TaxTMI Updates e-Newsletter
Dec 06,2018

Release of seized goods on furnishing security and indemnity bond under Section 129(1)(a) of the U.P. Goods and Service Tax Act, 2017 - ownership during pendency of sale transaction - status of selling dealer as owner for purposes of release - distinction between release proceedings and penalty proceedings

Status of selling dealer as owner for purposes of release - release of seized goods on furnishing security and indemnity bond under Section 129(1)(a) of the U.P. Goods and Service Tax Act, 2017 - Entitlement of the petitioner (selling dealer) to release of seized goods under the provisions of Section 129(1)(a) of the Act on the basis that the sale transaction had not attained finality and the petitioner remained the owner. - HELD THAT: - The Court accepted the petitioner's submission that, being the selling dealer and as the sale transaction had not attained finality, the petitioner continued to be the owner of the goods. On that basis the Court held that for the purpose of release the provisions of Section 129(1)(a) of the Act were applicable and not Section 129(1)(b). The Court directed that the petitioner should deposit the tax and penalty and furnish the security and indemnity bond in accordance with Section 129(1)(a), and ordered immediate release of the goods and vehicle on compliance with those conditions. The determinative reasoning rests on the legal consequence of ownership during the pendency of the sale transaction and the corresponding statutory mechanism for release under Section 129(1)(a).

Petitioner entitled to release under Section 129(1)(a) upon deposit of tax and penalty and furnishing security and indemnity bond; goods and vehicle to be released immediately on compliance.

Distinction between release proceedings and penalty proceedings - Whether the penalty order already passed affects the order for release of goods. - HELD THAT: - The Court observed that the penalty order already passed is independent of the release order. It held that the existence of a penalty order does not preclude release under the statutory provisions and that the penalty order can be challenged by the petitioner in the appropriate forum separately. This clarifies that release proceedings under Section 129(1)(a) are procedurally separable from adjudication of penalty.

Penalty order does not prevent release; penalty can be challenged independently in the appropriate forum.

Final Conclusion: Writ petition disposed by directing the petitioner to deposit tax and penalty and to furnish security and indemnity bond under Section 129(1)(a) of the U.P. Goods and Service Tax Act, 2017; on compliance the seized goods and vehicle shall be released immediately, and the penalty order remains open to challenge separately.

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

Summary order. Special leave petitions dismissed; delay condoned and pending applications, if any, disposed of.

Reasons to believe - reasons to suspect - search and seizure under Section 132 - consequential warrants - satisfaction note - warrant of authorization - nexus between information and belief - Section 153A proceedings - protection of right to privacy

Search and seizure under Section 132 - warrant of authorization - satisfaction note - nexus between information and belief - Validity of the warrants of authorization issued on 27th June, 2014 for search of three lockers in the joint names of the petitioners - HELD THAT: - The satisfaction note on which the consequential warrants were issued did not set out material or credible information linking the petitioners to undisclosed assets; it speculatively stated that the lockers "may" contain valuables without referring to any evidence, failed to show any business or financial nexus with the searched person and omitted to verify or investigate the statements already on record. Consequential warrants issued in the names of the petitioners therefore did not satisfy the statutory requirement of formation of an opinion grounded in information and material and amounted to a precipitous and legally inadequate exercise of the power under Section 132(1). On this basis the warrants of authorization qua the three lockers were held to be vitiated and were quashed. [Paras 16, 17, 18, 32]

Warrants of authorization for search and seizure in respect of the three lockers are illegal and are quashed.

Reasons to believe - reasons to suspect - consequential warrants - Whether a lower test of "reasons to suspect" suffices for issuing consequential warrants under clause (i) of Section 132(1) and sub-section (1A) - HELD THAT: - While clause (i) and sub-section (1A) refer to "reason to suspect" in relation to a place where 'such' articles may be kept, earlier precedents require that the initial formation of the requisite opinion must be predicated on "reasons to believe" satisfying clauses (a), (b) or (c). Consequential warrants cannot be issued as an independent substitute for the statutory requirement; there must be a clear confluence between the earlier recorded reasons to believe (which justify the primary search) and stated reasons to suspect why the particular place is likely to contain the 'such' articles. The satisfaction note must therefore evince this connection; mere discovery of a locker key without further material does not convert suspicion into the mandated belief. [Paras 21, 22, 24]

The statutory mandate of recording "reasons to believe" cannot be circumvented by invoking "reasons to suspect" for consequential searches in the absence of a demonstrated nexus; "reasons to suspect" alone did not justify the warrants in this case.

Section 153A proceedings - warrant of authorization - Consequences of quashing the warrants on the proceedings initiated under Section 153A of the Act - HELD THAT: - Since the warrants of authorization for the searches of the three lockers were held to be vitiated and quashed, the consequential assessment proceedings initiated under Section 153A that arose from those warrants were also invalidated. The Court confined its order to quashing the warrants and the Section 153A proceedings and expressly refrained from ruling on the admissibility or use of any evidence collected during the searches in future proceedings conducted in accordance with law. [Paras 32]

Proceedings under Section 153A initiated consequent to the impugned searches are set aside and quashed.

Final Conclusion: The writ petitions are allowed: the warrants of authorization dated 27th June, 2014 for search of the three lockers are quashed as legally invalid for failure to record reasons grounded in material satisfying Section 132(1); consequential proceedings under Section 153A for Assessment Years 2009-10 to 2014-2015 are also set aside; no observation is made on the ultimate admissibility of material seized, and there shall be no order as to costs.

Estimation of income from bus operations - Telescoping of credits in capital account to avoid double addition - Assessment of share income/loss in hands of individual versus HUF - Application of coordinate Bench decision

Estimation of income from bus operations - Application of coordinate Bench decision - Tribunal ought to have followed its earlier decision in the assessee's son's case in estimating bus income; expenditure must be computed adopting the method used in that decision. - HELD THAT: - The Tribunal in the impugned order accepted the Assessing Officer's estimate of daily receipts without adopting the computation of expenditure applied by the Tribunal earlier in the assessee's son's case. The Court examined the earlier Tribunal order (ITA.No.1483/Mds/93 etc.) and found that the Tribunal there had applied a clear and fair method, taking into account factors such as age of the bus and AO's reasons and fixing expenditure per bus per month. No reason was given in the impugned order for departing from that method. Consequently the Court held that the Tribunal ought to have adopted the same computation and directed the Assessing Officer to first compute expenditure by adopting the computation done in the assessee's son's case. [Paras 7]

Answered in favour of the assessee; AO directed to compute expenditure adopting the computation made in the assessee's son's case.

Telescoping of credits in capital account to avoid double addition - Estimation of income from bus operations - Credits in the capital account offered as business income must be telescoped to the extent possible to avoid double addition; income to be restricted to the extent it could not be telescoped. - HELD THAT: - The question whether credits in capital account should be telescoped with the business additions was considered by the Tribunal in the assessee's son's case, where it held the plea for telescoping to be reasonable and restricted income to the extent it could not be telescoped. The Court found no justification advanced by Revenue for denying similar relief to the assessee. Consequently the Court directed the Assessing Officer to restrict the income to the extent it could not be telescoped with the addition made on account of income from business. [Paras 11]

Answered in favour of the assessee; AO directed to telescope credits and restrict income to the extent not so telescopable.

Assessment of share income/loss in hands of individual versus HUF - Findings that share income/loss from the transport business and from Dhanapal Maligai are assessable in the hands of the individual (and not the HUFs) are upheld. - HELD THAT: - The Assessing Officer recorded factual findings that the investment in the firm Dhanapal Maligai was not made out of HUF funds and that there was no dent to HUF funds; consequently the share from Dhanapal Maligai would arise in the hands of the individual. Similarly, in respect of the transport business said to belong to the bigger HUF, the Assessing Officer concluded the income was assessable in the hands of the individual. Those factual findings were confirmed by the CIT(A) and the Tribunal. The High Court found no perversity in these conclusions and declined to interfere. [Paras 14]

Answered against the assessee and in favour of the Revenue; the assessments of share income/loss in the hands of the individual are upheld.

Final Conclusion: Appeals partly allowed: estimation of bus expenditure and telescoping of capital-account credits directed in favour of the assessee; factual findings that share income/losss are assessable in the hands of the individual upheld against the assessee.

Cash credit under Section 68 - Unexplained investment under Section 69 - Genuineness and capacity of creditor - Burden on assessee to explain nature and source of credited sum - Inference from surmises and conjectures - Share capital treated as undisclosed income

Cash credit under Section 68 - Genuineness and capacity of creditor - Burden on assessee to explain nature and source of credited sum - Whether the sums credited as advance for share allotment were liable to be treated as cash credits under Section 68 on the ground that the assessee failed to prove the genuineness and capacity of the alleged creditor. - HELD THAT: - The court examined the Assessing Officer's finding that the assessee's explanation regarding the source of the credited sum was not satisfactory. By the time of assessment the alleged investor had died and the only explanation came from the investor's daughter in law that the investment was out of cash in hand and that the investor carried on a small chitty and financing business. The court found it improbable that such a person could have raised the amount in question and held that the essential question was one of fact as to the satisfactory nature of the explanation. In absence of positive evidence establishing the source and capacity of the creditor, the AO's conclusion treating the amounts as cash credits under Section 68 could not be faulted. The court therefore refused to disturb the factual finding that the explanation was unsatisfactory.

Assessee failed to prove genuineness and capacity of the creditor; sums correctly liable to be treated as cash credit under Section 68 in view of unsatisfactory explanation.

Share capital treated as undisclosed income - Unexplained investment under Section 69 - Whether authorities erred in treating the advance as undisclosed income in face of precedents holding share capital not to be undisclosed income (as relied on by the assessee). - HELD THAT: - The court observed that the Delhi High Court decision relied upon did not consider Section 68 and therefore that reliance was unsustainable. However, the court declined to answer the framed questions of law on the merits because the appeal turned on the absence of positive evidence and the unsatisfactory nature of the explanation given by the assessee. Accordingly, the court did not decide the asserted legal proposition in favour of the assessee and refused to set aside the Tribunal's conclusion on the factual record.

Questions of law premised on the cited precedents were not answered because the factual finding-absence of satisfactory proof of source-rendered appellate interference inappropriate; reliance on the Delhi High Court decision was held unsustained since Section 68 was not considered there.

Final Conclusion: Appeal dismissed. The court declined to entertain the questions of law because the assessee had not produced positive evidence and the explanation for the credited sums was found not to be satisfactory; the sums were therefore liable to be treated as cash credits under Section 68 and the Tribunal's order is upheld.

Reopening of assessment under section 147/148 - reason to believe - AIR information - bank deposits not prima facie income - independent application of mind - penalty under section 271(1)(c)

Reopening of assessment under section 147/148 - reason to believe - AIR information - bank deposits not prima facie income - independent application of mind - Validity of reopening of assessment in ITA No.2740/Del./2018 (A.Y. 2011-2012) and consequential deletion of addition. - HELD THAT: - The Assessing Officer recorded reasons based on information of cash deposits but showed contradictions between amounts mentioned in the assessment order and in the reasons. The AO issued enquiry letters without there being any pending proceedings and did not apply independent mind to the AIR information. Deposits in bank accounts, without cogent, tangible or corroborative material, cannot by themselves furnish a 'reason to believe' that income has escaped assessment. Relying on earlier Division Bench orders of this Tribunal which reached the same conclusion on identical facts, the reopening was held to be invalid and the addition made in reassessment was set aside. [Paras 6, 7]

Reopening quashed and addition deleted; appeal allowed.

Reopening of assessment under section 147/148 - AIR information - bank deposits not prima facie income - independent application of mind - Validity of reopening of assessment in ITA No.1384/Del./2018 (A.Y. 2008-2009) and deletion of addition. - HELD THAT: - The reasons recorded mirrored the defects found in ITA No.2740: reliance on non-PAN AIR information, absence of independent verification, and treatment of mere bank deposits as unexplained income. The Bench followed the reasoning and outcome in ITA No.2740/Del./2018, set aside the reopening under section 148 and quashed the reassessment, resulting in deletion of the addition. [Paras 10, 11]

Reopening quashed and addition deleted; appeal allowed.

Penalty under section 271(1)(c) - reopening of assessment under section 147/148 - Validity of penalty imposed in ITA No.2647/Del./2018 (A.Y. 2008-2009) consequent to the reassessment. - HELD THAT: - The penalty was levied solely on the basis of additions made in the reassessment. As the reopening and the resulting additions have been quashed, the penalty proceedings could not survive. The Bench therefore set aside and cancelled the penalty orders. [Paras 13, 14]

Penalty cancelled; appeal allowed.

Final Conclusion: The Tribunal quashed the reopenings under section 147/148 in the consolidated appeals, deleted the additions arising from those reassessments and, consequentially, cancelled the penalty under section 271(1)(c); all assessee appeals are allowed.

Penalty under section 271(1)(c) of the Income Tax Act - requirement of recording valid satisfaction by the Assessing Officer before initiating penalty - furnishing inaccurate particulars of income - obligation to specify the correct limb of clause (c) at initiation and levy of penalty - quashing of penalty for deficiency in satisfaction recorded

Penalty under section 271(1)(c) of the Income Tax Act - requirement of recording valid satisfaction by the Assessing Officer before initiating penalty - obligation to specify the correct limb of clause (c) at initiation and levy of penalty - Validity of penalty levied under section 271(1)(c) where the Assessing Officer did not record a clear satisfaction specifying the limb of clause (c) at the time of initiation and at the time of levy. - HELD THAT: - The Tribunal examined the assessment order and the penalty order and found that the Assessing Officer's note at initiation merely stated that "Penalty proceedings u/s. 271 (1)(c) are separately initiated" without referring to any specific limb of clause (c). The penalty order stated that the assessee "has not substantiated any reasonable cause for furnishing the inaccurate particulars" and levied penalty for furnishing inaccurate particulars, but that post-facto statement did not cure the omission at initiation. Reliance was placed on binding authorities referred to in the order (CIT Vs. Shri Samson Perinchery and CIT Vs. Manjunatha Cotton and Ginning Factory ) establishing that a valid and specific satisfaction by the AO, identifying the limb of clause (c) invoked, is a legal prerequisite for sustaining a penalty. The Tribunal held that the ambiguity and failure to specify the correct limb at initiation and levy amounted to a deficiency in recording satisfaction, making the penalty unsustainable in law. Consequently, the Tribunal quashed the penalty and directed deletion by the AO. [Paras 7, 8, 9]

Penalty imposed under section 271(1)(c) is quashed for failure of the Assessing Officer to record a valid satisfaction specifying the applicable limb; the order of the CIT(A) is set aside and the AO is directed to delete the penalty.

Final Conclusion: The appeal is allowed; the penalty under section 271(1)(c) is quashed because the Assessing Officer did not record the requisite specific satisfaction identifying the applicable limb of clause (c) at initiation or at levy, and the AO is directed to delete the penalty.

Restoration to the assessing officer for fresh adjudication - allowability of business expenses - requirement to prove wholly and exclusively for business - penal payments v. compensatory payments - explanation 1 to section 37(1) - perquisite, personal use and disallowance of car/vehicle expenses - expenditure on company owned residential property - business v. personal element - deduction under section 80IA and applicability of section 80AC - filing of return within due date - disallowance under section 14A r.w. rule 8D - admission of additional ground for perversity and verification under section 80HHD - deduction under section 43B on payment basis

Restoration to the assessing officer for fresh adjudication - allowability of business expenses - requirement to prove wholly and exclusively for business - Disallowance of travelling expenses (foreign and domestic) aggregating to Rs. 3,19,386/- - HELD THAT: - The Tribunal found that the CIT(A) had merely followed his predecessor's order for an earlier year which itself was set aside by the Tribunal. The assessee had asserted that spouses/children accompanying directors travelled on business-related trips but had not placed cogent evidence before the authorities below. In view of the identical earlier order having been set aside, and for adjudication on merits after allowing the assessee to place explanations/evidence, the Tribunal restored the issue to the file of the AO for fresh adjudication in accordance with law, directing adherence to principles of natural justice. [Paras 4]

Issue restored to the AO for fresh adjudication.

Penal payments v. compensatory payments - explanation 1 to section 37(1) - restoration to the assessing officer for fresh adjudication - Disallowance of amounts termed as penalties and fines aggregating to Rs. 1,56,449/- - HELD THAT: - The AO treated the amounts as penal (traffic challans, interest, tax etc.) and disallowed them; the CIT(A) sustained the addition for lack of substantiation. The Tribunal observed that the assessee had not filed complete details and that the character of each payment (penal or compensatory) required examination. Accordingly the Tribunal set aside the issue and restored it to the AO for fresh analysis of each claimed expense with direction to admit relevant explanations/evidence and decide on merits, applying explanation 1 to section 37(1) where appropriate. [Paras 5]

Issue restored to the AO for fresh adjudication.

Perquisite, personal use and disallowance of car/vehicle expenses - restoration to the assessing officer for fresh adjudication - Disallowance of vehicle expenses of Rs. 90,000/- - HELD THAT: - The AO disallowed vehicle expenses having regard to auditors' note that perquisite entitlement and personal use by directors were not quantified; the CIT(A) upheld that disallowance following earlier-year reasoning. Since the corresponding earlier-year order was set aside by the Tribunal, and because the matter requires fresh consideration of evidence as to business use, recoveries from directors and quantification of perquisite, the Tribunal restored the issue to the AO for fresh adjudication, directing compliance with natural justice and admission of the assessee's explanations/evidence. [Paras 6]

Issue restored to the AO for fresh adjudication.

