been raised. - HELD THAT: - The SCN alleging wrong availment of credit in respect of the rebate claim presumed the existence of bogus suppliers but did not substantiate the allegation with any evidence. No extended period was invoked in this proceeding and no demand was shown to have been raised against the appellant. Given the absence of any material establishing the appellant's involvement in fraud or any demand on which to base penalty proceedings, the imposition of penalty under Section 11AC read with Rule 15(2) is unsustainable. The earlier penalty under Rule 27 had already been set aside by the Commissioner (Appeals). On these facts the Tribunal set aside the penalty. [Paras 9]

Penalty under Section 11AC read with Rule 15(2) of the Cenvat Credit Rules, 2004 is set aside.

Final Conclusion: The appeals are allowed: the demand of Cenvat credit raised by invoking the extended period is set aside on limitation grounds, and the penalty under Section 11AC read with Rule 15(2) of the Cenvat Credit Rules, 2004 is quashed for lack of evidence and absence of a demand.

Extended period of limitation under the proviso to Section 11A - wilful mis-statement or suppression of facts with intent to evade duty - balance sheet as a public document - requirement of positive evidence to establish intent to evade

Extended period of limitation under the proviso to Section 11A - wilful mis-statement or suppression of facts with intent to evade duty - balance sheet as a public document - requirement of positive evidence to establish intent to evade - Extended period was not rightly invoked by the Revenue. - HELD THAT: - The Tribunal held that invocation of the extended period is permissible only where non-payment of duty is by reason of fraud, collusion, or wilful mis-statement or suppression of facts with intent to evade duty, and that the Department must establish such intent by positive evidence. In the present case the amount in question was duly reflected in the audited balance sheet and Profit & Loss Account, dealings were on record, payments passed through banking channels and clearances were under central excise invoices; there was no allegation or proof of a positive concealment or deliberate suppression with intent to evade duty. The Show Cause Notice did not allege intention to evade duty and the authorities below based the case on balance-sheet information. Following the principle that a balance sheet is a public document and the requirement laid down in the cited precedents that wilful suppression with intent must be proved, the Tribunal found that intent to evade duty was not established and therefore the extended period could not be invoked; the demand is hit by limitation. [Paras 7, 8, 9, 10, 11]

The invocation of the extended period is negatived and the demand is barred by limitation.

Final Conclusion: The appeal is allowed and the impugned order is set aside on the ground of limitation; no adjudication on the merits of duty liability was undertaken.

Availing of CENVAT credit and depreciation on the same capital goods (double benefit) - Withdrawal of depreciation by filing revised income tax return and acceptance by Income tax Department - Effect of accepted revised return on denial of CENVAT credit - Remand for factual verification of acceptance of revised return

Availing of CENVAT credit and depreciation on the same capital goods (double benefit) - Withdrawal of depreciation by filing revised income tax return and acceptance by Income tax Department - Effect of accepted revised return on denial of CENVAT credit - Whether, as a matter of law, an assessee who withdraws depreciation in a revised income tax return and whose revised return is accepted by the Income tax authorities can be denied CENVAT credit claimed on the duty component of capital goods. - HELD THAT: - The Tribunal applied the binding view of the jurisdictional High Court in M/s. S.L. Lumax Ltd. which holds that where an assessee initially availed both the tax deduction (depreciation) and CENVAT/MODVAT credit but subsequently withdraws the depreciation claim by filing a revised return which is accepted by the Income tax authorities, deprivation of the CENVAT credit would be punitive and is not warranted. The Tribunal noted that several decisions, including that of the Gujarat High Court and various Benches of the CESTAT, support the principle that the assessee should not be penalised once the depreciation claim has been withdrawn and accepted by the Income tax Department. Having found the jurisdictional High Court's decision to be binding, the Tribunal held that if the assessee has indeed withdrawn the depreciation claim in a revised return and that revised return has been accepted by the Income tax Officer, the High Court's principle applies and denial of CENVAT credit would not be justified. [Paras 7, 8]

The legal principle of the jurisdictional High Court applies: acceptance by the Income tax Department of a withdrawn depreciation claim precludes denial of the CENVAT credit on that ground.

