TaxTMI Updates e-Newsletter
Dec 11,2018

Construction intended for sale - supply of services under Schedule II entry 5 - completion certificate / occupancy certificate as date of completion - first occupation - competent authority - entire consideration - taxability of advances received prior to completion

Completion certificate / occupancy certificate as date of completion - competent authority - construction intended for sale - supply of services under Schedule II entry 5 - Date of completion of construction is the date of Occupancy Certificate issued by the competent authority (BBMP) and the Chartered Engineer's certificate is not a substitute. - HELD THAT: - Entry 5 of Schedule II treats construction of a complex intended for sale as supply of services unless the entire consideration is received after issuance of a completion certificate by the competent authority or after first occupation, whichever is earlier. The CGST Act defines 'competent authority' by notification. The Bengaluru Mahanagara Palike Bye laws require submission of a certificate from a registered architect/engineer as a pre inspection document but mandate physical inspection by the authority and issuance of an Occupancy Certificate only after such inspection. Therefore the architect/engineer certificate is merely supportive and does not itself confer the character of completion. An Occupancy Certificate issued by BBMP certifies compliance with sanctioned plans and bye laws and is akin to a completion certificate for the purposes of Schedule II; hence its date is the date of completion for GST purposes. [Paras 7]

The date of the Occupancy Certificate issued by the Bruhat Bengaluru Mahanagara Palike is to be treated as the date of completion of construction; the Chartered Engineer's certificate is not a substitute.

Taxability of advances received prior to completion - entire consideration - construction intended for sale - supply of services under Schedule II entry 5 - Where any part of the consideration is received before the date of completion (date of Occupancy Certificate), the transaction is a supply of service and attracts GST. - HELD THAT: - Schedule II Entry 5 treats construction sold wholly or partly as a supply of services except where the entire consideration is received after issuance of the completion/occupancy certificate or after first occupation, whichever is earlier. Since the date of completion is the date of the Occupancy Certificate, any receipt of consideration (in whole or in part) prior to that date means the condition of 'entire consideration received after completion' is not satisfied and the transaction falls within chargeability as a supply of services under Schedule II. [Paras 7, 9]

If any part of the consideration is received before the date of the Occupancy Certificate, the transaction is a taxable supply of services under Entry 5 of Schedule II and GST is leviable.

Entire consideration - first occupation - construction intended for sale - supply of services under Schedule II entry 5 - If the entire consideration is received after the date of completion (date of Occupancy Certificate), the transaction is not liable to GST. - HELD THAT: - Entry 5 provides an exception to treatment as a supply of services where the entire consideration for sale of a complex is received after issuance of the completion certificate by the competent authority or after first occupation, whichever is earlier. As the Authority has held that the date of completion is the date of the Occupancy Certificate issued by BBMP, receipt of the entire consideration after that date means the exception applies and the transaction is not taxable under GST. [Paras 8, 9]

Where the entire consideration is received after the date of the Occupancy Certificate, the transaction is not liable to GST.

Final Conclusion: The Authority rules that for the subject project the date of completion is the date of the Occupancy Certificate issued by BBMP; any part payment received before that date renders the transaction a taxable supply of services under Entry 5 of Schedule II, whereas receipt of the entire consideration after that date is not liable to GST.

Supply of development rights - registration liability for supplier of development rights - consideration partly or wholly in the form of construction service - time of tax liability upon transfer of possession by conveyance deed or allotment - advance ruling

Supply of development rights - registration liability for supplier of development rights - consideration partly or wholly in the form of construction service - time of tax liability upon transfer of possession by conveyance deed or allotment - Applicant, being the land owner who supplied development rights to a developer in consideration partly in the form of construction service, is liable to be registered under the CGST/KGST Acts and to pay GST on the premises allotted to him. - HELD THAT: - The Authority examined Notification No.4/2018-Central Tax (Rate) dated 25.01.2018 which treats persons who supply development rights to a developer against consideration (wholly or partly in the form of construction service) as registered persons liable for tax. The notification also provides that the liability to pay central tax on such supply arises when the developer transfers possession or right in the constructed building to the supplier of development rights by entering into a conveyance deed or similar instrument (for example allotment letter). The applicant contributed land under a joint development agreement and, in return, is to receive specified flats and commercial area as consideration. The applicant has not produced any allotment order or shown that possession has been handed over; accordingly, the Authority proceeds on the basis that possession/transfer has not occurred. Applying the notification and the definition of persons liable for registration, the Authority held that the applicant is a supplier of a taxable service by way of transfer of undivided share in land in consideration of construction service and therefore is required to register and discharge the tax when the conditions for time of liability under the notification are met. [Paras 11, 12, 14, 15]

The applicant is liable to registration and to pay GST on the premises allotted to him in respect of the development rights supplied to the developer.

Final Conclusion: Advance ruling: The applicant, as supplier of development rights in consideration partly in the form of construction services, is liable to register under the CGST/KGST Acts and to pay GST on the premises allotted to him; the tax liability arises in accordance with Notification No.4/2018 when the developer transfers possession or right by conveyance deed or similar instrument.

Liability to pay tax on construction services supplied to supplier of development rights - time of taxation on transfer of possession or right in constructed property (conveyance deed/allotment) - valuation of composite supply involving transfer of land - deeming one third land value under Notification No.11/2017 para 2 - proportionate liability for service tax before the appointed day and GST thereafter under transitional provision

Liability to pay tax on construction services supplied to supplier of development rights - time of taxation on transfer of possession or right in constructed property (conveyance deed/allotment) - Applicant is liable to pay GST on the value of building constructed and handed over to the land owner under the Joint Development Agreement. - HELD THAT: - Notification No.4/2018-Central Tax (Rate) dated 25.01.2018 classifies suppliers of construction service to suppliers of development rights as registered persons in whose case the liability to pay central tax on such services arises when the developer transfers possession or right in the constructed complex to the supplier of development rights by entering into a conveyance deed or similar instrument (for example allotment letter). The facts show the applicant supplied construction service to the land owner against consideration in the form of transfer of development rights; accordingly the applicant is liable to pay GST when possession or right is transferred as specified in the Notification. [Paras 9]

The applicant must pay GST on the construction service supplied to the land owner under the JDA, with tax liability arising on transfer of possession/right as provided in the Notification.

Valuation of composite supply involving transfer of land - deeming one third land value under Notification No.11/2017 para 2 - Value for GST on the construction service is to be determined in terms of paragraph 2 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - Paragraph 2 of Notification No.11/2017 provides that where supply of service involves transfer of property in land or undivided share of land, the value of the service and goods portion shall be equivalent to the total amount charged for the supply less the value of land or undivided share, and the value of the land or undivided share shall be deemed to be one third of the total amount charged for such supply. The applicant's liability to pay GST on the construction component must therefore be computed following this valuation mechanism. [Paras 10]

GST payable by the applicant on the construction service shall be computed in accordance with para 2 of Notification No.11/2017 (deeming one third of total amount as land value and treating the remainder as the service/goods portion).

Proportionate liability for service tax before the appointed day and GST thereafter under transitional provision - Applicant is liable to pay service tax for services provided up to 30.06.2017 and GST for services provided after 01.07.2017, on a proportionate basis. - HELD THAT: - Section 142(11) of the CGST/KGST Act provides that tax shall be leviable under the existing law to the extent it was leviable thereunder for supplies up to the appointed day and under the CGST/KGST Act thereafter; where services spanned the appointed day the taxable person is entitled to take credit of prior law taxes for supplies made after the appointed day as prescribed. Applying this transitional provision, the Authority concludes that service tax is payable for the portion of construction service provided before 01.07.2017 and GST is payable for the portion provided after that date, on a proportionate basis. [Paras 11, 12]

The applicant must discharge service tax for the pre 01.07.2017 portion and GST for the post 01.07.2017 portion of the services, apportioned as per the transitional provision.

Final Conclusion: The Authority rules that the applicant must (i) pay GST on the building constructed and handed over under the JDA with tax point on transfer of possession/right as prescribed, (ii) determine the taxable value of the construction service in accordance with para 2 of Notification No.11/2017 (one third deemed as land value), and (iii) discharge service tax for services rendered up to 30.06.2017 and GST for services rendered thereafter, on a proportionate basis.

Supply of transportation of goods services - exemption under Notification No. 12/2017 - Central Tax (Rate) - goods transport agency (GTA) - composite supply - principal supply - works contract (composite works contract) - cross fall breach clause - place of supply - reverse charge mechanism

Supply of transportation of goods services - exemption under Notification No. 12/2017 - Central Tax (Rate) - goods transport agency (GTA) - composite supply - works contract (composite works contract) - cross fall breach clause - Whether the transportation services rendered by the applicant are exempt from GST under Sl. No. 18 of Notification No. 12/2017 - Central Tax (Rate). - HELD THAT: - The Authority examined the two separate agreements-an ex works supply contract and a services contract (which includes transportation, insurance, delivery, unloading, installation and related activities)-and the contractual cross fall breach clause which treats breach of one agreement as breach of the other. The Authority accepted the jurisdictional officer's factual and legal analysis that the first contract cannot be executed independently of the second, and that the contracts, though executed as two instruments, are interdependent and constitute a single composite works contract with single source responsibility. The applicant further admitted that it sub contracts road transportation to a GTA and discharges tax under the reverse charge mechanism; the Authority noted that in that factual matrix the applicant is the recipient of GTA services and not the supplier of road transportation. Given the composite nature of the supply (transportation and allied services being integral components of the works contract rather than standalone supplies) and the contractual allocation of single responsibility, the transportation component cannot be treated as an independently exempt supply under Sl. No. 18 of Notification No. 12/2017. The Authority relied on the contractual interdependence, the economic and factual reality of a single composite works contract, and consistent advance ruling precedents to conclude that the aggregate consideration falls to be taxed as a works contract service.

Answered in the negative; the transportation services are not exempt under Sl. No. 18 of Notification No. 12/2017 and form part of a taxable composite works contract.

Final Conclusion: The Authority held that the transportation services in the facts before it form part of an indivisible composite works contract (single source responsibility) and are not eligible for exemption under Sl. No. 18 of Notification No. 12/2017; the question is answered in the negative.

Place of supply - registration in State from where taxable supply is made - import of goods treated as inter state supply - location of the importer - e way bill: GSTIN of consignor and dispatch place

Place of supply - registration in State from where taxable supply is made - import of goods treated as inter state supply - location of the importer - Whether separate GST registration in West Bengal is required when imported goods are stored in a customs bonded warehouse at Haldia and invoices are raised from the Mumbai Head Office charging IGST. - HELD THAT: - The Authority found that supplies of goods imported into India fall within inter state trade or commerce and, for such imported goods, the place of supply is the location of the importer. The applicant is an importer registered in Mumbai and intends to clear the imported goods ex bond in the name of its Mumbai Head Office, paying applicable taxes at import. The applicant has no establishment, place of business or godown in West Bengal other than storage in a rented customs bonded warehouse. Registration under the GST law is required in the State from which a supplier makes taxable supplies. Since the place from which the applicant makes taxable supply, as determined for imported goods, is the Mumbai location of the importer and not West Bengal, the Authority concluded that separate registration in West Bengal is not required for the stated transactions. [Paras 6, 7, 8]

No separate GST registration in West Bengal is required for the described transactions; the place of supply is the Mumbai location of the importer and the supplier may invoice from the Mumbai GSTIN charging IGST.

E way bill: GSTIN of consignor and dispatch place - GSTIN of supplier - dispatch location - Whether the applicant can issue e way bills mentioning the Mumbai Head Office GSTIN as the consignor and the customs bonded warehouse at Haldia as the dispatch place when invoicing from Mumbai and charging IGST. - HELD THAT: - Having concluded that the place of supply for the imported goods is the Mumbai location of the importer and that invoices may be raised from the Mumbai GSTIN with IGST paid at import, the Authority held that it is permissible to carry out subsequent transactions on the Mumbai Head Office GSTIN. Consequently, it is acceptable to mention the Mumbai GSTIN in the e way bill while recording the dispatch place as the customs bonded warehouse at Haldia, subject to issuance of a proper tax invoice and payment of applicable IGST (or CGST+SGST/Compensation Cess as may be applicable in other cases) in accordance with law. [Paras 7, 8]

The applicant may transact on the Mumbai Head Office GSTIN and may mention the Mumbai GSTIN in the e way bill with the dispatch place as the Haldia customs warehouse, subject to compliance with invoicing and tax payment requirements.

Final Conclusion: The Advance Ruling answers both questions in the applicant's favour: no separate GST registration in West Bengal is required for the described import store ex bond supply arrangement, and transactions (including e way bills) may be effected on the Mumbai Head Office GSTIN with the Haldia customs warehouse shown as the dispatch place, subject to proper invoicing and payment of applicable taxes.

Detention and release under Section 129 - e-way bill requirement under Rule 138 - used personal and household effects exemption - place of supply and determination of inter-State/intra-State supply - movement of goods occasioned by the transaction of supply - temporary registration as evidence of delivery and transfer of property - release on payment of tax and penalty under Section 129

E-way bill requirement under Rule 138 - used personal and household effects exemption - detention and release under Section 129 - Whether omission to upload an e-way bill justified detention under Section 129 when the goods transported are the purchaser's used personal effect - HELD THAT: - The Court held that once the vehicle had been sold and came into the possession of the purchaser (temporary registration and insurance in purchaser's name), the subsequent movement from Puducherry to Thiruvananthapuram was not occasioned by the transaction of supply. A vehicle in the possession of its purchaser, even though recently purchased and temporarily registered, falls within the ordinary meaning of a "used" and "personal effect" for the purpose of the Annexure to Rule 138 and Sub-rule (14). Consequently, the statutory requirement to generate an e-way bill prior to movement did not apply to the transport of that vehicle in the circumstances, and detention solely for non-uploading of an e-way bill was without lawful sanction. [Paras 17, 24, 25, 26, 28]

The transport was of the purchaser's used personal effect and non-uploading of an e-way bill did not justify detention under Section 129 in the facts of the case.

Place of supply and determination of inter-State/intra-State supply - movement of goods occasioned by the transaction of supply - temporary registration as evidence of delivery and transfer of property - Whether the sale was completed in Puducherry (place of supply) or the movement to Kerala constituted an inter-State supply attracting IGST - HELD THAT: - The Court analysed Chapter IV of the IGST Act and held that where the supply involves movement of goods, the place of supply is the location at which movement of goods terminates for delivery to the recipient. The movement is relevant only if occasioned by the supply. Here the purchaser had taken delivery in Puducherry, obtained temporary registration and insurance in his name, and used the vehicle (odometer reading), indicating delivery and transfer of property in Puducherry. Thus the transaction terminated with delivery in Puducherry and any subsequent movement to Kerala was volition of the purchaser and not part of the supply transaction. [Paras 13, 14, 15, 17, 21]

The sale was completed and delivery effected in Puducherry; subsequent movement to Kerala was not occasioned by the supply and did not alter the place of supply determination.

Detention and release under Section 129 - release on payment of tax and penalty under Section 129 - e-way bill requirement under Rule 138 - Whether the detention order and notice under Section 129 were legally sustainable and whether the detention should be quashed - HELD THAT: - The Court observed the statutory scheme for detention and release under Section 129 and the machinery in Rule 138 but concluded that, having found the transport was of the purchaser's used personal effect and that delivery had been effected in Puducherry, detention at Amaravila solely for non-uploading of an e-way bill lacked lawful basis. The detention therefore amounted to action without sanction of law. In view of established principles permitting relief under Article 226 where action is taken under an invalid provision or arbitrarily, the Court set aside the notice and detention order and directed release. [Paras 6, 8, 28, 29, 30]

The detention and the notice issued under Section 129 were illegal and without jurisdiction; they were quashed and the vehicle released.

Final Conclusion: The High Court held that the vehicle had been delivered to the purchaser in Puducherry (temporary registration and insurance in purchaser's name), the subsequent movement to Kerala was not occasioned by the supply, the vehicle constituted the purchaser's used personal effect exempt under Rule 138(14) Annexure, and therefore detention solely for non-uploading of an e-way bill under Section 129 was without lawful sanction; the detention order and notice were quashed and the vehicle released.

