TaxTMI Updates e-Newsletter
Nov 27,2012

Principles of natural justice (audi alteram partem) - equal protection of law / prohibition of hostile discrimination - intelligible differentia and reasonable nexus - taxability of employer provided accommodation as a perquisite - employer's duty to deduct tax at source under Section 192 - certificate for deduction at lower rate or no deduction under Section 197

Principles of natural justice (audi alteram partem) - equal protection of law / prohibition of hostile discrimination - intelligible differentia and reasonable nexus - Validity of the impugned order rejecting claim of parity between executives and non executives when passed without affording opportunity of hearing. - HELD THAT: - The Court examined the contention that the impugned order under Annexure 1 effected hostile discrimination between executives and non executives and was passed without hearing. Established authorities require that administrative orders which have adverse civil consequences must ordinarily be preceded by an opportunity of hearing unless statute or necessary implication excludes it. Classification between employees must rest on an intelligible differentia having a rational nexus to the object sought to be achieved. The Court found that the petitioner's grievance that no personal hearing was afforded before rejecting the claim engages the audi alteram partem rule and that absence of such hearing rendered the impugned order vulnerable. Accordingly the requirement of fair play compelled setting aside the order so that the claim of parity and classification may be examined after giving the petitioner an opportunity to be heard. [Paras 20]

Impugned order under Annexure 1 is not valid in law for having been passed without affording opportunity of hearing; the order is set aside and the claim is to be decided afresh after hearing.

Taxability of employer provided accommodation as a perquisite - employer's duty to deduct tax at source under Section 192 - certificate for deduction at lower rate or no deduction under Section 197 - Whether accommodation provided to executives can be held not to be a taxable perquisite in the writ proceedings and whether tax deduction at source under Section 192 may be prevented by this Court. - HELD THAT: - The Court held that the question whether employer provided accommodation is part of income (a taxable perquisite) depends on factual circumstances and documentary evidence, including whether provision of quarters is an incident of duty. Such factual determination cannot be undertaken in the writ jurisdiction on the record before this Court; it is a matter for the Assessing Officer to consider. The Court also noted the statutory machinery under Section 197 whereby an assessee may apply to the Assessing Officer for a certificate for deduction at lower rate or for no deduction; if such certificate is granted, the employer is bound to act on it until cancellation. Therefore, while the Court refrained from adjudicating the taxability of accommodation on merits, it directed that the statutory remedy under Section 197 is available to the members of the petitioner Association and left the factual and legal determination to the Assessing Officer and appropriate authorities. [Paras 23, 27, 28]

Court declined to determine taxability of accommodation in the writ; members may seek relief under Section 197 from the Assessing Officer and the claim as to entitlement to up keep allowance and classification is to be decided afresh after hearing.

Final Conclusion: The impugned order is set aside for want of hearing; opposite party No.1 is directed to decide, after affording opportunity of hearing, whether executives and non executives constitute the same class for grant of the upkeep allowance and whether executives are entitled to the 5% upkeep allowance, within one month from production of a certified copy of this judgment; questions as to taxability of accommodation are left to the Assessing Officer and petitioners may pursue a certificate under Section 197.

Condonation of delay - waiver of pre-deposit for stay of demand - pre-deposit of penalty under Customs Act - remand for fresh adjudication after following principles of natural justice

Condonation of delay - Delay of 13 days in filing the appeal - HELD THAT: - The Tribunal found the delay to be marginal and, exercising discretion, condoned the delay and directed the registry to take the stay petitions and appeals on record. The order records acceptance of the application for condonation and admission of the appeals for adjudication. [Paras 1]

Delay of 13 days condoned; registry directed to place stay petitions and appeals on record.

Waiver of pre-deposit for stay of demand - pre-deposit of penalty under Customs Act - remand for fresh adjudication after following principles of natural justice - Stay/waiver of pre-deposit of penalties imposed under the Customs Act and consequent course of action - HELD THAT: - On the stay petition the Tribunal declined an unconditional waiver of pre-deposit. Noting prima facie admissions by the manager and that the appellant had not appeared before the adjudicating authority nor filed a reply to the show cause notice (issued in July 2011), the Tribunal treated the appellant's conduct as callous and required a conditional pre-deposit to ensure cooperation. The Tribunal directed M/s. Kunal Travels (Cargo) to deposit Rs. One lakh within eight weeks and to report compliance on the specified date; upon such compliance the impugned order would be set aside and the matter remanded to the adjudicating authority to reconsider afresh after affording the principles of natural justice. The appellants undertook to file the reply within six weeks, and the adjudicating authority was directed to proceed on receipt of the reply and proof of deposit. [Paras 2, 3, 4]

Conditional stay: deposit of Rs. One lakh within eight weeks and filing of reply within six weeks; on compliance the impugned order set aside and matter remanded to the adjudicating authority for fresh adjudication after following principles of natural justice.

Final Conclusion: The Tribunal condoned the delay and admitted the appeals; it directed a conditional pre-deposit as a prerequisite to stay and remanded the matters to the adjudicating authority for fresh consideration after compliance and after affording the principles of natural justice.

Equivalence of examinations under CHALR-84 and CHALR-04 - Deeming of qualification on passing additional subjects under Board's Circular - Entitlement to grant of CHA licence upon satisfaction of prescribed eligibility - Invalidity of refusing licence because examination was passed in another Commissionerate

Equivalence of examinations under CHALR-84 and CHALR-04 - Deeming of qualification on passing additional subjects under Board's Circular - Entitlement to grant of CHA licence upon satisfaction of prescribed eligibility - Whether the appellant's having passed the examination under Regulation 9 of CHALR-84 entitles her to be treated as having passed the examination under Regulation 8 of CHALR-04 and hence to be considered for grant of CHA licence - HELD THAT: - The Tribunal found that the provisions of Regulation 8 of CHALR-04 correspond to Regulation 9 of CHALR-84 though Regulation 8 includes additional subjects such as online filing/ICES and related matters. The Board's Circular No. 9/2010 (8-4-2010) and Circular No. 25/2011 (22-6-2011) clarify that applicants who had earlier passed the CHALR-84 examination but were not licensed were required to appear in, and qualify, the examination in the additional subjects specified by Notification No. 30/10-Cus. (N.T.), dated 8-4-2010; those who qualify in that examination shall be deemed to have passed the examination under Regulation 8 of CHALR-04 and would be eligible to be considered for grant of CHA licence under Regulation 9 of CHALR-04. The Commissioner failed to consider these Board instructions in rejecting the application. In consequence, the legal effect of passing the required additional subjects, as set out in the Board circulars, is to render the candidate equivalent to one who has passed Regulation 8 of CHALR-04 and thus potentially eligible for licence subject to fulfillment of other prescribed conditions.

The Commissioner's rejection for want of having passed Regulation 8 of CHALR-04 was set aside to the extent that the Board's Circulars require consideration; passing the additional subjects as per the Board's instruction will deem a candidate to have passed Regulation 8 and make her eligible to be considered for a CHA licence.

Invalidity of refusing licence because examination was passed in another Commissionerate - Entitlement to grant of CHA licence upon satisfaction of prescribed eligibility - Whether an applicant can be denied a CHA licence on the ground that the qualifying examination was passed in a different Customs House/Commissionerate - HELD THAT: - The Tribunal observed that the examinations under Regulation 8 of CHALR-04 and Regulation 9 of CHALR-84 are conducted by the Directorate General of Inspection and are not confined to the jurisdiction of any single Commissionerate. Therefore, refusal to grant a licence on the basis that the examination was passed under another Commissioner's jurisdiction is without basis. The Commissioner's objection on this ground was incorrect and could not stand.