Remand for factual verification of acceptance of revised return - Whether the assessee had filed a revised income tax return withdrawing the depreciation claim and whether that revised return was accepted by the Income tax authorities. - HELD THAT: - The Tribunal observed that neither the adjudicating authority nor the Commissioner (Appeals) recorded any finding on the acceptance by the Income tax authorities of the alleged revised return filed by the assessee. Because the applicability of the binding High Court principle turns on the factual question of whether the depreciation claim was withdrawn and accepted by the Income tax Department, the Tribunal considered it necessary to obtain a factual finding. Consequently, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority with a direction that the assessee furnish the revised return and the income tax assessment order based on that revised return, and that the lower authority pass a fresh order taking into account the jurisdictional High Court decision and any other authorities the assessee may produce. [Paras 4, 10]

Matter remanded to the adjudicating authority for fresh consideration and factual finding on filing and acceptance of the revised income tax return; fresh order to be passed in light of the jurisdictional High Court's decision if the revised return was accepted.

Final Conclusion: Appeal partly allowed for statistical purposes; impugned order set aside and matter remanded to the adjudicating authority to verify and record whether the assessee's revised income tax return withdrawing the depreciation claim was accepted, and to pass a fresh order in accordance with the jurisdictional High Court's ruling if acceptance is established.

Equal penalty - Penalty under section 11AC - Assessable value - Intention to evade - Voluntary payment and reconciliation - Departmental investigation

Penalty under section 11AC - Equal penalty - Intention to evade - Voluntary payment and reconciliation - Whether the equal penalty imposed under section 11AC is sustainable where the assessee reconciled and paid the differential duty and interest after departmental intimation and there is no evidence of suppression with intent to evade duty. - HELD THAT: - The Tribunal examined the appellants' internal reconciliation carried out after the department's visit and the letter dated 29.3.2016 in which the appellants explained two scenarios: instances of excess duty payment and instances of short payment arising from the method of adopting Delhi dealer prices as the highest price. The record shows the appellants themselves verified the variation, disclosed excess duty for part of the period and paid the differential duty and interest for 2011-12. The Tribunal found no material establishing deliberate suppression or an intent to evade duty; the short payment resulted from an error in method of arriving at assessable value and was rectified promptly on being pointed out. In these circumstances the ingredients necessary for imposing an equal penalty under section 11AC were not attracted. The Tribunal also noted reliance on earlier decisions cited by the appellant and that the departmental quantification used the appellant's own exercise. Consequently the equal penalty was held unsustainable while the demand and interest were left undisturbed. [Paras 5, 6]

Equal penalty under section 11AC set aside; demand of duty and interest affirmed; appeal partly allowed.

Final Conclusion: The equal penalty imposed on M/s. Nissan Motors India Pvt. Ltd. is set aside in view of the voluntary reconciliation and payment of differential duty and interest and absence of any finding of suppression with intent to evade; the duty demand and interest remain undisturbed and the appeal is partly allowed.

Maintainability of refund claim under Section 11B - cenvat credit on service tax paid for rent of job work unit - payment made voluntarily pursuant to audit observation (bona fide payment) - distinction between payment under protest and voluntary payment - inapplicability of precedents where no appealable assessment order exists (Priya Blue / Flock India)