Allowability of business expenditure under Section 37 - nexus between expenditure and business - deputation for training and employment quid pro quo - reimbursement of education expenses by a holding company - distinguishing precedents on related party education expenses - closely held company and motive of love and affection

Allowability of business expenditure under Section 37 - nexus between expenditure and business - reimbursement of education expenses by a holding company - The Tribunal was justified in disallowing the business expenditure claimed by the assessee for the foreign higher education of the son of a Director. - HELD THAT: - The Court upheld the Tribunal's conclusion that the expenditure lacked the requisite business nexus with the assessee. At the time the expense was incurred the person sent abroad was Managing Director of the subsidiary and not connected with the assessee company; the subsidiary, not the holding company, was the entity with the primary connection to the deputation and could properly have claimed the expense. The subsequent appointment of the person as a Director of the assessee did not retrospectively create a business purpose for the earlier outlay. The Board resolution of the assessee merely to reimburse the amount was treated as reflecting affection in the context of a closely held company and did not establish that the outlay was incurred wholly and exclusively for the assessee's business. On these facts the disallowance was sustained and interference with the Tribunal's order was declined. [Paras 8, 9]

Disallowance of the claimed expenditure upheld; question decided for the Revenue and against the assessee.

Distinguishing precedents on related party education expenses - deputation for training and employment quid pro quo - closely held company and motive of love and affection - The Tribunal was correct in distinguishing Kohinoor Paper Products and Sakal Papers and in relying on the decision in R. K. K. R Steels (Madras HC). - HELD THAT: - The Court agreed with the Tribunal's factual differentiation: in Kohinoor and Sakal Papers the persons sent abroad were directly employed by or were partners in the assessee entity, thereby establishing a business nexus; by contrast, in the present case the person was connected to the subsidiary and not to the assessee at the time of deputation. The Madras High Court decision was found to be factually analogous insofar as the Court there rejected allowance where the motive was personal (love and affection) and there was no scheme or pre existing obligation to employ the trainee as quid pro quo. Accordingly the Tribunal's reliance on the Madras decision and its distinction of the other precedents was endorsed. [Paras 5, 6, 7, 8]

Tribunal's treatment of authorities affirmed; reliance on the Madras High Court decision sustained and Kohinoor/Sakal distinguished.

Final Conclusion: The Income Tax appeal is dismissed; the Tribunal's disallowance of the claimed education reimbursement is upheld and no interference is warranted.

Scope of appellate interference with findings of fact - valuation and admissibility of stock discovered on search - relevance of sworn statements and voluntary disclosures under VDIS - cash credits and explanation by production of partners' returns - rectification and consequential additions in block assessment proceedings

Valuation and admissibility of stock discovered on search - relevance of sworn statements and voluntary disclosures under VDIS - Excess stock found on search and the explanation offered by the partners were held to be satisfactorily proved and were accepted by the appellate authorities. - HELD THAT: - On verification the First Appellate Authority found that the excess stock (17639.686 gms) identified on search was explained by the partners as undisclosed stock purchased by them and held for the partnership. The partners produced sworn statements, VDIS disclosures of gold with tax payment, and their individual returns which, on verification, tallied with the figures in the firm's books. The Tribunal concurred with the First Appellate Authority's factual findings. The High Court found no reason to disturb these concurrent findings of fact and considered there was no substantial question of law arising from this factual conclusion. [Paras 3, 4, 5]

The acceptance by the appellate authorities of the explanation for the excess stock and the voluntary disclosures under VDIS is upheld; no interference with those factual findings.

Cash credits and explanation by production of partners' returns - rectification and consequential additions in block assessment proceedings - scope of appellate interference with findings of fact - Credits shown in the capital accounts and cash credits were satisfactorily explained by the partners' returns and capacity to advance funds; additions made after rectification did not warrant interference. - HELD THAT: - The Assessing Officer treated credits in the partners' capital accounts as indicative of suppression, but the partners produced their returns and other materials showing capacity to advance money and purchases of gold on behalf of the firm. The First Appellate Authority modified the assessment, deleting the major portion of additions, and the Tribunal affirmed that approach. The High Court held that the post-rectification additions related to the same credits already explained by the partners and that the concurrent appellate findings rejecting the Assessing Officer's disbelief were sustainable on facts. Consequently the Court found no jurisdictional or legal error warranting interference in respect of these additions. [Paras 5, 6]

Additions in respect of capital-account credits and cash credits, as re-examined on rectification, are not interfered with; concurrent appellate conclusions are sustained.

Scope of appellate interference with findings of fact - Whether any question of law arises from the Tribunal's orders such as would justify interference by the High Court. - HELD THAT: - Having considered the material placed before the appellate authorities, including sworn statements, VDIS disclosures, and the partners' returns, the High Court found that the Tribunal and the First Appellate Authority had reached conclusions on facts which were supported by the record. The Court therefore concluded that the Revenue had not established any substantial question of law arising from the Tribunal's orders to warrant interference. [Paras 6]

No question of law arises from the Tribunal's orders; the Revenue's appeals are rejected.

Final Conclusion: The High Court dismissed the Revenue appeals, upholding the Tribunal's and First Appellate Authority's factual findings on excess stock, VDIS disclosures and cash credit explanations; no question of law was found to warrant interference. No order as to costs.

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness under section 68 - treatment of share premium as capital receipt - evidentiary value of compliance with notices issued under section 133(6) - non-compliance with summons under section 131 not warranting adverse inference where documentary evidence and replies exist

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness under section 68 - treatment of share premium as capital receipt - evidentiary value of compliance with notices issued under section 133(6) - non-compliance with summons under section 131 not warranting adverse inference where documentary evidence and replies exist - Validity of the addition of share premium of Rs. 1,98,00,000 as unexplained cash credit under section 68 for AY 2012-13 - HELD THAT: - The Assessing Officer accepted the share capital portion but treated the share premium received from the same 18 corporate subscribers as unexplained cash credit. The Tribunal found that the assessee proved the three ingredients of section 68 - identity of subscribers, genuineness of transactions and creditworthiness of subscribers - by producing letters of allotment, bank statements showing routing of payments through banking channels, audited financial statements and income-tax returns of the subscriber companies, replies furnished by the subscribers to notices issued under section 133(6), and ROC filings. No falsity or adverse inference was found in those documents. The director of the assessee offered to depose and supplied the documents called for in the summons under section 131; the Revenue did not controvert the fact that documents and explanations had been furnished. Having accepted the receipt of share capital from the same persons under section 68, the Tribunal held there was no basis to single out the share premium as bogus. The Tribunal further distinguished contrary authority relied upon by Revenue on the factual ground that in those cases the statutory enquiries (such as compliance with notices) were not satisfactorily complied with. Following relevant High Court and Tribunal precedents, the Tribunal concluded that the share premium is capital receipt and, on the facts and evidence before it, was not taxable as unexplained income under section 68. [Paras 5, 6]

The addition of share premium of Rs. 1,98,00,000 made under section 68 is deleted; the CIT(A)'s deletion is upheld and the Revenue's grounds are dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the deletion of the addition of share premium under section 68 for AY 2012-13 is upheld.

Admissibility of additional evidence under Rule 46A - burden of proof - deemed income on cessation or remission of trading liability under section 41(1) - remand for fresh consideration - allowability of business expenses subject to production of bills/vouchers

Admissibility of additional evidence under Rule 46A - burden of proof - Admissibility of additional evidence filed before the Commissioner (Appeals) in appellate proceedings. - HELD THAT: - The Tribunal examined the facts that the Assessing Officer recorded absence of basic particulars of creditors during assessment and that the Commissioner (Appeals) had rejected the additional evidence under Rule 46A on the ground that the appellant failed to satisfy the prescribed conditions and did not show sufficient cause for non-production earlier. The Tribunal observed that the authorities had not, on the record, examined the applicability of section 41(1) because the evidential material was not considered. In the interests of justice and having regard to the appellant's explanation that non-filing was due to the authorised representative's omission, the Tribunal exercised its discretion to admit the additional evidence and restore the matter to the Commissioner (Appeals) for fresh consideration, permitting the Assessing Officer to be called upon for remand report and directing production of books, vouchers, confirmations and creditor details for verification. The Tribunal emphasised that the assessee must be afforded sufficient opportunity to be heard. [Paras 3]

Additional evidence admitted and matter restored to the Commissioner (Appeals) for fresh decision after verification and opportunity to produce records.

Deemed income on cessation or remission of trading liability under section 41(1) - burden of proof - remand for fresh consideration - Whether the addition made by the Assessing Officer under section 41(1) in respect of sundry creditors amounting to the claimed liability is sustainable. - HELD THAT: - Both the Assessing Officer and the Commissioner (Appeals) reached conclusions against the assessee without having considered the additional evidences now admitted. The Tribunal noted the statutory conditions necessary to invoke section 41(1) and observed that in absence of examination of the newly admitted documents the question of applicability of section 41(1) was not finally adjudicated. In view of that, and because the documents and confirmations may be material to determine existence of creditors, any conclusion on deemed income under section 41(1) must await fresh appraisal of the evidence. Accordingly the Tribunal directed restoration of the issue to the Commissioner (Appeals) with leave to call for a remand report and to verify creditor confirmations, ledger entries, books and vouchers and, if necessary, make inquiries of third parties. [Paras 3]

Addition under section 41(1) not finally upheld; issue remanded to the Commissioner (Appeals) for fresh adjudication on admitted evidence and verification.

Allowability of business expenses-vouchers/bills - remand for fresh consideration - Disallowance of advertisement expense on the ground that supporting bills were not produced. - HELD THAT: - The Assessing Officer disallowed the advertisement expense for want of bills and the Commissioner (Appeals) confirmed the disallowance. The Tribunal, mindful of substantial justice and the fact that the sundry-creditors issue was being restored for fresh enquiry, granted the assessee one more opportunity to produce bills and documentary evidence supporting the expenditure. The Tribunal directed that the issue be restored to the Commissioner (Appeals) for fresh decision after production and verification of bills and afforded opportunity of hearing to both parties. [Paras 5]

Disallowance set aside for reconsideration; issue remanded to the Commissioner (Appeals) for fresh adjudication upon production of supporting bills and documents.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, admitted the additional evidence, and restored the disputed issues (sundry creditors/addition under section 41(1) and advertisement expense disallowance) to the Commissioner (Appeals) for fresh decision after verification of records, production of books, vouchers, confirmations and giving the parties adequate opportunity of being heard.

Deduction under section 80IA - Initial assessment year option under section 80IA - Notional set-off of brought forward losses - Treatment of eligible business as separate source under section 80IA(5) - Fiction created by sub-section (construed narrowly)

Deduction under section 80IA - Initial assessment year option under section 80IA - Notional set-off of brought forward losses - Treatment of eligible business as separate source under section 80IA(5) - Brought forward losses or depreciation of years prior to the assessee's chosen initial assessment year cannot be notionally carried forward and set off against the profits of the eligible business for computing deduction under section 80IA. - HELD THAT: - The Tribunal held that section 80IA, as amended, gives the assessee an option to select an initial assessment year from which deduction for ten consecutive years may be claimed; once so chosen that year becomes the 'initial assessment year' and the eligible business is to be treated as a separate sole source of income under section 80IA(5) from that year onward. The statutory fiction operates prospectively from the selected initial assessment year and therefore only losses of years beginning from that initial assessment year can be carried forward in relation to the eligible business. Losses or depreciation of years prior to the initial assessment year which were already set off or adjusted against other business income in earlier years cannot be notionally resurrected and set off against the current profits of the eligible business for computing the 80IA deduction. The Tribunal applied and followed the reasoning in the Madras High Court decision and the CBDT clarification to hold that the Revenue cannot rework earlier set-offs by bringing them notionally for the purpose of section 80IA relief; on that basis the Commissioner (Appeals) order allowing the assessee's claim was confirmed. [Paras 5]

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s allowance of the full deduction under section 80IA without adjusting brought forward losses prior to the initial assessment year.

Final Conclusion: The Revenue's appeal is dismissed; the assessee's election of an initial assessment year for claiming section 80IA relief precludes notional carry-forward and set-off of losses incurred in years prior to that chosen initial assessment year for computing the deduction.

Application of proviso to section 56(2)(vii)(c) to transactions between close relatives - taxation of difference between fair market value and consideration on rights allotment - revision under section 263 initiated on the basis of audit objection - distinction between creation and transfer of shares in rights issue (allotment v. transfer) - lifting of corporate veil in intra-family share arrangements

Application of proviso to section 56(2)(vii)(c) to transactions between close relatives - taxation of difference between fair market value and consideration on rights allotment - lifting of corporate veil in intra-family share arrangements - Whether section 56(2)(vii)(c) applies to the excess shares allotted on rights issue when all shareholders are close relatives and the family retains overall control - HELD THAT: - The Tribunal found that all shareholders of the closely held company were legal ascendants or descendants and that the allotment of additional shares occurred within the family; therefore the transaction fell within the proviso excluding transfers between close relatives from taxation under section 56(2)(vii)(c). The Tribunal observed that the provision is an anti abuse measure aimed at taxing benefits passing to unrelated recipients and that where shareholding remains within the family the corporate veil may be lifted to treat such intra family arrangements as not attracting the provision. Reliance on High Court precedents recognising that family arrangements may negate taxable transfer was noted. In these facts the assessee could transfer or re distribute the shares among relatives without attracting the charge under section 56(2)(vii)(c), and the claim that only excess shares beyond pro rata entitlement should be taxed was unnecessary to decide once the proviso operated. [Paras 14, 15]

Section 56(2)(vii)(c) does not apply to the excess shares allotted to the assessee because the allotment was within close relatives; the Pr.CIT's order directing addition under section 56(2)(vii)(c) is set aside and the appeal on this ground is allowed.

Revision under section 263 initiated on the basis of audit objection - Explanation 2 to section 263 - enquiry or verification by AO - Whether the Principal Commissioner validly exercised revisional jurisdiction under section 263 where revision proceedings were initiated on the basis of an audit objection and rectification proceedings under section 154 were pending - HELD THAT: - The Tribunal held that while the Commissioner must apply his own mind before exercising jurisdiction under section 263, initiation of revision solely on the basis of an audit objection is impermissible. Noting precedents which require independent application of mind and that audit objections per se do not constitute 'records' empowering exercise of revisional power, the Tribunal found that the Pr.CIT had initiated revision on the basis of the audit objection without independent consideration of other material. Although Explanation 2 to section 263 (w.e.f. 01.06.2015) permits revision where the AO failed to make enquiries or verification which should have been made, the facts showed the AO had initiated section 154 proceedings and the Pr.CIT relied on the audit objection; accordingly the revisional exercise lacked the requisite independent application of mind. [Paras 16, 18]

The Pr.CIT's exercise of revisional jurisdiction under section 263 based on the audit objection is unsustainable; the section 263 order is set aside and the appeal is allowed on this ground.

Final Conclusion: The Tribunal allowed the appeal, set aside the Pr.CIT's order under section 263, and held that section 56(2)(vii)(c) is not attracted to the rights allotment received by the assessee where the transaction was within close relatives; the addition directed by the Pr.CIT is quashed.

Scope of section 153A - abated and concluded assessments - incriminating material requirement for disturbing concluded assessment - assessment framed under section 143(1) - addition under section 68

Incriminating material requirement for disturbing concluded assessment - abated and concluded assessments - scope of section 153A - addition under section 68 - Whether an assessing officer can disturb an assessment already concluded under section 143(1) by making an addition in a section 153A assessment in the absence of any incriminating material found during the course of search - HELD THAT: - The Tribunal examined the scheme of section 153A and the distinction between abated (pending) and concluded (unabated) assessments as on the date of search. Section 153A mandates issuance of notices and fresh assessment activity for six years but, by its language and legislative scheme, contemplates different treatment for proceedings which were pending on the date of search and those which were already concluded. The Tribunal followed precedents of coordinate benches and the Hon'ble Delhi and Calcutta High Courts holding that while abated assessments may be assessed afresh under section 153A without reliance on seized material, concluded assessments (including those completed under section 143(1) where time for issuing a notice under section 143(2) has expired) cannot be disturbed in the absence of incriminating material unearthed in the search relatable to that assessment year. Applying this principle to the facts, the Tribunal observed that the assessment for AY 2009-10 stood concluded under section 143(1) on the date of search and no incriminating documents or material relating to the share capital/share application money/share premium (addition under section 68) were found in the search. Consequently, the statutory power to 'assess or reassess' under section 153A does not empower the AO to disturb the concluded assessment without such incriminating material, and the addition was therefore not sustainable. The Tribunal refrained from deciding the merits of the addition under section 68 since the deletion was upheld on the preliminary statutory ground of absence of incriminating material. [Paras 9]

The addition of Rs. 1,63,00,000 made under section 68 in the assessment framed under section 153A for AY 2009-10 is deleted because the assessment was concluded under section 143(1) on the date of search and no incriminating material was found during the search to disturb that concluded assessment.

