TaxTMI Updates e-Newsletter
Dec 17,2018

Supply - Schedule II para 5(e) - agreeing to obligation to do an act - Schedule I - supply between related persons without consideration - Value of supply between related persons - Rule 28 of CGST Rules - Input tax credit eligibility

Supply - Schedule II para 5(e) - agreeing to obligation to do an act - Whether the applicant's direction to the seller to transfer specified businesses to its affiliates constitutes a supply between the applicant and the affiliates. - HELD THAT: - The Authority examined the Business Transfer Agreement and the attendant agreements and held that the applicant occupies a central and decisive role: the first agreement vests in the applicant the right to direct transfer of the BPL business (or parts thereof) to an affiliate, and the subsequent agreements effect direct transfers to the named affiliates only upon the applicant's direction. The Authority concluded that the act of giving such direction falls within para 5(e) of Schedule II to Section 7 as an act of 'agreeing to the obligation to do an act' and therefore constitutes a service covered by the scope of 'supply' under Section 7. The Authority accordingly answered the first question in the affirmative, treating the applicant's direction as a taxable supply to the affiliates.

Answered in the affirmative: the applicant's direction to the seller is a supply between the applicant and the affiliates under Schedule II para 5(e).

Schedule I - supply between related persons without consideration - Value of supply between related persons - Rule 28 of CGST Rules - If the direction is a supply between related parties made without consideration, whether a notional consideration must be attributed and how value is to be determined. - HELD THAT: - The Authority noted that the case involves a service falling under Schedule II provided between related persons where no consideration is paid. In such circumstances valuation is governed by the provisions dealing with supplies between related persons. The Authority observed that the value of such supply is to be determined in accordance with Rule 28 of the CGST Rules, 2017, and therefore directed that valuation be determined as per that rule.

The value of the supply is to be determined as per Rule 28 of the CGST Rules, 2017.

Value of supply between related persons - Rule 28 of CGST Rules - Input tax credit eligibility - Whether, given recipients' eligibility to claim full input tax credit, the notional consideration is only academic and the invoice value will be deemed the open market value. - HELD THAT: - The Authority declined to answer this question separately because valuation has been directed to be determined under Rule 28; having fixed the applicable valuation mechanism, the Authority considered a separate determination on whether the notional consideration is merely academic or whether invoice value will be treated as open market value unnecessary at this stage.

Not answered separately in view of the direction that valuation is to be determined under Rule 28 of the CGST Rules.

Final Conclusion: The Authority ruled that the applicant's direction to the seller to transfer specified businesses to affiliates constitutes a taxable supply by the applicant to those affiliates under Schedule II para 5(e). Where such a supply between related persons is without consideration, its value is to be determined under Rule 28 of the CGST Rules, 2017. A separate answer as to whether the notional consideration is merely academic or the invoice value will be the open market value was not given in view of the valuation direction under Rule 28.

Transaction value - consideration - inclusion under Section 15(2)(b) - free of cost supplies (FOC) - amortised value of tools - CBIC Circular No.47/21/2018 clarification - business efficacy - double taxation

Transaction value - consideration - inclusion under Section 15(2)(b) - free of cost supplies (FOC) - amortised value of tools - CBIC Circular No.47/21/2018 clarification - Whether the amortised value of tools provided on free of cost basis by the customer must be included in the value of the finished goods supplied by the applicant under the GST Act. - HELD THAT: - The Authority applied the transaction value principle: value of a supply is the price actually paid or payable, and Section 15(2)(b) requires inclusion only where an amount which the supplier is liable to pay has been borne by the recipient. On the facts, tools/moulds were owned by the OEM/customers and their cost was borne by the customers (either provided directly on FOC basis or procured by the applicant and sold to the OEM), so no amount which the supplier was liable to pay remained unpaid and borne by the recipient. The Board's clarification in CBIC Circular No.47/21/2018 treating moulds/dies supplied FOC by OEMs to component manufacturers as not constituting supply and not to be added to the component value was held applicable. The Authority also noted that where contractual obligation to provide tooling rests on the supplier but OEM nonetheless supplies tooling FOC, that is a different factual scenario (covered by para 1.3 of the Circular) and would attract inclusion; that factual situation is not present here. Reliance was placed on industry agreements, purchase orders and invoices showing ownership and tax treatment of tooling, and on analogous judicial reasoning that one cannot import excise valuation concepts into a VAT/GST transaction value regime absent specific provision. In those circumstances the amortised value of tools supplied by the customer on FOC basis is not includible in the value of the finished goods under Section 15.