Refusal of the appellant's application solely because the examination was passed in another Customs House/Commissionerate is unsustainable.

De novo consideration in light of Board circulars - Entitlement to grant of CHA licence upon satisfaction of prescribed eligibility - Whether the application must be reconsidered afresh by the Jurisdictional Commissioner in the light of the Board's Circulars and the Tribunal's observations - HELD THAT: - Having found that the Commissioner did not consider the Board's Circulars and that refusal based on jurisdiction of examination was untenable, the Tribunal directed that the impugned order be set aside and the matter remanded for fresh adjudication. The Jurisdictional Commissioner is to consider the appellant's application de novo, applying the Board's instructions (including the deeming provision upon passing additional subjects) and determine eligibility for grant of licence, bearing in mind that the number of licences is to be governed by market forces as clarified by Board Circular No. 25/2011.

The matter is remanded for de novo decision by the Jurisdictional Commissioner in accordance with the Tribunal's observations and the Board's circulars; stay disposed of.

Final Conclusion: The Tribunal set aside the Commissioner's rejection insofar as it failed to apply the Board's circulars and insofar as it refused licence because the qualifying exam was passed in another Commissionerate; the application is remitted for de novo consideration by the Jurisdictional Commissioner in light of the Board's instructions (including the deeming provision on passing additional subjects) and the market forces guidance in Circular No. 25/2011.

Interest on security deposit deposited for provisional release of seized goods - refund of security deposit on outcome favourable to importer - scope of statutory refund provisions and limitation - doctrine of per incuriam in relation to overlooked precedent - Commissioner (Appeals) cannot grant relief beyond statute unless supported by precedent

Interest on security deposit deposited for provisional release of seized goods - refund of security deposit on outcome favourable to importer - Whether the appellant is entitled to interest on the security deposit paid for provisional release of goods, from the date of filing the refund claim. - HELD THAT: - The Tribunal examined the Commissioner (Appeals) view that a security deposit given for provisional release, being an estimated amount and not finally appropriated as duty, fine or penalty, falls outside the refund provision relied upon and therefore interest is not payable. The Tribunal analysed earlier decisions: some Tribunals and High Courts have held interest payable on such deposits, while others have not. Noting that the Calcutta Iron & Steel Company decision did not advert to contrary Tribunal and High Court precedents, the Tribunal applied the principle in Larger Bench decisions that a decision rendered without considering a binding precedent may be per incuriam. The Tribunal concluded that where contrary precedent exists and was not considered, the earlier inconsistent decision should not be followed. Applying those precedents, the Tribunal held that interest is payable on the refunded security deposit and fixed the date for computation as the date of filing the refund claim, viz. 28-4-2006. [Paras 5, 6]

Appeal allowed; appellant entitled to interest on the refunded security deposit from the date of filing the refund claim (28-4-2006).

Final Conclusion: The Tribunal allowed the appeal and directed payment of interest on the refunded security deposit from the date of filing the refund claim, holding that prior inconsistent decisions which failed to consider binding precedents were not to be followed and that interest is payable in the circumstances of this case.

Petition under Section 391 of the Companies Act, 1956 - Scheme of Amalgamation - dispensing with convening of meetings of shareholders - convening of meetings of unsecured creditors - appointment of Chairman and Co-Chairman for creditor meetings - publication and individual notice requirements for meetings - production of secured creditors' consents at creditor meeting - approval by three-fourths in value of creditors present and voting - restriction on proxies (not to exceed 50% of those present and voting)

Petition under Section 391 of the Companies Act, 1956 - Scheme of Amalgamation - dispensing with convening of meetings of shareholders - Dispense with holding of meetings of equity shareholders of the Transferor Company-2 and the Transferee Company and accept the petition as prayed. - HELD THAT: - Having perused the consents filed by the equity shareholders of Transferor Company-2 and of the Transferee Company and on the submissions of learned counsel, the Court found no reason to refuse the prayer to dispense with convening meetings of those equity shareholders and accordingly allowed the petition to that extent. The Court noted there is no secured creditor of Transferor Company-2, so no issue arises regarding dispensing with any secured creditors' meeting for that company. [Paras 11]

Prayer to dispense with convening of meetings of equity shareholders of Petitioner No.1/Transferor Company-2 and Petitioner No.2/Transferee Company accepted; petition allowed as prayed insofar as such dispensation is concerned.

Convening of meetings of unsecured creditors - Scheme of Amalgamation - Direct convening of separate meetings of unsecured creditors of each petitioner-company on the specified schedule to consider and approve the Scheme of Amalgamation. - HELD THAT: - The Court directed that separate meetings of the unsecured creditors of the petitioner-companies be convened at the dates, times and venue specified in the order. The meetings are to consider and approve the Scheme of Amalgamation annexed to the petition, and are to be conducted in accordance with the directions in the order. [Paras 11]

Meetings of unsecured creditors of the petitioner-companies ordered to be convened as per the schedule in paragraph 11.

Appointment of Chairman and Co-Chairman for creditor meetings - Appointment of designated Chairmen and Co-Chairmen to preside over the respective unsecured-creditor meetings and fixation of their fees. - HELD THAT: - The Court appointed named advocates as Chairman and Co-Chairman for the unsecured-creditor meeting of each petitioner-company and fixed their fees. The Chairman is directed to report the result of the meeting to the Court within seven days of conclusion, by affidavit verifying the report. [Paras 12, 13, 14]

Chairmen and Co-Chairmen appointed for each meeting; fees fixed; Chairman to report results to the Court by verified affidavit within seven days.

Publication and individual notice requirements for meetings - Directions for notice publication and individual service for the unsecured-creditor meetings. - HELD THAT: - The Court directed that the meetings be conducted strictly in accordance with law and after due notification by (i) publication in specified newspapers (English and vernacular editions) and in the Official Gazette of the State of Haryana, and (ii) individual notice by Speed Post or Registered Post to each unsecured creditor. A common notice must be published at least 21 days before the meetings. [Paras 15]

Notice and publication requirements for the unsecured-creditor meetings directed as stated in the order.

Production of secured creditors' consents at creditor meeting - Requirement that consents/no-objection letters of the Transferee Company's secured creditors be produced at the unsecured-creditor meeting. - HELD THAT: - The Court observed that the Transferee Company had five secured creditors and directed that the consents/no-objections of those secured creditors shall be produced before the Chairman and Co-Chairman at the time of the unsecured-creditor meeting of the Transferee Company, to be held as scheduled. [Paras 9, 16]

Consents of the five secured creditors of the Transferee Company to be produced before the Chairman and Co-Chairman at the unsecured-creditor meeting.

Approval by three-fourths in value of creditors present and voting - restriction on proxies (not to exceed 50% of those present and voting) - Voting and proxy rules for the unsecured-creditor meetings: approval by three-fourths in value and limit on proxies. - HELD THAT: - The Court prescribed that the Scheme in the unsecured-creditor meetings shall be decided by the majority in number representing three-fourths in value of those present and voting, either in person or by proxy. Additionally, proxies shall not exceed fifty percent of those present and voting. [Paras 17, 18]

Voting threshold fixed at three-fourths in value of creditors present and voting; proxies limited to not more than 50% of those present and voting.