Final Conclusion: Following authoritative precedents and construing the scheme of section 153A, the Tribunal dismissed the Revenue's appeal and sustained the Commissioner (Appeals)'s deletion of the addition, holding that a concluded assessment under section 143(1) cannot be disturbed in a section 153A proceeding in the absence of incriminating material found during the search.

Scope of assessment under section 153A where original assessment is unabated - requirement of incriminating material from search for making additions in unabated assessments - treatment of additions under section 68 in proceedings initiated by search - precedential effect of coordinate-benches and non-jurisdictional High Court conflicts

Requirement of incriminating material from search for making additions in unabated assessments - scope of assessment under section 153A where original assessment is unabated - treatment of additions under section 68 in proceedings initiated by search - Whether additions by the Assessing Officer in proceedings under section 153A can be made in an assessment which was already completed (unabated) when the search was carried out, in the absence of incriminating material discovered in the search. - HELD THAT: - The Tribunal examined the facts that the original assessments for the relevant years had been completed before the date of search and notices under section 143(2) had not been issued within the statutory time, making the original returns final. Applying the ratio of the coordinate-bench decisions considered, and following the principle that where assessment is unabated the Assessing Officer's jurisdiction to reopen under section 153A is confined to incriminating material discovered in the search, the Tribunal held that additions dehors the search material cannot be sustained. The Tribunal noted the conflict in authority from non-jurisdictional High Courts relied upon by the Revenue but applied the settled rule that conflicting non-jurisdictional High Court decisions should be resolved in favour of the assessee, and therefore followed the coordinate-bench precedent which required incriminating search material to justify additions in unabated assessments. On the facts, no incriminating material justifying the addition in respect of share capital/share premium was found, and the CIT(A)'s deletion of the addition was upheld insofar as it removed that unexplained credit. [Paras 14, 15, 16, 17]

Addition made in proceedings under section 153A in respect of share capital/share premium in an assessment that had been completed before the search was deleted as there was no incriminating material from the search to justify reopening; appeals of the Revenue dismissed and cross objections of the assessees allowed.

Final Conclusion: The Tribunal allowed the assessees' cross objections and dismissed the Revenue's appeals: where the original assessments were unabated at the time of search and no incriminating material was found, additions (including under section 68) could not be sustained in proceedings under section 153A.

Deemed dividend under section 2(22)(e) of the Income Tax Act - benefit to shareholder (direct or indirect) - substantial interest - application of section 2(22)(e) to advances to concerns in which shareholders have substantial interest - disallowance of interest where partners' accounts show net overdraft - nexus between loan utilization and business purpose

Deemed dividend under section 2(22)(e) of the Income Tax Act - benefit to shareholder (direct or indirect) - substantial interest - Whether advances of Rs. 7,54,00,000/- received by the assessee from M/s. Symbiotic Infotech Pvt. Ltd. constitute deemed dividend under section 2(22)(e) of the Act and whether the CIT(A)'s exclusion of Rs. 3,00,00,000/- was justified. - HELD THAT: - The Tribunal found that the company making the advances and the assessee-firm had common persons as shareholders/partners and that the facts were materially similar to those before the Supreme Court in National Travel Services, which cast doubt on contrary High Court decisions. The Tribunal rejected a narrow conception of 'individual benefit' and held that benefit may be direct or indirect; advances routed through the firm to a third party closely related to a partner still resulted in an indirect benefit to the partner. The CIT(A)'s view that Rs. 3,00,00,000/- routed to Smt. Priya Rachel did not confer benefit on the partners was held to be incorrect because the loan would not have been advanced but for the close relationship to a partner. Consequently the entire advance was held to fall within the deeming provision and the partial deletion by the CIT(A) was reversed. [Paras 13, 14]

The addition under section 2(22)(e) in respect of the advances of Rs. 7,54,00,000/- is upheld in full; the CIT(A)'s exclusion of Rs. 3,00,00,000/- is set aside and the Revenue's appeal is allowed on this issue.

Disallowance of interest where partners' accounts show net overdraft - nexus between loan utilization and business purpose - Whether the disallowance of interest (sustaining Rs. 17,87,519/- by the CIT(A)) was justified given the loan utilisation and the net overdrawn position in partners' accounts. - HELD THAT: - The Tribunal noted an aggregate net overdraft of Rs. 1,70,69,208/- in partners' capital/current accounts as on the date of borrowing, and that therefore the firm could have avoided borrowing at least that sum. Although the loan proceeds were applied towards acquisition of property, the Tribunal held that where partners have overdrawn funds, benefit accrued such that interest attributable to the avoidable borrowing is not allowable. The CIT(A)'s computation and sustenance of part of the disallowance was therefore appropriate and not interfered with. [Paras 16, 17, 20]

The disallowance of interest sustained by the CIT(A) (amounting to Rs. 17,87,519/-) is upheld and the assessee's grounds on this issue are dismissed.

Final Conclusion: The assessee's appeal is dismissed in full; the Revenue's appeal is allowed insofar as the CIT(A)'s partial deletion of the addition under section 2(22)(e) is set aside and the entire advance is treated as deemed dividend, while the disallowance of interest sustained by the CIT(A) is upheld.

Re-adjudication after providing documents and opportunity for cross-examination - unexplained cash credits under s.68 - claim of exemption under s.10(38) - treatment of long term capital gains - principles of natural justice - confrontation and right to rebut - restoration to the Assessing Officer for fresh adjudication

Re-adjudication after providing documents and opportunity for cross-examination - principles of natural justice - confrontation and right to rebut - restoration to the Assessing Officer for fresh adjudication - Matter remanded to the Assessing Officer for fresh adjudication after providing the assessee with documents relied upon and an opportunity for cross-examination and rebuttal. - HELD THAT: - The Tribunal found that the Assessing Officer made additions treating sale consideration as unexplained credits relying on reports and statements originating from the Investigation Directorate without having made those documents or statements available to the assessee or affording opportunity for rebuttal and cross-examination. Having regard to the assessee's specific request for cross-examination of deponents and for supply of the Investigation Directorate report, and following precedents of the Bangalore Bench, the Tribunal held that the proper course is to set aside the impugned orders and restore the matter to the file of the AO for de novo adjudication. The AO is directed to make available to the assessee all documents, statements and investigation reports proposed to be relied upon, permit the assessee to rebut the material and to cross-examine persons whose statements are relied upon, and then adjudicate the issue afresh. In view of this procedural remand, the Tribunal declined to adjudicate the substantive merits of the additions, rendering those grounds academic. [Paras 3, 4, 5]

Orders of the authorities below set aside and matter restored to the Assessing Officer for fresh adjudication after supplying relied-upon documents and providing opportunity for rebuttal and cross-examination; other merits left undecided.

Final Conclusion: The appeal is allowed for statistical purposes by remanding the issue of treatment of profit on sale of shares (claimed exempt under s.10(38)) to the Assessing Officer for fresh adjudication after compliance with the Tribunal's directions on supply of documents and opportunity for cross-examination; substantive grounds not decided.

Unexplained cash credits - treatment of sale proceeds as income under section 68 - right to confrontation and supply of documents relied upon by Revenue - right to cross-examination of witnesses whose statements are relied upon - remand for de novo adjudication

Unexplained cash credits - treatment of sale proceeds as income under section 68 - right to confrontation and supply of documents relied upon by Revenue - right to cross-examination of witnesses whose statements are relied upon - remand for de novo adjudication - Whether the assessment treating sale proceeds on sale of shares as unexplained credits under section 68 could be sustained without supplying to the assessee the investigation reports/documents relied upon and without affording opportunity for rebuttal and cross-examination, and whether the matter should be restored to the file of the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal held that on the facts of the case the additions treating the sale consideration as unexplained credits could not be finally adjudicated without confronting the assessee with the reports/documents and statements relied upon by Revenue and without affording opportunity to rebut and to cross-examine persons whose statements are proposed to be used. Applying the decisions of the Bengaluru Bench in Arvind Kumar Moolchand and Pukhraj Hasmukhlal, the Tribunal set aside the orders of the Assessing Officer and restored the matter to the file of the AO for de novo adjudication. The AO is directed to make available to the assessee for rebuttal all documents relied upon by Revenue, to provide adequate opportunity for cross-examination of persons whose statements are to be relied upon, and thereafter adjudicate the issue afresh. In view of this remand the Tribunal did not adjudicate the merits of the claim under section 10(38) or the substantive validity of the addition under section 68. [Paras 3, 4, 5]

The orders of the Assessing Officer are set aside and the matter relating to treatment of sale proceeds as unexplained credits under section 68 is remanded to the file of the AO for fresh adjudication after supplying the documents/reports to the assessee, allowing rebuttal and cross-examination.

Final Conclusion: Appeal allowed for statistical purposes by remanding the issue of treating sale proceeds as unexplained credits to the Assessing Officer for de novo adjudication after providing the assessee copies of documents relied upon and an opportunity for rebuttal and cross-examination; other grounds rendered academic.

Remand for fresh adjudication - right to confront evidence and cross-examine witnesses - disclosure of investigation reports and statements relied upon by revenue - principles of natural justice - treatment of sale consideration as unexplained credit under section 68

Remand for fresh adjudication - right to confront evidence and cross-examine witnesses - disclosure of investigation reports and statements relied upon by revenue - principles of natural justice - treatment of sale consideration as unexplained credit under section 68 - Assessment remitted to the Assessing Officer for de novo adjudication after providing the assessee full access to documents and opportunity for rebuttal and cross-examination. - HELD THAT: - The Tribunal found that the Assessing Officer's addition treating the sale consideration as unexplained credit was based on reports and statements from the Investigation Directorate and third-party averments which were not placed before or confronted to the assessee. The assessee had specifically sought cross-examination of the deponents and supply of the Investigation Report for rebuttal. Following precedents of the Bengaluru Bench where similar additions were set aside for want of disclosure and opportunity to rebut, the Tribunal held that the matter must be reopened and adjudicated afresh. The AO is directed to make available to the assessee all documents, statements and investigation reports relied upon, afford the assessee adequate opportunity to rebut and to cross-examine persons whose statements are to be relied upon, and thereafter adjudicate the claim regarding the claim of exemption under section 10(38) and the treatment under section 68 on merits. [Paras 3]

Order of the Assessing Officer is set aside and the matter remitted to the file of the AO for de novo adjudication after disclosure and opportunity for cross-examination.

Final Conclusion: The appeal is allowed for statistical purposes by setting aside the assessment on the disputed treatment of sale proceeds and remitting the matter to the Assessing Officer for fresh adjudication with directions to furnish all documents and permit rebuttal and cross-examination; other grounds are rendered academic.

Transfer pricing adjustment - arm's length principle - functional and risk analysis - conduct of the parties - risk allocation and quantification - application software treated as revenue expenditure

Transfer pricing adjustment - arm's length principle - functional and risk analysis - conduct of the parties - risk allocation and quantification - Deletion of the transfer pricing adjustment made by the TPO was upheld. - HELD THAT: - The Tribunal found that the TPO's adjustment ignored the assessee's demonstrated business model and the actual conduct of the parties, which showed identical functional and risk profiles across the two invoicing models. The authorities below had recorded that the assessee undertook the core delivery functions and bore the non administrative service risks, while the associated enterprises performed marketing/administrative roles. The Tribunal accepted the assessee's submissions on contractual terms, conduct, and the global delivery model, observed that the TPO's re allocation and quantification of risk were unsupported and ad hoc, and relied on guidance recognizing that allocation of risk must reflect economic substance and financial capacity. The view of the Tribunal was subsequently upheld by the jurisdictional High Court on concurrent factual findings. Following those concurrent findings, the Tribunal confirmed the CIT(A)'s deletion of the TPO adjustment as unreasonable and without basis. [Paras 5]

Confirm deletion of the transfer pricing adjustment; revenue's ground dismissed.

Application software treated as revenue expenditure - business purpose and lack of enduring benefit - Disallowance of software purchase expenses as capital expenditure was rejected and the expenses were held revenue in nature. - HELD THAT: - The Tribunal (following the CIT(A)) accepted that the software acquired were application software used in connection with client projects and to enhance business efficiency, did not confer any enduring benefit or constitute a standalone income generating asset, and were therefore akin to consumables or tools of the trade. On that factual basis the expenditure was held allowable as revenue expenditure under the governing principles applicable to business expenditure. The revenue did not challenge the Tribunal's decision before the High Court, and the department thus accepted the view of the authorities below. [Paras 7]

Confirm deletion of the addition; software purchase expenses held revenue in nature and allowable.

Final Conclusion: Revenue's appeal for AY 2007-08 is dismissed: the transfer pricing adjustment was set aside for lack of basis after analysis of functional and risk profile and conduct of the parties, and the disallowance of application software purchases was correctly deleted as revenue expenditure.

Additional depreciation under Section 32(1)(iia) - restriction to fifty per cent where asset used for less than 180 days - amortisation of upfront lease/license payment as revenue expenditure - disallowance under section 14A and Rule 8D computation - remand for adjudication pending Supreme Court decision on section 43B(f) - carry forward of long term capital loss and its adjudication in year of set-off

Additional depreciation under Section 32(1)(iia) - restriction to fifty per cent where asset used for less than 180 days - Allowance of remaining fifty per cent of additional depreciation in the succeeding assessment year - HELD THAT: - The Tribunal followed precedents of High Courts (including CIT v. Rittal India and the Madras High Court decision) and its own earlier order in the assessee's case to hold that where additional depreciation under clause (iia) is restricted to fifty per cent in the year of acquisition because the asset was used for less than 180 days, the balance fifty per cent can be claimed in the immediately succeeding year. The statutory scheme and subsequent legislative clarification (effective 1.4.2016) were treated as clarificatory of the proper reading of the unamended provision. Applying this principle, the Tribunal granted the assessee the balance additional depreciation claimed in AY 2011-12 and dismissed the Revenue's ground.

Revenue appeal dismissed insofar as disallowance of the remaining 50% additional depreciation is concerned.

Amortisation of upfront lease/license payment as revenue expenditure - Allowability of annual amortisation of upfront lease/license payment as revenue expenditure - HELD THAT: - The Tribunal accepted the assessee's treatment of the upfront license payment being amortised annually as allowable revenue expenditure, applying the principle in Madras Industrial Investment Corporation Ltd. v. CIT that, depending on facts, expenditure incurred in one year may be spread over ensuing years to avoid distorting profits. The Tribunal noted consistent allowance in scrutiny assessments up to AY 2008-09 and found no reason for the Revenue to take a divergent stand in AY 2011-12, further relying on the principle of consistent treatment (Radhaswami Satsang).

Disallowance of the amortised lease rental of Rs. 10,26,000/- deleted; Revenue's ground dismissed.

Disallowance under section 14A and Rule 8D computation - Extent of disallowance under section 14A computed under Rule 8D - HELD THAT: - On the facts, the Tribunal found the assessee had sufficient own funds relative to investments, and that investments were largely in debt/liquid mutual funds. Following Calcutta and Bombay High Court decisions and the Tribunal's precedents, it held that no disallowance under the second limb of Rule 8D(2) could be made in these circumstances. With respect to the third limb of Rule 8D(2), the Tribunal held that only the investments which actually yielded dividend income are to be considered for computing disallowance under that limb (consistent with Tribunal precedents). Applying these principles, the Tribunal partly allowed the assessee's cross-objection on section 14A disallowance.

Section 14A disallowance under Rule 8D partly set aside; cross-objection partly allowed.

Remand for adjudication pending Supreme Court decision on section 43B(f) - Adjudication of unpaid leave encashment claimed under section 43B(f) - HELD THAT: - The Tribunal noted that the constitutional validity and interpretation of section 43B(f) had been the subject of High Court and Supreme Court proceedings. Following its earlier approach in the assessee's own case, and in the interest of justice given the pendency and interim orders in higher proceedings, the Tribunal did not decide the issue on merits but remanded the matter to the Assessing Officer to pass orders in accordance with the outcome of the main appeal pending before the Supreme Court.

Issue remanded to the file of the Assessing Officer for decision after outcome of the Supreme Court appeal; allowed for statistical purposes.

Carry forward of long term capital loss and its adjudication in year of set-off - Right to carry forward long term capital loss and the timing of its adjudication - HELD THAT: - Relying on the Supreme Court decision in CIT v. Manmohan Das, the Tribunal held that the question whether a loss brought forward from an earlier year is eligible for set-off must be examined by the Assessing Officer in the year in which the loss is sought to be set off, and that a decision in the earlier year's assessment that the loss is not admissible is not binding on the assessee. Applying that principle, the Tribunal allowed the assessee's cross-objection, stating the eligibility for carry forward of the long term capital loss of AY 2010-11 should be considered when the loss is sought to be set off in a subsequent year.