Amortised value of tools supplied on FOC basis by the customer is not to be included in the taxable value of the finished goods supplied by the applicant, on the facts and contractual arrangements before the Authority.

Final Conclusion: The advance ruling answers the question in the negative: on the facts and contracts before the Authority, tools/moulds provided by the customer on a free of cost basis (ownership and cost borne by the customer) are not includible in the value of the finished goods supplied by the applicant under the GST law.

Release of detained goods and vehicle on furnishing bank guarantee and bond - detention under the GST regime and release on security under Rule 140(1) of the CGST Rules - application of precedent for interim release pending assessment of tax and penalty

Release of detained goods and vehicle on furnishing bank guarantee and bond - detention under the GST regime and release on security under Rule 140(1) of the CGST Rules - Entitlement of the petitioner to release of the goods and vehicle detained under proceedings initiated under Section 129 of the GST Act upon furnishing security. - HELD THAT: - The High Court, applying the ratio of the Division Bench decision in Renji Lal Damodaran v. State Tax Officer (dated 6.8.18), directed that the detained goods and vehicle belonging to the petitioner be released on the petitioner furnishing a bank guarantee for the tax and penalty found due and executing a bond for the value of the goods in the form prescribed under Rule 140(1) of the CGST Rules. The court thus granted interim relief by conditioning release on provision of security in the specified form, without finally adjudicating the merits of tax liability.

Goods and vehicle to be released on furnishing bank guarantee for tax and penalty and a bond for the value of goods in the form prescribed under Rule 140(1) of the CGST Rules; writ petition disposed accordingly.

Final Conclusion: Writ petition disposed by directing release of the detained goods and vehicle on the petitioner furnishing a bank guarantee for tax and penalty and a bond for the value of the goods in the form prescribed under Rule 140(1) of the CGST Rules, following the precedent relied upon by the Court.

Jurisdictional vires of assessment order - convertibility of final assessment order into draft by corrigendum - mandatory requirement of draft assessment order under the transfer pricing dispensation - limitation under Section 153(2A) and its effect on corrigendum - non-estoppel in respect of jurisdictional objections - scope of remand and adherence to directions of appellate forum

Jurisdictional vires of assessment order - convertibility of final assessment order into draft by corrigendum - limitation under Section 153(2A) and its effect on corrigendum - mandatory requirement of draft assessment order under the transfer pricing dispensation - Validity of assessment proceedings where a final assessment order dated 12th March, 2014 was sought to be converted into a draft order by a corrigendum dated 16th April, 2014, issued after the statutory time for passing draft/final orders had expired. - HELD THAT: - The Court analyzed the transfer pricing procedure whereby a draft assessment order under Section 144C(1) must precede finalisation after DRP directions. It found that a final order was in fact passed on 12th March, 2014 and that the statutory time to pass a draft assessment order (and thereby preserve power to pass a final order in terms of DRP directions) expired by 31st March, 2014 in the facts of the case. Issuing a corrigendum on 16th April, 2014 to convert a final order into a draft order was beyond the time permitted by the statute and thus impermissible. The Court relied on precedents holding that non-issuance of the draft assessment order cannot be cured by a belated corrigendum and that a draft order is a jurisdictional prerequisite under the transfer pricing scheme; absent it the subsequent final order is without jurisdiction. [Paras 5, 6, 9, 11]

The corrigendum issued after the expiry of the statutory period was ineffective and the assessment proceedings founded on that corrigendum were without jurisdiction.