Final Conclusion: The petition under Section 391 is allowed in part: meetings of equity shareholders are dispensed with as recorded; separate meetings of unsecured creditors are ordered to be convened with appointed Chairmen and specified procedural directions (notice/publication, production of secured creditors' consents, voting threshold and proxy limit); the matter is adjourned to 24.01.2013.

Time barred review under Rule 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993 - limitation and non application of Section 5 of the Limitation Act to Rule 5A review - scope of protection under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - distinction between "proceedings" and "suit" in Section 22(1) of SICA - whether recovery proceedings before Debt Recovery Tribunal qualify as a "suit" under Section 22(1) SICA - limited protection against execution pending decision in larger bench authority

Time barred review under Rule 5A of the Debts Recovery Tribunal (Procedure) Rules, 1993 - limitation and non application of Section 5 of the Limitation Act to Rule 5A review - The petitioners' application for clarification/modification/review (IA No. 6425/2010) was barred by limitation and rightly dismissed. - HELD THAT: - The court found that the petitioners had notice of the DRT proceedings from 20.11.2009 and were directed on 22.12.2009 to file written statements. The impugned order of the DRT dated 03.05.2010 was passed in the presence of the petitioners' counsel. Rule 5A permits review only within sixty days and contains an express bar on entertaining review applications after that period. The petitioners filed the review only on 08.10.2010, well beyond the sixty day window. No application for condonation under Section 5 of the Limitation Act was made before the court; the special statute (RDDB Act and Rule 5A) prescribes its own limitation and appears to exclude reliance on Section 5. In these circumstances the DRT was justified in holding the review time barred and dismissing it, and the DRAT did not err in upholding that conclusion. The court also noted the petitioners' unexplained failure to pursue the matter actively and rejected the proffered explanation as unacceptable. Limited protection against execution was nonetheless granted pending the Supreme Court's larger bench decision, but that did not affect the conclusion on limitation. [Paras 11, 12, 14, 15]

Application for review was time barred and its dismissal was correct; the DRAT's upholding of that conclusion is sustainable.

Scope of protection under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 - distinction between "proceedings" and "suit" in Section 22(1) of SICA - whether recovery proceedings before Debt Recovery Tribunal qualify as a "suit" under Section 22(1) SICA - limited protection against execution pending decision in larger bench authority - The protection under Section 22(1) SICA does not extend to guarantors in respect of recovery proceedings filed before the DRT under the RDDB Act because such proceedings are not 'suits' within Section 22(1). - HELD THAT: - The court examined the scheme, objects and legislative history of SICA, including the 1994 amendment introducing the phrase concerning "suit for the recovery of money ... or of any guarantee". It noted prior authorities (including Patheja Bros. and Kailash Nath Aggarwal) and observed that the 1994 amendment gave only limited protection to guarantees. The term "proceedings" has been given a wide meaning in earlier decisions for actions against the company itself, but the word "suit" must be read in context and, in the court's view, confined to proceedings in a civil court under the Code. The RDDB Act creates a specialized tribunal (DRT) which is not a civil court; therefore recovery actions before the DRT do not fall within the term "suit" in Section 22(1). The legislature was aware of the RDDB Act when it amended SICA and used different expressions deliberately. Consequently the petitioners, as guarantors, were not entitled to the broader suspension of proceedings under Section 22(1) in respect of the OA before the DRT, save for a limited stay against execution granted in view of the pending larger bench reference in the Supreme Court. On this basis the DRT's and DRAT's conclusions were affirmed. [Paras 16, 22, 23, 25, 26]

Section 22(1) SICA's protection does not extend to guarantors against recovery proceedings before the DRT under the RDDB Act; the DRT/DRAT rightly decided the issue against the petitioners.

Final Conclusion: The writ petition is dismissed. The DRT's order holding the review application time barred and the DRAT's decision upholding that conclusion and clarifying the petitioners' rights were not vitiated; the petitioners are not entitled to Section 22(1) SICA protection in respect of recovery proceedings before the DRT, although a limited stay against execution was maintained pending the Supreme Court's larger bench consideration.

Quashing of FIR under Section 482 Cr.P.C. - Scope of exercise of inherent power at investigation stage - Interference with investigation pending clarification from regulatory authority - Prejudice to accused and delay in investigation - Allegations of hawala and foreign remittances

Quashing of FIR under Section 482 Cr.P.C. - Scope of exercise of inherent power at investigation stage - Interference with investigation pending clarification from regulatory authority - Whether the FIR could be quashed at the threshold while the investigation was at an initial stage and clarification from a regulatory authority was awaited. - HELD THAT: - The Court held that exercise of inherent jurisdiction to quash an FIR is not appropriate when the investigation is still in its initial stages and material remains to be collected. The police had sought clarification from the Reserve Bank of India regarding possible contraventions of the Foreign Exchange Management Act and a reply was awaited; therefore the court should not prematurely scuttle the probe. The short passage of time since registration of the FIR (four months) and absence of demonstrated prejudice to the petitioner militated against quashing. The court also refrained from adjudicating merits of allegations-including those of hawala and foreign remittances-observing that such questions are to be addressed after completion of investigation and filing of the challan under Section 173 Cr.P.C.

No ground made out for quashing the FIR at this stage; petition dismissed.

Final Conclusion: The petition under Section 482 Cr.P.C. seeking quashing of the FIR is dismissed because investigation was at an initial stage, clarification from RBI was pending, no sufficient delay or prejudice was shown, and merits cannot be examined until the investigation and resulting challan are completed.

Time-barred demand and limitation under Section 73(1) of the Finance Act, 1994 - relevant date for computation of limitation - plea of limitation first raised before first appellate authority - non-speaking order - fresh adjudication on merits - principles of natural justice

Time-barred demand and limitation under Section 73(1) of the Finance Act, 1994 - non-speaking order - relevant date for computation of limitation - Validity of the Commissioner (Appeals) order setting aside the demand solely on the ground of limitation without examining merits and without a reasoned finding on relevant date. - HELD THAT: - The Tribunal found that there was no proper reply to the show-cause notice indicating a plea of limitation before the adjudicating authority and that the original authority decided the matter on merits. The plea of limitation was raised for the first time before the Commissioner (Appeals), who allowed the appeal without examining the merits and without referring to the relevant date or other material factors; the impugned order is therefore not a speaking order on limitation. The appellate authority's action of deciding the appeal solely on the ground of limitation, without reasoned application to the facts and without consideration of the merits, is not legally justified. For these reasons the impugned order setting aside the demand on the sole basis of limitation was set aside. [Paras 3]

Impugned Commissioner (Appeals) order is set aside for being non-speaking and for deciding appeal solely on limitation without examining merits.

Fresh adjudication on merits - plea of limitation first raised before first appellate authority - relevant date for computation of limitation - principles of natural justice - Appropriate remedy and further course of action in view of the defect in the appellate order. - HELD THAT: - The Tribunal remanded the matter to the Commissioner (Appeals) for a fresh decision on the assessee's appeal on merits in accordance with law and the principles of natural justice. The Commissioner (Appeals) is directed to hear both sides with due notice on the question whether a plea of limitation may be lawfully raised for the first time at the appellate stage; if the plea is held to be legally maintainable, the limitation issue shall be examined with reference to the relevant date under Section 73(1) of the Finance Act, 1994 and in the light of applicable authorities. [Paras 4]

Appeal allowed by way of remand to the Commissioner (Appeals) for fresh, reasoned adjudication on merits and, if applicable, considered determination of the limitation plea after hearing both parties.