Maintainability of refund claim under Section 11B - payment made voluntarily pursuant to audit observation (bona fide payment) - inapplicability of precedents where no appealable assessment order exists (Priya Blue / Flock India) - cenvat credit on service tax paid for rent of job work unit - Whether the appellant is entitled to maintain a refund claim of cenvat credit of service tax paid on rent for Unit 2 after having accepted audit objection and paid the amount along with interest and penalty without challenging any assessment order. - HELD THAT: - The Tribunal found that the audit party did not pass an appealable assessment order and the appellant paid the service tax, interest and penalty as a bona fide compliance with the audit observation. Unit 2 performed exclusive job work for Unit 1, goods were returned to Unit 1 and cleared on payment of duty from Unit 1, and the appellant followed job work procedures under the notifications. The Apex Court decisions in Priya Blue and Flock India, relied upon by the Department, apply where there was an appealable assessment or a lis between the parties at the time of assessment; those precedents are therefore distinguishable on the facts where no appealable order was passed. The Tribunal accepted the line of authority (including the High Court decision in Aman Medical Products Ltd. and other Tribunal/High Court decisions cited) holding that where tax is paid due to a bona fide mistake or pursuant to non appealable audit directions, the assessee may maintain a timely refund claim. Applying that reasoning, the adjudicating authority's sole ground that the appellant must first challenge an assessment is unsustainable because there was no assessment order to be challenged and the payment was not the result of a contested assessment. [Paras 5]

The appeal is allowed; the impugned order rejecting the refund claim is set aside and the appellant is granted consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that where no appealable assessment order was passed and the assessee made a bona fide payment pursuant to audit observations, a timely refund claim under Section 11B is maintainable; the impugned rejection is set aside and consequential relief granted.

Reversal of CENVAT credit on partially written off inputs and capital goods - Prospective operation of amendment w.e.f. 1.3.2011 - Limitation for recovery of CENVAT credit demand - Application of CENVAT Credit Rules, 2004

Reversal of CENVAT credit on partially written off inputs and capital goods - Prospective operation of amendment w.e.f. 1.3.2011 - Whether reversal of proportionate CENVAT credit was required for partial write off made during 2009 10 - HELD THAT: - The show cause notice and the record establish that the appellant made only partial provisions for write off and that the goods remained in inventory without physical removal. The Tribunal relied on the decision in Sanghavi Engineering (Tri. Bang.) which held that the obligation to reverse CENVAT credit for partially written off inputs did not exist prior to 1.3.2011. The amendment introducing such reversal operated prospectively from 1.3.2011 and was not retrospective. Applying that ratio to the facts, the obligation to reverse did not arise for the 2009 10 period and the demand therefore could not be sustained on merits. [Paras 5]

Findings in the impugned order on reversal of CENVAT credit for partial write off for 2009 10 are set aside; no reversal was required for the period concerned.

Limitation for recovery of CENVAT credit demand - Whether the demand raised by show cause notice dated 20.3.2015 for the 2009 10 period was barred by limitation - HELD THAT: - The audit was conducted on 31.1.2010 for 2009 10 while the show cause notice was issued on 20.3.2015. The Tribunal noted that the appellant had, from 2011 onwards, clarified by correspondence that the write off was partial and that there was no suppression or intent to evade duty. In view of the prospective nature of the amendment and the delay in issuance of the notice, the impugned demand was held to be unsustainable on limitation grounds as well. [Paras 5]

The demand is unsustainable as barred by limitation; impugned order is set aside on this ground as well.

Final Conclusion: The appeal is allowed; the impugned order dated 21.3.2018 is set aside and the demand confirmed therein is quashed with consequential relief, if any.

Penalty under Rule 26(2) of the Central Excise Rules, 2002 - fraudulent availment of CENVAT credit - purchase of invoices without receipt of goods - admissibility and evidentiary value of subsequent retraction of statement - reliance on earlier admission to conclude investigation