Non-estoppel in respect of jurisdictional objections - Whether the assessee is estopped from challenging the corrigendum and its consequences because it had participated in proceedings before the DRP. - HELD THAT: - The Court rejected the Revenue's contention that the assessee's conduct in filing representations before the DRP amounted to acceptance and estopped it from raising jurisdictional objection. The Court held that questions going to jurisdiction are not amenable to estoppel; mere consent or participation by parties cannot confer jurisdiction on actions otherwise beyond statutory power. [Paras 11]

Estoppel cannot be invoked to validate an order that is beyond jurisdiction; the assessee was entitled to challenge the corrigendum and consequent proceedings.

Scope of remand and adherence to directions of appellate forum - Whether the Assessing Officer acted within the scope of the Tribunal's remand dated 25th January, 2012 by referring matters again to the TPO and passing the impugned assessment. - HELD THAT: - The Court examined the remand and observed that it was occasioned by the DRP's failure to deal with the assessee's objections to the draft assessment order. The Assessing Officer's action in making a fresh reference to the TPO and proceeding beyond the remit of the remand was found to be contrary to the Tribunal's directions. Nothing was pointed out to displace the Tribunal's finding that the Assessing Officer exceeded the scope of the remand. [Paras 4, 9, 11]

The Assessing Officer's proceedings exceeded the remit of the remand and were unsustainable.

Final Conclusion: The appeal is dismissed. The Tribunal correctly held that the corrigendum converting a final order into a draft order, issued after the statutory period, was ineffective; consequential proceedings were therefore without jurisdiction and the assessee was not estopped from raising that jurisdictional objection. The Assessing Officer had also acted beyond the scope of the remand.

Re-assessment under Section 147 - Re-assessment and change of opinion - Amalgamation-transferor ceasing to exist; transferee continuing - Rectification under Section 154-limits and grounds - Deduction under Section 80HHC(1)-treatment of export turnover post-amalgamation

Re-assessment under Section 147 - Change of opinion - Knowledge of Assessing Officer - Re-assessment under Section 147 was not permissible where the Assessing Officer had knowledge of the amalgamation and had completed the assessment; the reassessment amounted to a mere change of opinion. - HELD THAT: - The Court found from the Department's own documents (including the application for change of previous year and the assessment order) that the Assessing Officer was aware of the amalgamation and the related facts when passing the assessment order for the assessment year 1985-86. The assessment order itself recorded the amalgamation. In these circumstances the attempt to reopen the assessment under Section 147 was a re-assessment based on a mere change of opinion, which the Court held impermissible. The Court applied settled principles that reassessment cannot be sustained where the material facts were within the knowledge of the AO and the order is challenged only by a difference of view. [Paras 11, 12]

Re-assessment under Section 147 set aside; question answered against the Revenue and in favour of the assessee.

Rectification under Section 154 - Amalgamation-transferor ceasing to exist; transferee continuing - Deduction under Section 80HHC(1)-treatment of export turnover post-amalgamation - The rectification under Section 154 was not permissible; the transferee company continued after amalgamation (not a newly incorporated company), and the deduction under Section 80HHC(1) as computed in the assessment order was sustainable. - HELD THAT: - The Court examined the scheme of amalgamation and the subsequent corporate paperwork showing that one company was amalgamated into the other, with the transferee continuing and later changing its name (not a new incorporation). Applying the principle that where one company is absorbed the transferor ceases to exist and the transferee continues, the Court held that the AO's rectification proceeded on the wrong premise of a 'new' company and thereby erred. The assessment computation of export turnover and the consequent deductions under Section 80HHC(1) - as reflected in the assessment order - were found to have no legal infirmity. Interference by way of rectification was therefore held to be bad in law. [Paras 13, 14, 15, 16, 17]

Rectification under Section 154 quashed; assessment order upheld and the claim under Section 80HHC(1) sustained.

Final Conclusion: All appeals by the Revenue dismissed; the attempted re-assessments and the rectification were set aside and the assessment order for the relevant period upheld in favour of the assessee.