Cross-objection allowed: the question of carry forward/set-off of the AY 2010-11 long term capital loss to be examined in the year of set-off.

Final Conclusion: The Revenue's appeal for AY 2011-12 is dismissed (including the claim to disallow the remaining 50% additional depreciation and the lease amortisation disallowance). The assessee's cross-objection is partly allowed: section 14A disallowance under Rule 8D is reduced consistent with the Tribunal's findings; the unpaid leave encashment issue under section 43B(f) is remanded to the Assessing Officer for decision after the Supreme Court's outcome; and the carry forward of the AY 2010-11 long term capital loss is to be examined in the year in which set-off is claimed.

Long-term capital gains - Deemed sale consideration under section 50C - Amendment of assessment where stamp-duty value is revised under section 155(15) - Cost of acquisition - option of actual cost or fair market value as on 01.04.1981 - Reference to valuation officer for determination of fair market value under section 55A - Admissibility and probative value of registered valuer's report - Verification of salary evidence and correction of clerical/typographical error

Deemed sale consideration under section 50C - Amendment of assessment where stamp-duty value is revised under section 155(15) - Appropriateness of adopting higher stamp-duty/conveyance value for computing capital gains and the course of action where the registering authority's notice/order status is not on record - HELD THAT: - The Tribunal noted that the AO relied on the Sub Registrar's communication showing a higher conveyance value and a reference to a notice under section 54 of the Stamp Act but neither party produced the conveyance copy, the Sub Registrar's final order nor the status of any appeal. In absence of adequate material the Tribunal could not adjudicate the correctness of applying the higher stamp value. The Tribunal observed that section 155(15) provides for amendment of assessment if the stamp duty value is subsequently revised on appeal and directed that the AO obtain the requisite information from the Sub Registrar and decide afresh in accordance with law. [Paras 6]

Set aside to the file of the AO to examine afresh after seeking requisite information from the Sub Registrar regarding the final value determined and to decide in accordance with law (matter remanded).

Cost of acquisition - option of actual cost or fair market value as on 01.04.1981 - Reference to valuation officer for determination of fair market value under section 55A - Admissibility and probative value of registered valuer's report - Validity of the cost of acquisition adopted by the AO (Rs. 38,500) in preference to the assessee's claimed indexed cost based on a registered valuer's report - HELD THAT: - The Tribunal held that the sale deed dated 17.04.1980 is the credible evidence of acquisition and rejected the contention that the property was effectively acquired in 1978. The assessee's registered valuer's report was found deficient: the valuer surveyed in 2011, described the property as residential but applied commercial rates, and did not supply contemporaneous data or respond adequately to the AO's inquiry under section 133(6). The Tribunal agreed with the AO's methodology of adopting the purchase deed amount and applying a reasonable appreciation (as done by the AO) to arrive at the cost of acquisition. Given these defects and the onus on the assessee to substantiate a fair market value option under section 55(2)(b)(i), the Tribunal upheld the lower authorities' conclusion. [Paras 11, 12]

Assessee's claim on cost of acquisition rejected; the AO's determination of cost of acquisition is upheld and the ground is dismissed.

Verification of salary evidence and correction of clerical/typographical error - Sustenance of addition to salary income where a salary certificate containing a higher year's figures was filed at assessment and a corrected certificate was produced on appeal - HELD THAT: - The Tribunal recorded that the accountant had mistakenly prepared a salary certificate for the subsequent year, resulting in a higher salary figure being submitted at assessment. A correct salary certificate for the relevant previous year was filed before the CIT(A). The Tribunal directed the AO to verify the salary certificates against the return of income and, if found in order, to allow the relief. [Paras 13, 15]

Addition deleted subject to AO's verification of submitted salary certificates; relief to be granted if verified.

Final Conclusion: The appeal is partly allowed for statistical purposes: the issue under section 50C is set aside and remanded to the AO for fresh examination after obtaining Sub Registrar records; the challenge to cost of acquisition is dismissed and the AO's determination is upheld; the salary addition is directed to be verified by the AO and, if found in order, to be allowed.

Suspension of license - Interim suspension under Regulation 16 of the Customs Brokers Licensing Regulations, 2018 - Opportunity of hearing within fifteen days - Requirement to record reasons in writing for suspension - Principles of natural justice

Interim suspension under Regulation 16 of the Customs Brokers Licensing Regulations, 2018 - Suspension of license - Principles of natural justice - Validity of the Ext.P4 suspension order issued by the Commissioner of Customs. - HELD THAT: - The court examined Regulation 16 which authorises the Principal Commissioner or Commissioner to suspend a customs broker's licence in appropriate cases where immediate action is necessary and contemplates an enquiry. The bench acknowledged that the suspension in Ext.P4 is an interim measure permissible under Regulation 16 and that the authority has power to suspend a licence. At the same time the court emphasised that suspension of a trade licence carries severe financial consequences and cannot be approached with undue technicality; principles of natural justice require that the licensee be apprised of the grounds and afforded an opportunity to be heard. The Court therefore treated the power under Regulation 16 as subject to the requirement that the affected licensee be informed of grounds and afforded the hearing contemplated by the Regulation, so as to meet the ends of justice and constitutional morality. [Paras 6, 7]

Ext.P4 is an interim suspension under Regulation 16 and the power to suspend is lawful, but it must be exercised consistently with principles of natural justice by informing the licensee of the grounds and affording a hearing.

Opportunity of hearing within fifteen days - Requirement to record reasons in writing for suspension - Suspension of license - Remedial direction to the Customs Department to provide detailed grounds and to conclude the hearing-process expeditiously. - HELD THAT: - Relying on Regulation 16(2) which mandates that where a licence is suspended the authority shall within fifteen days give an opportunity of hearing and may pass orders within fifteen days of that hearing, the court directed that the Customs Department must immediately issue a detailed notice informing MBK Logistics of the grounds of suspension and hear its representatives. The authority was directed to pass orders expeditiously after hearing. To meet the ends of justice the Court fixed a schedule: the entire exercise is to be completed within two weeks from the Department's receipt of a copy of this judgment, and the licensee may place its defence and relevant records before the authority. [Paras 6, 8, 9]

Customs Department to serve a detailed notice of grounds and grant hearing to MBK Logistics and conclude proceedings within two weeks after receiving this judgment.

Final Conclusion: The interim suspension in Ext.P4 is authorised by Regulation 16 but must be implemented consistent with natural justice; the Customs Department is directed to issue a detailed notice of grounds, hear the licensee and conclude the matter expeditiously within two weeks of receiving this judgment.

Admissibility of statements recorded during inquiry - requirement of examination-in-chief before cross-examination - relevancy of statements under Section 138B of the Customs Act - parity between Section 138B and Section 9D - natural justice - right to cross-examine witnesses - remand for fresh adjudication in accordance with binding precedent

Requirement of examination-in-chief before cross-examination - natural justice - right to cross-examine witnesses - admissibility of statements recorded during inquiry - Whether the adjudicating authority erred in relying on statements recorded during inquiry without first examining the deponents in chief and permitting cross-examination in accordance with the procedure prescribed under Section 138B of the Customs Act, 1962 (pari materia to Section 9D of the Central Excise Act). - HELD THAT: - The Tribunal held that the procedure encapsulated in Section 138B(1)(b) (as interpreted with reference to Section 9D) requires two steps before a previously recorded statement can be treated as relevant in adjudication: first, the person who made the statement must be examined as a witness in chief; and second, the adjudicating authority must form an opinion, having regard to the circumstances, that the statement should be admitted in evidence in the interests of justice. Absent the specified exceptional circumstances, the evidentiary value of such statements for proving their contents is lost. The Tribunal relied on prior decisions and settled principles that cross-examination follows examination-in-chief and that tendering a witness for cross-examination without examination-in-chief is impermissible. Applying these principles, the Tribunal found that the adjudicating authority did not follow the prescribed procedure and thereby denied the appellant the opportunity to have witnesses examined and cross-examined, resulting in a breach of principles of natural justice.

Finding of procedural infirmity: the adjudicating authority failed to follow the mandatory procedure of examining witnesses in chief and forming the requisite opinion before admitting statements; such failure vitiates reliance on those statements.

Parity between Section 138B and Section 9D - remand for fresh adjudication in accordance with binding precedent - Relief to be granted in consequence of the procedural failure: whether the impugned orders should be set aside and remitted for fresh adjudication consistent with the Tribunal's observations and binding precedent. - HELD THAT: - In view of the procedural shortcoming-namely, non-compliance with the statutory regime governing admissibility of statements and the concomitant denial of opportunity to examine and cross-examine witnesses-the Tribunal concluded that the impugned orders could not stand. The matter was required to be re-adjudicated by the adjudicating authority applying the procedure laid down under Section 138B (and construed pari materia with Section 9D) and the Tribunal's earlier observations in Alliance Alloys Pvt. Ltd. The remand is for fresh adjudication in accordance with those legal principles and for affording the appellant the opportunity to examine and cross-examine relevant witnesses as mandated.

Impugned orders set aside and matter remitted to the adjudicating authority for re-adjudication in accordance with the Tribunal's directions and applicable precedent.

Final Conclusion: The appeals are allowed to the extent that the impugned adjudication orders are set aside and the matter is remanded to the adjudicating authority for fresh adjudication in conformity with the statutory procedure regarding admissibility of previously recorded statements and the right to examination-in-chief and cross-examination, as explained by the Tribunal.

Rectification of order - clerical or typographical error - correction of appellate record - Registry correction of dispatch letter - review or rectification application (ROM)

Rectification of order - clerical or typographical error - correction of appellate record - Substitution of the correct OIA number in the Tribunal's order against appeal No. C/11801/2017 - HELD THAT: - The Tribunal examined its order dated 06.08.2018 and the record of appeal No. C/11801/2017 and found that the OIA number recorded in the order was incorrect. The appeal on record was filed against OIA No. "KDL-CUSTM-000-APP-032-17-18 dated 08.08.2017". The error in the order (in paragraph 1 and the preamble) is a clerical/typographical mistake that can be rectified. The Tribunal therefore substituted the correct OIA number in the order to reflect the document against which the appeal was filed. [Paras 2]

The OIA number in paragraph 1 and the preamble of the order dated 06.08.2018 for appeal C/11801/2017 is substituted with "KDL-CUSTM-000-APP-032-17-18 dated 08.08.2017".

Registry correction of dispatch letter - rectification of order - Correction of the name and address of the Respondent in the dispatch letter of the order - HELD THAT: - On review, it was noted that the dispatch letter accompanying the order contained an incorrect name and address for the Respondent. The applicant pointed out that the correct address is Commissioner of Customs, Kandla. The Tribunal directed the Registry to amend the dispatch letter to reflect the correct name and address. This correction is administrative and ancillary to the rectification of the order and is permitted to ensure accurate communication of the Tribunal's decision. [Paras 2]

The Registry is directed to correct the dispatch letter so that the Respondent's name and address read as Commissioner of Customs, Kandla.

Final Conclusion: The ROM application is allowed: the Tribunal's order dated 06.08.2018 is rectified by substituting the correct OIA number for appeal C/11801/2017, and the Registry is directed to correct the dispatch letter to show the Respondent as Commissioner of Customs, Kandla.

Rectification of register of members - limitation and laches - oppression and mismanagement - invalid/illegal transfer for want of proper transfer instrument - duty of company to inform shareholders and send notices of meetings - remand for fresh consideration on merits

Limitation and laches - rectification of register of members - Whether the Company Petition was barred by limitation and laches so as to preclude relief for rectification of the register of members. - HELD THAT: - The Tribunal had dismissed the petition as time barred and on grounds of laches, treating the date of knowledge as earlier than the appellant's inspection and complaints. The Appellate Tribunal examined the chronology, including the appellant's correspondence with the company and complaint to the ROC, and noted the company's failure to inform the appellant of the transfer despite her being recorded as shareholder. The Appellate Tribunal found the conduct of the respondents (including long delay in effecting any transfer, absence of any transfer deed produced, lack of notice to the appellant, and absence of steps such as lodging FIRs or newspaper notices if a transfer deed was claimed lost) inconsistent with a straightforward public knowledge defence. For these reasons the Tribunal erred in applying limitation and latches as a bar without resolving the factual and documentary gaps; the dismissal on purely technical grounds was inappropriate where material disputes and non production of transfer instruments remained. [Paras 30, 31, 35]

The NCLT's dismissal on limitation and laches is set aside; the appellant's plea that the petition was within time is accepted for the purpose of proceeding further.

Invalid/illegal transfer for want of proper transfer instrument - duty of company to inform shareholders and send notices of meetings - Whether the transfer of the appellant's 200 shares to the 3rd respondent was valid and whether the register should be rectified to restore the appellant as holder of those shares. - HELD THAT: - The Appellate Tribunal found that no transfer deed bearing the appellant's signature was placed before either forum, and the respondents did not explain why the transfer apparently effected in 2013 was not done earlier if based on earlier conduct. The company failed to show steps consistent with a bona fide lost instrument claim (such as FIR, newspaper notice or seeking fresh execution). Given these lacunae and the respondents' control over company records, the Tribunal concluded that the transfer was illegal and that the appellant remained the rightful holder of the 200 shares. Consequently, the 1st respondent was directed to rectify its register to restore the appellant as the holder of those shares. [Paras 31, 35]

The appellant is declared the rightful holder of 200 shares; the register of members shall be rectified to restore her as holder of those shares and the transfers to the 3rd respondent are held illegal.

Oppression and mismanagement - remand for fresh consideration on merits - Whether the allegations of oppression, mismanagement, and the validity of corporate acts (increase of authorised capital, allotment of shares) should be adjudicated in light of the finding on share ownership. - HELD THAT: - The Appellate Tribunal observed that the NCLT had framed points on alleged illegal board meetings, increase of authorised capital and allotment of shares, and allegations of siphoning of funds and sale of assets, but declined to decide them after dismissing the petition on limitation grounds. Having set aside that dismissal and restored the appellant's shareholding, the Tribunal held it appropriate that the NCLT decide those substantive issues on merits. The matter was therefore remanded for adjudication of the remaining points which concern corporate acts and allegations of oppression and mismanagement. [Paras 34, 36]

The issues relating to alleged illegal corporate acts and allegations of oppression and mismanagement are remitted to the NCLT for fresh consideration and decision on merits.

Final Conclusion: The NCLT order dismissing the petition as barred by limitation and laches is set aside; the appellant is declared the rightful holder of 200 shares and the company is directed to rectify its register. Remaining allegations concerning increase of capital, allotment and alleged oppression/mismanagement are remanded to the NCLT for fresh adjudication on merits.

Summary order. Appeal dismissed; delay condoned; pending applications, if any, disposed of.

Management or Business Consultant - Service Tax liability on reverse charge basis - Characterisation of CERs as goods or services - Penalty under Sections 76, 77 and 78

Management or Business Consultant - Service Tax liability on reverse charge basis - Characterisation of CERs as goods or services - Whether the services rendered by the foreign service provider under the agreement fall within the definition of 'management or business consultant' and attract Service Tax on reverse charge, notwithstanding contentions that CERs are goods sold and not a service. - HELD THAT: - The Court examined the agreement between the petitioner and the foreign service provider and found the contractual obligations unambiguous. The agreement obliged the UK company to produce the Project Design Document, arrange validation, registration and annual verification, market the CERs, obtain purchase contracts, and assume responsibility for sale and management of CERs (subject to prior approval of the project owner). These obligations, read in light of the broad definition of 'management or business consultant' in Section 65(65) of the Finance Act, 2007, import consultancy and assistance in management-related functions. The Court accepted the view of the Appellate Tribunal that such consultancy services fall within the scope of 'management or business consultant' and therefore attract Service Tax, including liability assessed on reverse charge basis. The Court rejected the contention that trading in CERs alone places the transaction outside the definition when, by contract, the foreign entity undertook marketing, managerial and sale-related services integral to the CDM project. [Paras 6, 8]

The Appellate Tribunal's conclusion that the services come within 'management or business consultant' and are liable to Service Tax (reverse charge) is upheld.