Final Conclusion: The departmental appeal is allowed in part: the Commissioner (Appeals) order is set aside for being non-speaking and for deciding the matter solely on limitation; the matter is remanded to the Commissioner (Appeals) for fresh, reasoned decision on merits and for lawful consideration of any limitation plea after hearing both parties in accordance with Section 73(1) and principles of natural justice.

Tour Operator Services - tour - service tax liability for services rendered using hired/third party vehicles - extended period of limitation - penalty under Section 78 - penalty under Section 77 - penalty under Section 76 - Business Auxiliary Services - Notification No. 15/2007 ST (exemption on value in excess of 40% of gross) - requantification of tax liability

Tour Operator Services - tour - service tax liability for services rendered using hired/third party vehicles - Activities of the assessee in providing vehicles (including vehicles belonging to third parties) fall within the category of Tour Operator Services and attract service tax. - HELD THAT: - The appellants were registered under the category of "Tour Operator Services" and collected service tax from customers for services performed using third party vehicles. Reliance on the Tribunal's decision in M/s. Ideal Travels and others establishes that "tour" means a journey from one place to another and that a "tour operator" includes persons operating tours in tourist vehicles covered by a permit. The fact that bills, including service tax, were raised and collected by the appellants for such services renders their activities taxable as Tourist Operator Services even where vehicles are hired from third parties; treating activities using own and third party vehicles differently for taxation is not warranted. The appellants' contention that they merely acted as agents or that only their commission is taxable is rejected. [Paras 6]

Assessee's operations using third party vehicles are taxable as Tour Operator Services.

Extended period of limitation - penalty under Section 78 - penalty under Section 77 - penalty under Section 76 - Invocation of the extended period of limitation for demand and imposition of penalties is justified; penalty under Section 78 and Section 77 sustained but penalty under Section 76 set aside. - HELD THAT: - The appellants failed to disclose service charges for services rendered using third party vehicles in their returns despite having collected service tax, thereby justifying issuance of demand under the extended period. Penalties are warranted in these circumstances. However, the Tribunal finds no justification for sustaining a separate penalty under Section 76 when penalty under Section 78 is upheld; accordingly Section 76 penalty is set aside while penalties under Sections 77 and 78 are sustained (with requantification of Section 78 penalty as directed). [Paras 6, 8]

Extended period invocation and penalties under Sections 77 and 78 sustained; penalty under Section 76 set aside.

Business Auxiliary Services - The appellants' activities are not to be characterised as Business Auxiliary Services with tax only on commission retained. - HELD THAT: - The appellants' claim that they only billed and collected on behalf of vehicle owners and that only the 5% commission constitutes taxable consideration under Business Auxiliary Services is not accepted. Given that the appellants held registration as Tour Operator Services providers and collected service tax from customers for the tours (including those using third party vehicles), the correct characterisation is Tour Operator Services rather than Business Auxiliary Services. [Paras 6]

Claim of taxation only on retained commission as Business Auxiliary Services is rejected.

Notification No. 15/2007 ST (exemption on value in excess of 40% of gross) - requantification of tax liability - Assessees are eligible for benefit of Notification No. 15/2007 ST and tax, interest and penalty under Section 78 are to be requantified by the original authority after allowing that benefit. - HELD THAT: - The Tribunal accepts the alternative submission that Notification No. 15/2007 ST, which exempts service tax on value in excess of 40% of the gross amount for the relevant period from 01.04.2000 onwards, is applicable. Consequently, the tax liability, interest and the penalty under Section 78 must be recomputed by the original authority after allowing this exemption; the matter is remitted for redetermination of quantification in accordance with this direction. [Paras 7, 8]

Benefit of Notification No. 15/2007 ST allowed; tax, interest and Section 78 penalty to be requantified by the original authority.

Final Conclusion: The appeal is partly allowed: appellants are held liable to service tax as Tour Operator Services for tours operated using third party vehicles and liable to penalties under Sections 77 and 78 (penalty under Section 76 set aside); benefit of Notification No. 15/2007 ST is granted and the original authority is directed to requantify tax, interest and the Section 78 penalty accordingly.

CENVAT credit - input service - used in or in relation to manufacturing activity - Rule 3(1) of the CENVAT Credit Rules, 2004 - input service credit not admissible for Convention services, Club membership, Health club & fitness centre and House keeping services - pre deposit and conditional stay of recovery pending appeal - reliance on High Court precedent

CENVAT credit - input service - used in or in relation to manufacturing activity - input service credit not admissible for Convention services, Club membership, Health club & fitness centre and House keeping services - reliance on High Court precedent - Entitlement to CENVAT credit on the listed input services - HELD THAT: - The Tribunal examined whether the appellant was entitled to claim CENVAT credit on a list of input services on the ground they were not used in or in relation to manufacturing activity and therefore not covered under Rule 3(1) of the CENVAT Credit Rules, 2004. It held that Convention services, Memberships of Clubs & Association services, Health Club & Fitness Centre services and House Keeping services are not eligible for input service credit. For the remaining listed services the Tribunal concluded that credit was not admissible as availed in the course of the appellant's business of manufacturing, having regard to the decision of the Hon'ble High Court of Bombay in CCE v. Ultratech Cement Ltd. , which the Tribunal treated as determinative on the question of admissibility of such credits.

All the challenged input service credits were found not admissible; specifically Convention, Club membership, Health club & fitness centre and House keeping services were held ineligible, and the balance of services were held not admissible in view of the High Court precedent.

Pre deposit and conditional stay of recovery - CENVAT credit - Interim directions on pre deposit and stay of recovery during pendency of appeal - HELD THAT: - The Tribunal directed the appellant to make a pre deposit of the input service credit amount availed in respect of the four specifically disallowed services (Convention services, Memberships of Clubs & Association services, Health Club & Fitness Centre services and House Keeping services) within four weeks and to report compliance on the listed date. Upon such compliance the Tribunal ordered that the pre deposit of the balance of dues adjudged against the appellant shall stand waived and recovery thereof shall be stayed during the pendency of the appeal. The direction thus conditions the grant of stay on the specified pre deposit and compliance reporting.

Appellant directed to pre deposit the credit availed on the four disallowed services within four weeks and to report compliance; on such compliance the balance pre deposit requirement is waived and recovery stayed pending appeal.

Final Conclusion: The Tribunal disallowed CENVAT credit on the listed input services (expressly holding convention, club membership, health club and housekeeping services ineligible and treating the other services as not admissible in view of the High Court precedent), and directed a targeted pre deposit for the four named services with a conditional stay of recovery upon compliance.

Confirmation of service tax and interest - imposition of penalty under Section 78 vis-a -vis Section 76 - option to pay 25% of penalty within 30 days - penalty under Section 77 for delayed payment

Confirmation of service tax and interest - Confirmation of the assessed Service Tax and interest - HELD THAT: - The appellant did not contest the demand of Service Tax and interest. The Tribunal recorded that the amount of Service Tax along with interest is confirmed as not being disputed by the appellant and therefore the confirmation is maintained. [Paras 5]

Service Tax demand and interest confirmed.