Deduction under Section 37(1) of the Income tax Act - laid out wholly and exclusively for the purpose of business - commercial expediency as a test for business purpose - capital expenditure - assets not owned by the assessee - on the assessee to plead and prove deduction claims

Deduction under Section 37(1) of the Income tax Act - laid out wholly and exclusively for the purpose of business - commercial expediency as a test for business purpose - on the assessee to plead and prove deduction claims - Project expenses incurred by the respondent assessee in furtherance of its objects qualify as deductible under Section 37(1). - HELD THAT: - The Court held that the respondent assessee was established and carried on activities of social and economic upliftment coupled with trading/marketing of fertilisers to further those objectives; the expenditure incurred for rural development, employment generation and related projects was incurred in the respondent's capacity as a business undertaking. Applying the established tests, expenditure voluntarily incurred on grounds of commercial expediency and to facilitate carrying on of the business falls within Section 37(1) if it is laid out wholly and exclusively for business purposes. The fact that the payments benefitted third parties or were not covered by Section 80G did not preclude deduction where the nexus with the assessee's business was established. The Tribunal and the appellate authority correctly accepted that the project expenses were connected with and necessary for the respondent's business operations and were therefore allowable under Section 37(1). [Paras 13, 14]

The disallowance of project expenses by the Assessing Officer is set aside; the expenses are deductible under Section 37(1).

Capital expenditure - assets not owned by the assessee - Expenditure in creating assets that belong to third party villagers is not capital expenditure in the hands of the respondent assessee. - HELD THAT: - The Court accepted the appellate findings that the assets created (forests, check dams, ponds etc.) were owned and managed by village communities and not by the respondent assessee. Because the respondent did not acquire or own enduring capital assets for its own use, the expenditure could not be characterized as capital expenditure in the hands of the respondent. The Assessing Officer failed to examine ownership and therefore erred in treating the payments as capital disallowable items. [Paras 15]

The expenditure is not capital expenditure in the hands of the respondent and cannot be disallowed on that ground.

Final Conclusion: Revenue's appeals are dismissed; the Tribunal's allowance of the project expenses under Section 37(1) and the finding that the expenditures were not capital in the hands of the respondent are upheld.

Compensation as damages not taxable - Interest component as part of compensation - Illegality of TDS deduction on compensation and interest - Refund of TDS to deductor - Execution proceedings and realization of balance award

Compensation as damages not taxable - Interest component as part of compensation - Illegality of TDS deduction on compensation and interest - Refund of TDS to deductor - Deduction of TDS by the insurer on the awarded compensation and on interest thereon was not permissible and the TDS amount deposited with the Income Tax Department must be refunded to the insurer. - HELD THAT: - The Court held that compensation awarded under the Employees' Compensation Act is a damage and not income; consequently interest awarded on such compensation forms part of the compensation. Section 194A's mandate to deduct tax on interest does not render compensation or interest thereon taxable. Relying on the principle applied in earlier decisions of this Court that interest awarded with compensation is not chargeable to income tax, the Court concluded that the insurer's deduction of tax at source on the compensation and interest was contrary to law. The Income Tax Officer was directed to refund the TDS deposited by the insurer within ten weeks upon receipt of requisite information, to be supplied by the insurer within two weeks, in accordance with applicable rules. [Paras 5, 6, 7, 8]

TDS deducted by the insurer on the compensation and interest is illegal; the Income Tax Officer to refund the TDS to the insurer within ten weeks on receipt of information.

Execution proceedings and realization of balance award - The executing court/Commissioner retains power to realize any balance payable to the claimants beyond the TDS amount refunded to the insurer. - HELD THAT: - The Court noted that the amount actually deposited with the Income Tax Department on account of TDS is a specific sum and that the Commissioner's order for attachment sought recovery of a larger amount claimed in execution. The decision to order refund of TDS does not preclude the claimants from pursuing the balance of the award; if any amount beyond the refunded TDS is found due, the Commissioner/Executing Court is entitled to pass orders in accordance with law to enforce satisfaction of the award against the insurer. [Paras 9]

If any amount beyond the refunded TDS is found payable to the claimants, the Commissioner/Executing Court may proceed to realize that balance in accordance with law.

Final Conclusion: The petition is disposed: the Income Tax Officer is directed to refund the TDS to the insurer within ten weeks upon receipt of information; the insurer remains liable to satisfy any balance of the award found payable and the Commissioner may proceed to realize such balance in accordance with law; interim order vacated; no order as to costs.