Penalty under Sections 76, 77 and 78 - Whether penalties under Sections 76, 77 and 78 of the Finance Act, 2007 should be imposed in respect of the Service Tax demand. - HELD THAT: - The Court observed that divergent views were taken by the Assessing Authority and the Commissioner (Appeals), and that the legal position concerning obligations arising from CDM arrangements and CER transactions had been debated with no final settled view at the relevant time. Given this variation of opinion within revenue authorities and the novel nature of the issues, the Court concluded that imposing statutory penalties would be inappropriate. The Court therefore declined to sustain the imposition of penalties by the Assessing Authority in the circumstances of the case. [Paras 9, 10, 11]

The appeal is dismissed on merits but the imposition of penalties under Sections 76, 77 and 78 is set aside.

Final Conclusion: The Court upholds the Appellate Tribunal's finding that the foreign company's contractual obligations amount to services within the definition of 'management or business consultant' attracting Service Tax (reverse charge); however, having regard to divergent views within revenue authorities and the novel nature of the issue, the penalties imposed under Sections 76, 77 and 78 are not sustained.

Interest as mandatory statutory levy on delayed payment of service tax - immunity under Voluntary Compliance Encouragement Scheme (VCES) and its effect on interest and penalty - penalty under proviso 2 to Section 73 for wilful mis representation or suppression - validity of show cause notice issued after rejection of VCES application

Interest as mandatory statutory levy on delayed payment of service tax - immunity under Voluntary Compliance Encouragement Scheme (VCES) and its effect on interest and penalty - Whether interest was payable on the service tax declared and deposited under VCES-I after the relevant period and after rejection of the VCES application - HELD THAT: - The Tribunal found that the service tax of Rs. 4,50,756/- for the period w.e.f. 01.10.2008 to 31.03.2010 had been deposited under the VCES scheme on 30.12.2013 but the VCES application was subsequently rejected by the original adjudicating authority. Once the VCES immunity ceased on rejection, delayed discharge of the liability attracts mandatory interest under Section 75 of the Finance Act. The deposit itself does not negate the obligation to pay statutory interest for delayed payment. The adjudicating authority therefore committed no error in confirming the demand of interest on the amount.

Demand of interest on the service tax deposited belatedly is sustainable and is confirmed.

Penalty under proviso 2 to Section 73 for wilful mis representation or suppression - immunity under Voluntary Compliance Encouragement Scheme (VCES) and its effect on interest and penalty - Whether penalty under proviso 2 to Section 73 could be imposed for wilful mis representation or suppression of facts in respect of the same facts leading to the VCES rejection - HELD THAT: - The Tribunal noted that the Department had knowledge of non payment since 2011 and that there was contemporaneous confusion regarding liability for renting of immovable property services. The assessee had received service tax from tenants only in January 2012 and had deposited the amount under VCES voluntarily. There was no material to establish wilful mis representation or suppression of facts by the appellant. In absence of wilful intent, the conditions for invoking proviso 2 to Section 73 for penalty are not satisfied. Consequently the order imposing penalty was found to be unsustainable.

Imposition of penalty is set aside for lack of wilful mis representation or suppression.

Validity of show cause notice issued after rejection of VCES application - Whether the impugned show cause notice proposing recovery was maintainable when issued after the prior VCES rejection proceedings - HELD THAT: - The Tribunal observed that an earlier show cause notice proposing rejection of the VCES application had been served and the proposal was decided against the appellant by order dated 18.05.2015. The impugned show cause notice was issued after confirmation of that proposal and therefore related to the same demand and period. The issuance of the subsequent show cause notice in those circumstances was not rendered invalid by the pendency of the earlier proceedings, since it was issued after the rejection had been confirmed.

Impugned show cause notice is maintainable as it was issued after confirmation of rejection of the VCES application.

Final Conclusion: The appeal is partly allowed: the order is sustained only insofar as it confirms the mandatory interest on the belatedly discharged service tax for the period w.e.f. 01.10.2008 to 31.03.2010; the demand for tax is not sustainable to the extent already deposited and the penalty imposed under proviso 2 to Section 73 is set aside.

Classification of receipts as taxable service - Service Tax on banking and other financial services - extended period of limitation - demand and penalty confirmation - remand for fresh adjudication

Classification of receipts as taxable service - Service Tax on banking and other financial services - Impugned orders set aside and remanded for fresh adjudication on the question whether specified heads of income constitute taxable services - HELD THAT: - The Tribunal observed that the lower authorities and Commissioner (Appeals) did not specifically examine each head of income-namely income from public issue, interest on RBI relief bonds, interest received from others, income from mutual funds, and income from distributor and others-and did not explain how the income arises and falls within the category of a taxable service under the law. Because the determinative reasoning with respect to the nature of each receipt and the basis for treating it as a service is absent, the impugned orders cannot stand. The matter is therefore remitted to the original adjudicating authority with a direction to consider, for each head of income, the nature of the receipt, the manner in which it arises, and the legal basis for treating it as a service, and to pass fresh, reasoned orders addressing these points.

Impugned orders set aside and matter remanded to the original adjudicating authority to decide afresh with reasoned findings on the taxability of each specified head of income.

Extended period of limitation - demand and penalty confirmation - Validity of invoking extended period of limitation left open and to be addressed afresh by the adjudicating authority - HELD THAT: - Though the appellant contended that separate show-cause notices invoking the extended period could not be sustained for overlapping periods (relying on the decision cited as Sugar Factory 2006 (147) ELT 465 (SC)), the Tribunal did not adjudicate the extended-period contention on merits. Instead, because the lower authorities failed to consider and record reasons on the taxability of each head, the Tribunal remanded the matter keeping all issues, including the question of invocation of extended limitation for the respective periods, open for fresh consideration by the original authority.

Issue of invocation of extended period of limitation is not decided and is remanded to the original adjudicating authority for fresh consideration.

Final Conclusion: The impugned orders confirming service tax demand and imposing penalty are set aside; the matters are remanded to the original adjudicating authority to examine, for each specified head of income and for the relevant periods, whether the receipts constitute taxable services and whether the extended period of limitation was validly invoked, and to pass fresh reasoned orders.

Penalty under Section 78 - bonafide belief as defence to penalty - voluntary payment with interest and appropriation - application of Section 73(3) of the Finance Act, 1994 - bar on issuance of show cause notice after disclosure

Penalty under Section 78 - bonafide belief as defence to penalty - Imposition of penalty under Section 78 was not warranted in the facts of the case. - HELD THAT: - The appellant had recorded all transactions in books, disclosed non-payment to the department and, upon audit pointing out, immediately paid the Service Tax with interest and informed the department by letter dated 18.12.2012. The non-payment arose from a bona fide belief that services provided to an SEZ (subsequently converted to DTA) were not chargeable to Service Tax. There was no finding of mala fide intention or suppression. In these circumstances the Tribunal held that imposition of penalty under Section 78 was not justified and set aside the penalty. [Paras 4, 5]

Penalty under Section 78 set aside.

Application of Section 73(3) of the Finance Act, 1994 - bar on issuance of show cause notice after disclosure - voluntary payment with interest and appropriation - Proceedings ought to have been governed by Section 73(3); department was not required to issue show cause notice after voluntary disclosure and payment. - HELD THAT: - The Tribunal observed that, given the appellant's immediate payment of Service Tax with interest upon audit and the explanation that non-payment resulted from a bona fide belief, the matter fell within the scope of Section 73(3) (as interpreted by the Tribunal) which, in the circumstances, meant the department should not have issued a show cause notice. Consequently the amount of Service Tax and interest already paid was appropriately maintained/appropriated, while the penal consequence could not be sustained. [Paras 4]

Show cause notice and penalty inappropriate insofar as penalty is concerned; payment of Service Tax and interest maintained.

Final Conclusion: Appeal allowed: penalty under Section 78 set aside; the Service Tax and interest already paid and appropriated are maintained; Tribunal found non-payment arose from bona fide belief and that proceedings should have been governed by the principles of Section 73(3).

Rectification of mistake - gross value of taxable service - material supplied by service recipient not includable in service value - availability of exemption under Notification No. 12/2003 ST

Material supplied by service recipient not includable in service value - gross value of taxable service - Whether the value of materials procured in the name of the service recipient for erection, installation and commissioning provided to M/s. Suzlon forms part of the appellant's gross value of service. - HELD THAT: - The Tribunal examined invoices and records and found that materials used for the service to M/s. Suzlon were neither purchased by the appellant nor sold by it to the service recipient; the invoices for supply of material were in the name of the service recipient. On that factual basis the Tribunal concluded that the material portion is not part of the appellant's gross value of service and cannot be added to the service value by the authorities. Consequently the demand raised by the lower authorities attributable to the material value cannot be sustained and is set aside. [Paras 4]

Demand attributable to material value in respect of services to M/s. Suzlon set aside.

Rectification of mistake - availability of exemption under Notification No. 12/2003 ST - Whether any change is required in the Tribunal's order in respect of services rendered to M/s. L&T and the applicability of the earlier remand concerning invoices and Notification No. 12/2003 ST. - HELD THAT: - The Tribunal noted that its earlier order had remanded the matter to the Adjudicating Authority to verify whether invoices demonstrated sale of goods to the service recipient so as to attract Notification No. 12/2003 ST. On perusal of the record and submissions, the Tribunal found no separate or independent finding necessitating alteration of its decision in respect of services provided to M/s. L&T. Therefore the earlier finding as to services to M/s. L&T remains undisturbed. [Paras 4]

Order as regards services provided to M/s. L&T remains intact.

Final Conclusion: The review/rectification application is allowed to the extent that the demand attributable to material supplied in the name of the service recipient (M/s. Suzlon) is set aside; the Tribunal's order in respect of services to M/s. L&T is left unchanged.

Intellectual Property Rights Service - reverse charge mechanism - temporary transfer of intellectual property - outright sale versus temporary transfer

Reverse charge mechanism - Intellectual Property Rights Service - Demand of service tax for the period 16/03/2005 to 18/04/2006 - HELD THAT: - The tribunal held that the levy of service tax on the reverse charge basis could be imposed only from 18/04/2006 when section 66A was introduced. Reliance on the settled law in Indian National Ship Owners Associations (as cited) establishes that reverse charge could not be applied prior to enactment of the provision creating liability. Consequently, the demand for the period antecedent to 18/04/2006 is unsustainable.

Demand for the period 16/03/2005 to 18/04/2006 is set aside.

Intellectual Property Rights Service - temporary transfer of intellectual property - outright sale versus temporary transfer - Characterisation of the supply of drawings and designs (outright sale or intellectual property service) for the remaining period - HELD THAT: - On the plain reading of the definition of Intellectual Property Rights, only a temporary transfer or temporary use of property rights qualifies as an Intellectual Property Rights Service. The appellant asserts that the drawings and designs were outrightly purchased from foreign suppliers and produced supplier certificates in support; however those certificates were not placed before the lower authorities. In view of the absence of those documents in the earlier proceedings, the tribunal found that the question whether the transactions amounted to an outright sale (and thus excluded from IP service) requires fresh consideration by the adjudicating authority.

Matter remanded to the Adjudicating Authority to decide afresh on the question of outright sale versus intellectual property service for the remaining period.

Final Conclusion: Appeal disposed: demand for 16/03/2005 to 18/04/2006 set aside; remaining demand remanded to the Adjudicating Authority for fresh adjudication on whether the transactions constituted outright sale or Intellectual Property Rights Service.

Maintainability of appeal before the Appellate Tribunal - revisionary jurisdiction under Section 86 and first proviso to Section 35B(i) of the Finance Act, 1994 - appeal barred where first proviso to Section 35B(i) designates revisionary remedy - liberty to file revision application before the revisionary authority, Government of India

Maintainability of appeal before the Appellate Tribunal - revisionary jurisdiction under Section 86 and first proviso to Section 35B(i) of the Finance Act, 1994 - Appeal not maintainable before the Tribunal; revision application is the proper remedy before the revisionary authority (Government of India) under the statutory provision and established Tribunal precedent. - HELD THAT: - The appellant contended that the appeal was not maintainable before this Tribunal because the first proviso to Section 35B(i), read with Section 86, confers jurisdiction on the revisionary authority. The Revenue raised no objection to that stance. Having considered the statutory scheme and the Tribunal's earlier decision in VODAFONE MOBILE SERVICES LIMITED v. COMMISSIONER OF SERVICE TAX, PUNE, the Tribunal held that where the first proviso to Section 35B(i) applies, the corrective remedy lies by way of revision before the designated revisionary authority and not by appeal to this Tribunal. The Tribunal therefore concluded that the present appeal could not be entertained and that the appellant should be permitted to seek remedy by filing a revision application before the revisionary authority, Government of India.

Appeal dismissed as not maintainable with liberty to the appellant to file a revision application before the revisionary authority, Government of India.

Final Conclusion: The appeal is dismissed as not maintainable; the appellant is granted liberty to pursue a revision application before the revisionary authority, Government of India, in accordance with the statutory provision and the Tribunal's precedents.

Application for restoration of appeal - pre-deposit compliance - non-compliance with tribunal direction - finality of order - maintainability of restoration application

Application for restoration of appeal - pre-deposit compliance - non-compliance with tribunal direction - Whether the application for restoration of the appeal is maintainable where the appellant belatedly made the pre-deposit but earlier failed to comply with this Tribunal's and Commissioner (Appeals)'s directions. - HELD THAT: - The Tribunal recorded that the appellant had earlier failed to comply with its direction dated 22.03.2012 to deposit the remaining adjudged dues by 24.04.2012 and also failed to comply with the Commissioner (Appeals)'s direction for pre-deposit. The Tribunal had remanded the matter earlier and subsequently dismissed the appeal for non-compliance; an application for restoration was dismissed by order dated 28.01.2016. On the present application, the appellant contended that the required pre-deposit was ultimately made and relied on precedents for restoration where pre-deposit was subsequently deposited. The Tribunal examined the file and found no change in circumstances since the dismissal order of 28.01.2016, emphasising that the appellant had repeatedly failed to comply with earlier directions. Having already passed a detailed and reasoned order dismissing restoration, and with that order having attained finality, the Tribunal held that the present restoration application was not maintainable and could not be allowed merely because the pre-deposit was belatedly made.

Application for restoration of appeal dismissed as not maintainable; earlier order dated 28.01.2016 having attained finality and no change in circumstances.

Final Conclusion: The application for restoration of the appeal is dismissed; the Tribunal upheld the earlier dismissal for non-compliance and declined to disturb the final order, finding no fresh circumstances warranting restoration.

Interest on delayed refunds under Section 11BB - interpretation of the three month refund period under Section 11B - credit or adjustment of sanctioned refund against outstanding liability - date of entitlement to refund and interest where refund was adjusted pending appellate decision - Explanation (B)(ec) to sub clause (5) of Section 11B - duty becomes refundable as a consequence of appellate order

Interest on delayed refunds under Section 11BB - credit or adjustment of sanctioned refund against outstanding liability - Explanation (B)(ec) to sub clause (5) of Section 11B - duty becomes refundable as a consequence of appellate order - Whether the appellant was entitled to interest on the portion of sanctioned refund that had been initially adjusted against an outstanding liability but later became payable after that liability was set aside by the Tribunal. - HELD THAT: - The Tribunal found that part of the refund was paid in cash within the three month period prescribed by Section 11B and the balance had been adjusted against an outstanding liability. When that liability was subsequently set aside by the Tribunal, the date from which entitlement to refund (and hence interest under Section 11BB) arose is the date of the appellate order setting aside the liability. Explanation (B)(ec) to sub clause (5) of Section 11B treats duty as becoming refundable as a consequence of an appellate order, and therefore the three month period under Section 11BB is to be reckoned from that date. The adjusted portion was refunded within three months of the Tribunal's order; accordingly no interest under Section 11BB was payable. The Tribunal relied on this statutory construction and consistent precedents holding that interest on amounts pre deposited or adjusted pending appeal accrues only from the date of the final favourable order, and concluded that the lower authorities did not err in denying interest. [Paras 5, 6, 7, 8]

Entitlement to interest on the adjusted portion is to be reckoned from the date of the Tribunal's order setting aside the liability; as the amount was refunded within three months of that order, no interest is payable.

Final Conclusion: The appeal is dismissed. The claim for interest on the portion of the sanctioned refund that had been adjusted against an outstanding liability was correctly rejected because the adjusted amount was refunded within three months of the Tribunal's order setting aside the liability.