Imposition of penalty under Section 78 vis-a -vis Section 76 - Validity of simultaneous imposition of penalty under Section 78 and Section 76 - HELD THAT: - Relying on the principle applied by the Hon'ble Punjab & Haryana High Court in the cited authority, the Tribunal held that where penalty is imposed under Section 78, imposition of a separate penalty under Section 76 is not justified. Applying that legal principle to the facts, the Tribunal upheld the penalty imposed under Section 78 and set aside the penalty imposed under Section 76. [Paras 5]

Penalty under Section 78 upheld; penalty under Section 76 set aside.

Option to pay 25% of penalty within 30 days - Grant of option to deposit 25% of penalty for reduction - HELD THAT: - The lower authorities had not afforded the appellant the option to pay 25% of the penalty within 30 days of the impugned order. The Tribunal extended that option at the appellate stage and directed that if the appellant deposits 25% of the penalty imposed under Section 78 within 30 days from the date of the Tribunal's order, the penalty shall stand reduced to that amount. [Paras 5]

Appellant granted option to deposit 25% of the penalty within 30 days; on such deposit the penalty will stand reduced accordingly.

Penalty under Section 77 for delayed payment - Sustainment of penalty imposed under Section 77 - HELD THAT: - The Tribunal considered the penalty imposed under Section 77 for delayed deposit and found no grounds to interfere with that imposition. Accordingly, the Tribunal upheld the penalty levied under Section 77. [Paras 5]

Penalty under Section 77 upheld.

Final Conclusion: The appeal is disposed of by confirming the Service Tax demand with interest; upholding the penalty under Section 78 while setting aside the penalty under Section 76; granting the appellant the appellate-stage option to deposit 25% of the Section 78 penalty within 30 days for reduction; and upholding the penalty under Section 77.

Entitlement to re-credit of Cenvat credit on repayment of erroneously availed rebate - appellate duty to decide issues not considered by the adjudicating authority

Entitlement to re-credit of Cenvat credit on repayment of erroneously availed rebate - Whether the appellant is entitled to re-credit entries in the Cenvat credit account after repayment of rebate sanctioned earlier. - HELD THAT: - The Tribunal found that the appellants had exported Homatropine Methyl Bromide, paid duty from their Cenvat credit account and claimed rebate which was sanctioned. Subsequently, on demand being confirmed for exemption, the appellants repaid the rebate amount and specifically sought re-credit of the duty paid to their Cenvat credit account. The Tribunal observed that repayment of the rebate gives rise to a consequential right to readjust and re-credit the Cenvat credit account. Having repaid the rebate, the appellants are entitled to make re-credit entries and obtain consequential relief flowing from such repayment.

Entitlement to re-credit in Cenvat credit account granted consequent upon repayment of the rebate; appeal allowed for this relief.

Appellate duty to decide issues not considered by the adjudicating authority - Whether the Commissioner (Appeals) was justified in refusing to decide the plea for re-credit on the ground that the original adjudicating authority had not passed orders on that plea. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) erred in refusing to examine the request for re-credit merely because the original adjudicating authority had not passed specific orders on that plea. Where a plea raised before the adjudicating authority remains unadjudicated, the appellate authority should consider and decide it rather than decline to exercise appellate jurisdiction. Non-consideration by the original authority cannot be endorsed at the appellate stage; the appellate forum must correct such omission and pass appropriate orders so as to remedy the casual or incomplete adjudication below.

Commissioner (Appeals) erred in rejecting the plea for re-credit on that procedural ground; the appellate authority must consider and decide the plea.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the appellants are entitled to consequential re-credit of Cenvat credit upon repayment of the rebate, and the appellate authority must decide the re-credit claim rather than decline it for non-adjudication below.

Denial of Cenvat credit for shortage of inputs - Clandestine removal / clandestine clearance - Evidentiary value of admissions recorded during search - Requirement of corroborative evidence for clandestine removal - Burden of proof on the Revenue

Denial of Cenvat credit for shortage of inputs - Evidentiary value of admissions recorded during search - Burden of proof on the Revenue - Whether the confirmation of demand and penalty for denial of Cenvat credit in respect of shortage of clinker could be sustained. - HELD THAT: - Shortages of clinker were detected on the officers' visit but no inventory stand showing actual weighment of stock was made. The authorised representative's admission related only to shortages detected at the time of visit and did not amount to an admission that the shortfall was cleared clandestinely or used in duty evaded clearances. In absence of actual weighment or any conclusive evidence linking the shortage to clandestine use or clearance, the benefit of doubt is to be extended to the appellant. The Revenue therefore failed to discharge the burden of proof required to sustain denial of Cenvat credit and the consequential demand and penalty. [Paras 7]

Confirmation of demand relating to the shortage of clinker and the penalty imposed thereon set aside.

Clandestine removal / clandestine clearance - Requirement of corroborative evidence for clandestine removal - Evidentiary value of admissions recorded during search - Burden of proof on the Revenue - Whether the finding of clandestine removal of cement, based on loose sheets recovered during search and statement of the Director, was justified. - HELD THAT: - Revenue's case rested on loose papers recovered from the premises and on a statement attributed to the Director. The loose papers on their face contain no indication that they related to cement sales and the appellants offered a plausible explanation that such private documents could belong to independent stockists operating on the premises. The Tribunal noted that an admission, while important, is not conclusive and may be rebutted; further, established authorities require concrete, corroborative evidence before clandestine removal can be established. Despite truck numbers and buyer names being recorded on the loose papers, Revenue did not pursue basic corroborative inquiries (transporters, drivers, buyers) to establish the link. In absence of independent, corroborative evidence of clandestine production or sale, the sole reliance on recovered loose sheets and the Director's statement was insufficient to prove clandestine removal. [Paras 9, 10, 11, 12, 13]

Findings of clandestine removal and the consequent demand and penalties set aside for lack of corroborative evidence.

Final Conclusion: Both confirmations of demand and the penalties imposed by the authorities below are set aside; appeals allowed with consequential relief to the appellant.

Demand for duty - penalty imposition - shortages in stock - calculated weighment by weight per cubic foot - absence of actual weighment - pseudo shortages

Calculated weighment by weight per cubic foot - absence of actual weighment - pseudo shortages - demand for duty - penalty imposition - Demand of duty and penalty in respect of sponge iron set aside - HELD THAT: - The panchnama records that the officers did not perform an actual weighment of the sponge iron stock but estimated weight by calculating the weight of one cubic foot and applying that measure to the loose and bagged stock. The Tribunal found that shortages derived from such a calculative method do not establish real shortfalls in physical stock and described those shortages as pseudo. On this basis the Tribunal concluded there was no justification for confirmation of the duty demand or for imposing penalty in respect of sponge iron, and therefore set aside the duty demand and equal penalty relating to sponge iron. [Paras 4, 5]

Duty demand of Rs.78,670/- and equal penalty in respect of sponge iron are set aside.

Shortages in stock - demand for duty - penalty imposition - Other confirmed demands and penalties upheld as not contested - HELD THAT: - The appellants did not challenge the confirmation of demand in respect of MS ingots, runners and risers, scrap and related items; counsel stated those demands stood paid and appropriated. The Tribunal accordingly confirmed the remaining demands and penalties which were not contested before it. [Paras 3, 5]

All other demands and penalties (relating to MS ingots, runners and risers, scrap and final products) are confirmed.

Final Conclusion: Appeal allowed in part: demand and penalty relating to sponge iron set aside; remaining confirmed demands and penalties upheld as not contested.