Expenditure on company owned residential property - business v. personal element - restoration to the assessing officer for fresh adjudication - Disallowance of expenses relating to Pali Hill bungalow amounting to Rs. 5,00,000/- - HELD THAT: - The AO found that part of the bungalow was used by directors and that certain repair and maintenance expenses had a personal element; the CIT(A) followed earlier-year conclusions. Given that the earlier-year appellate conclusion had been set aside by the Tribunal, and that the nature and allocation of expenses require fresh factual inquiry and evidence, the Tribunal restored this issue to the AO for de novo adjudication, directing the AO to consider the assessee's explanations and evidence on merits. [Paras 7]

Issue restored to the AO for fresh adjudication.

Deduction under section 80IA and applicability of section 80AC - filing of return within due date - doctrine of supervening impossibility and burden of proof - Claim of deduction under section 80IA (Rs. 75,85,911/-) denied by AO on ground of late filing and applicability of section 80AC - HELD THAT: - Section 80AC, effective for AY 2006-07, bars the allowance of specified deductions unless the return is filed on or before the due date under section 139(1). The assessee filed returns belatedly due to protracted disputes between promoters and relied on Supreme Court directions authorising an auditor to complete accounts. The Tribunal observed that the onus is on the assessee to prove supervening impossibility that prevented timely filing; not every inter se dispute suffices. While recognising the factual material, the Tribunal directed restoration to the AO for fresh adjudication requiring the assessee to produce full records of litigation/orders and proof of impossibility to establish entitlement to the deduction strictly within the parameters of sections 80IA and 80AC. [Paras 8]

Issue restored to the AO for fresh adjudication on the assessee producing necessary records to prove supervening impossibility.

Disallowance under section 14A r.w. rule 8D - Disallowance under section 14A r.w. rule 8D (Rs. 16,102/-) relating to exempt dividend income - HELD THAT: - The assessee did not press this ground before the Tribunal. The Tribunal, after hearing parties and noting the assessee's concession, dismissed the ground as not pressed. [Paras 9]

Ground dismissed as not pressed.

Non-pressed grounds - prior period adjustments and TDS matters - Claims relating to prior period expenses, non-deduction of TDS and prior period adjustments not considered - HELD THAT: - The assessee did not press these alternate/subject-to claims before the authorities below or before the Tribunal. Accordingly the Tribunal dismissed these grounds as not pressed. [Paras 10]

Grounds dismissed as not pressed.

Admission of additional ground for perversity and verification under section 80HHD - restoration to the assessing officer for fresh adjudication - Additional ground relating to alleged incorrect disallowance under section 80HHD (reserve utilisation) - admission and remand - HELD THAT: - The assessee raised for the first time before the Tribunal that reserves created in FY 1999-2000 under section 80HHD had been added back by the AO though, the assessee contended, those reserves were utilised for purchase of fixed assets. Given the question of perversity and the need to verify factual compliance with section 80HHD, the Tribunal admitted the additional ground and restored the matter to the AO for verification of facts and fresh adjudication, placing the burden on the assessee to prove fulfilment of statutory conditions. [Paras 11]

Additional ground admitted; issue restored to the AO for fresh adjudication and verification.

Deduction under section 43B on payment basis - Allowability in AY 2009-10 of additional property tax paid on 10.12.2008 (Rs. 32,10,870/-) under section 43B - HELD THAT: - The property tax payment was made on 10.12.2008 and was disallowed for AY 2008-09 by the AO and CIT(A) under section 43B as not paid during the accounting period or before the due date for filing return. The assessee, without prejudice, claimed the amount on payment basis in AY 2009-10. The Tribunal held that, on the facts in the record, the payment was made on 10.12.2008 and therefore the expenditure is allowable on payment basis in AY 2009-10 under section 43B and directed that deduction be allowed for that year. [Paras 17]

Deduction under section 43B allowed in AY 2009-10.

Final Conclusion: The Tribunal partly allowed the appeals for AY 2006-07 to AY 2009-10: several contested additions (travelling expenses, penalties/fines, vehicle expenses, Pali Hill bungalow expenditure, claim under section 80IA and the admitted additional ground under section 80HHD) were set aside and restored to the AO for fresh adjudication after receipt and verification of evidence; the section 14A and certain other grounds were dismissed as not pressed; and the additional property tax payment was held allowable under section 43B in AY 2009-10.

Deemed date of payment for government dues on tendering cheque - binding effect of CBDT Circular No. 261 dated 08.08.1979 - effect of Central Government Account (Receipts & Payments) Rules, 1983 on date of payment - assessees not in default for delayed remittance by bank or clearing house - interest under section 201(1A) for delayed deposit of TDS - consequential vacatur of interest under section 220(2)

Deemed date of payment for government dues on tendering cheque - binding effect of CBDT Circular No. 261 dated 08.08.1979 - interest under section 201(1A) for delayed deposit of TDS - assessees not in default for delayed remittance by bank or clearing house - Whether the assessee could be treated as in default and charged interest under section 201(1A) where cheques for TDS were tendered to the government banker before the due date but credited to the Government account after the due date. - HELD THAT: - The Tribunal examined CBDT Circular No. 261 dated 08.08.1979 which provides that where a cheque or draft tendered in payment of Government dues and accepted under the relevant Treasury Rules is honoured on presentation, payment is deemed to have been made on the date it was handed over to the Government banker. Although the Central Treasury Rules were later replaced by the Central Government Account (Receipts & Payments) Rules, 1983, the Tribunal noted that the CBDT circular has not been withdrawn or modified and therefore continues to operate. Applying these principles and following relevant judicial decisions, the Tribunal held that where the assessee tendered cheques to the bank within the stipulated due date, any subsequent delay in the bank's or clearing house's remittance to the Government account is beyond the assessee's control and cannot render the assessee in default. Consequently the levy of interest under section 201(1A) for delayed deposit of TDS was not sustainable and was deleted. [Paras 6, 7, 8, 9]

Interest under section 201(1A) charged for delayed deposit of TDS was deleted because payment by cheque tendered to the Government banker within the due date is to be treated as payment on that date; the assessee was not in default.

Consequential vacatur of interest under section 220(2) - additional late payment interest vacated on deletion of primary interest - Whether consequential demands such as additional late payment interest and interest under section 220(2) should stand where interest under section 201(1A) has been quashed. - HELD THAT: - The Tribunal observed that the additional demands (additional late payment interest and interest under section 220(2)) arose as a consequence of the primary levy of interest under section 201(1A). Having quashed the primary interest liability, the Tribunal held the consequential demands cannot survive. The order quashing interest under section 201(1A) therefore entails vacatur of the consequential interest demands. [Paras 13, 18, 28]

Consequential demands for additional late payment interest and interest under section 220(2) were vacated on account of deletion of interest under section 201(1A).

Final Conclusion: For A.Y. 2008-09 the Tribunal allowed the appeals, holding that tendering cheques for TDS to the Government banker within the due date constitutes payment for purposes of liability and interest under section 201(1A) cannot be levied for subsequent bank delay; consequential demands including interest under section 220(2) were accordingly vacated.

Deduction under section 80IA - infrastructure developer vs works contractor - admission of additional evidence under Rule 29 - remand for fresh adjudication - additions for non confirmation of sundry creditors - Chapter VI A deduction on enhanced profits

Deduction under section 80IA - infrastructure developer vs works contractor - Allowability of deduction under section 80IA to the assessee on facts that it developed and widened a road and was not merely a works contractor - HELD THAT: - The Tribunal applied its earlier detailed reasoning in paras 14.1-14.2 of its own order (reproduced in the judgment) and followed judicial precedents holding that where a contract involves design, development, operation and maintenance, financial involvement and defect correction/liability obligations the activity is development of infrastructure and not a mere works contract, and is eligible for deduction under section 80IA. The factual findings of the CIT(A) that the assessee deployed its own capital, material and expertise, bore risk and performed maintenance were not controverted. The Tribunal noted that the same view in the assessee's earlier proceedings was affirmed by the Allahabad High Court and that the Supreme Court dismissed the Revenue appeal; accordingly the Revenue's appeal against grant of deduction was dismissed. [Paras 6]

Revenue appeal dismissed; deduction under section 80IA upheld in favour of the assessee.

Remand for fresh adjudication - Claim for depreciation on shuttering material remitted for production of purchase bills - HELD THAT: - The Assessing Officer had disallowed depreciation for lack of purchase bills; CIT(A) noted purchases across different periods and that depreciation had been claimed at 100% notwithstanding timing of purchases. The Tribunal considered that the assessee should be afforded another opportunity to produce the relevant purchase invoices and directed remand to the Assessing Officer for fresh consideration. [Paras 8]

Ground allowed for statistical purposes and remitted to the Assessing Officer for verification of purchase bills and fresh adjudication.

Admission of additional evidence under Rule 29 - remand for fresh adjudication - Advance payment to NCC VEE (JV) - additional memorandum of agreement admitted and matter remitted for readjudication - HELD THAT: - The assessee filed additional evidence (memorandum of agreement) under Rule 29 showing obligation to pay 4% of gross receipts to NCC VEE (JV). The Tribunal admitted the evidence as going to the root of the matter and remitted the issue to the Assessing Officer to re adjudicate in light of the admitted document. [Paras 9]

Additional evidence admitted; matter remanded to the Assessing Officer for fresh decision.

Remand for fresh adjudication - Deduction claimed for work contract and other tax (TDS/VAT certificates) remitted for verification - HELD THAT: - Part of the assessee's claim for taxes paid was accepted below but a portion was rejected for lack of proof during remand proceedings. The Tribunal observed that the assessee had submitted tax details and break up (papers at pp.95-111) and directed remand to the Assessing Officer to re examine the submissions and reconcile the figures before adjudicating the claim. [Paras 10]

Issue remitted to the Assessing Officer for fresh examination and adjudication.

Additions for non confirmation of sundry creditors - remand for fresh adjudication - Addition on account of alleged non confirmation of sundry creditors remitted for fresh enquiry and verification - HELD THAT: - The Assessing Officer made additions where creditor confirmations were not obtained; CIT(A) allowed partial relief after some creditors responded. The assessee produced bank evidence and confirmations for payments made. The Tribunal found it appropriate to remit the matter to the Assessing Officer to adjudicate afresh, including verification of banking evidence and creditor confirmations. [Paras 11]

Additions remitted to the Assessing Officer for fresh adjudication; grounds allowed for statistical purposes.

Chapter VI A deduction on enhanced profits - remand for fresh adjudication - Claim that, if any addition is sustained, Chapter VI A deductions should be allowed on the enhanced income remitted to Assessing Officer - HELD THAT: - Relying on CBDT guidance that disallowed expenditure related to the activity against which Chapter VI A deductions were claimed should not defeat such deductions on enhanced profits, the Tribunal remitted the additional ground to the Assessing Officer to consider Chapter VI A relief while re adjudicating the remanded issues. [Paras 13]

Additional ground remitted to the Assessing Officer for adjudication along with the remanded issues.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the assessee's entitlement to deduction under section 80IA; several grounds raised by the assessee (depreciation on shuttering material, advance to NCC VEE (JV), work contract/other tax deductions, and additions for non confirmed sundry creditors), together with the Chapter VI A contention, were admitted/remitted to the Assessing Officer for fresh adjudication after verification of records and admitted additional evidence.

Approval under section 80G - conditions under section 80G(5) - registration under section 12AA and its relevance to 80G - principle of natural justice - remand for fresh consideration

Approval under section 80G - conditions under section 80G(5) - registration under section 12AA and its relevance to 80G - principle of natural justice - Whether the rejection of the assessee's application for approval under section 80G was sustainable and what relief should follow. - HELD THAT: - The Tribunal found that the learned CIT (Exemptions) rejected the application on the same day the assessee filed its reply and supporting documents, without recording any findings that the conditions enumerated in clauses (i) to (v) of section 80G(5) were not satisfied. The learned CIT's order did not identify any specific deficiency under those conditions nor did it afford the assessee an opportunity to rebut adverse conclusions, thereby infringing the principles of natural justice. The Tribunal observed that registration under section 12A does not automatically compel grant of approval under section 80G, but the CIT must examine the application against the statutory conditions in section 80G(5) and give reasoned findings. In view of the absence of such consideration and the failure to provide a hearing after submission of documents, the matter could not be finally adjudicated by the Tribunal on merits and required fresh consideration by the learned CIT (Exemptions), who must decide the application afresh in accordance with law and after affording a reasonable opportunity of being heard to the assessee. [Paras 4, 5]

Matter remitted to the file of learned CIT (Exemptions) for fresh adjudication of the application for approval under section 80G in accordance with the conditions of section 80G(5) and after affording the assessee a reasonable opportunity of being heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the rejection order and remitted the application for approval under section 80G to the learned CIT (Exemptions) for fresh consideration in light of the statutory conditions and after providing the assessee an opportunity of hearing; the appeal is allowed for statistical purposes.

Allowability of cash expenses based on seized documents - burden of proof in search and seizure evidence - set off of proved expenses against admitted undisclosed income - characterisation of cash receipt as amount received versus undisclosed payment - reasonable/ad hoc restriction of disallowance of sundry cash expenses - timing and year of allowance of advance payments (expense recognition) - treatment of purchases when supplier does not respond to summons under section 133(6) - allowability of regularization fee paid to Slum Rehabilitation Authority under section 37(1) (penalty vs regularization)

Allowability of cash expenses based on seized documents - burden of proof in search and seizure evidence - set off of proved expenses against admitted undisclosed income - Deletion of additions made by AO (Rs.33,00,000 and Rs.24,22,000) in assessment for AY 2009-10 as unexplained cash/registration expenses - HELD THAT: - Tribunal upheld the Commissioner (Appeals) finding that the seized loose papers were not self explanatory and no further enquiry was made to establish the AO's interpretation that the figures represented large cash payments to registration authorities. The assessee had specifically explained at the time of search that the item in Part A referred to Rs.35,000 (not Rs.35,00,000) and denied knowledge of Part B; the AO bore the onus to prove the contrary. Even if the AO's presumptions were accepted, the Tribunal noted entitlement to set off the claimed expenses against the undisclosed income admitted by the assessee, leading to deletion of the additions. [Paras 7, 8]

Additions deleted and CIT(A)'s order sustained.

Characterisation of cash receipt as amount received versus undisclosed payment - set off of proved expenses against admitted undisclosed income - Deletion of addition of Rs.10,00,000 treated by AO as undisclosed brokerage (AY 2009-10) - HELD THAT: - Tribunal accepted CIT(A)'s conclusion that the cash sum recorded related to cash received from Shri Ravi Bhushan in connection with sale of a flat (corroborated by findings in a related group's assessment) and that the cash portion had been offered to tax. Alternatively, even if treated as an undisclosed payment, it would be susceptible to set off against the assessee's admitted undisclosed income for the year. Revenue produced no evidence to rebut the CIT(A)'s findings. [Paras 11, 12]

Addition deleted; Revenue's ground dismissed.

Reasonable/ad hoc restriction of disallowance of sundry cash expenses - Extent of disallowance of sundry cash expenses in AY 2010-11 - HELD THAT: - While AO and CIT(A) sustained disallowance of sundry cash expenses for want of supporting bills and because many expenses were said to be to government bodies, Tribunal found AO had not established that the entire amount related solely to government bodies. Considering the totality of facts, Tribunal exercised a moderating approach and directed that 75% of such expenses be disallowed and 25% be allowed as deduction. [Paras 14, 17]

Disallowance restricted to 75%; 25% allowed as deduction.

Timing and year of allowance of advance payments (expense recognition) - Treatment of payment to M/s Western Outdoor Structures (allowability in AY 2011-12 instead of AY 2010-11) - HELD THAT: - Record and the party's confirmation showed work commenced and completed in the Financial Year 2010-11 (relevant to AY 2011-12) and final bill was raised in that year. Tribunal directed that the expenditure, disallowed in AY 2010-11 as merely an advance, be allowed in the assessment for AY 2011-12. [Paras 18, 21]

Expenditure to be allowed in AY 2011-12 (Assessing Officer to consider in that assessment).

Treatment of purchases when supplier does not respond to summons under section 133(6) - Partial disallowance of purchases disallowed as unproved (AY 2011-12) - HELD THAT: - Although AO disallowed entire purchases because a supplier did not respond to summons, Tribunal noted sales were accepted and assessee produced invoices, delivery challans and bank evidence. Given the nature of business, Tribunal concluded entire purchases could not be treated as bogus and directed AO to restrict disallowance to 8% of the purchases. [Paras 24, 25]

Disallowance reduced and restricted to 8% of the purchases.

Timing and year of allowance of advance payments (expense recognition) - Allowance in AY 2011-12 of the payment to M/s Western Outdoor Structures that was earlier disallowed (AY 2011-12 appeal of assessee) - HELD THAT: - Following the coordinate bench finding in the related appeal, Tribunal observed that services were rendered and sales/accounts were taken in FY 2010-11 (AY 2011-12); consequently the advance should be allowed in AY 2011-12. The Tribunal directed the Assessing Officer to allow the expense in the relevant assessment year. [Paras 26]

Addition deleted for AY 2011-12; expenditure to be allowed in that year.