Entitlement to exercise option under Rule 6(3A) of Cenvat Credit Rules, 2004 - provisional monthly payment procedure under Rule 6(3A)(b) of Cenvat Credit Rules, 2004 - treatment of electricity generated and sold from factory premises as excisable goods - inapplicability of Rule 6(2)/6(3)(b) to inevitable waste/by-product - Cenvat credit admissibility where common inputs serve dutiable and exempt outputs

Entitlement to exercise option under Rule 6(3A) of Cenvat Credit Rules, 2004 - provisional monthly payment procedure under Rule 6(3A)(b) of Cenvat Credit Rules, 2004 - Appellant's exercise of the option under Rule 6(3A) and compliance with the provisional payment procedure prescribed therein. - HELD THAT: - The Tribunal found as an admitted fact that the appellant was not maintaining separate accounts for inputs used in relation to exempted and dutiable goods and had given intimation of exercising the option under Rule 6(3A) by letter dated 01.04.2014. Sub rule (3A)(a) formalities were complied with and the appellant had been making payments in accordance with sub rule (3A)(b)(iii). In these circumstances the appellant was entitled to the scheme of provisional monthly determination and payment under Rule 6(3A). The Tribunal therefore considered the exercise of the option and the method of provisional payment to be properly availed and complied with by the appellant. [Paras 5, 6]

The appellant was entitled to exercise the option under Rule 6(3A) and had complied with the provisional monthly payment procedure prescribed by sub rule (3A)(b).

Treatment of electricity generated and sold from factory premises as excisable goods - Cenvat credit admissibility where common inputs serve dutiable and exempt outputs - Whether denial of Cenvat credit on inputs/input services used for electricity sold by the appellant was justified given characterisation of that electricity. - HELD THAT: - The Commissioner (Appeals) had recorded that electricity generated within the appellant's premises under the same title as sponge iron etc. is covered by the Central Excise Tariff and therefore constitutes excisable goods. The Tribunal held that once such electricity is characterised as excisable, denial of Cenvat credit on inputs/input services used in its generation is inconsistent with the legislative intent underpinning the Cenvat scheme. Accordingly the finding denying credit on that basis was held to be unsustainable and liable to be set aside. [Paras 7]

Electricity generated and sold from the appellant's premises was to be treated as excisable goods and denial of Cenvat credit on that basis was not justified.

Inapplicability of Rule 6(2)/6(3)(b) to inevitable waste/by-product - Cenvat credit admissibility where common inputs serve dutiable and exempt outputs - Whether Rule 6(2) and Rule 6(3)(b) apply to iron fines/iron fills emerging as inevitable waste or by product during manufacture. - HELD THAT: - The Tribunal held that iron fills emerging as an inevitable and unavoidable waste during manufacture are by products which cannot be treated as consciously manufactured exempted goods for purposes of Rules 6(2) and 6(3)(b). Relying on the principle in Union of India v. Hindustan Zinc and earlier tribunal decisions, the Tribunal reasoned that the provisions governing allocation of Cenvat credit between dutiable and exempt outputs apply where a manufacturer consciously manufactures both kinds of products using common inputs and fails to maintain separate accounts; they do not apply where the exempted item is an unavoidable waste/by product and compliance with Rule 6(2) is impossible. Consequently the denial of credit on this ground was set aside. [Paras 8]

Rules 6(2) and 6(3)(b) do not apply to inevitable waste/by product such as iron fills; the appellant is not liable under those provisions for such material.

Final Conclusion: The Tribunal set aside the impugned order: it held that the appellant validly exercised and complied with the option and provisional payment method under Rule 6(3A), that electricity generated and sold from the factory is to be treated as excisable goods (so denial of credit on that basis was erroneous), and that Rules 6(2)/6(3)(b) do not apply to inevitable waste/by product (iron fills); the appeal was allowed.

Plant Growth Regulator - Plant bio stimulant - Classification of goods - Chapter 31 versus Chapter 38 - Essential character test - Application to plant versus soil - Deemed manufacture by repacking/labeling

Plant Growth Regulator - Plant bio stimulant - Application to plant versus soil - Classification of goods - Chapter 31 versus Chapter 38 - Referral to a Larger Bench of the question whether a plant growth promoter must be capable of simultaneously inhibiting growth or otherwise modifying plant processes (in addition to promoting) in order to qualify as a plant growth regulator under heading 3808. - HELD THAT: - The Tribunal examined competing contentions whether the product Siapton 10L is a fertilizer (Chapter 31) or a plant growth regulator (Chapter 38) and reviewed earlier Tribunal authority which had treated a product described as a plant growth promoter as not being a PGR unless it could also inhibit or otherwise modify plant processes. After analysing HSN notes, technical literature and Circular No. 1022/10/2016-CX, the Tribunal concluded that the earlier decision's requirement that a PGR must both promote and inhibit/modify was erroneous. The Tribunal observed that the HSN and technical sources treat PGRs as organic compounds other than nutrients that, when applied (directly) to plants, may promote, inhibit or otherwise modify physiological processes; many marketed PGRs perform only one such function. Given the differing factual matrices in earlier precedents (notably whether the product is applied to soil or directly to plants) and the significance of that factual distinction to classification, the legal question of whether promotion alone (by modifying life processes) suffices to characterise a substance as a PGR under heading 3808 was held to require authoritative settlement. Consequently the Tribunal did not finally decide the classification or related penalty but referred the determinative legal question to a Larger Bench for resolution. [Paras 5, 6]

Question referred to a Larger Bench to decide whether a plant growth promoter that modifies life processes by promoting growth alone qualifies as a plant growth regulator under heading 3808, or whether it must also be capable of inhibiting or otherwise modifying plant processes.

Final Conclusion: The Tribunal has not finally adjudicated the classification or penalty but has referred the determinative legal question concerning the definition and scope of Plant Growth Regulator under heading 3808 to a Larger Bench and directed registry to place the file before the President for constitution of the Larger Bench.

Rectification of tribunal order - mistake apparent on record - review versus re-appreciation of evidence - principles of natural justice - evidentiary appreciation and rejection of retractions - benefit of exemption under Notification No. 6/2003

Rectification of tribunal order - mistake apparent on record - review versus re-appreciation of evidence - benefit of exemption under Notification No. 6/2003 - The ROM application filed by the appellant was dismissed on the ground that the Tribunal had considered and rejected the appellant's defenses and that seeking re-appreciation of evidence in a rectification application would amount to impermissible review. - HELD THAT: - The Tribunal's order (paras 6.1-6.8) was examined and found to have considered the appellant's assertions, including buyers' statements and the claim of manufacture/dispatch of unbranded oil in March-April 2003, transport documents and alleged manipulations, the letter dated 05.05.2003 and related invoice-cum-challans, and retractions relied upon by the Revenue. The Tribunal expressly concluded that there were sufficient evidences to prove that the goods were branded and therefore not eligible for the exemption under Notification No. 6/2003, and it specifically rejected the appellant's submissions (paras 6.6 and 6.8). The application for rectification sought re-appreciation of evidence already considered and rejected by the Tribunal; following the principle that a rectification cannot be used to re-open or review the merits, and distinguishing the authorities relied upon by the appellant (which involved failure to consider material or breach of natural justice), the ROM was dismissed. The decision of the Apex Court in RDC Concrete (as applied in the order) was followed to hold that rectification cannot be converted into a forum for re-appreciation of evidence or change of view previously taken by the Tribunal. [Paras 4, 5, 7, 8]

ROM application dismissed; no rectification because the Tribunal had considered and rejected the appellant's defenses and re-appreciation would amount to prohibited review.

Final Conclusion: The rectification application is dismissed: the Tribunal had considered the relevant evidence and rejected the appellant's submissions, and a rectification cannot be used to re-appreciate evidence or review the earlier decision.

SSI exemption - use of same brand by family members - brand name belonging to another person - suppression with intent to evade duty - time-bar of demand

SSI exemption - use of same brand by family members - brand name belonging to another person - Whether the appellant is eligible for SSI exemption despite using brand names that are also used by other family members - HELD THAT: - The Tribunal accepted that the same brand name was used by authorized family members for their respective businesses. Relying on the reasoning in Laxmi Industries (which applied Minimax Industries and Elex Knitting Machinery), the Court held that where a brand name is used by members of the same family and no other person has established proprietary rights in that name, the use cannot be treated as use of a brand belonging to some other person. The Tribunal further noted that the Law Ministry opinion and Circular dated 1-9-1994 support the proposition that if a brand name does not belong to any particular person, its use will not deprive a unit of small scale exemption. Applying that ratio to the facts, the appellants could not be said to have used a brand of another person and were therefore eligible for SSI exemption. [Paras 4, 5]

Appellant entitled to SSI exemption as the brand names used by it, which are also used by family members, do not amount to use of a brand belonging to another person.

Suppression with intent to evade duty - time-bar of demand - Whether the demand was sustainable on the ground of suppression with intent to evade duty and whether the demand was time-barred - HELD THAT: - The Tribunal observed that the appellants had filed the necessary declarations under the relevant rules and notifications and could have been under a bona fide belief that the brand name did not belong to any other person. In the absence of any established owner of the brand name and given the Circular clarifying eligibility where a brand name is not owned by any person, the Tribunal concluded there was no suppression with intent to evade duty. On this basis, and considering the factual circumstances, the impugned demand could not be sustained; the appeals were allowed on both merit and limitation grounds. [Paras 10]

No suppression with intent to evade duty found; demand not sustainable and appeals allowed on merit as well as on limitation.

Abatement of appeal - Disposition of the appeal filed by Shri Pravinbhai D. Patel - HELD THAT: - It was recorded that Shri Pravinbhai D. Patel had passed away and a death certificate was produced. In consequence, the Tribunal treated his appeal as not maintainable and abated it. [Paras 5]

The appeal of Shri Pravinbhai D. Patel is abated.

Final Conclusion: The Tribunal allowed the appeal of M/s. Shreeji Enterprise holding the firm eligible for SSI exemption since the brand names used by it are also used by family members and no other person established ownership; the demand was consequently not sustained on merits or limitation grounds. The individual appeal of Shri Pravinbhai D. Patel was abated on account of his death.

Classification of goods under Central Excise Tariff - Interpretation of headings 3302 and 3303 - Valuation under Section 4 and Section 4A of Central Excise Act, 1944 - Burden of proof on Revenue for classification - End use and identity of goods for tariff classification

Classification of goods under Central Excise Tariff - Interpretation of headings 3302 and 3303 - End use and identity of goods for tariff classification - Perfumery compound manufactured by the appellant is classifiable under CETH 3302 9011 and not under CETH 3303 0040, for all supplies including those made to traders. - HELD THAT: - The Tribunal found on the record that the product is supplied mainly to industrial consumers and that supplies to traders were from the same batches and of identical nature and use as those supplied directly to industrial customers. Documentary material produced by the appellant - production and batch reports, invoices and product labels stating "for industrial use only" and "free from alcohol" - establish that the product is not designed for direct application to the human body and does not contain alcohol. The Revenue produced no contrary evidence to rebut these facts. Given that heading 3303 (perfumery preparations designed to give fragrance primarily to the human body and generally dissolved in alcohol) is inapplicable where the product is not alcohol-based and not intended for personal use, the Tribunal held that the goods fall within heading 3302. The Tribunal also held that the same goods cannot be subjected to different classification based solely on being sold through traders where identity, composition and end-use remain the same.

Impugned orders reclassifying the goods under CETH 3303 0040 and assessing them under Section 4A are set aside; the product is held classifiable under CETH 3302 9011 for all impugned supplies.

Burden of proof on Revenue for classification - The Revenue failed to discharge the burden of proof to establish a different classification for the goods. - HELD THAT: - The Tribunal applied the principle that the burden to prove correct classification lies on the Revenue when it seeks to reclassify goods. In the absence of contrary evidence to rebut the appellant's documentary proofs regarding composition, packaging and intended industrial use, the Tribunal concluded that the departmental demand based on alternative classification could not be sustained.

Demand and adjudication based on the Revenue's classification are annulled for want of proof; appeals allowed.

Final Conclusion: The appeals are allowed: the perfumery compound is held to be classifiable under CETH 3302 9011 (not 3303 0040), the departmental reclassification and consequential demand under Section 4A fail for lack of proof, and the impugned orders are set aside.

Cenvat Credit utilization - Education Cess and Secondary & Higher Education Cess as duty of excise - Rule 3 of the Cenvat Credit Rules, 2004 - Utilisation of Cenvat credit for payment of any duty of excise

Cenvat Credit utilization - Education Cess and Secondary & Higher Education Cess as duty of excise - Rule 3 of the Cenvat Credit Rules, 2004 - Entitlement to utilize Cenvat credit of basic excise duty for payment of Education Cess and Secondary & Higher Education Cess. - HELD THAT: - The Tribunal held that Education Cess and Secondary & Higher Education Cess are duties of excise and therefore fall within the ambit of Cenvat credit as contemplated by Rule 3 of the Cenvat Credit Rules, 2004. In view of the express inclusion of basic excise duty within the definition of Cenvat credit and the absence of any bar in Rule 3 against using such credit for payment of other excise duties, the credit accumulated on basic excise duty can be applied towards payment of Education Cess and Secondary & Higher Education Cess. The conclusion is supported by precedents of this Tribunal, various High Courts and the Hon'ble Supreme Court, including SRD Nutrients Pvt. Ltd., and the decisions of the Guwahati High Court followed in Dharmpal Satyapal Ltd. and Union of India v. Kamakhya Cosmetics & Pharmaceutical Pvt. Ltd., which treat the cesses as excise duty and permit utilisation of Cenvat credit for their payment.

Assessee entitled to utilise Cenvat credit of basic excise duty for payment of Education Cess and Secondary & Higher Education Cess; demand set aside and related penalty not sustainable.

Final Conclusion: The assessee's appeal is allowed: the demand for unpaid Education Cess and Secondary & Higher Education Cess cannot be sustained as Cenvat credit of basic excise duty is utilisable for their payment; consequently the Revenue's appeal is dismissed and no penalty arises.

Manufacture within the meaning of Section 2(f)(iii) of the Central Excise Act, 1944 - process of tinting as manufacture - Cenvat credit eligibility - remand for reconsideration - penalty on employee

Manufacture within the meaning of Section 2(f)(iii) of the Central Excise Act, 1944 - process of tinting as manufacture - The process of tinting-mixing base paint with colourants to obtain the desired shade-amounts to manufacture and the demand is sustainable. - HELD THAT: - The Tribunal applied its earlier decision in the appellant's case (order No. A/11219-11222/2018 dated 20.06.2018) which held that the tinting activity constitutes manufacture. Relying on that precedent, the Tribunal concluded that the activity in the present appeal similarly amounts to manufacture and therefore the excise demand founded on that classification is sustainable. [Paras 4]

Demand sustained because tinting constitutes manufacture as per the Tribunal's earlier decision.

Cenvat credit eligibility - remand for reconsideration - The question of entitlement to Cenvat credit was not finally adjudicated and is remanded to the Adjudicating Authority for reconsideration. - HELD THAT: - The Tribunal found that the Adjudicating Authority had not considered the appellant's claim for Cenvat credit. The matter is therefore sent back for fresh consideration, with liberty granted to the appellant to produce supporting documents such as input invoices, evidence of receipt of goods and proof of use of inputs. If such documents establish the inputs, the appellant will be eligible for Cenvat credit. [Paras 5]

Remanded to the Adjudicating Authority to reconsider Cenvat credit claim on production and verification of input documents.

Penalty on employee - The penalty imposed on the employee, Shri Abhijit Velhal, is set aside. - HELD THAT: - Applying the ratio adopted in the Tribunal's earlier decision, and having taken the view that on the facts and circumstances penalty is not imposable on the employee, the Tribunal set aside the penalty order against the employee. [Paras 5]

Penalty on the employee is quashed and set aside.

Final Conclusion: The appeal is allowed in part: the Tribunal held that tinting (mixing base paint with colourants) amounts to manufacture and sustained the demand; the issue of Cenvat credit entitlement is remanded to the Adjudicating Authority for reconsideration on production of input documents; and the penalty on the employee is set aside.