Mistakes apparent from record - rectification under Section 35C(2) - re-evaluation of evidence not permissible in a review/ROM application - test for patent mistake as laid down in CCE, Calcutta v. ASCU Ltd. - confiscation under Rule 173Q(2) of the Central Excise Rules - redemption fine in lieu of confiscation - non-prosecution dismissal and restoration - clerical/typographical correction of tribunal orders

Rectification under Section 35C(2) - clerical/typographical correction of tribunal orders - Application to add para 16 to the ROM application and clerical corrections in the Tribunal's final order. - HELD THAT: - Miscellaneous Application No. 783/2011 seeking insertion of para 16 (pointing out omission regarding confiscation/redemption fine) is allowed and para 16 is added to the ROM application. The Tribunal noted inadvertent wording in its final order dated 23-11-2010 where the word "others" after "the appellant company" in para 5 should be deleted and the phrase "appeals are dismissed" in the last sentence of para 6 should read "appeal is dismissed." These are corrected as clerical amendments without affecting the substantive adjudication. The order further explains that appeals of other parties had been earlier dismissed for non-prosecution and one appeal restored by a separate ROA order; therefore the impugned order did not dismiss those unlisted appeals. [Paras 6, 8]

Para 16 is added to the ROM application and the typographical/clerical corrections in the Tribunal's final order are ordered to be made.

Mistakes apparent from record - re-evaluation of evidence not permissible in a review/ROM application - test for patent mistake as laid down in CCE, Calcutta v. ASCU Ltd. - Whether the Tribunal's final order upholding duty demand and imposition of penalty contains a mistake apparent on the face of the record warranting recall or rectification. - HELD THAT: - The ROM application, insofar as it challenges confirmation of duty and imposition of penalty, is framed as an appeal requesting re-assessment of evidence. The Tribunal applied the established test that a "mistake apparent on the face of the record" must be an obvious and patent error not requiring extended reasoning, and held that the appellant's contentions require re-evaluation of evidence or involve points on which reasonable views differ. Reference to the CCE, Calcutta v. ASCU Ltd. criterion led to the conclusion that the requirements for rectification under Section 35C(2) are not satisfied. Similarly, the contention that the order was passed after three months and so contravened the principle in Anil Roy v. State of Bihar was held to be an arguable point on which two views are possible and therefore not a patent mistake. [Paras 9]

No mistake apparent from record is made out in the Tribunal's decision upholding the duty demand and penalty; the ROM relief is refused as amounting to impermissible re-evaluation of evidence.

Confiscation under Rule 173Q(2) of the Central Excise Rules - redemption fine in lieu of confiscation - Whether the Tribunal's final order should have dealt with the challenge to confiscation of plant and machinery and imposition of redemption fine, and whether confiscation and the redemption fine are sustainable. - HELD THAT: - The Tribunal accepted that its earlier final order was silent on the specific contention challenging confiscation of land, building, plant and machinery and the option of redemption on payment of a redemption fine. Because this question is linked to the already-decided issue of duty demand and penalty, the Tribunal considered the matter without recalling the order or re-hearing the parties. Applying Rule 173Q(2) as then in force, the Tribunal found the statutory conditions satisfied: contraventions attracting Clause (d) of sub rule (1) and duty involved exceeding the threshold. On this basis, the confiscation was held to have been correctly ordered, and, considering the nature of the offence, the quantum of the redemption fine was held not to be excessive. [Paras 10, 11]

The omission is remedied by deciding the point: confiscation under Rule 173Q(2) is upheld and the redemption fine is not excessive.

Final Conclusion: Miscellaneous application to add para 16 is allowed and minor clerical corrections in the Tribunal's final order are directed. The ROM application is refused to the extent it seeks recall or re-evaluation of the Tribunal's decision upholding duty demand and penalty, as no patent mistake is shown. The Tribunal's omission to address confiscation and redemption fine is remedied on review: confiscation under Rule 173Q(2) and the redemption fine are upheld.

Modvat credit - packing material - admissibility of input tax credit where value not included in assessable value - substantial question of law - statement of case - jurisdiction of the High Court

Jurisdiction of the High Court - High Court retains jurisdiction to entertain the appeal pending before it despite the National Tax Tribunal Act, 2005, in view of non-notification of provisions intended to alter High Court jurisdiction. - HELD THAT: - The Court noted that the National Tax Tribunal Act, 2005 could not be made applicable insofar as Section 30 (which seeks to amend the provision relating to the High Court's jurisdiction) has not been given effect by notification. Having regard to the statute and the Supreme Court's judgment, the High Court continues to possess jurisdiction to entertain appeals as was permissible before the Act came into force. On that basis the appeal was admitted and taken up for hearing by this Court. [Paras 1]

The High Court retains jurisdiction to entertain the appeal; the appeal is admitted for hearing.

Modvat credit - admissibility of input tax credit where value not included in assessable value - packing material - substantial question of law - statement of case - Whether Modvat credit is admissible on glass bottles and plastic crates used as packing material for aerated water when the value of such bottles/crates is not included in the assessable value of the final product is to be determined by this Court after a statement of case is placed before it. - HELD THAT: - The Court framed and admitted the substantial question of law concerning the entitlement to Modvat credit on bottles and crates used for packing where their value is not reflected in the assessable value of the finished goods. Although the respondent contended that the departmental position had already clarified the point, the Court considered that a final opinion should be expressed by this Court. Consequently, the Tribunal was directed to prepare and forward a statement of the case presenting the referred point to this Court within four weeks from communication of the order so that the matter may be placed before the Court for determination. [Paras 2, 3, 4, 5]

The substantive question regarding admissibility of Modvat credit on bottles and crates is not decided on merits and is referred by directing the Tribunal to furnish a statement of the case to this Court within four weeks for adjudication.

Final Conclusion: The appeal was admitted; the High Court retained jurisdiction to hear the appeal, and the substantive question on admissibility of Modvat credit on bottles and crates (where their value is not included in assessable value) was referred for the Tribunal to prepare a statement of the case to enable this Court to decide the point.

Valuation of inputs removed as such to sister units - Cenvat credit reversal as assessable value - application of Central Excise Valuation Rules to intracorporate transfers - precedential effect of Larger Bench decision - Board Circular No. 6/39/2000-CX.1 guidance

Valuation of inputs removed as such to sister units - Cenvat credit reversal as assessable value - precedential effect of Larger Bench decision - Board Circular No. 6/39/2000-CX.1 guidance - Whether reversal of Cenvat credit on inputs removed as such to sister concerns suffices as the assessable value, or whether assessable value must be recomputed at 115% of cost. - HELD THAT: - The Tribunal recorded as undisputed that the appellant removed only inputs as such to its sister concerns and had reversed the Cenvat credit availed on those inputs, with no processing undertaken. The question of valuation in such circumstances was treated as res integra and governed by the Larger Bench decision in Eicher Tractors which reproduced and applied C.B.E.&C. Circular No. 6/39/2000-CX.1 dated 1-7-2002. That guidance accepts that where inputs are removed as such to sister units without processing, the invoice-based Cenvat credit amount (i.e., the duty paid on the invoice value) may be taken as the correct assessable value and the corresponding Cenvat credit reversed suffices to discharge duty liability. Applying that precedent and the Board's circular to the facts here, recomputation of assessable value at 115% of cost was not warranted. [Paras 6, 7, 8, 9]

Reversal of the Cenvat credit availed on inputs removed as such to sister concerns is sufficient as the assessable value; recomputation at 115% was not required.