Penalty under Rule 26(2) of the Central Excise Rules, 2002 - fraudulent availment of CENVAT credit - Liability to penalty under Rule 26(2) on account of invoices allegedly issued without actual receipt of goods and consequent fraudulent availment of CENVAT credit. - HELD THAT: - The Tribunal examined the material including the showcause notice, the first statement dated 14.09.2012 and the proceedings before the lower authorities. The proprietor had in the first statement categorically admitted the modus operandi whereby the respondent purchaser obtained credit on invoices issued by the appellant without receipt of goods. The appellant's reliance on later materials such as bank statements and the submission that payments need not exactly correlate with invoices was held insufficient to rebut the admitted facts or to dispel the suspicion arising from the admitted transactions. On this basis, the Tribunal found no reason to interfere with the confirmation of penalty by the adjudicating authority and the Commissioner (Appeals). [Paras 1, 2, 4, 5, 8]

Penalty under Rule 26(2) confirmed; appeal dismissed insofar as penalty liability is concerned.

Admissibility and evidentiary value of subsequent retraction of statement - reliance on earlier admission to conclude investigation - Whether the retraction statement dated 19.02.2015 could negate the earlier admission made on 14.09.2012 and affect the penalty proceedings. - HELD THAT: - The Tribunal found the retraction to have been recorded after a long gap of about 29 months without any satisfactory explanation for re-examination; the circumstances suggested the retraction undermined the integrity of the investigative process rather than cleansing it. The earlier admission in the contemporaneous statement of 14.09.2012 was held to be reliable and to have effectively blocked further probe. The Tribunal therefore endorsed the Commissioner (Appeals) in rejecting the retraction and treating the original statement as determinative for the purpose of adjudication. [Paras 4, 5, 6, 7]

Retraction held inadmissible/insufficient to overturn the earlier admission; retraction not accepted and does not vitiate the findings leading to penalty.

Final Conclusion: The Tribunal upheld the penalty imposed under Rule 26(2) of the Central Excise Rules, 2002 for issuance of invoices without actual receipt of goods and fraudulent availment of CENVAT credit, rejected the late retraction as unreliable, and dismissed the appeal.

Cenvat credit of duty paid by supplier - eligibility of 100% EOU to avail Cenvat credit - DGFT circular's relevance to availment of Cenvat credit - VCES disclosure and effect of suppression or mis-statement - inadmissibility of credit where tax/duty is paid under suppression or mis-statement

Cenvat credit of duty paid by supplier - eligibility of 100% EOU to avail Cenvat credit - DGFT circular's relevance to availment of Cenvat credit - The appellant, a 100% EOU, is entitled to Cenvat credit of excise duty paid by the manufacturer-supplier even though the supplier could have availed exemption under Notification No. 22/2003-CE and notwithstanding the DGFT policy circular relied upon by Revenue. - HELD THAT: - The Tribunal noted there was no dispute that duty had been paid by the supplier and that Revenue did not object at the time of acceptance of supplier-paid duty; Revenue's objection related only to the supplier's alleged entitlement to exemption. Relying on the Tribunal's earlier decision in M/s Teva API India Pvt. Ltd. which held that receipt of goods from a manufacturer who has paid duty entitles a 100% EOU to claim credit, the Court observed the DGFT circular relied upon by Revenue has no bearing on entitlement to Cenvat credit. Applying that precedent and the determinative reasoning that actual payment of duty by the manufacturer-supplier and receipt of goods by the EOU satisfy entitlement, the demand and penalty based on denial of such credit were set aside. [Paras 4, 9]

Demand of Rs. 2,78,19,091/- and the penalty imposed thereon set aside; appellant entitled to Cenvat credit of duty paid by the manufacturer-supplier.