Cenvat credit on returned goods - Rule 16 of Central Excise Rules, 2002 - suo moto re-credit - no permission required for claiming Cenvat credit - improper audit objection and departmental inaction

Cenvat credit on returned goods - Rule 16 of Central Excise Rules, 2002 - suo moto re-credit - no permission required for claiming Cenvat credit - improper audit objection and departmental inaction - Entitlement of the assessee to retain Cenvat credit on goods returned by customers and validity of suo moto re-credit without prior departmental permission - HELD THAT: - The Tribunal found that Rule 16 of the Central Excise Rules, 2002 expressly provides for Cenvat credit in respect of returned goods and that the audit objection did not identify any statutory provision or reason rendering such credit inadmissible. The appellant had reversed the credit under audit pressure and thereafter sought departmental permission for re-credit; the department failed to act on that request and the appellant subsequently re-credited the amount. Since entitlement to the credit was on the merits under Rule 16 and no statutory permission is required to take Cenvat credit, the Tribunal held that the suo moto re-credit was legally permissible. The Tribunal further observed that the audit insistence to reverse credit without assigning statutory reasons and the departmental failure to respond constituted departmental error and amounted to harassment of the assessee. Relying on the principle that where the department raises no meritorious objection to admissibility under the governing rule, re-credit permitted by the rule cannot be treated as wrongful, the demand based solely on the ground that the credit was taken suo moto was unsustainable. [Paras 4, 5]

Impugned order set aside; appeal allowed and re-credit held to be valid.

Final Conclusion: The Tribunal allowed the appeal, held that Cenvat credit on returned goods was admissible under Rule 16 and that suo moto re-credit without departmental permission was valid where no meritorious departmental objection was shown; the demand based on taking suo moto credit was accordingly set aside.

Shortage detected during physical stock taking - clandestine removal - requirement of independent and corroborative evidence to sustain demand - statement recorded under Section 14 - spillage and evaporation as explanation for shortage

Shortage detected during physical stock taking - clandestine removal - requirement of independent and corroborative evidence to sustain demand - statement recorded under Section 14 - spillage and evaporation as explanation for shortage - Whether a duty demand based solely on shortages found at physical verification can be sustained in the absence of evidence of clandestine removal and where the manager has stated that shortage arose from spillage/evaporation and not from clandestine removal. - HELD THAT: - The Tribunal found that although shortages were recorded during departmental physical stock taking, there was no evidence on record of clandestine removal of goods. The manager's statement recorded under Section 14 expressly disclaimed clandestine removal and provided an explanation attributing the shortage to the nature of the product-spillage and evaporation during handling and a long production period. The Tribunal held that merely detecting shortages at the time of inspection, without independent and positive evidence corroborating clandestine removal, is insufficient to confirm a duty demand. The reasoning follows the Tribunal's earlier decision in Galaxy Textile , where similar shortages uncorroborated by independent evidence led to setting aside the demand. Applying that principle to the facts at hand, and finding the manager's explanation convincing in the absence of corroborative evidence of illicit removal, the Tribunal concluded that the demand could not be sustained.

Impugned order confirming duty demand set aside; appeals allowed.

Final Conclusion: In view of the absence of evidence of clandestine removal and the satisfactory explanation of shortages as arising from spillage/evaporation (supported by the manager's statement), the demand confirmed on the basis of shortages detected at physical verification was unsustainable; the impugned order is set aside and the appeals are allowed.

Export under Bond/LUT - availability of Cenvat credit on inputs for exported exempt goods - Rule 6(6)(v) of Cenvat Credit Rules, 2004 barring Rule 6(1) - refund under Rule 5 of Cenvat Credit Rules, 2004 - CBEC Circular No.754/70/2003-CX applicability - judicial discipline and binding effect of appellate orders - interest under Section 11BB of Central Excise Act, 1944

Export under Bond/LUT - Notification No.42/2001-CE (NT) - Validity of exporting exempted goods under Bond/LUT - HELD THAT: - The Tribunal accepted the Commissioner(A)'s finding that exports of goods specified in the Central Excise Tariff, though attracting nil rate, fall within the expression "excisable goods" and therefore may be exported under Bond/LUT in terms of Notification No.42/2001-CE (NT) issued under rule 19. A prior Commissioner(A) order and the Tribunal's order upholding it in the appellant's own case had become final and, applying the binding effect of those appellate decisions, the lower authority was incorrect to hold that export under Bond/LUT was unavailable for exempted goods.

Exempted goods can validly be exported under Bond/LUT and the lower authority's contrary view was erroneous.

Rule 6(6)(v) of Cenvat Credit Rules, 2004 barring Rule 6(1) - availability of Cenvat credit on inputs for exported exempt goods - Whether Rule 6(6)(v) applies to exports under Bond/LUT and thereby prevents application of Rule 6(1) so as to permit Cenvat credit on inputs used in exempted goods exported - HELD THAT: - The Commissioner(A) and the Tribunal concluded that Rule 6(6)(v) applies to exports of excisable goods without payment of duty (including exempted goods) under Bond/LUT and, by its operation, bars the applicability of Rule 6(1) (and related sub-rules) in such cases. Prior appellate orders in the appellants' own matters and judicial decisions (including Repro India and various tribunal/high court decisions cited) support the position that where exempted goods are exported under Bond/LUT, input credit can be availed subject to the conditions of the Cenvat scheme. The adjudicating authority's reliance on general observations in unrelated Supreme Court decisions was held to be misplaced and insufficient to override the specific provisions and binding precedents.

Rule 6(6)(v) applies to export under Bond/LUT and, consequently, Rule 6(1) does not bar availment of Cenvat credit on inputs used in exempted goods exported under Bond/LUT.

CBEC Circular No.754/70/2003-CX applicability - availability of Cenvat credit on inputs for exported exempt goods - Applicability of CBEC Circular No.754/70/2003-CX (no credit where inputs exclusively used for exempt goods) - HELD THAT: - The Tribunal accepted the Commissioner(A)'s finding that the circular disallows credit only where inputs are exclusively used in or in relation to exempted final products. In the present case the manufacturer used common inputs for both dutiable and exempted products, maintained accounts as required by Rule 6(2), and did not take credit for inputs exclusively used for exempted goods cleared for domestic nil-rated clearance. Accordingly, the circular did not apply to bar credit in the facts before the authority.

CBEC Circular No.754/70/2003-CX is not attracted in this case and does not prohibit availment of credit.

Refund under Rule 5 of Cenvat Credit Rules, 2004 - Admissibility of refund of accumulated Cenvat credit under Rule 5 for inputs used in exempted goods exported under Bond/LUT - HELD THAT: - The Tribunal endorsed the Commissioner(A)'s conclusion that once export under Bond/LUT and the applicability of Rule 6(6)(v) permitting credit are established, the safeguards, conditions and limitations for refund are governed by Notification No.5/2006-CE (NT) issued under rule 5. The adjudicating authority had not demonstrated contravention of those conditions in the show cause notices or orders. Given that the primary objections (non-availability of Bond/LUT and operation of Rule 6(1)) were unsustainable, rejection of the refund claims under Rule 5 was held to be legally untenable.

Refund under Rule 5 is admissible subject to fulfillment of the conditions prescribed in the Notification under rule 5.

Judicial discipline and binding effect of appellate orders - Whether the adjudicating authority violated principles of judicial discipline by disregarding binding appellate/tribunal decisions - HELD THAT: - The Tribunal agreed with the Commissioner(A) that the adjudicating authority erred by ignoring final appellate orders in the appellants' own case and other directly applicable decisions. The authority had relied on general observations from unrelated Supreme Court judgments without explaining why those dicta would displace specific statutory provisions and binding precedents. The Tribunal reiterated the principle that subordinate quasi judicial authorities must follow the ratio of higher appellate decisions within their jurisdiction.

The adjudicating authority violated judicial discipline by not following binding appellate/tribunal decisions; its orders were therefore set aside.

Interest under Section 11BB of Central Excise Act, 1944 - Entitlement to interest on refund amounts under Section 11BB - HELD THAT: - The Tribunal followed the statutory scheme and Commissioner(A)'s conclusion that orders passed by higher appellate authorities in refund cases under Section 11B are to be treated as orders under Section 11BB, thereby attracting interest. Consequently, appellants (respondent-manufacturers) are entitled to interest from the ninety first day after filing the refund applications until the date of actual refund as awarded by the order.

Appellants are entitled to interest on the refund amounts in terms of Section 11BB.

Final Conclusion: The Tribunal agreed with the Commissioner(A) that exempted goods may be exported under Bond/LUT and that Rule 6(6)(v) applies to such exports, permitting Cenvat credit on inputs used in the manufacture of exported exempt goods; the adjudicating authority's contrary findings were set aside as violative of judicial discipline. Refunds under Rule 5 (subject to notification conditions) and interest under Section 11BB were held to be admissible. The Revenue's appeals were dismissed.

Concessional duty for clearance to industrial consumers - qualification of buyers under Rule 2A of the Standards and Weights and Measures (Packaged Commodities) Rules, 1977 - retail sale (statutory definition under the PC Rules) - sale without marking of RSP does not qualify as retail sale - non-application of Rule 3 of the PC Rules to direct sales without RSP marking

Retail sale (statutory definition under the PC Rules) - sale without marking of RSP does not qualify as retail sale - Whether sales of cement made directly to consumers without marking of RSP qualify as 'retail sale' under the Packaged Commodities Rules so as to sustain denial of concessional duty. - HELD THAT: - The Tribunal applied its earlier decisions and recent authorities which examined the statutory definition of 'retail sale' (Rule 2(q) of the PC Rules) and concluded that a sale effected directly to a consumer without RSP marking, and not through a retail agency or intermediary, does not meet the statutory criteria of 'retail sale'. Consequently, such direct sales are not governed by the procedures under Rule 3 and cannot be treated as qualifying transactions for the concessional duty claimed. The impugned adjudications, which held otherwise by treating those buyers as qualifying under the PC Rules, were therefore found legally unsustainable and liable to be set aside. [Paras 3, 4]

Impugned orders denying concessional treatment were set aside and the appeals allowed.

Final Conclusion: Following Tribunal precedents that direct sales without RSP marking do not qualify as 'retail sale' under the Packaged Commodities Rules, the impugned orders were found unsustainable, set aside and the appeals allowed.

Classification of goods under Central Excise Tariff headings - Composite machine rule / classification of components under principal function - Legal status of HSN Explanatory Notes in tariff classification - Interpretation and application of Section Notes to Section 16 (Section notes 3,4,5)

Composite machine rule / classification of components under principal function - Classification of conveyors and elevators as part of rice mill machinery - Application of Section Notes (3,4,5) to decide tariff heading - Whether conveyors and elevators manufactured and supplied along with rice milling machinery, and specifically designed for rice mills, are classifiable under Chapter Heading 8437 as part of rice mill machinery. - HELD THAT: - The Tribunal applied Section Notes 3, 4 and 5 to Section 16 of the Central Excise Tariff Act and found that where machines fitted together form a whole or consist of individual components intended to contribute together to a clearly defined function, the whole falls to be classified in the heading appropriate to that function. The conveyors and elevators in question were found to be specifically designed for rice mills, supplied along with other rice milling machines, and to perform the complementary function of feeding/transporting grain between stages of the rice milling process. Those facts were undisturbed by the adjudicating authority. On that basis the Tribunal held that the conveyors and elevators form part of a composite machinery performing the principal function of rice milling and therefore merit classification under Chapter Heading 8437. [Paras 7, 11, 12]

Conveyors and elevators specifically manufactured for and supplied as part of rice milling machinery are classifiable under Chapter Heading 8437; demands, interest and penalties based on classification under 8428 are unsustainable.

Legal status of HSN Explanatory Notes in tariff classification - Primacy of domestic tariff section notes over HSN explanatory notes - Whether reliance on HSN Explanatory Notes permits re-classifying the conveyors and elevators under Chapter Heading 8428 despite Section Notes to the Central Excise Tariff Act. - HELD THAT: - The Tribunal held that HSN Explanatory Notes are only a guiding aid and do not have the force of law. Where the Central Excise Tariff Act's Section Notes clearly govern classification (as in notes 3, 4 and 5 to Section 16), the department cannot displace that domestic statutory scheme by invoking HSN explanatory notes. The Tribunal relied on its earlier authority to the same effect and on the Apex Court principle that items specifically made for a particular machine are classifiable as part of that machine. Consequently the revenue's reliance on the HSN explanatory note to place the goods under 8428 was rejected. [Paras 7, 8]

HSN Explanatory Notes cannot override the Section Notes of the Central Excise Tariff Act; reliance on those explanatory notes to classify the specified conveyors and elevators under 8428 is not sustainable.

Final Conclusion: The appeals are allowed: conveyors and elevators specifically manufactured for and supplied with rice milling machinery are held classifiable under Chapter Heading 8437; the impugned orders confirming duty, interest and penalties under classification 8428 are set aside with consequential relief.

Principles of natural justice - service of statutory notice - deemed service of notice - opportunity of being heard - setting aside ex parte order - remand for fresh consideration

Principles of natural justice - service of statutory notice - deemed service of notice - remand for fresh consideration - Ext.P6 (the ex parte penalty order) set aside and the matter remanded to the Intelligence Officer for fresh consideration after affording the petitioner an opportunity to be heard. - HELD THAT: - The Court found the controversy turned on whether a statutory notice had been served or was to be treated as deemed served. Ext.P6 recorded that the notice issued under the Act was returned 'closed'. The petitioner was shown with alternative addresses in the departmental records (as consignor and consignee), and given the penal consequences of the order the authorities ought to have made use of the available alternative address before proceeding ex parte. The Court observed that the Department may not at this stage supply fresh reasons inconsistent with Ext.P6 and that the proper course is to set aside the impugned order and remit the matter for fresh action. The Court directed that the petitioner appear before the Intelligence Officer on the fixed date; on appearance the Intelligence Officer shall proceed with the matter afresh, whereas failure to appear will revive Ext.P6. [Paras 6, 7, 8]

Ext.P6 is set aside and the matter is remanded to the third respondent (Intelligence Officer) to proceed afresh after affording the petitioner an opportunity of being heard; the petitioner must appear on 05.12.2018, failing which Ext.P6 shall stand revived.

Final Conclusion: The ex parte penalty order (Ext.P6) is set aside and the matter remanded to the Intelligence Officer for fresh consideration after giving the petitioner an opportunity to be heard; a firm date (05.12.2018) for appearance is fixed, and failure to appear will revive Ext.P6.

Chemicals and dyes used in job work taxable only to the extent property in them is transferred - value of goods transferred in the execution of works contract is the taxable quantum - entire value of consumables not transferable cannot be included in turnover for VAT/CST - remand to Assessing Officer for factual determination of quantity/percentage of consumables retained or lost in process

Chemicals and dyes used in job work taxable only to the extent property in them is transferred - entire value of consumables not transferable cannot be included in turnover for VAT/CST - Taxability of chemicals, dyes and other consumables used in job work of bleaching, washing, processing and dyeing - whether tax can be levied on the entire value of such consumables. - HELD THAT: - The Court held that the matter was no longer res integra and followed the reasoning in VATAP No.32 of 2017 (M/s AP Processors). The determinative legal principle is that what is taxable under the HVAT and CST Acts is the value of goods which get transferred to the customer in the execution of works contract, and not the full value of goods used or consumed if such use does not result in transfer of property to the customer. Accordingly, tax cannot be levied on the entire value of chemicals and dyes consumed during processing where a substantial portion is not transferred to the principal. [Paras 7]

The impugned view upholding levy of tax on the entire value of chemicals and dyes is not sustained; only the value of consumables that are transferred (retained/embedded) in the finished goods is taxable.

Remand to Assessing Officer for factual determination of quantity/percentage of consumables retained or lost in process - Procedure to determine taxable quantum where only part of consumables is transferred - whether factual enquiry and computation are required. - HELD THAT: - The Court directed that the factual determination of how much of the dyes, chemicals and colours are retained on the fabric (and therefore form part of taxable turnover) is a matter for the Assessing Officer. The Assessing Officer is to conduct a factual enquiry, permitting the parties to produce evidence, and thereafter compute the percentage/value of consumables to be included in turnover in accordance with law and applicable precedents. [Paras 7, 8]

Matter remanded to the Assessing Officer to work out details of quantity/percentage of chemicals, dyes and colours retained in the finished goods and to proceed to compute tax liability accordingly.

Correction of clerical error in appeal headnote - Application to amend the head note of VAT Appeal No. 85 of 2018 to correct STA number from 790 to 791. - HELD THAT: - On perusal, the Court allowed the application under Order 151 CPC to rectify the reference in the head note of the appeal, permitting the STA number to be read as STA No. 791 of 2014-15. [Paras 1, 2]

Prayer allowed; the head note is amended to read STA No. 791 of 2014-15.

Final Conclusion: The appeals are disposed of by setting aside the Tribunal's orders insofar as they upheld taxation of the entire value of chemicals and dyes; the matters are remanded to the Assessing Officer to determine, after factual enquiry and evidence, the quantity/percentage of consumables retained in the finished goods and to compute tax liability in accordance with law; a clerical correction to the appeal head note is allowed.