Final Conclusion: Impugned order confirming demand, interest and penalty set aside; appeal allowed with consequential relief.

Reversal of input credit on exempted goods - export under bond with AR-4/ARE-1 - exempted/inapplicable excise duty goods carrying nil rate - precedential applicability of Repro India (High Court of Mumbai)

Reversal of input credit on exempted goods - export under bond with AR-4/ARE-1 - precedential applicability of Repro India (High Court of Mumbai) - Whether the respondent-assessee was required to reverse 8% of the total value of goods which were exempted (nil rate) and exported by debiting under bond. - HELD THAT: - The tribunal found on the record that the respondent had exported the products after filing AR-4/ARE-1 forms and cleared the goods by debiting amount under bond, a fact accepted by the lower authorities. Applying the principle in the High Court of Mumbai's decision in Repro India, the tribunal held that where exempted goods carrying nil rate are exported under bond with the proper ARE documentation, the obligation to reverse 8% does not arise. The first appellate authority's conclusion that no reversal was required was held to be consistent with that precedent and legally sustainable. [Paras 5, 6]

Impugned order upheld; Revenue's appeal rejected and assessee's cross-objection disposed in favour of the assessee.

Final Conclusion: The tribunal upheld the first appellate authority's rejection of the demand for reversal of 8% in respect of nil-rate/exempted goods exported under bond with AR-4/ARE-1, applying the High Court of Mumbai precedent in Repro India; the Revenue's appeal was dismissed.

Waiver of pre-deposit for admission of appeal - stay on recovery of disputed duties during pendency of appeal - deemed exports and relief under Import-Export Policy - prima facie entitlement to concessional treatment where supplier is a sub-contractor to an international competitive bidding contract

Waiver of pre-deposit for admission of appeal - stay on recovery of disputed duties during pendency of appeal - Grant of interim relief in the form of waiver of pre-deposit and stay on recovery of duties pending disposal of the appeal. - HELD THAT: - The Tribunal examined the contentions of the parties and recorded prima facie satisfaction on several points relevant to the appellants' entitlement to relief-namely, that the goods supplied were used in a project qualifying under the excise notification read with the customs notification, that components supplied by a sub-contractor may constitute "material" for the main contractor, that the appellants' procurement was treated as "deemed exports" under the Import-Export Policy, and that the timing of issuance of advance authorisation did not, on a prima facie view, necessarily defeat the claim. On this basis and having regard to the hardship that requiring a pre-deposit would cause, the Tribunal exercised its discretion to admit the appeal without the pre-deposit and to stay recovery of the disputed duties during the pendency of the appeal. The order reflects an interim determination of convenience and prima facie merit, not a final adjudication on the substantive entitlement to exemption.

Waiver of pre-deposit for admission of the appeal granted and stay on collection of the disputed duties during the pendency of the appeal.

Final Conclusion: The appeal was admitted without any pre-deposit and recovery of the disputed excise dues was stayed pending final disposal of the appeal; the Tribunal's observations on the merits were recorded as prima facie views and did not constitute a final decision on entitlement to exemption.

Denial of Cenvat credit for delayed availment - Rule 4(1) of Cenvat Credit Rules - time limit for availment - Waiver of pre-deposit and grant of stay pending appeal - Prima facie determination on appeal

Waiver of pre-deposit and grant of stay pending appeal - Prima facie determination on appeal - Application for waiver of pre-deposit and stay of recovery of amounts confirmed as reversal of cenvat credit, interest and equivalent penalty - HELD THAT: - The Tribunal, on perusal of records and hearing parties, found that the appellant had made out a prima facie case for relief. There was no dispute as to receipt of duty-paid inputs, their consumption in the factory and the duty-paid character of the goods. Relying on a recent Tribunal decision cited by the appellant, the Bench concluded that these factors prima facie favoured the appellant's claim and therefore justified suspension of recovery. The Tribunal did not finally adjudicate the merits of the cenvat credit claim, but accepted that a prima facie view in favour of the assessee warrants waiver of the pre-deposit and a stay until disposal of the appeal.

Application allowed; pre-deposit waived and recovery stayed till disposal of appeal.

Denial of Cenvat credit for delayed availment - Rule 4(1) of Cenvat Credit Rules - time limit for availment - Prima facie consideration of the Revenue's contention that cenvat credit was ineligible as it was availed beyond one year under Rule 4 - HELD THAT: - The Revenue's case was that credit was taken beyond the period of one year and hence barred by Rule 4. The Tribunal noted the Revenue's reliance on earlier authority holding that availment should be within one year, but observed that on the facts before it there was no dispute about receipt and consumption of duty-paid inputs. The Tribunal considered a recent contrary Tribunal decision relied on by the appellant and concluded that, prima facie, that decision may cover the issue in favour of the assessee. The Tribunal confined itself to a prima facie appraisal for the limited purpose of grant of interim relief and did not decide the substantive question finally.

On prima facie view, the appellant's contention regarding entitlement to credit is plausible; substantive issue left open for final adjudication.

Final Conclusion: The Tribunal granted waiver of the pre-deposit and a stay on recovery of the amounts confirmed as reversal of cenvat credit, interest and equivalent penalty, taking a prima facie view favouring the appellant on the undisputed facts of receipt and consumption of duty-paid inputs; the substantive merits remain to be finally decided on appeal.

De-bonding - export obligation - prematurity of demand - waiver of pre-deposit - stay of recovery - benefit of depreciation on capital goods

De-bonding - prematurity of demand - export obligation - Whether the duty demand confirmed by the Commissioner is premature where no de-bonding order has been issued and the unit continues to be treated as an EOU - HELD THAT: - The Tribunal applied the settled administrative position that an EOU remains an EOU until a final de-bonding order is passed by the competent authority and that de-bonding is a pre-condition for treating capital goods as released from bond conditions. Relying on the procedure in the relevant circulars and Handbook of Procedures and the Tribunal's earlier decision in Bluegold Maritech (para. 8 reproduced), the Tribunal held that in absence of a de-bonding order the capital goods remain under bond and any demand for duties on account of non-fulfilment of export obligation is premature. The decision records that standard de-bonding conditions contemplate payment of applicable duties at the time of de-bonding and that computation when de-bonding is considered should afford benefit of depreciation in appropriate cases. [Paras 5, 6]

Demand is premature in view of non-issuance of de-bonding order; capital goods are deemed under bond until de-bonding is effected.

Waiver of pre-deposit - stay of recovery - Whether pre-deposit of the adjudged dues should be waived and recovery stayed pending the appeal - HELD THAT: - Having held the demand to be premature because no de-bonding order had been issued, the Tribunal concluded that the appellants had made out a case for relief from pre-deposit. On that basis the Tribunal exercised its power to waive the requirement of pre-deposit of the dues adjudged and ordered a stay of recovery during the pendency of the appeals. [Paras 6]

Requirement of pre-deposit waived and recovery of the adjudged dues stayed pending appeal.

Final Conclusion: The Tribunal held the demand premature in the absence of a de-bonding order, waived the pre-deposit of the adjudged dues and stayed recovery during the pendency of the appeals; computation of any duty liability on de-bonding to take into account applicable principles including depreciation as appropriate.