VCES disclosure and effect of suppression or mis-statement - inadmissibility of credit where tax/duty is paid under suppression or mis-statement - Cenvat credit in respect of service tax paid by the appellant's head office under VCES (voluntary scheme) is not admissible because the tax was originally not paid for the relevant period and was later declared under VCES, amounting to suppression or mis-statement. - HELD THAT: - The Court examined the VCES scheme and found the appellant's head office declared service tax liabilities on 30.12.2013 for the period July 2009 to March 2012, indicating the tax had not been paid when due. Under the Cenvat Credit Rules, 2004 credit is not allowable where tax is paid as a result of suppression or mis-statement. The Board circular cited by the appellant only states that admissibility is governed by the Cenvat Credit Rules and does not override the prohibition on credit where suppression/mis-statement is established. Decisions cited on behalf of the appellant were distinguished on their facts because admissibility was not otherwise contested in those cases. Accordingly, the denial of credit was upheld. However, as the appellant reflected the credit in its Cenvat account and the matter involved a bona fide interpretation of law, penalty for this count was held to be not imposable and was set aside, though demand and interest were confirmed. [Paras 5, 6, 7, 8, 9]

Denial of credit of Rs. 21,68,285/- upheld; demand and interest confirmed but penalty relating to this count set aside.

Final Conclusion: Allowing the appeal in part, the Tribunal set aside the demand and penalty relating to Cenvat credit of duty paid by the manufacturer-supplier and upheld denial of credit for service tax declared under VCES while cancelling the penalty on that count; appeal disposed accordingly.

Inclusion of buyer incurred advertisement expenditure in assessable value under Rule 6 of the Central Excise Valuation Rules, 2000 - Advertisement expenditure as additional consideration for sale - Enforceable legal right of the manufacturer against the customer to insist on incurring expenditure - Reliance on Supreme Court precedent in Commissioner of Central Excise, Surat vs. Surat Textile Mills Ltd. regarding enforceability test

Advertisement expenditure as additional consideration for sale - Enforceable legal right of the manufacturer against the customer to insist on incurring expenditure - Inclusion of buyer incurred advertisement expenditure in assessable value under Rule 6 of the Central Excise Valuation Rules, 2000 - Whether the share of advertisement expenses borne by distributors is includible in the respondent's assessable value because the respondent had an enforceable legal right to require distributors to incur such expenditure. - HELD THAT: - The Tribunal applied the yardstick laid down by the Supreme Court that advertisement expenditure borne by a manufacturer's customer can be added to the manufacturer's sale price only if the manufacturer possesses an enforceable legal right to insist on incurring such expenditure. The agreements examined contain clauses requiring distributors to advertise and to obtain the company's approval of layouts and publicity, and clause language uses 'shall' in parts. However, the agreement contains no provision allocating or obligating the distributors to bear the expenditure for such advertisements. The internal letter and the admission that costs were shared and reimbursed by the respondent establish that distributors did bear a share and were reimbursed, but do not create a legal obligation enforceable by the respondent to make them incur the expense. Prior Tribunal decisions dealing with similar joint advertising arrangements were considered and followed to the extent they hold that commercial understandings or internal reimbursement mechanisms, without a legal right of recovery or specific contractual obligation to pay, do not render the dealer's expenditure as an amount paid 'to, or on behalf' of the manufacturer for inclusion in assessable value. Applying these principles, the Tribunal held that the Supreme Court yardstick is not satisfied on the facts: there is no contractual provision creating an enforceable right to compel distributors to incur advertisement expenditure or to recover it, and therefore the distributors' share cannot be added to the respondent's assessable value under the valuation rules. [Paras 8, 10, 11, 14]

The distributors' share of advertisement expenses is not includible in the respondent's assessable value because the respondent did not have an enforceable legal right to insist on the distributors incurring such expenditure; the impugned order of the Commissioner (Appeals) is sustained and the revenue's appeal is rejected.

Final Conclusion: The Tribunal rejected the revenue appeal and upheld the Commissioner (Appeals) order setting aside the demand, holding that on the facts and contractual terms the yardstick laid down by the Supreme Court for inclusion of buyer borne advertisement expenditure in assessable value was not satisfied.