Rejection of books of account under Section 145(3) and assessment to best judgment - Extrapolation of unrecorded receipts for full year - Profit embedded in suppressed receipts as the correct addition - Burden of estimating corresponding expenditure when gross receipts are extrapolated

Rejection of books of account under Section 145(3) and assessment to best judgment - Profit embedded in suppressed receipts as the correct addition - Whether, after rejection of books of account, the addition should be of gross extrapolated receipts or only the profit embedded in those suppressed receipts. - HELD THAT: - The Tribunal accepted that the seized material showed unrecorded receipts for six months and that the books did not reflect the true picture; consequently the books were rejected and assessment had to be made to the best judgment. However, where the assessing officer extrapolated gross receipts for the year on the basis of six months' seized records, the corresponding expenditure must also be assumed and estimated because gross receipts do not equate to income. The ld.CIT(A) relied on precedent and computed the average net profit (excluding fixed/fully disclosed expenses) from past years to determine the profit rate applicable to the unrecorded receipts. Applying that profit rate, the assessee's voluntary disclosure of additional income was held to reasonably represent the profit embedded in the suppressed receipts. The Tribunal found no error in this approach and agreed that the correct addition is the profit portion of the suppressed receipts, not the entire extrapolated gross receipts. [Paras 8, 9]

Addition limited to profit embedded in the suppressed receipts; the CIT(A)'s deletion of the addition of the gross amount was upheld.

Extrapolation of unrecorded receipts for full year - Burden of estimating corresponding expenditure when gross receipts are extrapolated - Whether the AO was justified in extrapolating six months' unrecorded receipts to the full year and treating the extrapolated gross as income without estimating corresponding expenditure. - HELD THAT: - The Tribunal upheld that extrapolation of receipts from six months to a full year was justified on the facts and in view of precedent, and that the AO correctly carried out the gross extrapolation. However, the Tribunal agreed with the ld.CIT(A) that once gross receipts are so extrapolated the AO must also estimate corresponding expenses or determine profit by reference to reliable data (such as historical profit ratios) rather than mechanically adding the entire extrapolated receipts to income. The ld.CIT(A)'s methodological approach-excluding fixed expenses, computing average net profit ratios for preceding years, and applying the resulting profit rate to the extrapolated unrecorded receipts-was held to be a permissible and reasonable exercise of assessment powers. The Tribunal found no infirmity in declining to accept the AO's addition of gross receipts without allowance for corresponding expenditure. [Paras 3, 8]

Extrapolation to full year sustained, but AO's addition of gross extrapolated receipts without estimating corresponding expenditure was not sustained; CIT(A)'s profit-based approach approved.

Final Conclusion: The Tribunal found no error in the ld.CIT(A)'s reasoning or computation and dismissed the Revenue's appeal, upholding the deletion of the addition by treating only the profit embedded in the suppressed receipts as taxable income.

Deeming provision - special provision for full value of consideration in certain cases - binding nature of Valuation Officer's report under section 50C(3) - reference to Valuation Officer under section 50C(2) - no tolerance band for difference between declared consideration and stamp/value - valuation adjustments for time, location, shape, size and future potential

Binding nature of Valuation Officer's report under section 50C(3) - reference to Valuation Officer under section 50C(2) - Report of the District Valuation Officer is binding on the Assessing Officer once reference is made under section 50C(2), subject only to proof of glaring error. - HELD THAT: - Section 50C is a deeming provision which, read with sub-section (2), permits the assessee to claim before the AO that the stamp valuation exceeds fair market value and, where such claim is made, mandates a reference to the Valuation Officer. Sub-section (3) provides that where the value ascertained by the Valuation Officer is less than the stamp valuation, that lower value shall be taken as the full value of consideration. The Tribunal held that the DVO's report is therefore binding on the AO unless the assessee demonstrates glaring mistakes in the valuation. This conclusion follows the statutory scheme and the settled approach that the deeming fiction created by section 50C must be given full effect within its ambit. [Paras 5, 15]

DVO's valuation report is binding on the AO in terms of section 50C(3), absent proof of glaring error.