Allowability of regularization fee paid to Slum Rehabilitation Authority under section 37(1) (penalty vs regularization) - Disallowance of regularization/regularisation fee paid to Slum Rehabilitation Authority (AY 2011-12) rejected - HELD THAT: - Tribunal, following its decision in the assessee's own case for a related year, held that the fee paid to SRA was for regularization of construction within permissible bye laws and not a penalty for an offence or activity prohibited by law. The payment was made to obtain commencement certificate where delay was attributable to bona fide ambiguity in Coastal Regulation Zone demarcation; SRA itself collected fees and granted commencement certificate. On these findings the AO erred in treating the payment as a non deductible penalty under the Explanation to section 37(1). [Paras 31, 32]

Disallowance deleted; payment held allowable deduction.

Final Conclusion: Revenue appeals dismissed; assessee's appeals partly allowed as directed: additions based on seized documents and disputed cash/commission entries deleted for AY 2009-10; in AY 2010-11 sundry cash disallowance limited to 75% and payment to Western Outdoor Structures to be allowed in AY 2011-12; in AY 2011-12 certain disallowances reduced/allowed (purchases disallowance restricted to 8%, advance payment allowed) and regularization fee paid to SRA held allowable.

Rejection of books of account - unaccounted turnover versus unaccounted stock - addition by applying gross profit rate to unaccounted turnover - estimation of gross profit rate - inapplicability of Section 69 for unaccounted turnover

Unaccounted turnover versus unaccounted stock - addition by applying gross profit rate to unaccounted turnover - inapplicability of Section 69 for unaccounted turnover - Extent of addition permissible where excise/ search reveals unaccounted sales: whether AO could treat the finding as unaccounted stock and make full addition or was restricted to adding only profit embedded in unaccounted turnover. - HELD THAT: - The Tribunal accepted the factual conclusion that the material seized and communicated by excise authorities related to unaccounted turnover (sales) and not undisclosed stock. Established authorities relied upon by the assessee hold that where unaccounted turnover is detected, the tax addition is confined to the gross/net profit embedded in that turnover and the Assessing Officer cannot resort to Section 69 to treat the receipts as unexplained investments or make full value additions. The CIT(A) applied the profit-embedding approach and reduced the addition to the profit element; the Tribunal found this to be correct on facts and law and declined to disturb it. [Paras 6, 7]

Addition limited to profit embedded in the unaccounted turnover; AO's treatment as unaccounted stock and full addition under Section 69 not sustained.

Rejection of books of account - estimation of gross profit rate - Whether, after confirming rejection of books of account, the AO was justified in applying a higher gross profit rate from a subsequent year instead of the gross profit rate reflected in the books for the year under assessment. - HELD THAT: - The CIT(A) upheld the legal validity of rejecting books of account but declined to apply the higher gross profit rate (11.9%) taken from the subsequent assessment year; instead he adopted the gross profit ratio as per the assessee's books for Assessment Year 2007-08 (6.16%) for estimating profit on the unaccounted turnover. The Tribunal noted that complete books in electronic form had been before the AO earlier and that the GP rate declared in the original 143(3) assessment had been accepted; on this basis the Tribunal found no reason to interfere with the CIT(A)'s choice of gross profit rate and confirmed the quantification adopted by the CIT(A). [Paras 6, 7]

CIT(A)'s estimation of gross profit rate at 6.16% (as per books for AY 2007-08) upheld and AO's application of 11.9% from subsequent year not sustained.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s restriction of the addition to profit embedded in unaccounted turnover and its adoption of the gross profit rate as per books for AY 2007-08, declining to apply the higher gross profit rate from a subsequent year or to treat the matter as unexplained investment under Section 69.

Revisionary jurisdiction under section 263 - Minimum Alternate Tax (MAT) / Book Profit under section 115JB - Proviso to section 10(38) and its applicability to Book Profit - Explanation 2 to section 263 (failure to make inquiries or verification) - Accounting treatment on amalgamation - securities premium versus revaluation reserve / AS-14 - Requirement of Form No.29B / Rule 40B - Remand for fresh computation / reassessment of Book Profit

Revisionary jurisdiction under section 263 - Explanation 2 to section 263 (failure to make inquiries or verification) - Minimum Alternate Tax (MAT) / Book Profit under section 115JB - Validity of the Pr. CIT's exercise of revisionary jurisdiction under section 263 in setting aside the assessment dated 02-01-2016 as erroneous and prejudicial to the interests of Revenue. - HELD THAT: - The Tribunal upheld the Pr. CIT's view that the assessment order was set aside validly under section 263 because the assessing officer had not applied his mind to computation of Book Profit under section 115JB. The assessing officer accepted the returned income without recording any computation under section 115JB, no Form No.29B (Rule 40B) was furnished, and material discrepancies (notably the valuation adopted on amalgamation vis-a -vis exchange price and the consequent impact on Book Profit/MAT) were not examined for the purpose of MAT. In these circumstances, and having regard to Explanation 2 to section 263 (w.e.f. 01-06-2015) which deems an order erroneous if inquiries/verification which should have been made were not made, the Pr. CIT's opinion was held to be reasonable and the revisionary exercise justified. The Tribunal found no reason to interfere with the Pr. CIT's conclusion that the assessment was erroneous insofar as prejudicial to revenue and confirmed the exercise of revisionary jurisdiction. [Paras 9, 14, 15]

The revisionary order passed by the Pr. CIT under section 263 was upheld; the assessee's appeal against the same is dismissed in so far as the challenge to the exercise of jurisdiction is concerned.

Requirement of Form No.29B / Rule 40B - Remand for fresh computation / reassessment of Book Profit - Proviso to section 10(38) and its applicability to Book Profit - Accounting treatment on amalgamation - securities premium versus revaluation reserve / AS-14 - Whether the matter should be remitted to the assessing officer for fresh adjudication on computation of Book Profit under section 115JB (including examination of the effect of amalgamation accounting, valuation adopted, treatment of securities premium/revaluation reserve and applicability of the proviso to section 10(38)). - HELD THAT: - The Tribunal endorsed the Pr. CIT's direction to set aside the assessment and directed the assessing officer to reframe the assessment afresh on the issues identified. The Tribunal recorded that the assessing officer did not verify the computation of Book Profit (no Form No.29B), did not reconcile the market/valuator values and the treatment in books for MAT purpose, and did not examine whether the accounting entries (credit to securities premium instead of capital/revaluation reserve) masked MAT liability arising from LTCG. Consequently, the Tribunal confirmed remand so that the AO may conduct detailed inquiries, permit the assessee to be heard, verify valuations, obtain necessary certifications (including Form No.29B), and decide the MAT implications including application of the proviso to section 10(38) and the correct treatment under Explanation 1 to section 115JB. [Paras 14, 15]

Matter remitted to the assessing officer to pass a fresh assessment order after making necessary inquiries and verification on computation of Book Profit under section 115JB (including consideration of Form No.29B, the valuation adopted on amalgamation, treatment of securities premium/revaluation reserve and applicability of the proviso to section 10(38)), after affording the assessee an opportunity of hearing.

Final Conclusion: The Tribunal dismissed the assessee's appeal and upheld the Pr. CIT's revisionary order under section 263: the assessment dated 02-01-2016 was held to be erroneous and prejudicial to revenue for lack of proper examination of Book Profit/MAT issues, and the matter is remitted to the assessing officer for fresh assessment on those issues after necessary enquiries and opportunity to the assessee.

Exemption under section 10(22) - existence solely for educational purposes - surplus not itself profit - use of income for educational purposes - reasonable cause for non-production of records

Exemption under section 10(22) - existence solely for educational purposes - surplus not itself profit - use of income for educational purposes - Entitlement of the assessee-trust to exemption under section 10(22) for A.Y. 1998-99 - HELD THAT: - The Tribunal examined section 10(22) as applicable to A.Y. 1998-99 and applied settled principles that an institution which exists solely for educational purposes is entitled to exemption even if a surplus arises, since surplus does not convert the object into profit-making. The character of the recipient in foreign jurisdictions or affiliation abroad is not determinative; the relevant test is whether the recipient in India has the character of an educational institution and whether income is directly relatable to educational activity. No material was found to show that the assessee did not exist solely for educational purposes; earlier findings and judicial precedents relied upon by the CIT(A) support granting exemption. The Tribunal accepted that conditions specific to section 10(23C) or audit/approval requirements are not prerequisites under section 10(22). Having regard to these considerations, the Tribunal upheld the CIT(A)'s allowance of exemption under section 10(22). [Paras 6, 8]

The assessee is entitled to exemption under section 10(22) for A.Y. 1998-99 and the Revenue appeal is dismissed on this point.

Reasonable cause for non-production of records - allowability of expenses in absence of supporting vouchers - Validity of Assessing Officer's disallowance of entire expenses on ground of non-production of vouchers destroyed in flood - HELD THAT: - The Tribunal found that the assessee's supporting documents were destroyed during severe floods and observed photographic evidence and an FIR corroborating destruction. Having examined the nature of expenses (salaries, rent, utilities, repairs, administration) which are integral to running a school, the Tribunal concluded that the Assessing Officer was not justified in disallowing the expenditures merely because vouchers could not be produced. The Tribunal treated the destruction as a reasonable cause for non-production and endorsed the CIT(A)'s direction to allow the expenses claimed in the income and expenditure statement. [Paras 6]

The Assessing Officer's disallowance is set aside and the claimed expenses are to be allowed; the Revenue appeal is dismissed on this point.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s order allowing exemption under section 10(22) for A.Y. 1998-99 and permitting the claimed expenses (having regard to destruction of records in the floods) is affirmed; the assessee's cross-objection is dismissed as not pressed.

Benami transaction - necessary elements (consideration provided by another and property held for benefit of that other) - Burden of proof on authority to establish a benami transaction - Provisional attachment under Section 24 of the Benami Transactions (Prohibition) Act, 1988 - Reason to believe - requirement of application of mind by Initiating Officer - Scope of Benami Act in relation to genuine salary advances

Benami transaction - necessary elements (consideration provided by another and property held for benefit of that other) - Scope of Benami Act in relation to genuine salary advances - Burden of proof on authority to establish a benami transaction - Whether the properties (cash/savings account balances) in the hands of the appellants constituted benami property and whether the attachment confirmed by the Adjudicating Authority was sustainable - HELD THAT: - The Tribunal applied the statutory definition and legislative purpose of the Benami Act, holding that not every cash transaction or receipt of cash amounts to a benami transaction. The essential twin conditions under the Act are (i) that the property be held by a person who has not provided the consideration, and (ii) that the property be held for the immediate or future benefit (direct or indirect) of the person who furnished the consideration. The record showed that the amounts in question were salary advances given by the Trust to employees for their personal purposes, that the Chairman's statement acknowledged advances and the Trust paid tax on the aggregate amount, and that the appellants either spent the advance or returned/adjusted it to the Trust. The Initiating Officer relied primarily on sworn statements evidencing receipt of cash and issued mechanistic notices and attachment orders without cogent material establishing the required beneficial interest in favour of the alleged beneficial owner or a reasoned 'reason to believe' based on application of mind. The Tribunal observed that the authority alleging a benami transaction bears the burden of proof and must form a reason to believe grounded in appreciation of material; mere receipt of cash, absence of deposit in the appellants' bank accounts, and subsequent return/adjustment of the advance were held insufficient to establish benami transactions. Applying these principles to the facts, there was no evidence of name-lending with denial of beneficial interest or of any nexus showing that the appellants held the amounts for the benefit of the alleged beneficial owner; consequently the attachment related to non-existent benami property. [Paras 21, 22, 23, 35, 45]

Attachment confirmed by the Adjudicating Authority was unsustainable; the appellants were not shown to hold benami property and the attachment was set aside.

Provisional attachment under Section 24 of the Benami Transactions (Prohibition) Act, 1988 - Reason to believe - requirement of application of mind by Initiating Officer - Whether the Initiating Officer and the Adjudicating Authority complied with the statutory requirement to form a reason to believe and apply their mind before passing provisional and final attachment orders - HELD THAT: - The Tribunal found that the Initiating Officer proceeded on assumptions and issued nearly identical, mechanical notices referring to receipt of cash without supplying relied-upon material or articulating cogent reasons to believe that the appellants would retain or convert property for the benefit of the alleged beneficial owner. The Adjudicating Authority upheld the IO's order without addressing the appellants' written replies and affidavits which showed return/adjustment of advances and absence of deposits in bank accounts. The Tribunal emphasised that when stringent provisions are invoked, authorities must adhere strictly to statutory requirements and demonstrate an application of mind based on appreciation of material; in the present appeals those requirements were not satisfied. [Paras 7, 9, 30, 35]

Provisional/final attachment orders were passed without adequate reasoned 'reason to believe' and without proper consideration of appellants' replies; such orders were infirm and liable to be set aside.

Final Conclusion: The appeals succeed. The Adjudicating Authority's confirmation of the attachment is set aside and the attached properties are released forthwith; the Tribunal disposed of the appeals and applications with no order as to costs.

Provisional release of seized goods - provisional release under Section 110A of the Customs Act, 1962 - seizure and confiscation proceedings under the Customs Act, 1962 - concurrent investigation and adjudication - exercise of writ jurisdiction under Article 226 of the Constitution - cooperation with investigation and service of summons

Provisional release of seized goods - provisional release under Section 110A of the Customs Act, 1962 - Direction to dispose of the petitioner's pending application for provisional release of goods seized and to perform statutory duties under Section 110A. - HELD THAT: - The Court directed that the respondents must deal with and dispose of the petitioner's application dated 30.10.2018 for provisional release of the perfumes/deodorants seized under Section 110, in accordance with law. The Court held that the statutory power conferred by Section 110A to consider provisional release is to be exercised by the respondents and ordered that the application be decided while the investigation continues. The petitioner was permitted to file further representation in support of the application and the respondents undertook to dispose of the application within two weeks of such additional representation. [Paras 6, 7]

Respondents directed to dispose of the application for provisional release under Section 110A in accordance with law; petitioner permitted to file further representation and respondents to decide the application within the stipulated timeframe.

Cooperation with investigation and service of summons - concurrent investigation and adjudication - exercise of writ jurisdiction under Article 226 of the Constitution - Petitioner's explanation for non-receipt of summons accepted and refusal to exercise extraordinary writ jurisdiction to dismiss the petition on that ground. - HELD THAT: - The Court accepted the petitioner's explanation that non-receipt of summons was due to relocation and irregular staff attendance, as supported by the affidavit-in-rejoinder dated 29.11.2018, and recorded the petitioner's assurance that its director would cooperate with the investigation and appear before the adjudicating authority. In view of this explanation and assurance, the Court found that dismissal of the petition on the ground of non-cooperation was not warranted and that both the investigation and the provisional release application could proceed simultaneously. [Paras 5, 6]

Explanation for non-receipt of summons accepted; petitioner directed to cooperate and make director available; petition not dismissed for alleged non-cooperation and both investigation and provisional release proceedings may proceed concurrently.

Final Conclusion: The petition is disposed by directing the respondents to decide the petitioner's application for provisional release under Section 110A of the Customs Act, 1962, in accordance with law; the petitioner may file additional representation, the respondents to dispose of the application within the stipulated time after such filing, and the petition is disposed of with no order as to costs.

Confiscation of goods - redemption fine - penalty for breach of import policy - valuation for import duty - import licensing condition - circumvention of import restrictions

Confiscation of goods - redemption fine - penalty for breach of import policy - import licensing condition - Whether further discretionary relief was warranted in Custom Appeal No.60 of 2018 where the Tribunal had reduced redemption fine and penalty. - HELD THAT: - The court found the broad facts in Appeal No.60 not to be seriously in dispute: the imported marble had CIF value below the threshold for free import and the assessee's offer to pay duty on a higher notional valuation was held to be an attempt to bypass the notification's licensing requirement. The Tribunal had already granted substantial relief by reducing the redemption fine and penalty after considering the overall facts and circumstances. The High Court saw no reason to interfere further or to exercise additional discretionary relief beyond what the Tribunal had allowed. [Paras 9]

Custom Appeal No.60 of 2018 dismissed; no further relief warranted.

Valuation for import duty - confiscation of goods - redemption fine - penalty for breach of import policy - circumvention of import restrictions - Quantum of redemption fine and penalty in Custom Appeal No.57 of 2018 where confiscation and penalty were otherwise upheld. - HELD THAT: - The court accepted that confiscation and imposition of penalty were sustainable on facts, including the finding that the assessee had imported marble valued below the threshold and had offered to pay duty on a higher value to circumvent the notification. However, the Commissioner had relied on an alleged letter to estimate market profit which, on scrutiny, did not support the claimed sale-price or intention to sell. Applying the same yardstick the Tribunal used in Appeal No.60, adjusted for the comparative value of imports in this case, the High Court reduced the redemption fine and penalty to an appropriate round figure after judicial comparison and adjustment. [Paras 10]

Custom Appeal No.57 of 2018 allowed in part - redemption fine reduced and penalty reduced.

Final Conclusion: The High Court dismissed Custom Appeal No.60 of 2018 and allowed Custom Appeal No.57 of 2018 in part by reducing the confirmed redemption fine and penalty while upholding confiscation and the imposition of penalty in principle.