Classification of goods - limitation - consequential demand - appeal rendered infructuous

Classification of goods - limitation - appeal rendered infructuous - Whether the appeal could be adjudicated on classification when the consequential demand for the same subject-matter had already been set aside on the ground of limitation - HELD THAT: - The Tribunal recorded that the consequential demand raised in respect of the classification dispute for the period September 1991 to July 1993 had been set aside by this Tribunal on the ground of limitation. Given that the demand for that period was already vacated on limitation grounds, deciding the classification issue in the present appeal would serve no practical purpose. On that basis the Tribunal declined to examine or decide the classification controversy and treated the appeal as infructuous. [Paras 4, 5]

Appeal disposed of as infructuous without deciding the issue of classification.

Final Conclusion: The appeal was disposed of as infructuous; the Tribunal did not decide the classification issue because the consequential demand for the relevant period had previously been set aside on limitation grounds.

Summary order. The Special Leave Petition is dismissed; pending applications, if any, are disposed of.

Proportionate incentives - pioneer unit - Package Scheme of Incentives - exemption by way of incentives as distinct from deferment - Section 93(1A) substituted by Maharashtra Act No.XXII of 2009 - validation and saving provision - exhaustion of Cumulative Quantum of Benefits (CQB) - retrospective operation of amendment

Pioneer unit - proportionate incentives - Package Scheme of Incentives - Section 93(1A) substituted by Maharashtra Act No.XXII of 2009 - Whether the substituted provisions of Section 93 of the MVAT Act, 2002 apply to a unit recognised as a pioneer unit under the Package Scheme of Incentives - HELD THAT: - The Court examined the distinction between benefits conferred under para 3.8(1)(i)(c) (deemed expansion/acquisition of new fixed assets) and para 3.12 (pioneer unit) of the 1993 Scheme. It noted that the proportionate/increase in capacity language in the amended Section 93 corresponds to the expansion category (para 3.8) and not to the pioneer unit category (para 3.12), where benefits are linked to fixed capital investment and no proportionate restriction was prescribed. Earlier authorities, including ACC Ltd and decisions upholding the scheme, were held to support that pioneer units occupy a different footing and are not to be governed by the proportionality restriction designed for expansion/deemed expansion cases. The Court therefore concluded that a unit recognised as a pioneer unit under the applicable PSI is not governed by the substituted Section 93 provisions whose mechanism is directed at proportionate incentives for expansion categories. [Paras 13, 21, 23]

Substituted Section 93 does not apply to a pioneer unit governed by para 3.12 of the 1993 Scheme.

Exhaustion of Cumulative Quantum of Benefits (CQB) - validation and saving provision - retrospective operation of amendment - Whether the retrospective substitution of Section 93 (and Section 93A/validation provisions) could be applied so as to deprive a unit which had exhausted its CQB before 27th August 2009 of exemptions already enjoyed for sales made prior to that date - HELD THAT: - The Court reviewed the effect of the Amending Act No.XXII of 2009 and its validation clause (Section 5). While the retrospective amendment and validation were held constitutionally sustainable by earlier Division Bench and Supreme Court decisions, the Court emphasised that the amendment operates so as to govern eligible units from the appointed/operative date specified by the amending provisions. Where a unit had already exhausted its CQB before the operative date of the amendment (27th August 2009), the unit ceased to be an eligible unit and the substituted Section 93 could not be applied to disturb exemptions in respect of sales effected prior to the operative date. A statute which would impair a vested right to exemptions already enjoyed would be retrospective in a prohibited sense; accordingly the Amending Act does not apply to sales already effected up to the operative date where the CQB had been fully utilised. [Paras 24, 26]

Units which exhausted their CQB before 27th August 2009 cannot be deprived of exemptions for sales made prior to that date by application of the substituted Section 93; the amendment does not operate to claw back such vested exemption entitlements.