Use of CENVAT credit for payment of Customs duty - clearance of inputs as such by a 100% E.O.U. - treatment of imported inputs as excisable goods - distinction between inputs and final products under the CENVAT Credit Rules - pre-deposit as condition for grant of stay

Use of CENVAT credit for payment of Customs duty - clearance of inputs as such by a 100% E.O.U. - distinction between inputs and final products under the CENVAT Credit Rules - Whether the appellant was entitled to utilize accumulated CENVAT credit for payment of duty on imported inputs and indigenously procured inputs cleared as such to DTA - HELD THAT: - The Tribunal examined the submissions that accumulated CENVAT credit had been used to discharge duty when duty free imported inputs and inputs procured without payment of duty were cleared as such to DTA after obtaining permission. It held that the CENVAT Credit Rules distinguish between "inputs", "capital goods" and "final products" and that inputs cleared as such cannot be equated with clearances of final products for the purpose of utilizing CENVAT credit. The bench noted that the appellants had relied on a departmental appellate order which addressed CVD treatment, but observed that the present case involved use of credit even for basic customs duty and that reliance on that order did not support the claimed entitlement. The Tribunal further recorded the Commissioner's finding that the appellants had not indicated utilization of credit for such clearances in their returns, a factual finding left unchallenged in the grounds of appeal. [Paras 5]

Claim to utilize CENVAT credit for payment of duty on inputs cleared as such by the 100% E.O.U. was not accepted.

Treatment of imported inputs as excisable goods - application of Rule 17 of the Central Excise Rules - application of Rule 3(4) of the CENVAT Credit Rules - Whether Rule 17 of the Central Excise Rules or Rule 3(4) of the CENVAT Credit Rules entitled the appellant to treat inputs cleared as such as excisable final products for CENVAT utilisation - HELD THAT: - The Tribunal held that Rule 17 and the Central Excise Rules refer to excisable goods manufactured by the assessee and do not cover inputs cleared as such. Similarly, Rule 3(4) prescribing the purposes for which CENVAT credit can be utilized cannot be construed to treat inputs cleared as such on a par with final products. The Tribunal rejected the appellant's contention that these provisions permitted the use of credit for such clearances, observing there was no scope to treat inputs cleared as such as clearances of final products. [Paras 5]

Rule 17 and Rule 3(4) do not permit treating inputs cleared as such as excisable final products for the purpose of CENVAT utilisation.

Pre-deposit as condition for grant of stay - Whether stay of recovery should be granted and on what terms - HELD THAT: - Having considered submissions and the factual and legal position, the Tribunal directed a conditional stay: the appellant was ordered to make a specified pre-deposit within a fixed time and to report compliance, failing which the stay would not operate. The Tribunal noted no plea of financial hardship and, subject to the directed pre-deposit, waived pre deposit of the balance and stayed recovery till disposal of the appeal. [Paras 6, 7]

Directed deposit of the specified amount within six weeks and, subject to compliance, stayed recovery of the balance until disposal of the appeal.

Final Conclusion: The Tribunal rejected the appellant's contention that accumulated CENVAT credit could be utilized to pay duty on inputs cleared as such (including basic customs duty on imported inputs), held that Rule 17 and Rule 3(4) do not support treating such clearances as clearances of final products for CENVAT purposes, recorded the unchallenged finding that returns did not show utilization of credit, and granted a conditional stay of recovery subject to the directed pre deposit and reporting of compliance.

Entry tax on entry of goods into a local area - Article 286 restriction on tax on sale or purchase in course of import - Entry 52 of List II of the Seventh Schedule - Entry 83 of List I of the Seventh Schedule - duties of customs - charging section principle in taxing statutes - purchase value includes customs duty and incidental charges - plant and machinery as machinery within scheduled goods - scheduled goods exclusion from levy

Entry tax on entry of goods into a local area - Article 286 restriction on tax on sale or purchase in course of import - Entry 52 of List II of the Seventh Schedule - Entry 83 of List I of the Seventh Schedule - duties of customs - Validity of levy of entry tax on goods imported from outside the country - HELD THAT: - The Court held that the restriction in Article 286(1)(b) applies to taxes on the sale or purchase of goods in the course of import and does not extend to taxes on entry of goods into a local area under Entry 52, List II. The legislative fields and taxable incidents of customs duty (Entry 83, importation up to crossing customs barriers) and entry tax (Entry 52, entry into a local area for consumption, use or sale) are distinct; incidence of customs duty ends on crossing customs barriers whereas entry tax attaches on entry into the local area. The Court relied upon precedents and reasoning that charging section (Section 3) demonstrates legislative intent to tax entries into local areas irrespective of place of origin. Consequently, levy of entry tax on goods imported from abroad was held not to be ultra vires on the grounds raised under Article 246 or Article 286. [Paras 14, 15, 17, 19, 21]

Levy of entry tax on goods imported from outside the country is valid and not barred by Article 286 or by exclusive Union competence under Entry 83.

Charging section principle in taxing statutes - purchase value includes customs duty and incidental charges - Whether the definition of 'purchase value' excludes customs duty so as to indicate imported goods are outside entry tax net - HELD THAT: - The Court applied the settled principle that the charging section defines the taxable event and controls subsidiary provisions; the measure of tax cannot be used to alter the nature or scope of the charge. Section 2(j) defines 'purchase value' as value ascertained from the original invoice and includes insurance, excise, countervailing charges, sales tax, transport and 'all other charges incidental to the purchase'. The Customs Act (Section 28C) requires duty to be indicated in invoices, and precedents (including Garware Nylons and Shroff) support inclusion of customs duty in the value for local levies. Hence the absence of an express reference to 'customs duty' in Section 2(j) does not exclude it; customs duty forms part of purchase value. [Paras 26, 27, 28, 29, 30]

Customs duty and other incidental charges are includible within 'purchase value' for computing entry tax; the measure of tax does not exclude imported goods from the charging provision.

Plant and machinery as machinery within scheduled goods - scheduled goods exclusion from levy - Whether a paper plant brought in 'knock down' condition is liable to entry tax - HELD THAT: - The Court examined Part II of Schedule I (machinery and equipments including spare parts used in manufacture) and applied ordinary grammatical meaning of 'plant' as a combination of machinery used in industrial manufacture. The knock down plant, being an assemblage of machinery intended to be installed for manufacturing, falls within 'machinery' as scheduled goods. The taxing statute must be given effect according to its plain language in the charging section and schedule. [Paras 38, 39]

The paper plant imported in knock down condition is liable to entry tax as machinery within the schedule.

Scheduled goods exclusion from levy - Whether specified raw materials and spare parts used by IFGL Refractories are liable to entry tax - HELD THAT: - The Court examined the listed items (e.g., Ladle Shrouds, Tundish Nozzle, Fused Silica, Fused Magnesia, Zircon sand, Tabular Alumina, Carbon Black, etc.) and found that those items are not included in the Schedule to the Orissa Entry Tax Act. As entry tax is leviable only on 'scheduled goods' under the charging provision, items not appearing in the schedule cannot be taxed under the Act. [Paras 40]

The specified raw materials and spare parts described in the IFGL Refractories petition are not liable to entry tax.

Final Conclusion: The court upheld the constitutionality and interpretation of the Orissa Entry Tax Act to permit levy of entry tax on goods imported from outside India, rejected contentions based on Articles 246 and 286, held that 'purchase value' includes customs duty and incidental charges, ruled that a paper plant imported in knock down condition is taxable as machinery, and held that the specific raw materials and spares listed in the IFGL Refractories petition are not scheduled goods and thus not liable to entry tax. All writ petitions are dismissed except W.P.(C) No.7 of 2008 which is allowed in part as indicated.