Maintainability of appeal under Section 128 of the Customs Act, 1962 - appeal limitation and commencement from date of receipt of order - ex parte order arising from non-receipt of show-cause notice - principles of natural justice and opportunity of hearing - remand for de novo consideration after affording opportunity of hearing - duty drawback recovery and requirement of bank realization certificate

Maintainability of appeal under Section 128 of the Customs Act, 1962 - appeal limitation and commencement from date of receipt of order - ex parte order arising from non-receipt of show-cause notice - The Commissioner (Appeals) order rejecting the appellant's appeal as time barred under Section 128 was set aside. - HELD THAT: - The Tribunal found that the Commissioner (A) rejected the appeal on the ground of non maintainability under Section 128 without examining the factual position that the order in original had been passed ex parte because the appellant did not receive the show cause notice. The appellant asserted bona fide reasons for non receipt and delay in business operations consequent to part of its factory being taken over for a Metro Rail project. Given these circumstances the Tribunal concluded that the question of limitation and maintainability could not be decided without addressing the appellant's explanation and without applying the principles governing ex parte orders and computation of appeal time from the date of receipt of the order. The Commissioner (A)'s reliance on a precedent was held inapplicable on the facts and the impugned conclusion on non maintainability was therefore unsustainable.

Impugned order of the Commissioner (A) rejecting the appeal as barred by Section 128 is set aside.

Principles of natural justice and opportunity of hearing - remand for de novo consideration after affording opportunity of hearing - duty drawback recovery and requirement of bank realization certificate - The matter was remanded to the original authority for fresh adjudication on merits after affording the appellant a reasonable opportunity of hearing and taking their reply to the show cause notice. - HELD THAT: - The Tribunal observed that because the original order was passed ex parte and the appellant contends that export proceeds were realized (and the demand arose for failure to produce bank realization certificate), the original authority must re examine the factual and legal aspects. The remand directs the original authority to decide the case de novo, to take the appellant's reply to the show cause notice, to afford a reasonable hearing in conformity with principles of natural justice, and then to render a fresh decision on the demand, interest and penalty as appropriate.

Appeal allowed by way of remand; matter sent back to the original authority to decide afresh after receiving the appellant's reply and affording opportunity of hearing.

Final Conclusion: The Commissioner (A)'s order rejecting the appeal as time barred is set aside and the matter is remitted to the original authority for de novo adjudication after taking the appellant's reply to the show cause notice and affording a reasonable opportunity of hearing in accordance with natural justice.

Dissolution of company in liquidation - completion of winding up - official liquidator's discharge of liabilities - abuse of process of law - exemplary costs - transfer of unclaimed capital to Public Account of India

Dissolution of company in liquidation - completion of winding up - official liquidator's discharge of liabilities - transfer of unclaimed capital to Public Account of India - Final dissolution of M/s Mysore Tools Pvt. Ltd. (in liquidation). - HELD THAT: - The Court examined the Official Liquidator's report that the company's land was acquired by KIADB and compensation deposited; the sole secured creditor was paid in full, equity shareholders and preferential shareholders were paid as per the settled list and unclaimed capital was transferred to the Public Account of India. The Official Liquidator represented that no further assets remain and all liabilities known to him have been discharged, and winding up proceedings have been pending for decades. On these findings the Court concluded that the winding up process has been completed and that it is just and reasonable to dissolve the company. The Court further directed that a copy of the order be forwarded to the Registrar of Companies in accordance with the Company (Court) Rules. [Paras 4, 10, 11, 12, 19]

CA No.54/2018 allowed; M/s Mysore Tools Pvt. Ltd. (in liquidation) is directed to be dissolved and the order be forwarded to the Registrar of Companies.

Abuse of process of law - exemplary costs - Maintainability and disposal of multiple company applications seeking leave to file revival schemes. - HELD THAT: - The Court reviewed a series of applications by persons claiming to be former shareholders/promoters seeking leave to file schemes for revival, noting the absence of draft schemes, deposits or other steps showing bonafides and that many similar applications had previously been dismissed. The Court held that the repeated, belated applications amounted to an abuse of process designed to delay final dissolution after the Official Liquidator had completed winding up. Exercising its supervisory power to prevent misuse of court process, the Court dismissed C.A.Nos.245/2018, 135/2017, 382/2017 and 278/2018 and imposed exemplary costs to discourage repetition. [Paras 13, 15, 16, 17, 18]

C.A.Nos.245/2018, 135/2017, 382/2017 and 278/2018 dismissed; each applicant ordered to pay exemplary costs of Rs.25,000 to be deposited with the Registrar (Judicial) for remittance to the Prime Minister's Relief Fund, with recovery proceedings under the Land Revenue Recovery Act if not paid within two months.

Final Conclusion: The petition for dissolution filed by the Official Liquidator is allowed and M/s Mysore Tools Pvt. Ltd. (in liquidation) is ordered to be dissolved; a series of belated applications for revival are dismissed as an abuse of process with exemplary costs and directions for deposit and onward transmission of the dissolution order to the Registrar of Companies.

Limitation - extended period of limitation for assessment in cases of fraud, collusion, wilful mis statement or suppression of facts with intent to evade tax - burden to specifically plead fraud or suppression of facts - effect of payment of tax prior to issuance of show cause notice on limitation - absence of mala fide intent in respect of State Government undertakings - invocation of extended limitation without material particulars or specific allegations

Extended period of limitation for assessment in cases of fraud, collusion, wilful mis statement or suppression of facts with intent to evade tax - burden to specifically plead fraud or suppression of facts - effect of payment of tax prior to issuance of show cause notice on limitation - absence of mala fide intent in respect of State Government undertakings - Whether the demand for service tax for the periods in question is time barred because the proviso extending limitation to five years was not rightly invoked - HELD THAT: - The Tribunal found that the extended five year period under the proviso to Section 73(1) was invoked by the Revenue without any specific pleading or material to show fraud, collusion, wilful mis statement or suppression of facts with intent to evade payment of service tax. The appellants, being a State Government undertaking, had themselves computed and paid a substantial portion of the tax on 25.03.2006 after internal audit scrutiny and well before issuance of the show cause notice dated 16.01.2008. There was no material on record to demonstrate an intention to evade tax or that facts were suppressed; consequently the requisites for invoking the extended period were not satisfied. The Tribunal applied the reasoning of earlier decisions cited in the judgment, holding that vague or undeveloped assertions in the SCN are insufficient to extend limitation and that allegations of suppression or fraud must be specific so as to enable an effective reply. On this basis the Tribunal concluded that the demand fell outside the one year ordinary limitation period and was therefore time barred.

Extended period of limitation not invokable; entire demand is barred by limitation and impugned order set aside.

Final Conclusion: Appeal allowed; impugned order set aside on the ground of limitation and consequential relief granted.

Voluntary Compliance Encouragement Scheme (VCES) - ineligibility under proviso to Section 106(1) - "same issue" prohibition - settlement of issues under Order 14 CPC - limitation not to be considered where declaration invalid

Ineligibility under proviso to Section 106(1) - "same issue" prohibition - Voluntary Compliance Encouragement Scheme (VCES) - settlement of issues under Order 14 CPC - Declaration under VCES-I was barred by proviso 2 to Section 106(1) because a notice had already been issued in respect of the same issue and period. - HELD THAT: - The Tribunal examined proviso 2 to Section 106(1) of VCES 2013 which prohibits making a declaration where a notice or order of determination has been issued to a person in respect of any period on any issue. Applying the concept of 'issue' as understood under Order 14 CPC (issues arise where a material proposition of fact or law is affirmed by one party and denied by the other), the earlier Show Cause Notice dated 04.01.2011 related to service tax liability for renting of immovable property for the period 01.01.2009 to 31.03.2010. The VCES-I declaration covered renting of immovable property for the period 01.10.2008 to 31.03.2010, thereby overlapping the same allegation of non-payment for the same period. The Tribunal held that it was not merely similarity of service category but identity of the allegation and period that invokes the proviso. Consequently the declaration was prohibited and the adjudicating authority rightly rejected the VCES declaration.

Rejection of VCES-I under proviso 2 to Section 106(1) was valid; the adjudicating authority committed no error.

Limitation not to be considered where declaration invalid - Voluntary Compliance Encouragement Scheme (VCES) - Limitation objection to the later Show Cause Notice was not examined because the appellant was ineligible to file VCES and the declaration was correctly rejected. - HELD THAT: - The Tribunal observed that the time limit under the VCES framework would be relevant only if the assessee were entitled to file the declaration. Since the declaration was barred by proviso 2 to Section 106(1) and thus invalid, there was no necessity to adjudicate the separate contention of limitation. The Tribunal therefore declined to sustain the limitation objection and dismissed the appeal on merits of ineligibility.

Limitation plea held not sustainable and not determinative once VCES declaration was held invalid; appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that the VCES-I declaration was barred by proviso 2 to Section 106(1) as a notice had already been issued in respect of the same issue and period, and therefore the rejection of the declaration and consequent recovery were valid; the limitation objection was not considered since the declaration was invalid.

Partial reverse charge mechanism - service tax liability under reverse charge - penalty for non-payment of service tax - extended period for recovery due to wilful suppression - principles of natural justice - EA audit as participative/verification audit

Penalty for non-payment of service tax - extended period for recovery due to wilful suppression - partial reverse charge mechanism - EA audit as participative/verification audit - principles of natural justice - Whether penalty under the Finance Act and invocation of the extended period could be sustained where the assessee paid service tax and interest after an EA audit finding but before adjudication, in the context of the partial reverse charge mechanism and alleged denial of opportunity of personal hearing. - HELD THAT: - The Tribunal examined the effect of Notification 30/2012 introducing the partial reverse charge mechanism, the nature and purpose of EA/CERA audits as participative verification exercises, and the material placed on record. It noted that the appellant, upon audit pointing out non-observance of the partial reverse charge procedure, discharged the service tax liability along with interest for the services in question before adjudication. The adjudicating authority and the Commissioner (Appeals) treated the case as attracting the extended period on the ground of wilful suppression and confirmed penalty. The Tribunal observed that neither the show-cause notice nor the records produced before it established that the service provider had realized and deposited the entire tax component with Government or that there was cogent evidence of wilful suppression or mis-declaration in ST-3 returns. The Tribunal also considered the appellant's contention of denial of personal hearing and the Commissioner (Appeals)'s finding that there was a substantial gap between issue of show-cause and personal hearing; however, the determinative consideration was the absence of evidence to justify invoking the extended period or penalty. Applying these conclusions to the facts, the Tribunal held that the department had not brought forward cogent evidence of wilful suppression to justify extended period assessment or the penalty, and accordingly set aside the Commissioner (Appeals) order confirming penalty. [Paras 5, 6, 7, 8, 9]

The Tribunal held that there was no cogent evidence of wilful suppression to invoke the extended period or sustain the penalty; the Commissioner (Appeals) order confirming penalty is set aside and the appeal is allowed.

Final Conclusion: The appeal was allowed: in the absence of cogent evidence of wilful suppression and having regard to the appellant's payment of tax and interest after EA audit, the Tribunal set aside the Commissioner (Appeals) order confirming penalty and extended-period assessment under the Finance Act.

Penalty under Section 78 of the Finance Act, 1994 - reduced penalty benefit - recovery of service tax collected from lessee - renting of immovable property service - non-filing of ST-3 returns

Penalty under Section 78 of the Finance Act, 1994 - reduced penalty benefit - recovery of service tax collected from lessee - non-filing of ST-3 returns - Entitlement to benefit of reduced penalty under Section 78 where service tax collected from tenant was not deposited, returns were not filed in time, and payments to comply with the adjudicating order were delayed. - HELD THAT: - The Tribunal found on the record that the appellant had collected service tax from the lessee/tenant but failed to deposit the amounts to the Government exchequer and also did not file the requisite ST-3 returns timely, which prevented the department from ascertaining the liability. The appellant paid the principal tax and 25% of the penalty under Section 78, and paid the remaining interest only after some delay; they did not comply with the adjudicating authority's order in toto within the prescribed time. In these circumstances the appellant is not entitled to the benefit of reduced penalty under Section 78. Having regard to collection but non-deposit of tax, late return filing and delayed compliance with the adjudication, the appeal lacks merit. [Paras 6]

The appeal is dismissed and the impugned order of the Commissioner (Appeals) dated 10.5.2018 is upheld.

Final Conclusion: The Tribunal dismissed the appeal, upholding the demand, interest and penalties imposed by the adjudicating authority and rejecting the appellant's claim for the benefit of reduced penalty under Section 78 of the Finance Act, 1994.

Supply of Tangible Goods for Use service - extended period of limitation - exemption under Section 64 of the Finance Act, 1994 - best judgment assessment - CENVAT credit - penalty for non-filing or late filing of return

Extended period of limitation - Supply of Tangible Goods for Use service - Validity of demands confirmed for periods prior to 23.10.2008 and for FY 2013-14 under extended limitation - HELD THAT: - The Tribunal found that Service Tax on the said service became chargeable w.e.f. 16.05.2008 and that the first Show Cause Notice was issued on 21.10.2013. Consequently, demands in respect of periods prior to 23.10.2008 were held time-barred. The second SCN dated 24.04.2015 for the period 2013-14 was also held to be barred by limitation. The Tribunal noted that the appellant was registered for the service and that there was no basis to invoke extended limitation beyond the statutory window in the circumstances narrated in the order.

Demand for the period prior to 23.10.2008 set aside; SCN dated 24.04.2015 for 2013-14 set aside as time-barred.

Exemption under Section 64 of the Finance Act, 1994 - Supply of Tangible Goods for Use service - Whether services rendered in Jammu & Kashmir are exempt from service tax - HELD THAT: - On production and examination of sample invoices and passenger manifests, and the year-wise certified values submitted by the appellant, the Tribunal accepted that certain services originated and terminated in Jammu & Kashmir and thus fell within the exemption under Section 64. The Commissioner had failed to determine the value of exempted services despite the appellant furnishing documentary evidence and certified year-wise details; accordingly the amounts shown as receipts for J&K were held exempt.

Amount of services provided in the State of J&K held exempt under Section 64; value of such services accepted as submitted.

Best judgment assessment - Legitimacy of the adjudicating authority's application of best judgment assessment for FY 2013-14 - HELD THAT: - The Tribunal observed that best judgment assessment under Section 72 must be founded on material and data on record and not on speculation. The record showed that the department had obtained total receipt values for preceding years and that appellant had furnished computations and certified details; there was therefore no justification for a speculative best judgment assessment for 2013-14. The Tribunal relied on the principle that estimation must be fair and reasonable.

Assessment under best judgment for 2013-14 set aside for lack of proper material and unreasonable estimation.

CENVAT credit - Entitlement to CENVAT credit on spare parts and input services - HELD THAT: - The Tribunal noted that the appellant had maintained RG-23 register and had availed CENVAT credit on inputs, and that the Commissioner ignored this factual position. Having accepted that credit on inputs and spare parts was admissible on the material before it, the Tribunal held that the appellant was entitled to Cenvat credit on spare parts and input services.

Appellant entitled to Cenvat credit on spare parts and input services.

Penalty for non-filing or late filing of return - Sustainability of penalty under the provision for non-filing or late filing of returns - HELD THAT: - While many penalties imposed were examined, the Tribunal upheld the penalty under the provision for non-filing or late filing of returns after considering the facts and the adjudicating authority's findings. Other penalties rooted in willful suppression were not sustained to the extent the demand and limitation were set aside and exempted amounts accepted.

Penalty under provision for non-filing/late filing of return upheld; other penalty contentions adjusted in consequence of the findings on demand and exemption.

Final Conclusion: The impugned order was set aside for the defects identified: demands prior to 23.10.2008 and the SCN for 2013-14 were time-barred and struck down; services rendered in Jammu & Kashmir were held exempt under Section 64; best judgment assessment for 2013-14 was set aside; appellant entitled to Cenvat credit on spare parts and input services; penalty for non-filing/late filing of return upheld. The appeal was allowed accordingly.

Supply of Tangible Goods for Use - Transport of Passengers by Air - extended period of limitation for fraud, collusion, wilful misstatement or suppression - exemption for services originating and terminating in Jammu & Kashmir - CENVAT credit admissibility for input services and credits taken under Reverse Charge Mechanism - Place of Provision of Service Rules non retrospective application - penalty not leviable where there is a bona fide dispute on classification

Exemption for services originating and terminating in Jammu & Kashmir - Place of Provision of Service Rules non retrospective application - Service tax is not chargeable on the value of services provided which originated and terminated in Jammu & Kashmir for the periods prior to application of the Place of Provision Rules. - HELD THAT: - The Tribunal found that the adjudicating authority had admitted that the assessee had furnished year wise invoices and passenger manifests proving that the flights originated and terminated in J&K. The Place of Provision of Service Rules, 2012 became effective from 01.07.2012 and cannot be applied retrospectively. On the material submitted at the hearing the invoices and passenger manifests tallied with details on record and established that the services in question fell within the exemption under Section 64 for services originating and terminating in J&K. The demand confirmed in respect of services in J&K was therefore held unsustainable and set aside. [Paras 5]

Demand in respect of services provided in Jammu & Kashmir is set aside.