Valuation adjustments for time, location, shape, size and future potential - deeming provision - Valuation determined by the DVO, after adjusting comparable sales for time lag, location, shape, size and other relevant factors, was reasonable and cannot be rejected. - HELD THAT: - The DVO relied on earlier sale instances and adjusted rates upwards to arrive at the fair market value as on the date of sale, taking into account time lag, location, shape, size and future potential. The Tribunal observed that sale instances are a starting point and require modification to reflect the peculiars of the subject property and date of valuation. Specific objections by the assessee - that the DVO should have confined itself to raw comparable rates, that small size/odd shape required downward adjustment, and that subsequent or prior litigation should reduce value - were considered and rejected. The DVO had addressed these objections in his report (para 8.2) and the Tribunal found no infirmity in the methodology or conclusions. [Paras 6, 7, 8, 9]

DVO's adjusted valuation is upheld as reasonable; the assessee's objections on comparables, size/shape and litigation are repelled.

No tolerance band for difference between declared consideration and stamp/value - special provision for full value of consideration in certain cases - Section 50C contains no provision for a percentage tolerance; any positive difference between the stamp/DVO value and declared sale consideration activates the deeming provision. - HELD THAT: - The Tribunal analysed section 50C as a deeming provision that substitutes the declared consideration with the stamp value or the DVO-determined value whenever the declared consideration is less. The statute contains no threshold or tolerance percentage below which the deemed substitution would be inapplicable. Therefore, arguments based on a small percentage difference (about 10.57% in this case) cannot justify ignoring the value determined under section 50C. The statutory language ('shall') and judicial precedents were applied to hold that the deeming fiction must operate once the prescribed condition is satisfied. [Paras 10, 11, 12, 13, 16]

Difference being positive between declared consideration and DVO/stamp value, section 50C applies; no percentage-based tolerance can be read into the provision.

Final Conclusion: The Tribunal upheld the CIT(A)'s confirmation of the addition based on the DVO valuation under section 50C and dismissed the assessee's appeal.

Deduction under Section 80P(2) - eligibility of cooperative societies versus cooperatives registered under the Karnataka Souharda Sahakari Act, 1997 - registration and conversion between Co-operative Societies Act and Souharda Sahakari Act - remand for fresh adjudication by Assessing Officer - requirement of a reasoned and speaking order

Deduction under Section 80P(2) - eligibility of cooperative societies versus cooperatives registered under the Karnataka Souharda Sahakari Act, 1997 - registration and conversion between Co-operative Societies Act and Souharda Sahakari Act - remand for fresh adjudication by Assessing Officer - requirement of a reasoned and speaking order - Assessee's entitlement to deduction under Section 80P(2) was not adjudicated on merits and the matter was remitted to the Assessing Officer for re-examination of eligibility and related aspects. - HELD THAT: - The Tribunal, following a co-ordinate bench decision in ITA No.2831/Bang/2017 dated 17.08.2018, found that questions going to the root of the claim - in particular the distinction between entities registered under the Karnataka Souharda Sahakari Act, 1997 and those registered under the Karnataka Co-operative Societies Act, 1959, and the effect of any conversion between the two statutes - required further enquiry. The Tribunal observed that the Assessing Officer should re-examine whether the assessee is a co-operative society eligible for deduction under section 80P(2) or a co-operative registered under the Souharda Act which may not qualify, and consider related registration certificates, cause titles and factual aspects. In view of these points, and because new and potentially determinative legal and factual issues were raised before the Tribunal, the CIT(A)'s order allowing deduction was set aside and the matter restored to the Assessing Officer for adjudication by way of a reasoned and speaking order in terms of the observations and directions issued by the co-ordinate bench. [Paras 6, 7]

Impugned order of the CIT(A) set aside; matter remitted to the Assessing Officer to re-examine eligibility for deduction under Section 80P(2) and to pass a reasoned and speaking order.

Final Conclusion: The Tribunal set aside the CIT(A)'s allowance of deduction under Section 80P(2) for Assessment Year 2014-15 and restored the matter to the Assessing Officer for fresh enquiry and adjudication on eligibility, directing that a reasoned and speaking order be passed; Revenue's appeal is allowed for statistical purposes.