Exemption by way of incentives as distinct from deferment - assessment invoking substituted Section 93 - Whether the assessment for the period 1st April 2005 to 31st March 2006 that applied the substituted Section 93 and allowed exemption only on pro rata turnover was sustainable - HELD THAT: - Applying the conclusions on the limited reach of the substituted Section 93 (it does not govern pioneer units) and on the non applicability to units that exhausted CQB before 27th August 2009, the Court found that the Assessing Authority, First Appellate Authority and Tribunal erred in applying the substituted Section 93 to deny full exemption for the sales made in the relevant period. The appellant had exhausted its entitlement by March 2009 and had paid tax thereafter; the retrospective application of Section 93 to claw back exemption for sales up to 27th August 2009 was not permissible in the facts. Consequently, the assessment order for 2005 06 was quashed. [Paras 25, 27]

The assessment and appellate orders applying substituted Section 93 to restrict exemption to pro rata turnover for 2005 06 are quashed and set aside.

Final Conclusion: The concurrent orders of the Assessing Authority, the First Appellate Authority and the Tribunal applying the substituted Section 93 to restrict exemption for the Ratnagiri (pioneer) unit for the period 1st April 2005 to 31st March 2006 are quashed; substituted Section 93 does not govern pioneer units of the PSI and, in any event, cannot be applied to deprive a unit which exhausted its CQB before 27th August 2009 of exemptions for sales made before that operative date.

Deposit of principal tax pending assessment - penalty not payable before imposition - assessment proceedings to determine tax liability and classification of goods - right to claim input tax credit in respect of tax paid - filing of return-cum-challan as precondition for assessment

Deposit of principal tax pending assessment - penalty not payable before imposition - right to claim input tax credit in respect of tax paid - Whether the amount that the petitioner must deposit before invoking assessment includes penalty or is confined to the principal tax demanded. - HELD THAT: - The High Court's order required the petitioner to file return-cum-challan and deposit the tax demanded so that assessment proceedings could be undertaken. The Court interpreted its direction and the scheme of the Act to mean that the petitioner is required to deposit the principal sum of tax indicated in the demand notices, and not the penalty specified therein. The reasoning notes that entitlement to claim input tax credit arises only in respect of tax and not penalty, and that ordinarily penalty cannot be legitimately demanded or recovered prior to a determination in assessment and an express imposition of penalty. Once the principal tax is deposited and the return-cum-challan filed, the assessing mechanism must proceed and, upon completion of assessment, statutory rights including challenge to any confirmed penalty would be available to the assessee.

Petitioner need deposit only the principal tax demanded (not the penalty) before asking for assessment; penalty, if imposed in assessment, may be recovered thereafter and does not form part of the pre-assessment deposit.

Assessment proceedings to determine tax liability and classification of goods - filing of return-cum-challan as precondition for assessment - Whether the question of taxability (including whether hydraulic excavators are 'specified goods') and the amount of tax should be considered by the assessing authority and whether assessment should be directed upon compliance. - HELD THAT: - The High Court expressly left the question of whether the imported hydraulic excavators are 'specified goods' and whether there is any justifiable tax demand to the assessment proceedings. The present order clarifies that upon the petitioner filing the return-cum-challan and depositing the principal tax as directed, the assessing authority is required to carry out assessment in accordance with law, consider the classification and all contentions on merits during that assessment, and pass an assessment order after bipartite hearing. This constitutes a remand of the factual and legal controversies concerning taxability and classification to the assessing officer for fresh consideration and determination in the assessment process.

Assessment proceedings shall be carried out by the assessing authority on the petitioner filing return-cum-challan and depositing the principal tax; issues of classification and taxability are to be considered and decided in that assessment.

Filing of return-cum-challan as precondition for assessment - Time-limit for compliance with the Court's direction to enable assessment to be undertaken. - HELD THAT: - The Court clarified that the facility to file return-cum-challan with deposit of the principal tax, as clarified, must be availed of by the petitioner by a specific cut-off date to secure that the assessment, as directed, shall be carried out. This temporal direction was given to obviate the requirement of a review of the judgment and to provide finality and practicability to the order.