CENVAT credit admissibility for input services and credits taken under Reverse Charge Mechanism - value of parts and spares not leviable to service tax - CENVAT credit on input services and credit for service tax paid under Reverse Charge Mechanism is admissible; value of spare parts used in maintenance and repair is not chargeable to service tax. - HELD THAT: - The adjudicating authority had admitted that the assessee submitted documents showing bifurcation of foreign currency expenditure into parts/spares and service components. The Tribunal held that the value of parts and spares used in maintenance and repair is not leviable to service tax and that the assessee had paid service tax under RCM on pilot hiring and service components, which is admissible as CENVAT credit. Further, Rule 4(7) of the CENVAT Credit Rules permits taking credit on input services on or after the date payment is made. The Tribunal therefore allowed the CENVAT credit claimed and set aside the demand attributable to parts and spares. [Paras 5]

Demand in respect of value of spare parts is set aside; CENVAT credit including credits under RCM is held admissible.

Extended period of limitation for fraud, collusion, wilful misstatement or suppression - Invocation of the extended period of limitation was not sustainable as there was no record of suppression, fraud or collusion with intent to evade tax. - HELD THAT: - The Tribunal reviewed the evidentiary record and noted that the assessee was registered for the relevant services, had consistently contested classification from the beginning, and had supplied information and documents to the department during investigation. Citing settled precedents that mere failure to declare does not amount to willful suppression where facts were known to both parties, the Tribunal held that the ingredients necessary to invoke the proviso to the limitation provision were not made out. Consequently, demands could only be confirmed for the normal one year period and not for the extended period. [Paras 5]

Invocation of extended period of limitation is set aside; only normal period demands are maintainable.

Penalty not leviable where there is a bona fide dispute on classification - Penalties under the Finance Act were not leviable because the assessee acted on a bona fide belief and contested classification throughout. - HELD THAT: - The Tribunal noted that the assessee had paid service tax under a different classification and had consistently disputed the Department's re classification. There was no finding of deliberate suppression or fraud. Applying the principle that penalties should not be imposed where there is a bona fide dispute as to legal interpretation, the Tribunal held that penalties under the relevant provisions could not be sustained and therefore set them aside. [Paras 5]

All penalties imposed are set aside.

Supply of Tangible Goods for Use - The Tribunal refrained from deciding the classification issue as the appellant accepted the Larger Bench majority decision treating the service as 'Supply of Tangible Goods for Use'. - HELD THAT: - The appellant accepted the majority view of the Larger Bench in Global Vectra Helicopter Ltd. that the service is classifiable as supply of tangible goods for use. In view of this concession, the Tribunal did not adjudicate the classification issue and proceeded to address consequential matters (limitation, J&K exemption, CENVAT and penalties). [Paras 5]

Classification issue not adjudicated by the Tribunal at the instance of the appellant's acceptance of the Larger Bench view.

Calculation of demand for the normal period - Computation of the demand for the normal one year period remitted to the Commissioner for verification and correctness. - HELD THAT: - The Tribunal held that, having set aside demands for the extended period and having allowed relevant credits and exemptions, the assessable demand remains only for the normal period of limitation. The appellant was directed to compute the liability for the normal one year period and deposit any outstanding amount; the Commissioner was directed to verify the correctness of the calculation and point out discrepancies, if any. [Paras 5]

Liability for the normal period to be calculated by the appellant and verified by the Commissioner.

Final Conclusion: The impugned adjudication is set aside in part: demands for the extended period are quashed; only demands for the normal one year period remain payable subject to calculation and verification; service value for flights originating and terminating in J&K is not taxable for the relevant periods; value of spare parts used in maintenance/repair is not chargeable; CENVAT credit including RCM credits is admissible; and all penalties are set aside.

Value of taxable service - payment in kind as consideration - Service Tax (Determination of Value) Rules, 2006 - Rule 3 - treatment of scrap retained as part of consideration - double taxation - limitation - penalty

Value of taxable service - payment in kind as consideration - Service Tax (Determination of Value) Rules, 2006 - Rule 3 - treatment of scrap retained as part of consideration - Value of scrap generated and retained by the service provider forms part of the value of the repair and maintenance service and is liable to service tax. - HELD THAT: - The Tribunal held that where consideration for a taxable service is received partly in cash and partly in kind, the value in kind must be included in the value of the service under Rule 3 of the Service Tax (Determination of Value) Rules, 2006. The appellants retained scrap generated during repair work which in fact belonged to the customer; that retention reduced the cash job charge and therefore constituted payment in kind equivalent to the value of the scrap. The fact that the scrap was recorded in the appellant's books and cleared on payment of Central Excise Duty does not negate its character as consideration for the service nor preclude inclusion of its value for service tax purposes. The Tribunal illustrated the point hypothetically to show that cash plus value in kind together represent the true consideration and must be assessed to service tax, and accordingly rejected the contention of impermissible double taxation as irrelevant to determination of service value. [Paras 4, 5]

Value of the scrap retained by the appellant is required to be added to the value of the services and is liable to service tax; the appeal is rejected on merits on this issue.

Limitation - penalty - Whether part of the demand is barred by limitation and the correctness of penalty imposed. - HELD THAT: - The Tribunal noted that the appellants had placed on record a letter dated 17.07.2007 informing department officials about their activity and intention to discharge excise duty on scrap, and that the Lower Authorities did not consider this material. Given this omission, the Tribunal remanded the question of limitation to the Original Adjudicating Authority for fresh decision based on documentary evidence. The Tribunal also directed that the question of penalty be left open for de novo consideration by the Adjudicating Authority. [Paras 6, 7]

Matter remanded to the Original Adjudicating Authority for fresh adjudication on limitation; penalty issue to be decided afresh in de-novo proceedings.

Final Conclusion: The appeal is dismissed on merits on the question of valuation - the value of scrap retained by the appellant forms part of the consideration for the repair service and is taxable - but the matters of limitation and penalty are remitted to the Original Adjudicating Authority for fresh decision based on the record.

Exemption under Notification No. 18/2009-ST (reverse charge for Business Auxiliary Service) - procedural lapse versus substantive benefit - service tax leviability for services performed outside India - Business Exhibition Service taxability - Technical Inspection and Certification Service - place and nature of performance - GTA (Transport of Goods by Road) services - proof of agency involvement - limitation and extended period - suppression and mala fide - Cenvat credit / Revenue neutrality

Exemption under Notification No. 18/2009-ST (reverse charge for Business Auxiliary Service) - procedural lapse versus substantive benefit - Whether the appellants are entitled to exemption under Notification No.18/2009-ST for Business Auxiliary Services received from foreign commission agents despite late filing of EXP-1 and EXP-2 forms. - HELD THAT: - The Tribunal held that the exemption in Notification No.18/2009-ST applies to the commission-agent Business Auxiliary Services received from abroad and that non-filing of EXP-1/EXP-2 is a procedural lapse which cannot defeat the substantive benefit conferred by the notification. The Tribunal relied on earlier decisions of the Tribunal which treated non-filing as procedural and not a ground for denial of the exemption, and found no justifiable reason to uphold the demand confirmed by the adjudicating authority on the ground of late filing of returns/forms. [Paras 6]

Exemption under Notification No.18/2009-ST allowed; demand on account of Business Auxiliary Services from foreign service providers set aside.

Service tax leviability for services performed outside India - Business Exhibition Service taxability - Whether Business Exhibition Services held and performed outside India are taxable in India on the appellant under reverse charge. - HELD THAT: - The Tribunal found that the exhibitions were admittedly held in foreign countries and that Board's Circular stating that service tax is leviable only if services are received in India is binding on departmental officers. Since no service was provided in India, the taxability could not be sustained and the adjudicating authority's contrary conclusion, based on absence of substantial judicial pronouncement, was rejected. [Paras 6]

Demand in respect of Business Exhibition Services performed abroad set aside as not taxable in India.

Technical Inspection and Certification Service - place and nature of performance - Whether amounts remitted to foreign entities claimed as Technical Inspection and Certification Services attract service tax on reverse charge when no inspection or certification by the foreign provider is shown. - HELD THAT: - The Tribunal observed that the Department failed to establish that any inspection or certification was performed by the foreign service providers; payments related to procurement of technical literature and standards, not to inspection/certification. In the absence of proof of the nature of service (inspection/certification) performed by the foreign providers, the demand could not be sustained. [Paras 7]

Demand in respect of Technical Inspection and Certification Services from abroad set aside.

GTA (Transport of Goods by Road) services - proof of agency involvement - Whether service tax on GTA services can be confirmed where the appellants produced invoices showing transportation by individual truck owners and asserted that where GTA was used service tax was paid. - HELD THAT: - The Tribunal accepted the appellants' categorical stand that most transportation was performed by individual truck owners and that wherever GTA agency services were availed, service tax was paid. The adjudicating authority did not rebut this position with contrary evidence. Given the absence of evidence to the contrary, the Tribunal found no reason to uphold the demand on GTA services. [Paras 8]

Demand relating to GTA services not sustained and set aside.

Limitation and extended period - suppression and mala fide - Cenvat credit / Revenue neutrality - Whether the demands for the periods October, 2007 to March, 2012 (and other relevant periods) are barred by limitation or justify invocation of extended limitation period on account of suppression or mala fide, particularly where service tax would have been available as Cenvat credit. - HELD THAT: - The Tribunal noted the show cause notice was issued on 23.04.2013 for the period up to March, 2012, beyond the normal period of limitation. All services were reflected in the appellants' records and there was no substantiation of suppression or intentional mis-statement to warrant invocation of the extended period. Further, service tax on the impugned services was available as credit to the appellants, rendering the demand revenue neutral and further negating any finding of mala fide suppression. On these bases the Tribunal concluded the demands could not be sustained on limitation grounds. [Paras 9]

Demands are time-barred / cannot be sustained under extended limitation in absence of proven suppression or mala fide; revenue-neutral position noted.

Final Conclusion: The appeal is allowed; the impugned order confirming demands and imposing penalties is set aside in respect of the held issues (Business Auxiliary Services under Notification No.18/2009 ST, Business Exhibition Services held abroad, Technical Inspection & Certification Services from abroad, GTA services) and on limitation/revenue neutrality grounds; consequential relief granted to the appellant.

Valuation for service tax of renting of immovable property - Notional interest on interest-free security deposit - Taxable event in renting/lease - Pre-enactment agreements and taxability

Notional interest on interest-free security deposit - Valuation for service tax of renting of immovable property - Notional interest on an interest free security deposit cannot be added to the agreed rent for the purpose of valuing renting of immovable property for service tax. - HELD THAT: - The Tribunal examined whether the revenue was justified in loading a notional interest (15% p.a.) on the security deposit and treating the enhanced amount as the monthly consideration for levy of service tax. It noted that renting of immovable property became taxable w.e.f. 01.06.2007 and relied on precedents of this Tribunal which held that notional interest on security deposits cannot be added to the agreed rent for valuation of such services. Factually, the rent remained at Rs. 5,000 per month throughout the contract period, including after the security deposit was refunded, indicating that the deposit did not influence the rent. Applying these principles and the factual finding that the agreed rent was not affected by the deposit, the Tribunal held there was no reason to add notional interest to the monthly rent for assessment of service tax. [Paras 6]

Notional interest not added; impugned finding on valuation set aside.

Taxable event in renting/lease - Pre-enactment agreements and taxability - The lease agreement executed on 09.11.2005 (prior to taxability of the service) does not permit an inference that parties structured low rent and high deposit to evade service tax; the taxable incidence and valuation must be assessed in light of the timing and true contractual terms. - HELD THAT: - The Tribunal observed that the lease was executed in November 2005, before renting of immovable property was made taxable with effect from 01.06.2007. Given the antecedent execution date and the continuous charging of the same monthly rent even after the security deposit was refunded, the finding that the parties entered into the agreement to evade tax by inflating the deposit was not sustainable. The Tribunal therefore rejected the revenue's contention that the security deposit influenced the rent and that the lease event in 2005 rendered the deposit taxable, noting that the appellant had discharged service tax on monthly rentals once the service became taxable. [Paras 6]

Agreement dated 09.11.2005 not a basis to treat the deposit as altering taxable consideration; challenge to taxability on that ground allowed.

Final Conclusion: Following precedent and on the facts that the lease pre dated the taxable entry and the agreed monthly rent remained unchanged (even after refund of the deposit), the Tribunal held that notional interest on the security deposit could not be added to the rent; the impugned order is set aside and the appeal is allowed with consequential relief.

Validity of show cause notice - Demand based solely on balance sheet inadmissible - Requirement to examine agreements and invoices to determine nature of service - Exemption of taxable services provided to Reserve Bank of India - Taxability of cleaning services to non-commercial/public institutions

Validity of show cause notice - Demand based solely on balance sheet inadmissible - Impugned show cause notice and consequent demand were unsustainable and the Order-in-Original confirming the demand was set aside. - HELD THAT: - Tribunal found the show cause notice to be internally contradictory and based on an arithmetic aggregation of various receipts from the appellant's balance sheets without any scrutiny of underlying documents. Revenue did not examine the agreements entered into with service recipients or the invoices issued by the appellant to determine the exact nature of the activities or applicability of assessability tests and possible abatements. In these circumstances the demand, raised merely on the basis of balance-sheet figures and ST-3 returns without material scrutiny, was held to be vitiated and unsustainable.

Impugned order confirming demand quashed and appeal allowed.

Requirement to examine agreements and invoices to determine nature of service - Exemption of taxable services provided to Reserve Bank of India - Taxability of cleaning services to non-commercial/public institutions - Revenue failed to verify whether specific services fell within taxable categories or exemptions (including services to RBI and cleaning services to purported non-commercial hospitals), and such failure vitiated the proceedings. - HELD THAT: - Tribunal noted the show cause notice treated certain declared Para Medical Services as Manpower Supply without proper examination, and ignored that some services were rendered to entities (including Reserve Bank of India) covered by an exemption notification. The authority also did not address the appellant's contention that cleaning services to government or non-commercial hospitals might be outside levy. Because these factual and legal verifications-examination of agreements, invoices and recipients to determine applicability of exemptions or exclusions-were not undertaken, the demand could not be sustained.

Proceedings quashed for want of necessary factual and legal scrutiny; matter disposed by setting aside the impugned order.

Final Conclusion: The Tribunal set aside the Order-in-Original dated 29.01.2016 and allowed the appeal, holding the demand and penalty unsustainable because the show cause notice and adjudication proceeded without necessary examination of agreements, invoices and applicability of exemptions or exclusions (including services to RBI and alleged non-commercial hospitals).

Service tax on cleaning services - non-commercial buildings/premises - extended period of limitation - suppression of facts - limitation defence under Nizam Sugar Factory

Extended period of limitation - suppression of facts - Validity of show cause notice dated 28.10.2009 invoking extended period of limitation for the period November, 2005 to January, 2008 - HELD THAT: - The Tribunal found that the Department had knowledge of the appellant's activities as early as 13.08.2007. In those circumstances the invocation of the extended period of limitation by alleging suppression and issuing the show cause notice dated 28.10.2009 for November, 2005 to January, 2008 is unsustainable as being hit by limitation. The adjudicatory orders founded on that show cause notice were therefore set aside.

Show cause notice dated 28.10.2009 held time barred; impugned Order in Appeal dated 04.03.2011 set aside.

Limitation defence under Nizam Sugar Factory - extended period of limitation - Sustainability of show cause notice dated 29.09.2011 (period 2006-07 to 2009-10) in view of the Supreme Court ruling in Nizam Sugar Factory - HELD THAT: - The Tribunal held that the Supreme Court's decision in Nizam Sugar Factory applies to the facts of the case. Given earlier knowledge of the activity and the overlap with the earlier show cause notice, the Revenue could not validly invoke the extended period of limitation for the show cause notice dated 29.09.2011. Consequently, the demand and penalties confirmed pursuant to that notice were unsustainable and were set aside.

Show cause notice dated 29.09.2011 held unsustainable in view of Nizam Sugar Factory; impugned Order in Appeal dated 29.01.2014 set aside to the extent of the surviving demand and penalties.

Final Conclusion: Both appeals filed by the service provider are allowed and the demands and penalties sustained by the impugned orders are set aside; the Revenue's appeal is dismissed.

Bundled service (predominant main service doctrine) - Natural association of ancillary charges with main service - Construction of residential complex service - essential character test - Abatement under Notification No. 26/2012-ST - Application of fiction in taxability of bundled services

Bundled service (predominant main service doctrine) - Natural association of ancillary charges with main service - Abatement under Notification No. 26/2012-ST - Construction of residential complex service - essential character test - Whether charges described as External Development Charges, Club Building Charges, Fire Fighting Charges, Electrification Fitting Charges, Park Facing Preferential Location Charges, Electrical Sub Station Charges and similar charges form part of the consideration for construction of residential complex service and are eligible for abatement. - HELD THAT: - The Tribunal found as an undisputed fact that the sale deeds did not segregate the challenged charges and the deeds were executed for the entire consideration inclusive of those charges. Applying the principle in sub section (3) of Section 66F, the Tribunal held that where a service is naturally associated with a single service and gives the package its essential character, that naturally associated service is to be treated as a bundled service and regarded as the predominant/main service. In the facts of the case the construction of residential complex was held to give the essential character to the package, and the listed charges were essentially required to be provided along with that construction service and could not be independently contracted. Consequently those charges form part of the consideration for the construction service and fall within the scope of the abatement under the notification relied upon by the appellant.

Impugned Order in Original is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the challenged ancillary charges are bundled with and form part of the consideration for construction of residential complex service and are therefore eligible for abatement; the original demand and penalty were set aside.