Compounding option for dealers in jewellery - highest tax payable as conceded in the return or accounts - branch treated as independent place of business for compounding - assessed tax not to be used for computing compounded tax - inclusion of purchase tax in computing highest tax for KGST period - exclusion of purchase tax in KVAT period - inclusion of additional sales tax under KGST only if tax paid under Sections 5/5A

Branch treated as independent place of business for compounding - compounding option for dealers in jewellery - Computation of compounded tax must treat the Head Office and each branch independently and apply the 200% rate to the highest tax conceded by each distinct business place. - HELD THAT: - Explanation II to Section 8(f) of the Kerala Finance Act, 2006 treats a branch as an independent place of business and sub-clause (iii) contemplates special computation where a new branch is opened. Circular No.42/2006 is in consonance with the statutory scheme and instructs that branches are to be treated as independent units for compounding. These provisions and the circular demonstrate the legislative and administrative intention to compute compounded tax separately for the Head Office and for each branch on the basis of the tax conceded by each such place in the relevant preceding years. [Paras 13, 14]

Answered against the assessee and in favour of the Revenue: compute compounded tax separately for Head Office and each branch.

Highest tax payable as conceded in the return or accounts - assessed tax not to be used for computing compounded tax - The highest tax payable for the purpose of compounding is the tax conceded in the returns or accounts for the relevant years and not the tax as finally assessed or revised on appeal. - HELD THAT: - The statutory language of Section 8(f)(i) expressly refers to the highest tax 'as conceded in the return or accounts'. The Court adopted the reasoning of the Division Bench in M/s. Malabar Ornaments (P) Ltd. and held that the provision requires use of the conceded figures rather than post-assessment or appellate variations. Circular No.42/2006 complements this construction by prescribing the manner in which tax payable is to be considered for compounding. [Paras 15, 19]

Answered in favour of the assessee and against the Revenue: use conceded tax in returns/accounts, not assessed tax.

Inclusion of purchase tax in computing highest tax for KGST period - exclusion of purchase tax in KVAT period - Purchase tax is includable in determining the highest tax payable for the KGST period but not includable for the KVAT period (2005-06) because the subsequent departmental circular excludes purchase tax for KVAT. - HELD THAT: - The compounding provision speaks of the 'highest tax payable' without distinguishing purchase tax; therefore, on a plain reading purchase tax falls within the tax payable for the KGST years. However, Circular No.42/2006, adopting the position in Kurian Abraham, excludes purchase tax under Section 6(2) of the KVAT Act for the VAT period. The Court held the circular binding on the Department, resulting in inclusion of purchase tax for the KGST years but exclusion for the KVAT year. [Paras 16, 19]

Partly in favour of the assessee and partly in favour of the Revenue: include purchase tax for KGST years; exclude it for the KVAT year.

Inclusion of additional sales tax under KGST only if tax paid under Sections 5/5A - Additional sales tax under the KGST regime (Section 5D) is includable in determining the highest tax payable only where the dealer in that year actually paid tax in accordance with Sections 5 and 5A; if the dealer had paid tax at the compounded rate for that year, additional sales tax is not to be included. - HELD THAT: - The Supreme Court's decision in Bhima Jewellery holds that additional sales tax under Section 5D applies to dealers liable to pay tax under Sections 5 and 5A and does not attach to dealers who paid under a compounding scheme. Accordingly, where a dealer in a KGST year was assessed and paid tax under Sections 5/5A (and thereby paid the additional levy), that additional sales tax forms part of the highest tax payable. Conversely, if the dealer had opted for and paid compounded tax in that year, the additional sales tax cannot be included for computing the highest tax payable. [Paras 17, 18, 19]

Partly in favour of the assessee and partly in favour of the Revenue: include additional sales tax only when the dealer paid tax under Sections 5/5A in the relevant KGST year; exclude where the dealer paid compounded tax.

Final Conclusion: The Tribunal and first appellate authority are modified: compounded tax for 2006-07 must be computed separately for Head Office and each branch using the highest tax conceded in the returns/accounts for the relevant preceding years (2003-04 to 2005-06); assessed or appellate-determined tax cannot be the basis. Purchase tax is includable for KGST years but excluded for the KVAT year by Circular No.42/2006; additional sales tax under KGST is includable only where the dealer paid tax under Sections 5/5A in that year, and is excluded if the dealer had paid compounded tax.

Taxability of consumables used in job work - prospective operation of a tribunal's legal conclusion - remand to Assessing Officer for quantification of embedded consumables - liberty to revive proceedings pending outcome of higher forum

Prospective operation of a tribunal's legal conclusion - taxability of consumables used in job work - Validity of the Tribunal's direction that its legal conclusion shall operate prospectively and the substantive question whether chemicals/consumables used in job work are taxable. - HELD THAT: - The High Court recorded that the question raised by the revenue has already been considered and answered against it by this Court in VATAP No.32 of 2017 (M/s AP Processors). In that decision the Court held that chemicals used in job work are taxable, while leaving open the factual question of how much of the consumables (dyes/colours) are actually transferred to the finished goods. Given that precedent adverse to the revenue, the present challenge to the Tribunal's order - including its treatment of the law as prospective - had no merit as presented in these appeals. The court therefore dismissed the appeals brought by the revenue against the Tribunal's order.

Appeals dismissed insofar as they challenge the Tribunal's conclusion; the substantive position that chemicals used in job work are taxable is treated in accordance with the earlier decision in M/s AP Processors, with quantification to be determined on facts.

Remand to Assessing Officer for quantification of embedded consumables - liberty to revive proceedings pending outcome of higher forum - Procedure to determine the extent of consumables to be included in taxable turnover and the position of the revenue pending possible appellate challenge in the Supreme Court. - HELD THAT: - The Court referred to the operative directions in M/s AP Processors whereby factual quantification of the percentage/quantity of chemicals, dyes and colours embedded in the goods must be worked out by the Assessing Officer after affording parties opportunity to produce evidence. While the present appeals were dismissed, the Court granted the revenue liberty to revive these proceedings in the event the Supreme Court varies or overturns the decision in M/s AP Processors. The applications for condonation of delay were left open in view of the dismissal.

Matters stand for factual quantification before the Assessing Officer as indicated in the earlier decision; revenue permitted to revive these appeals if the higher court alters that precedent.

Final Conclusion: The batch of appeals by the revenue is dismissed, the legal position adopted in the earlier decision in M/s AP Processors (that chemicals used in job work are taxable while factual quantification is to be done by the Assessing Officer) governs these matters, and the revenue is granted liberty to revive the appeals if the Supreme Court varies that precedent.

Inclusive definition of sale price under Section 2(xliv) - treatment of job-work receipts as part of taxable turnover - obligation to maintain job-work register under Rule 58(1)(x) of the KVAT Rules - requirement of invoice particulars and address for proving job-works

Appellate fact-finding and perversity - The Tribunal was justified in reversing the first appellate authority's findings which were rendered without examination of records and were thereby unsustainable. - HELD THAT: - The first appellate authority's conclusion that the sawing charges were not related to the timber sold was recorded without scrutiny of the records and is contradicted by documentary material pointed out from the record. The High Court finds that the appellate finding was rendered without looking into the invoices and other materials and is therefore not sustainable. Consequently the Tribunal was correct in restoring the Assessing Officer's order. [Paras 4]

Answered against the assessee; the Tribunal's reversal of the first appellate authority is sustained.

Inclusive definition of sale price under Section 2(xliv) - turnover inclusion to capture charges for processes integral to manufacture - Amounts received for sawing liable to be included in sale price under the inclusive definition when they represent charges for processes integral to manufacture and delivery of goods. - HELD THAT: - Section 2(xliv) makes sale price inclusive of any sum received or charged for anything done by the dealer in respect of the goods at the time of or before delivery, ensuring manufacturing process charges are reflected in sale price. The Assessing Officer legitimately treated the sawing receipts as part of taxable turnover on the basis that invoices did not reflect the full taxable consideration and on the assessee's failure to prove these were standalone job-work receipts. [Paras 5]

Answered against the assessee; sawing charges could be included in taxable turnover under Section 2(xliv).

Burden of proof on assessee to establish genuineness of job-works - treatment of charges as part of consideration where job-work not proved - The Assessing Officer was justified in treating sawing charges as part of consideration for goods where the assessee failed to prove that such receipts related only to separate job-works. - HELD THAT: - The assessee, a registered dealer and manufacturer, bore the burden of proving that the sawing charges were purely job-work receipts unconnected to the goods it manufactured and sold. The assessee did not adduce effective proof - the job-work register lacked complete particulars, notices issued to persons in the register could not be served due to insufficient addresses, and no witnesses were summoned. In that factual matrix the AO's addition at best judgment was appropriate and the charges legitimately formed part of the consideration for goods sold. [Paras 5, 7]

Answered against the assessee; additions sustained for failure to prove job-work nature of receipts.

Interpretation and scope of Rule 58(1)(x) of the KVAT Rules - role of invoice/address particulars (Section 40A(2)) in proving job-works - Rule 58(1)(x) requires keeping particulars of goods and job-works, which in practice necessitates adequate identification of the person entrusting goods; absence of complete particulars impairs the assessee's ability to prove job-works and justifies AO's additions despite Section 40A(2) being addressed to invoices. - HELD THAT: - Rule 58(1)(x) mandates maintaining accounts showing particulars of goods received for job-works, the nature of job-works, quantity and date of return. While Section 40A(2) prescribes invoice particulars for taxable sales, its existence does not negate the practical need for complete particulars in the job-work register. Lack of complete name/address in the register allowed the AO's verification efforts to fail (notices unserved) and appropriately justified treating the receipts as taxable; absence of statutory obligation to capture address in every provision does not excuse failure to keep particulars necessary to substantiate job-works. [Paras 6, 7]

Answered against the assessee; incomplete particulars in the job-work register justified the AO's action and additions.

Final Conclusion: The High Court dismissed the revisions, upheld the Tribunal and Assessing Officer's treatment of the sawing receipts as part of taxable turnover for AYs 2010-11 and 2011-12, and refused relief to the assessee; no costs.

Power of Intelligence Officer in penalty proceedings - estimation of taxable turnover in penalty proceedings - best judgment assessment by Assessing Officer - quantification of evaded turnover and statutory limitation of penalty - use of auxiliary data (electricity/LPG consumption) as basis for estimation

Power of Intelligence Officer in penalty proceedings - estimation of taxable turnover in penalty proceedings - quantification of evaded turnover and statutory limitation of penalty - Whether an Intelligence Officer exercising powers under the penalty provision can make an estimation of taxable turnover or is limited to imposing penalty where turnover cannot be clearly quantified - HELD THAT: - The Court followed the earlier Division Bench decision in U.K. Monu Timbers and held that Section 67 (and the pari materia provision Section 45A) do not confer on the Intelligence Officer the power to make a best-judgment estimation of taxable turnover in penalty proceedings. Estimation involves probabilistic approximation and is the function of assessment proceedings under the statutory scheme; penalty proceedings require that any finding of suppression or omission be evidenced by materials revealing the amounts sought to be suppressed. Where such quantification is not practicable from the material available in inspection or penalty files, the officer imposing penalty is confined to imposing the statutory maximum fine permitted in penalty proceedings. The Assessing Officer alone has the statutory competence to undertake a best-judgment assessment (estimation) based on available factors and materials after appropriate notice and hearing. [Paras 12, 13, 15]

Estimation of taxable turnover cannot be undertaken by the Intelligence Officer in penalty proceedings; where quantification is not possible the penalty must be within statutory limits and any estimation must be made by the Assessing Officer.

Use of auxiliary data (electricity/LPG consumption) as basis for estimation - best judgment assessment by Assessing Officer - Whether turnover estimates based on auxiliary data such as electricity consumption are permissible and who may make such estimates - HELD THAT: - The Court acknowledged that auxiliary data like electricity or LPG consumption can furnish a rational basis for estimating taxable turnover, particularly where books are not produced or are rejected. However, it clarified that reliance on such data to arrive at an estimated taxable turnover is an exercise of best-judgment assessment which lies with the Assessing Officer in assessment proceedings, not with the Intelligence Officer in penalty proceedings. Where the Intelligence Officer detects omissions but cannot quantify evasion, the proper course is to impose the limited penalty contemplated by the statute and transfer the file to the Assessing Officer for assessment based on available factors, including consumption data. [Paras 12, 13, 14]

Auxiliary data may validly inform a best-judgment estimation of turnover, but such estimation must be made by the Assessing Officer in assessment proceedings; the Intelligence Officer must not usurp that function and should transfer the file after imposing appropriate penalty when quantification is not practicable.

Final Conclusion: The revisions are dismissed in favour of the assessees: estimations of taxable turnover made by the Intelligence Officer in penalty proceedings were set aside; penalties, where turnover cannot be quantified, are confined to the statutory limit and any best-judgment estimation must be made by the Assessing Officer.

Medical services as dominant nature of contract - integral supply of medicines, implants and surgical items - severance of service and sale - not permissible where supply is integral - deeming fiction must be rational and not farcical - Article 366(29-A) and its limited application to deemed sales - value added tax not exigible on composite medical treatment

Medical services as dominant nature of contract - integral supply of medicines, implants and surgical items - value added tax not exigible on composite medical treatment - Levy of VAT/sales tax on medicines, stents, implants and similar items supplied to indoor patients as part of hospital treatment - HELD THAT: - The assessment and demand were set aside because the supply of medicines, drugs, stents, implants and similar items during a medical procedure is part of a composite medical service and does not constitute a severable sale. Applying the dominant nature test, the contract for medical treatment is essentially for the medical procedure (the service) and the articles supplied are integral and essential to complete that service. Article 366(29-A) of the Constitution creates a limited deeming fiction applicable only where a transaction falls within its sub-clauses permitting severance of service and sale; it does not, on its true construction, cover services provided by hospitals where the supply of such articles is intrinsic to treatment. A deeming fiction must be rational; it cannot be used to treat the integral supply of medicines and implants as a sale merely because charges are separately recorded. The Division Bench's reasoning in M/s Fortis Health Care Limited (adopting and following Jharkhand and Allahabad High Court precedents) governs the present controversy. Although the State has challenged that decision before the Supreme Court, no interim order restrains the operation of the Division Bench judgment; accordingly the earlier ratio applies and mandates relief to the petitioner.

Assessment and demand set aside as the charges for medicines and implants supplied to indoor patients as part of treatment are not exigible to VAT/sales tax.

Final Conclusion: Writ petition allowed; assessment order and demand notice dated 15.06.2018 set aside in view of the binding Division Bench ratio that supplies of medicines, implants and similar items integral to hospital treatment are part of a composite medical service and not taxable as sale.

Input Tax Credit on capital goods used in manufacturing - Diesel generating set as part of plant and machinery - Clarification under Section 56(3) of the Act - Scope of Schedule E exclusion for dealers engaged in generation and distribution of power

Input Tax Credit on capital goods used in manufacturing - Diesel generating set as part of plant and machinery - Clarification under Section 56(3) of the Act - Input tax credit of tax paid on purchase of diesel generating set and its components is admissible where the set is used as a standby source to ensure uninterrupted power for running plant and machinery for production of goods. - HELD THAT: - The assessee purchased a diesel generating set to ensure uninterrupted power supply required for manufacture (predominantly for export) and to meet export deadlines. The State, on an application under Section 56(3), issued a clarification stating that a diesel generating set used as a standby to ensure uninterrupted power to a manufacturing plant is part of the plant and machinery and that the overall scheme of the Haryana VAT Act and Rules permits concessional purchase and availing of input tax credit in respect thereof. The Tribunal, in a subsequent identical dispute, accepted that clarification and allowed input tax credit for generator items, holding that the Schedule E entry at Sr. No. 5 applies to dealers whose business is generation and distribution (sale) of power and not to manufacturing units using a generator to run plant and machinery. The State's clarification and the Tribunal's subsequent final order on the identical point having attained finality, the appeals wre allowed and the claim of input tax credit was held to be rightly maintainable. [Paras 7, 8, 9, 10, 11]

Appeals allowed; input tax credit on tax paid for purchase of diesel generating set and its components is available where the set is used to run plant and machinery for production of goods, in accordance with the State's clarification and the Tribunal's subsequent decision.

Final Conclusion: The appeals are allowed. The substantial question of law is answered in the negative: the Tribunal was not justified in denying input tax credit on the diesel generating set used as a standby for running plant and machinery, the relief being available as per the State's clarification and the Tribunal's subsequent order.