Petitioner was permitted to file the return-cum-challan and deposit the principal tax latest by 30th October 2018, failing which the clarified course envisaged would not apply.

Final Conclusion: The Court refused review but clarified that the petitioner is required to file return-cum-challan and deposit only the principal tax (not the penalty) shown in the demand notices; on such compliance the assessing authority shall carry out assessment and decide taxability and classification issues on merits, with the petitioner permitted to avail the clarified facility by 30th October 2018.

Juridical seat of arbitration - law governing the arbitration agreement - Part-I of the Arbitration and Conciliation Act, 1996 - challenge under Section 34 - Commercial Arbitration Rules of the American Arbitration Association - place versus seat - lex arbitri - 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards - Rule 52(c) of the American Arbitration Association Rules - reasoned award requirement

Juridical seat of arbitration - place versus seat - lex arbitri - The juridical seat of the arbitration was New York (outside India) and the term 'place' in clause 15.1 is equivalent to 'seat' in the facts of this case. - HELD THAT: - Clause 15.1 expressly provided that the place of arbitration shall be New York, New York or such other place as may be agreed. The arbitration was instituted and conducted in New York and the award was passed there. Applying Section 2(2) of the Act and the interpretative guidance in Hardy Exploration and EITZEN Bulk, the Court held that where the place is fixed as New York and no condition precedent is attached, 'place' equates to the juridical seat. The selection of New York as the seat attracts the law of that seat (lex arbitri) ipso jure. Consequently the seat was held to be outside India. [Paras 24, 37, 38, 40, 46]

Seat of arbitration is New York; the juridical seat is outside India.

Law governing the arbitration agreement - Commercial Arbitration Rules of the American Arbitration Association - Rule 52(c) of the American Arbitration Association Rules - The law governing the arbitration agreement was U.S. law (Federal Arbitration Act / New York law), not Indian law. - HELD THAT: - Clause 15 provided that arbitration would be conducted under the American Arbitration Association (AAA) Rules and the place of arbitration was New York. Rule 52(c) of the AAA Rules deems parties to have consented that judgment upon the award may be entered in any federal or state court having jurisdiction, indicating submission to U.S. curial law. The appellant's own conduct - invoking arbitration in New York, relying on the Federal Arbitration Act in its pleadings, and treating joinder as a procedural matter under U.S. law - confirmed the parties' understanding that U.S. law governed the arbitration. The Court further recognised that an arbitration clause is separable from the main contract and, where the arbitration agreement itself specifies foreign procedures/place, the law of that seat governs the arbitration agreement. [Paras 26, 28, 29, 30, 33]

The arbitration agreement was governed by U.S. law; the law governing the arbitration agreement is Foreign Law.

Part-I of the Arbitration and Conciliation Act, 1996 - challenge under Section 34 - 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards - Because the seat was outside India and the arbitration agreement was governed by Foreign Law, Part I of the Act (including Section 34) is impliedly excluded and the challenge under Section 34 before Indian courts was not maintainable. - HELD THAT: - The Court applied the principles in Reliance II, EITZEN Bulk and Hardy Exploration: where the juridical seat is outside India or foreign law governs the arbitration agreement, Part I is excluded by necessary implication. Section 2(2) and its proviso make clear that only limited provisions of Part I apply to international arbitrations seated outside India; Section 34 is not among those exceptions. Given that the seat was New York and U.S. law governed the arbitration agreement, the Arbitration Petition under Section 34 could not be entertained by the Indian court. [Paras 39, 40, 41, 46, 50]

Part I of the Act is impliedly excluded; the Section 34 challenge before Indian courts is not maintainable.

Final Conclusion: The appeal is dismissed. The Court held that the arbitration seat was New York and the arbitration agreement was governed by U.S. law; therefore Part I of the Arbitration and Conciliation Act, 1996 (including a challenge under Section 34) was impliedly excluded and the petition under Section 34 was not maintainable. No order as to costs.