Scientific or Technical Consultancy Service - definition of scientific or technical consultancy service under Section 65(92) of the Finance Act, 1994 - manufacturer not covered by scientific or technical consultancy service - collecting service tax does not preclude challenge to classification - sustainability of show cause notice

Scientific or Technical Consultancy Service - definition of scientific or technical consultancy service under Section 65(92) of the Finance Act, 1994 - manufacturer not covered by scientific or technical consultancy service - Whether the appellants, being manufacturers, provided 'Scientific or Technical Consultancy Service' as defined and thus were liable to service tax for the period May, 2008 to September, 2010. - HELD THAT: - The Tribunal examined the statutory definition of scientific or technical consultancy service and the factual position of the appellants. The appellants were manufacturers and not scientists or technocrats, nor a science and technology institution or organization. The show cause notice alleged provision of scientific or technical consultancy service, but the appellants did not satisfy the descriptive criteria in the statutory definition. The fact that the appellants had raised invoices and collected service tax did not alter the characterisation required by the definition; collection of tax alone does not establish that the service rendered falls within the specific taxable category alleged. On this basis the Tribunal found the show cause notice unsustainable because the essential attributes required by the definition were absent.

The Tribunal held that the appellants did not provide scientific or technical consultancy service as defined and set aside the impugned order, allowing the appeal.

Final Conclusion: The appeal was allowed; the show cause notice and consequent demand confirming provision of scientific or technical consultancy service were held unsustainable since the appellants, being manufacturers and not scientists, technocrats or a science and technology institution, did not meet the statutory definition.

Works Contract Service - Erection, Commissioning and Installation Service - construction for non-commercial/non-industrial purposes - exclusion under clause (ii)(b) of the Works Contract definition - classification of pipeline/canal construction supplied to Government/Government undertakings

Works Contract Service - Erection, Commissioning and Installation Service - construction for non-commercial/non-industrial purposes - Classification of the activity of laying pipelines/sewerage system - whether it amounted to Erection, Commissioning and Installation Service or was a civil construction activity falling within clause (ii)(b) of the definition of Works Contract Service. - HELD THAT: - The Tribunal examined the nature of the appellant's activity of laying pipelines and constructing sewerage systems and concluded that the work is essentially civil construction in character. The activity involved not merely installation for transport of fluid but also construction of the space and civil works where pipelines are laid. Relying on the Larger Bench decision in Lanco Infratech Ltd. and consistent Tribunal decisions (including Indian Hume Pipes Co. Ltd.), the Court held that construction of pipelines for water/sewerage is a construction activity and cannot be treated as an Erection, Commissioning and Installation Service as envisaged in sub-clause (ii)(a). The determinative reasoning is that the activity's core character is construction rather than installation of plant/machinery for transport action of fluids.

The laying of pipelines/sewerage system is a civil construction activity and does not qualify as Erection, Commissioning and Installation Service under sub-clause (ii)(a).

Exclusion under clause (ii)(b) of the Works Contract definition - classification of pipeline/canal construction supplied to Government/Government undertakings - construction for non-commercial/non-industrial purposes - Whether construction of pipelines/sewerage system provided to a state authority (Uttar Pradesh Jal Nigam) falls within the exclusion in clause (ii)(b) of the Works Contract Service definition and is therefore not exigible to service tax. - HELD THAT: - Applying the Larger Bench's ratio in Lanco Infratech Ltd., the Tribunal held that construction of canals/pipelines/conduits for irrigation, water supply or sewerage disposal, when provided to Government or Government undertakings, is for non-commercial, non-industrial purposes and falls within the exclusion enacted in clause (ii)(b) of the Works Contract definition. As the appellant's services were rendered to Uttar Pradesh Jal Nigam, a state authority, the amounts collected were outside the taxable ambit by virtue of that exclusion. The Tribunal also noted prior decisions of this Tribunal and Madras Bench that treat such works supplied to state water authorities as non-commercial construction activity.

Construction of pipelines/sewerage provided to the state authority is excluded under clause (ii)(b) of the Works Contract definition and is not exigible to service tax.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and held that the laying of pipelines/sewerage for Uttar Pradesh Jal Nigam is a civil construction activity falling within the exclusion of clause (ii)(b) of the Works Contract definition and is not taxable as Erection, Commissioning and Installation Service.

Rent-a-Cab Service - Extended period of limitation - Exemption under Mega Exemption Notification - Amendment by Notification No.6/2014 - Penalty under Section 78 of the Finance Act, 1994

Extended period of limitation - Rent-a-Cab Service - Sustainability of the demand raised for the extended period prior to 24.03.2014 - HELD THAT: - The Tribunal found that the question whether carriage with driver constituted a "Rent-a-Cab Service" was a live controversy subject to litigation and interpretation. The show cause notice was issued on 24.09.2015, and the normal period of limitation was held to run from 25.03.2014; therefore the demand relating to the extended period (prior to 24.03.2014) could not be sustained. There was no finding of suppression warranting invocation of the extended period. [Paras 5]

Demand for the extended period prior to 24.03.2014 is set aside.

Exemption under Mega Exemption Notification - Rent-a-Cab Service - Applicability of Mega Exemption Notification No.25/2012 to the period 25.03.2014 to 10.07.2014 - HELD THAT: - The Tribunal accepted the appellant's submission that the activity was exempted under Clause 23(b) of Notification No.25/2012 for the relevant interim period. Consequently, the levy was not attracted for the period from 25.03.2014 until the amendment effected by Notification No.6/2014 became operative. [Paras 5]

Levy is not sustainable for the period 25.03.2014 to 10.07.2014 due to the exemption under the Mega Notification.

Amendment by Notification No.6/2014 - Rent-a-Cab Service - Sustainability of demand from 11.07.2014 after amendment by Notification No.6/2014 - HELD THAT: - The Tribunal noted that Notification No.6/2014 amended the exemption by restricting it to non air-conditioned vehicles with effect from 11.07.2014. The appellant conceded that air-conditioned vehicles provided with drivers attracted service tax from 11.07.2014. In view of the amendment and the concession, the demand for the period from 11.07.2014 onwards was held to be sustainable. [Paras 5]

Demand is sustained for the period from 11.07.2014.

Penalty under Section 78 of the Finance Act, 1994 - Extended period of limitation - Validity of penalty imposed under Section 78 of the Finance Act, 1994 - HELD THAT: - Having set aside the demand relating to the extended period and having found no suppression, the Tribunal concluded that the penalty under Section 78 could not be sustained. The penalty was therefore set aside in consequence of the decision on limitation and the exemption periods. [Paras 5]

Penalty imposed under Section 78 is set aside.

Final Conclusion: The appeal is allowed: the demand for the extended period prior to 24.03.2014 is set aside; the levy is not sustainable for 25.03.2014 to 10.07.2014 due to the Mega Exemption Notification; the demand is sustainable from 11.07.2014 after amendment by Notification No.6/2014; the penalty under Section 78 of the Finance Act, 1994 is set aside; the appellant is entitled to consequential relief.

Committee on Disputes (COD) clearance - dismissal for want of COD clearance - tribunal's jurisdiction to dismiss appeals - keeping proceedings pending till COD clearance - recall of COD directions by Electronics Corporation of India Ltd. - restoration of appeals - delay in filing restoration applications - right to appeal

Committee on Disputes (COD) clearance - dismissal for want of COD clearance - tribunal's jurisdiction to dismiss appeals - keeping proceedings pending till COD clearance - recall of COD directions by Electronics Corporation of India Ltd. - Tribunal had no jurisdiction to dismiss appeals solely for want of COD clearance. - HELD THAT: - The Court examined the series of directions in ONGC (1991, clarificatory orders and subsequent decisions) and the recall of those directions by the Constitution Bench in Electronics Corporation of India Ltd., concluding that the ONGC directions only required courts/tribunals to refrain from proceeding with matters until COD clearance was obtained and did not empower dismissal of appeals for want of such clearance. The correct course, as reflected in the authorities and the Court's reading of ONGC and its clarifications, was to keep proceedings pending awaiting resolution or clearance; the Committee itself could resolve the dispute or grant clearance. The recall of the COD requirement removed the impediment to proceeding, reinforcing that the right to appeal remained intact and could not be effaced by a dismissal for lack of COD clearance. The Tribunal's dismissal thereby exceeded its jurisdiction and unlawfully denied the statutory right of appeal. [Paras 9, 13, 15]

Tribunal's dismissal of the appeals for want of COD clearance was impermissible and without jurisdiction; such appeals should not have been dismissed on that ground.

Restoration of appeals - delay in filing restoration applications - right to appeal - Restoration applications dismissed as belated must be allowed in the circumstances and the appeals restored for hearing on merits. - HELD THAT: - Having held that the Tribunal lacked jurisdiction to dismiss the appeals for want of COD clearance, the Court addressed the Tribunal's secondary ground that restoration applications were filed after long delay. The Court found that the appeals were not dismissed for want of prosecution or pre-deposit but only on an erroneous basis (absence of COD clearance). Dismissing restoration applications as belated in that peculiar factual and legal scenario would perpetuate the miscarriage of justice caused by the initial wrongful dismissal. Accordingly, fairness and the appellant's statutory right to have appeals adjudicated on merits required restoration of the appeals despite the passage of time. [Paras 16, 18]

Applications for restoration are to be allowed and the appeals are restored to their original numbers for hearing on merits.

Final Conclusion: All three appeals are allowed; the Tribunal's impugned order is set aside and the appeals are restored to their original numbers for adjudication on merits in accordance with law.

Reliance on concurrent adjudication by another revenue authority - finality of adjudication by non-excise authority as evidence - burden of proof for clandestine removal - liability for excise duty based on proved unaccounted sales - penalty on director for confirmed clandestine removal

Reliance on concurrent adjudication by another revenue authority - finality of adjudication by non-excise authority as evidence - burden of proof for clandestine removal - liability for excise duty based on proved unaccounted sales - Whether confirmation of demand for excise duty could be upheld where the Central Excise Department relied on records, audit reports and the adjudication of the Sales Tax Department holding certain sales to be unaccounted - HELD THAT: - The Tribunal accepted that the primary factual foundation for the excise demand derived from the Sales Tax Department's search, seizure, stock verification and audit reports which established unaccounted sales of finished goods. The Sales Tax adjudication was partly upheld and partly set aside on appeal within the Sales Tax proceedings; the portion of sales held to be unaccounted (and confirmed by the Deputy Commissioner, Commercial Tax) attained finality because the appellant did not challenge that decision. No fresh search, seizure or independent evidence was produced by the excise authorities beyond the documents and findings generated in the Sales Tax action, but the Tribunal treated the concluded Sales Tax adjudication and the underlying audit records as sufficient to sustain the excise duty demand to the extent confirmed by that adjudication. In the absence of additional evidence by the appellant to displace the Sales Tax findings, there was no reason to disturb confirmation of excise duty on the value of sales already held to be unaccounted. [Paras 4, 5]

Confirmation of excise duty demand in respect of the portion of sales already adjudicated by the Sales Tax authorities as unaccounted is upheld; the excise demand is not set aside.

Penalty on director for confirmed clandestine removal - liability for excise duty based on proved unaccounted sales - Whether the penalty imposed on the Director of the appellant-company was liable to be set aside - HELD THAT: - The Tribunal observed that the confirmed finding of unaccounted sales by the Sales Tax adjudication, which the appellant did not challenge, supported the conclusion that the appellant had indulged in sales without accounting for them. Given the finality of those findings and the absence of contrary evidence before the excise authorities, the Tribunal found no infirmity in the imposition of penalty upon the Director linked to the confirmed clandestine removal and sustained the penalty. [Paras 5]

Penalty imposed on the Director is sustained; there is no reason to interfere with its confirmation.

Final Conclusion: The Tribunal dismissed the appeal, upholding the confirmation of excise duty and the penalties (including that on the Director) to the extent they corresponded to the sales already adjudicated by the Sales Tax authorities as unaccounted, since those findings had attained finality and no fresh evidence was produced to overturn them.

Cenvat credit on renting of immovable property - apportionment of input tax credit based on area of use - disallowance of Cenvat credit - penalty under proviso to Section 11AC(1)(C) - remand for re-quantification of demand

Cenvat credit on renting of immovable property - apportionment of input tax credit based on area of use - disallowance of Cenvat credit - Extent of inadmissible Cenvat credit on renting of the leased premises used partly for manufacturing and partly as a depot. - HELD THAT: - The adjudicating authorities had accepted that of the total leased area of 33,000 sq. ft., 30,990 sq. ft. (93.91%) was used for manufacturing and 2,010 sq. ft. (6.09%) for depot activity. Rent liability depends on area leased; therefore Cenvat credit attributable to the depot area alone is inadmissible. Once the Commissioner accepted that only 6.09% of the renting service credit was ineligible, the department had no justification to apply any other ratio (such as turnover ratio) for quantification. Consequently, only 6.09% of the Cenvat credit availed on renting of immovable property is to be disallowed and the balance credit on that service is allowable. The appellant did not contest disallowance of Cenvat credit on other input services, which stands upheld with interest. [Paras 5]

Only 6.09% of the Cenvat credit availed on renting of immovable property is inadmissible; the remainder is allowable; disallowance on other input services upheld with interest.

Penalty under proviso to Section 11AC(1)(C) - disallowance of Cenvat credit - Extent of penalty payable for availing inadmissible Cenvat credit during the period in dispute. - HELD THAT: - The period in dispute falls within the applicability of the proviso to Section 11AC(1)(C) as it stood then. Having found that the ineligible credit was not wholly concealed and that part of the contention of the appellant was accepted, the Tribunal applied the proviso and reduced the penalty to fifty percent of the levied penalty amount. The equal penalty imposed by the adjudicating authority therefore requires reduction in accordance with the proviso. [Paras 5]

Penalty reduced to fifty percent in accordance with the proviso to Section 11AC(1)(C) as applicable for the period in dispute.

Remand for re-quantification of demand - Whether the matter requires re-quantification of demand and penalty by the adjudicating authority. - HELD THAT: - Although the Tribunal has determined the legal position on admissibility of credit for renting and on applicability of the proviso to penalty, the precise quantification of the demand (including interest) and the adjusted penalty requires calculation consistent with these conclusions. The impugned order's quantified demand is set aside and the matter is remanded to the adjudicating authority for limited purpose of re-quantification in accordance with the Tribunal's observations. [Paras 6]

Impugned order set aside only for limited purpose of re-quantification of correct demand with interest and corresponding penalty; matter remanded to adjudicating authority.

Final Conclusion: The Tribunal allowed the appellant's contention that only 6.09% of the Cenvat credit on renting of immovable property is inadmissible and reduced the penalty to fifty percent under the proviso to Section 11AC(1)(C); the quantified demand in the impugned order is set aside and the matter is remanded to the adjudicating authority for limited re-quantification of demand, interest and penalty for the period April, 2011 to October, 2013.

Provisional assessment - doctrine of unjust enrichment - adjustment of excess duty against short paid duty upon finalization of provisional assessment - test of unjust enrichment under Section 11B of the Central Excise Act

Provisional assessment - adjustment of excess duty against short paid duty upon finalization of provisional assessment - doctrine of unjust enrichment - Whether excess duty paid during the period of provisional assessment can be adjusted against duty short-paid on finalization without subjecting the excess to the test of unjust enrichment. - HELD THAT: - The Tribunal held that the question is no longer res integra and consistent decisions of the Tribunal and High Court establish that, where assessments were provisionally assessed and finalised, adjustment (netting off) of excess duty paid against duty short-paid is permissible without first subjecting the excess to the test of unjust enrichment. The bench relied on earlier Division Bench and three member decisions (including decisions in Toyota Kirloskar Auto Parts Pvt. Ltd., Indian Telephone Industries and Hindustan Zinc Ltd.) which concluded that adjustments at finalization of provisional assessments do not require separate proof that the excess duty burden was not passed on to the consumer. The Revenue's reliance on the Apex Court decision in Addison and Company was distinguished on the ground that Addison dealt with ordinary refund claims and not adjustments made on finalization of provisional assessments; accordingly, Addison was not held to govern the present factual matrix. Applying this precedent, the impugned finding that the excess paid duty was automatically hit by unjust enrichment and required credit to the Consumer Welfare Fund was set aside. [Paras 5, 6]

Impugned order upholding denial of adjustment on the ground of unjust enrichment is set aside; appeal allowed and impugned order quashed.

Final Conclusion: Following consistent Tribunal precedent that adjustments on finalization of provisional assessments may be made without applying the unjust enrichment test, the impugned order was set aside and the appellant's appeal allowed.

Proportionate reversal of CENVAT credit as compliance with Rule 6(3A) - application of Rule 6(3) where common inputs/input services are used for dutiable and exempted activities - procedural requirement to intimate option under Rule 6(3A) is directory and not a condition precedent

Proportionate reversal of CENVAT credit as compliance with Rule 6(3A) - application of Rule 6(3) where common inputs/input services are used for dutiable and exempted activities - procedural requirement to intimate option under Rule 6(3A) is directory and not a condition precedent - Whether reversal of proportionate CENVAT credit made by the appellant prior to issuance of show cause notice amounted to compliance with the procedure under Rule 6(3A) so as to preclude demand under Rule 6(3)(i). - HELD THAT: - The Tribunal found that the appellant had reversed proportionate CENVAT credit on 13.5.2015 before the show cause notice dated 22.1.2016. The decision applies the established principle that Rule 6(3A) prescribes a procedural mode for exercising the option to reverse credit and that failure to intimate the option in writing does not extinguish the substantive right to follow the second option of reversing proportionate credit. Relying on the Division Bench precedent in Cranes & Structural Engineers, the Tribunal held that a procedural lapse in intimation is curable and cannot justify denial of the benefit of reversal already effected. Consequently, the demand calculated under the first option of Rule 6(3)(i) was held unsustainable in law where proportionate credit had been reversed with interest prior to initiation of proceedings.

Impugned order rejecting appellant's appeal set aside; appeal allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal, holding that the earlier reversal of proportionate CENVAT credit satisfied the procedural provisions of Rule 6(3A) and accordingly set aside the demand upheld by the lower authority.

Valuation on the basis of retail sale price (MRP) - assessment under Section 4A of the Central Excise Act - valuation under Section 4 of the Central Excise Act - retail sale price as price to ultimate consumer - disclosure in return and voluntary payment of differential duty - CENVAT credit - penalty under Section 11AC and invocation of extended period

Valuation on the basis of retail sale price (MRP) - assessment under Section 4A of the Central Excise Act - retail sale price as price to ultimate consumer - Whether valuation on MRP under Section 4A was applicable to the 75 gms detergent bar - HELD THAT: - The Tribunal held that valuation on the basis of retail sale price (MRP) under Section 4A applies only where the goods are sold to the ultimate consumer. The definition of "Retail Sale Price" in Section 4A and Rule 2 of the PC Rules, 1977 denotes the price at which goods are sold to the ultimate consumer. In the present case the 75 gms detergent bar was not sold to the ultimate consumer but was distributed (intended for free distribution) and therefore valuation under Section 4A did not apply. The Tribunal relied on the precedent cited by the appellant which stands for the proposition that MRP-based valuation is inapplicable where there is no sale to the ultimate consumer, and applied that principle to set aside the finding that Section 4A governed valuation here.

Valuation on MRP under Section 4A was not applicable to the 75 gms detergent bar; valuation under Section 4 could not be displaced on the basis of MRP in absence of sale to the ultimate consumer.

Disclosure in return and voluntary payment of differential duty - CENVAT credit - penalty under Section 11AC and invocation of extended period - Whether the demand, appropriation and equal penalty were sustainable where the assessee had disclosed the valuation method in returns, paid the differential duty with interest before issuance of the SCN, and the purchaser (sister concern) was separately adjudicated in its favour - HELD THAT: - The Tribunal noted that the assessee had disclosed the method of valuation in its returns and that the Department discovered the matter from those returns. The assessee paid the differential duty and interest after being pointed out by the Range Superintendent, relying on an assurance and because the duty would be available as CENVAT credit to a sister concern; payment was made well before the SCN was issued. Separate proceedings against the purchaser (sister concern) for denial of CENVAT credit were subsequently resolved in favour of the purchaser. In these circumstances, and having regard to the disclosure and voluntary payment, the Tribunal found the confirmation of demand with appropriation of amounts paid and imposition of equal penalty under Section 11AC unsustainable.

The demand, appropriation of amounts already paid and the imposition of equal penalty were set aside as not sustainable in law.

Final Conclusion: The appeal is allowed. The impugned order of the Commissioner (Appeals) is set aside; the demand, appropriation and equal penalty are quashed, and the finding that valuation under Section 4A applied to the 75 gms detergent bar is rejected.

Refund as consequential relief - binding effect of Tribunal order on subordinate authorities - doctrine of unjust enrichment in refund claims - judicial discipline in implementation of appellate directions

Refund as consequential relief - Respondent is eligible for refund of amounts paid in excess as a consequential relief flowing from the Tribunal's order dated 04.05.2016. - HELD THAT: - The Tribunal had earlier allowed the respondent's appeals and expressly granted consequential relief. The refund claim filed by the respondent arose directly from that Tribunal order. The First Appellate Authority correctly held that where a refund claim is the consequence of an appellate/tribunal direction in favour of the claimant and that direction has not been stayed or set aside by a higher forum, the claimant is entitled to the consequential refund. The adjudicating authority's denial of refund on merits ignored the operative Tribunal direction and therefore was unsustainable. The appellate finding that the refund claim must be sanctioned as consequential relief was accepted by the Tribunal in the present appeal. [Paras 6, 8, 9]

Refund claim arising as consequential relief from the Tribunal's order dated 04.05.2016 is allowed and respondent is eligible for refund.

Binding effect of Tribunal order on subordinate authorities - judicial discipline in implementation of appellate directions - Adjudicating authority was bound by the unchallenged Tribunal order and erred in re-examining merits contrary to judicial discipline. - HELD THAT: - The adjudicating authority ventured into merits and applied the doctrine of unjust enrichment despite the Tribunal's unambiguous direction granting consequential relief. The First Appellate Authority correctly observed that in the face of an operative Tribunal ruling (which had not been stayed), the lower authority could not override or ignore that direction by diverting the refund to the Consumer Welfare Fund. Such conduct was held to be violative of judicial discipline and legally unsustainable. The Tribunal upholds the appellate conclusion that the lower authority's order must be set aside and the refund sanctioned in accordance with the Tribunal's directive. [Paras 8, 9]

Order of the adjudicating authority is set aside for failing to follow the operative Tribunal order; judicial discipline requires sanctioning the refund as directed by the Tribunal.

Doctrine of unjust enrichment in refund claims - Application of the Apex Court decision in Adison & Company Ltd did not justify denial of the refund where the Tribunal had granted consequential relief and its order remained operative. - HELD THAT: - While the departmental representative relied on the Apex Court's statement that evidence is required to show that duty was not passed on to the buyer, the Tribunal noted that the First Appellate Authority considered the Adison decision and concluded it was not applicable on the facts. More importantly, the Tribunal's own earlier adjudication on the appeals had examined the identical dispute (including the unjust enrichment contention) and granted consequential relief. As that Tribunal order was in force and not stayed or set aside, the adjudicating authority could not invoke Adison to negate the Tribunal's direction. The present Bench accepted the First Appellate Authority's approach and declined to entertain the departmental contention that Adison compelled denial of refund. [Paras 3, 4, 5, 8]

Adison & Company Ltd does not operate to defeat the respondent's refund in the circumstances where the Tribunal has granted consequential relief and that direction remains effective.

Final Conclusion: The appeal is rejected. The adjudicating authority's order is set aside; the First Appellate Authority's decision allowing the refund as consequential relief in terms of the Tribunal order dated 04.05.2016 is upheld and the refund claim shall be sanctioned accordingly.

Liability of job-worker to pay duty on intermediate goods manufactured on job-work basis - Rule 4(5)(a) of the Cenvat Credit Rules, 2002 - extended period of limitation and requirement of suppression or misdeclaration - reference to Larger Bench for resolving conflicting views

Liability of job-worker to pay duty on intermediate goods manufactured on job-work basis - reference to Larger Bench for resolving conflicting views - Job-worker M/s. Thermax Ltd. is liable to pay duty on intermediate goods manufactured on job-work basis and supplied to the principal. - HELD THAT: - The Larger Bench of the Tribunal considered the reference framed by the Bench and, after examining the facts and law, held that the job-worker M/s. Thermax, being the manufacturer of excisable goods when processing inputs received from the principal on job-work basis, is liable to pay duty on the intermediate goods supplied to the principal. That determination was recorded by the Larger Bench and is reflected in the Tribunal's order directing placement before the referral bench for appropriate orders. The present Bench notes that, on merit, the liability to discharge duty stands decided against the appellant and the appellant has fairly admitted that position. [Paras 2]

The Larger Bench's holding that the job-worker is liable to pay duty on the intermediate goods manufactured on job-work basis is accepted.

Rule 4(5)(a) of the Cenvat Credit Rules, 2002 - extended period of limitation and requirement of suppression or misdeclaration - Extended period of limitation cannot be invoked against the appellant for recovery of duty where inputs/raw materials were moved under Rule 4(5)(a) and the liability was a subject of bona fide dispute referred to the Larger Bench. - HELD THAT: - All movements of inputs/raw materials from the principal to the appellant complied with the job-work procedure under Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The question whether a job-worker must discharge duty in such circumstances was beset by conflicting views within the Tribunal and was the subject-matter of a reference to the Larger Bench. In these circumstances, there was a bona fide dispute as to liability; the appellant acted under a belief supported by statutory annexures and challans. Since there is no finding of suppression or misdeclaration, the conditions for invoking the extended period of limitation are not satisfied. Accordingly, the demand raised by the show cause notice dated 18.7.2003 for the period September 2001 to June 2002 is time-barred to the extent premised on extended limitation. [Paras 6]

Extended period of limitation could not be invoked; the demand for the specified period is barred by limitation and the impugned order is set aside on this ground.

Final Conclusion: The Larger Bench's finding that the job-worker is liable on merits is recorded, but because the movements were under Rule 4(5)(a) and the question of liability was the subject of a bona fide dispute referred to the Larger Bench, extended limitation cannot be invoked; the impugned order is set aside and the appeals are allowed with consequential relief as per law.

Retrospective application of procedural limitation - time limit for availment of CENVAT credit - claim of CENVAT credit on inputs - remand for verification and fresh decision on merits - principles of natural justice in adjudication of credit claims

Retrospective application of procedural limitation - time limit for availment of CENVAT credit - claim of CENVAT credit on inputs - Amendment to Rule 4 of the CENVAT Credit Rules, 2004 prescribing a time limit for availment of CENVAT credit is not applicable retrospectively to inputs used and rights accrued during June 2009 to January 2010. - HELD THAT: - The Tribunal found that during the period June 2009 to January 2010 there was no statutory time limit under Rule 4 for claiming CENVAT credit on inputs, and the amendments introducing a six month (w.e.f. 01.09.2014) and subsequently one year (w.e.f. 01.03.2015) limitation cannot be applied retrospectively to deny credits which accrued in the earlier period. The Tribunal noted that the appellant had used inputs in manufacture and the alleged right to credit arose in that earlier period; therefore rejection of the claim solely on the ground of limitation introduced later is legally unsustainable. [Paras 6]

Rejection of CENVAT credit on the ground of the time limit prescribed subsequently in Rule 4 is not sustainable for the period June 2009 to January 2010.

Remand for verification and fresh decision on merits - claim of CENVAT credit on inputs - principles of natural justice in adjudication of credit claims - The claim for CENVAT credit is remitted to the Original Authority for fresh adjudication on merits and verification of documents without applying the time limit in Rule 4, and after affording opportunity of hearing. - HELD THAT: - The Tribunal observed that earlier the CESTAT had not rejected the credit claim on merits but had declined to grant it due to absence of scrutiny of documents. Having held that the subsequent limitation cannot be applied retrospectively, the Tribunal set aside the impugned order and remanded the matter to the Original Authority to examine the appellant's documentary evidence and decide the entitlement to credit on merits. The Original Authority is directed to follow the principles of natural justice in conducting such verification and decision making. [Paras 6]

Matter remitted to the Original Authority to decide the appellant's CENVAT credit claim on merits after document scrutiny and following principles of natural justice, without applying the time limit in Rule 4.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the Original Authority is directed to decide the appellant's claim for CENVAT credit on inputs (relating to June 2009-January 2010) on merits after document verification and after affording opportunity of hearing, without applying the post facto time limit prescribed in Rule 4 of the CENVAT Credit Rules, 2004.

Cenvat credit - capital goods - inputs - User Test Principle - overruled precedent

Cenvat credit - capital goods - inputs - User Test Principle - overruled precedent - Whether structural steel items (angles, channels, HR plates, MS rounds, joist, sections, wire rope, wire mesh, etc.) used by the appellant are 'inputs' or 'capital goods' entitling the appellant to Cenvat credit for the period January, 2011 to June, 2011. - HELD THAT: - The Tribunal applied the User Test Principle as elucidated by higher courts, holding that structural steel items used in fabrication of support structures for machines and capital installations become parts/components of relevant capital goods where they are so used and worked upon. The adjudicating authority and Commissioner(Appeals) erred in relying upon a Larger Bench decision that has been overruled by subsequent authoritative decisions; therefore reliance on the overruled precedent was improper. Applying the User Test Principle to the material facts, the Tribunal concluded that the structural items in question fall within the definition of capital goods and are accordingly eligible for Cenvat credit. The Tribunal further observed that the Commissioner(Appeals)'s failure to follow the prevailing law constituted judicial indiscipline and warranted setting aside of the impugned order.

Impugned order set aside and appeal allowed; structural steel items held to be capital goods and eligible for Cenvat credit for the period in dispute.

Final Conclusion: The Tribunal allowed the appeal, setting aside the orders below and holding that the structural steel items used for fabrication of support structures qualify as capital goods eligible for Cenvat credit for January, 2011 to June, 2011.

Clandestine removal - burden of proof - corroboration of confession - recovered documents as starting point of investigation - preponderance of probabilities in clandestine removal cases - parallel invoices - onus shifted to assessee to prove statutory records - penalty under Section 11AC

Clandestine removal - burden of proof - recovered documents as starting point of investigation - preponderance of probabilities in clandestine removal cases - corroboration of confession - Whether the demand of duty and penalty based on entries in loose papers recovered from the factory establishing clandestine removal is sustainable. - HELD THAT: - The Tribunal found that the Revenue's case rested solely on rough entries in loose papers and on statements of two employees, without any corroborative independent evidence. No discrepancy in stock was detected on the visit, buyers and transporters were not contacted, the scribe of the loose papers was not identified, and there was no evidence of excess raw material procurement or production. The law requires positive and affirmative evidence to establish clandestine removal; documents recovered are only a starting point and cannot alone support a demand based on surmise. Even confessional statements require scrutiny and independent corroboration. Applying these principles, the Tribunal held that the Revenue failed to discharge the burden of proof and that the demand and penalty founded on the loose papers were unsustainable. [Paras 7, 8, 9, 10, 11]

Demand of duty and penalty insofar as based on the recovered loose papers is set aside.

Parallel invoices - onus shifted to assessee to prove statutory records - penalty under Section 11AC - Whether duty, interest and penalty can be confirmed in respect of nine parallel Central Excise invoices recovered from the assessee's factory. - HELD THAT: - The Tribunal noted that the nine parallel invoices were recovered from the assessee's premises and were not denied or shown to be part of the statutory records by the assessee. Although the Revenue did not further investigate buyers or transporters, recovery of these invoices and the assessee's admission that clearances occurred under their cover shifted the onus to the assessee to prove that they formed part of statutory records. The assessee produced no evidence to that effect. Accordingly, the Tribunal held that duty, interest and penalty in respect of those nine invoices could be confirmed in terms of the provisions relating to demand and penalty (Section 11AC). [Paras 12]

Duty, interest and penalty are confirmed in respect of the nine parallel invoices recovered from the factory.

Penalty under Section 11AC - individual liability and specific role - Whether the penalty imposed on Shri Harmeet Singh (partner) is sustainable. - HELD THAT: - The Tribunal observed that the principal demand based on loose papers was set aside and that no specific role was attributed to Shri Harmeet Singh to justify a personal penalty. In the absence of distinct findings showing his involvement, imposition of penalty on him was held to be unjustified. [Paras 13]

Penalty imposed on Shri Harmeet Singh is set aside and his appeal is allowed.

Final Conclusion: The appeals are disposed by setting aside the duty and penalty confirmed on the basis of recovered loose papers, while confirming duty, interest and penalty in respect of nine recovered parallel invoices; the penalty on the partner is set aside.

Cenvat credit - input-output ratio - processing loss/wastage during manufacture - entitlement to credit where inputs are converted to waste or scrap during manufacture - Rule 16(1) of Cenvat Credit Rules, 2004 - penalty for wrongful availment / mala fide

Cenvat credit - input-output ratio - processing loss/wastage during manufacture - entitlement to credit where inputs are converted to waste or scrap during manufacture - Validity of denial of Cenvat credit on the basis of comparison of input consumption and output (input-output ratio) for 2006-07 and 2007-08 - HELD THAT: - Revenue denied Cenvat credit contending that higher inputs shown in 2006-07 vis-a -vis 2007-08, despite lower output, indicated excess credit. The Tribunal held that final output cannot be mechanically determined by input-output ratio. The appellant explained that 2006-07 was the first commercial year with substantial shop-floor wastage and that the products are high-precision, leading to rejection during manufacture. Once inputs are issued for manufacture, credit is not forfeited merely because inputs are converted into waste or scrap during the manufacturing process. In the absence of evidence that inputs were cleared "as such" after availing credit, or any allegation to that effect, there was no basis to deny credit or uphold penalty. The demand and penalty based solely on the input-output comparison were therefore set aside. [Paras 7]

Demand of Rs. 79,71,677/- (impugned demand relating to excess availed credit) and the penalty imposed thereon set aside.

Rule 16(1) of Cenvat Credit Rules, 2004 - rejected goods not processed - penalty for wrongful availment / mala fide - Liability in respect of Cenvat credit availed on rejected products and imposition of penalty - HELD THAT: - The appellant accepted before the Commissioner that duty was payable in respect of rejected goods which were not processed, and the adjudicating authority accordingly confirmed the duty under Rule 16(1). The Tribunal upheld the confirmation of duty since the appellant did not contest liability. However, finding no mala fide and that transactions were reflected in records, the Tribunal held that invoking penal provisions was not justified and set aside the penalty imposed in respect of the demand. [Paras 8]

Confirmation of duty of Rs. 1,59,541/- upheld; penalty of Rs. 1,59,541/- imposed thereon set aside.

Final Conclusion: The appeal is allowed in part: the demand and penalty based on alleged excess availment of Cenvat credit (derived from input-output ratio) are set aside; the duty confirmed in respect of rejected products under Rule 16(1) is sustained, but the penalty relating thereto is quashed.

Availability of Cenvat credit on the basis of STTG certificate - replacement of Railway Receipt by STTG certificate where relatable - consignor-to-consignee transfer of STTG certificate and entitlement of consignee to avail credit - departmental circular as clarification of law with retrospective application

Availability of Cenvat credit on the basis of STTG certificate - replacement of Railway Receipt by STTG certificate where relatable - Credit availed on the basis of Railway Receipts could be regularised by production of STTG certificate relatable to those RRs and denial of credit solely because the STTG certificate was not available at the time of taking credit was not justified. - HELD THAT: - The appellant had availed credit on the basis of Railway Receipts (RRs) and subsequently produced STTG certificates issued by the Railways which were relatable to the same RRs. The Tribunal held that in such circumstances the RRs are replaced by the STTG certificates thereby satisfying the statutory requirement for availment of credit. There was no allegation that the goods were not received, that service tax was not paid by Railways, or that the inputs were not used in manufacture; therefore refusal to accept the subsequently-produced STTG certificates on a hyper-technical ground of non-availability at the time of taking credit was unsustainable. The Tribunal accordingly set aside the demand, interest and penalty confirmed on this basis. [Paras 4, 6]

Impugned denial of credit on the ground that STTG certificate was not available at the relevant time is set aside and credit regularised where STTG certificate is relatable to the RRs.

Consignor-to-consignee transfer of STTG certificate and entitlement of consignee to avail credit - departmental circular as clarification of law with retrospective application - A consignor who has paid service tax and has not availed Cenvat credit may obtain consignee-wise STTG certificates from Railways and transfer them to the consignee; a Board circular clarifying this position applies as a clarification of the law and may be relied upon even if issued after the relevant period. - HELD THAT: - The Tribunal relied on the Board's Circular No. 1048/36/2016-CX (paras (v) and (vi)) which permits the consignor to procure consignee-wise STTG certificates from Railways and transfer them to consignees who may then avail Cenvat credit. In the present case SAIL declared it had not availed the credit and procured the STTG certificates which were produced by the appellant. The Revenue's objection that the circular was issued in 2016 and therefore inapplicable to the period July 2014-March 2015 was rejected: the circular was treated as a clarification of the law and hence retrospective in effect to the extent it explained the legal position already existing on the statute book. Consequently the objection that STTG certificates not issued in the appellant's name precluded credit was unsustainable. [Paras 5, 6]

Consignor-obtained STTG certificates transferred to the consignee entitle the consignee to avail Cenvat credit; the Board circular clarifying this position is applicable as a clarification of the law.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders confirming demand, interest and penalty, and held that the appellant is entitled to retain the Cenvat credit where STTG certificates relatable to the RRs were subsequently produced and where the consignor has transferred STTG certificates to the consignee in accordance with the Board's clarification.

Validity of Rule 8(3A) of Central Excise Rules, 2002 - Debarment from using Cenvat credit on default - Precedential effect of High Court decisions pending Special Leave Petition - Effect of Supreme Court stay on the ratio of lower court judgments

Validity of Rule 8(3A) of Central Excise Rules, 2002 - Debarment from using Cenvat credit on default - Rule 8(3A) cannot be applied to debar the assessee from using Cenvat credit where the High Courts have declared the provision unconstitutional and tribunals have followed those decisions. - HELD THAT: - The Tribunal observed that the question whether an assessee may be debarred from using Cenvat credit under Rule 8(3A) has been authoritatively addressed by several High Courts which have declared the provision unconstitutional, including the decision in M/s Indsur Global Ltd. . Those High Court decisions have been followed by other High Courts and by this Tribunal in a series of decisions. In view of the settled position in these precedents, the impugned demands and penalties founded on exclusion of Cenvat credit were not sustainable and the Commissioner (Appeals) correctly set them aside. [Paras 3, 6]

Proceedings founded on Rule 8(3A) to debar use of Cenvat credit were not sustained and the Commissioner (Appeals) order in favour of the assessee is upheld.

Precedential effect of High Court decisions pending Special Leave Petition - Effect of Supreme Court stay on the ratio of lower court judgments - A stay of a High Court judgment by the Supreme Court does not obliterate the underlying reasoning of that judgment and such High Court decisions may be followed by the Tribunal until the Supreme Court decides the SLP. - HELD THAT: - The Tribunal noted Revenue's contention that the Gujarat and Madras High Court decisions were stayed by the Supreme Court, and therefore should not be followed. Relying on authority that an order keeping a judgment in abeyance does not remove its underlying reasoning, the Tribunal held that the stay does not 'deface' the basis of the High Court decisions. The Tribunal further relied on its own and other High Court decisions taking the same view and applied those precedents to the present appeals. [Paras 4, 5, 6]

The stay of the High Court decisions in SLP proceedings before the Supreme Court does not preclude following those High Court ratios; therefore Revenue's plea based on the stay is untenable.

Final Conclusion: Revenue's appeals are devoid of merit and are rejected; the Commissioner (Appeals) order setting aside demands and penalties based on Rule 8(3A) is affirmed.

Cenvat credit reversal for exempted/non dutiable clearances - application of Rule 6(3)(b) of Cenvat Credit Rules, 2004 to supplies to SEZ - treatment of supplies to SEZ units and developers as 'export' - retrospective operation of SEZ amendment - invocation of extended period under proviso to Section 11AC

Application of Rule 6(3)(b) of Cenvat Credit Rules, 2004 to supplies to SEZ - treatment of supplies to SEZ units and developers as 'export' - Cenvat credit reversal for exempted/non dutiable clearances - Sustainability of demand and penalty for non reversal of cenvat credit in respect of TMT bars supplied without payment of duty to SEZ units and SEZ developers for the period October 2006 to December 2008. - HELD THAT: - The Tribunal held that supplies to SEZ units and SEZ developers fall within the concept of 'export' and are therefore governed by the SEZ provisions. Relying on the decision in Sujana Metal Products Ltd. (and consistent subsequent tribunal and High Court authorities), the Tribunal accepted that the amendment effected with effect from 31.12.2008 must be treated as retrospective for the purpose of treating supplies to SEZ as export; consequently, sub rule (6) of Rule 6 (and the proviso thereto) cannot be invoked to demand cenvat reversal for such supplies made prior to 31.12.2008. In view of that binding precedent, the demand confirmed under Rule 14, the interest and the penalty imposed under Rule 15 read with Section 11AC, to the extent founded on the non reversal for supplies to SEZ, were unsustainable. The Tribunal set aside the impugned order and allowed the appeal, granting consequential relief.

Impugned demand, interest and penalty in respect of supplies to SEZ units and developers for October 2006 to December 2008 set aside; appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: the confirmed duty, interest and penalty relating to supplies made without payment of duty to SEZ units and SEZ developers during October 2006 to December 2008 are held unsustainable in view of authoritative precedents treating such supplies as 'export' and the retrospective effect of the SEZ amendment; the impugned order is set aside and consequential relief granted.

Penalty under Section 54(1)(5) - satisfaction of the Assessing Officer - opportunity of being heard - imposition of penalty on dealer or other person - seizure proceedings are summary in nature - prohibition on multiple penalty orders for the same transaction

Penalty under Section 54(1)(5) - satisfaction of the Assessing Officer - prohibition on multiple penalty orders for the same transaction - Whether, after a penalty order has been validly passed against the seller in respect of the transaction, the assessing authority had jurisdiction to initiate and impose a second penalty on the purchaser for the same transaction. - HELD THAT: - Section 54(1)(5) permits imposition of penalty where the assessing authority 'is satisfied' that any dealer or other person has committed the wrong; such satisfaction must be recorded in proceedings and after giving the person a reasonable opportunity of being heard. In the present case the assessing authority recorded its satisfaction on 08.11.2013 solely against the selling dealer; no allegation, notice or satisfaction was recorded against the purchaser in those proceedings. Once satisfaction has been recorded and a penalty order passed against the seller for the transaction, the power to impose a further penalty for the same transaction is exhausted. Permitting a subsequently recorded, contradictory satisfaction against the purchaser while allowing the earlier satisfaction against the seller to stand would amount to self-contradiction by the authority. Although seizure proceedings are summary and do not necessarily bind final penalty findings, if the assessing authority intends to proceed against another person it must express that intent and afford that person the opportunity to be heard in the relevant penalty proceedings; no such step was taken here in relation to the purchaser. [Paras 13, 15, 16, 17, 20]

The assessing authority had no jurisdiction to impose a second penalty on the purchaser after having recorded satisfaction and imposed penalty on the seller; the subsequent penalty on the purchaser is invalid.

Seizure proceedings are summary in nature - opportunity of being heard - imposition of penalty on dealer or other person - Whether the fact that goods were seized at the hands of the seller and security deposited by the seller precluded imposition of penalty on the purchaser when no allegation was made against the purchaser at the stage of seizure. - HELD THAT: - Seizure proceedings are summary and intended to secure the interest of the revenue; findings in such proceedings do not necessarily determine final penalty liability. Thus, the mere fact that seizure was effected against the seller and security deposited by him is not in itself decisive to preclude proceedings against the purchaser. However, where the assessing authority, during the penalty proceedings, records satisfaction only against the seller and does not issue notice or record any satisfaction against the purchaser, the authority cannot thereafter, without having earlier expressed such intent and afforded the purchaser an opportunity to be heard, rope in the purchaser by issuing a fresh penalty order inconsistent with its earlier satisfaction. In the present case no notice was issued to the purchaser during the pendency of the penalty proceedings against the seller. [Paras 18, 19, 20]

Seizure and deposit of security by the seller do not automatically bar proceedings against the purchaser, but absent an expressed intention and notice to the purchaser in the original penalty proceedings, a later penalty against the purchaser in respect of the same transaction is impermissible.

Final Conclusion: The revision is allowed and the penalty imposed on the assessee (purchaser) in respect of the transaction is set aside; the penalty stands deleted.

Inter-state sale - appropriation to the contract - place of appropriation - works contract - indivisible works contract - passing of title by payment - place of conclusion of contract

Inter-state sale - appropriation to the contract - place of appropriation - works contract - Whether the supply of goods from Mumbai to Delhi for execution of the works contracts constituted an inter-state sale and hence was not taxable under the Delhi sales tax law. - HELD THAT: - The Tribunal found, and this Court agreed, that the goods were appropriated to the contract in Mumbai when the offer placed by the Delhi branch was accepted and further steps were taken by the supplier, so that the sale was completed at the place of appropriation. The sample contracts, invoice references and terms (including staged payment provisions and a clause providing that title passes on full payment, and that the contract is indivisible) support the conclusion that appropriation and the formation of the binding obligation occurred in Mumbai rather than in Delhi. Precedents treating a company and its branches as one legal entity and recognising that goods supplied by an out-of-state factory pursuant to orders taken by a branch constitute inter-state sale were held to apply. On that basis the transactions were held to be inter-state sale and not taxable under the Delhi Sales Tax on Works Contract Act, 1999. [Paras 3, 4]

The Tribunal's conclusion that the goods moving from outside Delhi for execution of the works contract were inter-state sale is upheld; the Delhi sales tax did not apply.

Final Conclusion: The High Court dismissed the Government's challenge and affirmed the Tribunal's finding that the goods were appropriated to the contract in Mumbai and therefore constituted inter-state sale, so no question of law arises.

Definition of "transporter" under Section 57 - confiscation of vehicle under Section 57(9) - detention, seizure and release powers of check-post officer - compounding of offence and payment of lump-sum in lieu of penalty under Section 57(17) - collusion with dealer as ground for confiscation - construction of penal provisions in taxing statutes

Definition of "transporter" under Section 57 - confiscation of vehicle under Section 57(9) - Appellant-owner of the vehicle is covered by the statutory definition of "transporter" and liable to action under Section 57(9) including confiscation of the vehicle - HELD THAT: - Explanation (ii) to Section 57 includes the owner of the vehicle carrying the goods within the expression "transporter." The vehicle owned by the appellant was hired to a transport company and was used to carry out-to-out goods through Madhya Pradesh; on inspection the documents were found deficient and proceedings were initiated. The statutory scheme empowers the check-post officer to detain, seize and, after inquiry, confiscate the vehicle where the transporter in possession or control of goods is found to be in collusion with a dealer involved in tax evasion. On the material before the authority the appellant, as vehicle-owner in possession/control during movement, falls within the definition of transporter and thus within the scope of Section 57(9). The court accepted the statutory construction that the comprehensive wording of Section 57 must be given effect to so as to accomplish the object of preventing tax evasion.

Owner of the vehicle is within the definition of "transporter" and may be subjected to confiscation under Section 57(9).

Compounding of offence and payment of lump-sum in lieu of penalty under Section 57(17) - collusion with dealer as ground for confiscation - construction of penal provisions in taxing statutes - Compounding the offence by payment of the prescribed lump-sum under Section 57(17) does not preclude subsequent action under Section 57(9) for confiscation where collusion is established - HELD THAT: - Sub section (17) allows a transporter, subject to conditions, to pay a lump-sum in lieu of penalty and forego challenge to the penalty order. However, in the present case the transporter admitted guilt and paid twice the amount of tax as composition; the court found that such payment and admission established collusion with the dealer who evaded tax. The court rejected the contention that compounding validates the illegality or bars confiscation, holding that the deposit of the lump-sum corroborated collusion and thus attracted the confiscation power under subsection (9). The court noted established principles of construing taxing/penal provisions and held that nothing in the language of the Act requires reading subsection (17) so as to defeat the object of subsection (9).

Payment of the composition amount under Section 57(17) does not preclude confiscation under Section 57(9) where collusion is established; confiscation was therefore permissible.

Final Conclusion: The High Court found no substantial question of law in the appellant's contentions: the vehicle-owner falls within the statutory definition of "transporter" and, notwithstanding compounding under Section 57(17), payment and admission establishing collusion justified confiscation under Section 57(9); the appeal is dismissed.

Application of the N.D.P.S. Act vis-a -vis the Drugs and Cosmetics Act - manufactured drugs and scope of the N.D.P.S. Act - prima facie violation of the prohibition in Section 8 of the N.D.P.S. Act - concurrent operation of a special statute with a general statute - suspension of sentence pending disposal of appeals

Application of the N.D.P.S. Act vis-a -vis the Drugs and Cosmetics Act - manufactured drugs and scope of the N.D.P.S. Act - concurrent operation of a special statute with a general statute - prima facie violation of the prohibition in Section 8 of the N.D.P.S. Act - Whether the High Court was right in holding that possession of bulk/"manufactured drugs" must be tried under the Drugs and Cosmetics Act, 1940 and not under the N.D.P.S. Act. - HELD THAT: - The Court examined objectives and scope of both enactments and the prohibitory command of Section 8 of the N.D.P.S. Act, and noted that the N.D.P.S. Act is a special law dealing with narcotic drugs and psychotropic substances whereas the Drugs and Cosmetics Act regulates manufacture and standards of drugs for therapeutic use. Reliance was placed on this Court's precedent that the provisions of the N.D.P.S. Act operate in addition to those of the Drugs and Cosmetics Act and are not in derogation thereof. Section 80 of the N.D.P.S. Act permits application of the Drugs and Cosmetics Act but does not exclude prosecution under the N.D.P.S. Act where a prima facie contravention of Section 8 exists. In the present matters the Trial Courts recorded convictions for offences under Sections 21/22 of the N.D.P.S. Act on evidence of bulk possession without authorization, constituting a prima facie breach of the prohibitory provisions. The High Court's conclusion that manufactured drugs must be tried only under the Drugs and Cosmetics Act was therefore held to be legally unsustainable. [Paras 9, 10, 14, 15, 16]

The High Court's view that the accused must be tried under the Drugs and Cosmetics Act and not under the N.D.P.S. Act was set aside; possession of manufactured drugs in bulk without authorization can prima facie attract the N.D.P.S. Act and the two statutes can operate concurrently.

Suspension of sentence pending disposal of appeals - observations on merits while appeals pending - Whether the High Court erred in granting suspension of sentence and directing release on bail while the appeals were pending, including by making merits-based observations. - HELD THAT: - The Court found that the High Court, in allowing suspension of sentence, proceeded to record and rely upon substantive merit-based conclusions about the appropriate statute of trial. Such observations were held to be inappropriate while appeals were pending. Having regard to the gravity of the offences and the Trial Courts' findings of guilt under Sections 21/22 of the N.D.P.S. Act, the High Court's order directing suspension of sentence and release on bail was unsustainable. The Supreme Court accordingly set aside the High Court's order and directed that the accused be taken into custody forthwith. The Court, however, noted counsel submissions about period already undergone in some matters and requested the High Court to expedite disposal of the appeals. [Paras 16, 17, 18, 19]

The High Court's order granting suspension of sentence and bail (with merit-based observations) was set aside and the accused were directed to be taken into custody; the High Court was requested to expedite hearings in respect of those who had undergone substantial incarceration.

Final Conclusion: The appeals are allowed; the common High Court order dated 29.01.2018 permitting suspension of sentence and directing release on bail is set aside. The N.D.P.S. Act may apply to bulk possession of manufactured drugs without authorisation and operates in addition to the Drugs and Cosmetics Act; the accused are to be taken into custody and the High Court is requested to expeditiously dispose of the pending appeals.