Vacancy deduction under section 23(1)(c) - annual value of property - interpretation of 'property is let' - intention to let and efforts to let - amount actually received or receivable

Vacancy deduction under section 23(1)(c) - interpretation of 'property is let' - intention to let and efforts to let - Assessee entitled to benefit of clause (c) of section 23(1) for the property at Chennai for AY 2012-13. - HELD THAT: - Clause (c) of section 23(1) applies only when (i) the property or part thereof must be let, (ii) it is vacant during whole or any part of the previous year, and (iii) owing to such vacancy the actual rent received or receivable is less than the sum for which the property might reasonably be expected to be let. The Tribunal concurred with the view in Premsudha Exports (P) Ltd. that the words 'property is let' are not confined to an 'actual letting' in the year; a property held with intention to let and with efforts made to let it out qualifies. The assessee proved that the flat had been let earlier (till AY 2001-02) and had remained vacant thereafter despite efforts to let it; the assessing officer himself recorded that the property was let out only till AY 2002-03 and vacant thereafter. The coordinate-bench view that a property previously let but vacant subsequently falls within clause (c) was held applicable; the authorities below misconstrued the contrary High Court observations. Applying these principles to the material facts, the Tribunal held that the requirements of clause (c) were satisfied and the vacancy-related computation of annual value must be allowed. [Paras 9, 10, 11, 13, 14]

Addition confirmed by the authorities deleted and benefit under section 23(1)(c) granted to the assessee for AY 2012-13.

Final Conclusion: The appeal is allowed; the addition made by treating the property at Chennai at its expected rent is set aside and the vacancy-based treatment under clause (c) of section 23(1) is to be given effect for assessment year 2012-13.

Deduction under section 54F - net consideration - section 50C deeming fiction limited to section 48 - computation of long term capital gains

Deduction under section 54F - net consideration - section 50C deeming fiction limited to section 48 - Whether section 50C is to be applied for determining the "net consideration" for the purpose of allowing deduction under section 54F when the assessee has invested the entire net sale consideration in acquiring a new residential house - HELD THAT: - The Tribunal held that the expression "net consideration" in the Explanation to section 54F means the full value of consideration actually received or accruing as a result of the transfer, less transfer-related expenditure, and is not governed by the deeming fiction in section 50C. Section 50C introduces a deeming provision for adopting stamp valuation as the "full value of consideration" for the limited purpose of computing capital gains under section 48. That statutory fiction does not alter the natural meaning of "full value of consideration" as used in the Explanation to section 54F. Where the entire net consideration actually received (as per the sale deed) is applied towards acquisition of the new house, the conditions of section 54F(1)(a) are satisfied and the whole of the capital gain shall not be charged to tax, even though capital gains, when computed under section 48 read with section 50C, may reflect a higher deemed consideration. The Tribunal relied on its earlier coordinate-bench decisions and similar decisions of other benches to conclude that section 50C is inapplicable for the purpose of determining net consideration under section 54F. [Paras 7]

Assessee entitled to deduction under section 54F as entire net consideration received was invested in the new house; orders of lower authorities applying section 50C for denying full relief set aside and addition deleted.

Final Conclusion: The appeal is allowed: where the assessee has invested the entire net consideration actually received from sale of a long term capital asset in acquiring a new residential house, the deduction under section 54F is allowable and the deeming provision of section 50C does not govern the meaning of "net consideration" for section 54F; the addition made by the AO is deleted.

Revenue expenditure - capital expenditure - advertisement and publicity expenses - wholly and exclusively for business - enduring benefit - allowability of business expenditure

Advertisement and publicity expenses - revenue expenditure - capital expenditure - wholly and exclusively for business - enduring benefit - Whether the expenditure on promotion/publicity of the Times of India Kannada edition claimed by the assessee is revenue in nature and allowable as business expenditure or is capital in nature and disallowable. - HELD THAT: - The Tribunal noted that the Assessing Officer did not dispute the genuineness of the expenditure but characterized it as capital on the basis that it produced an enduring benefit by establishing a new edition and because the assessee had ceased to render certain services to Bennett Coleman & Co. Ltd. from 01.04.2006. The assessee explained that the expenses, although accounted in March 2007, related to promotion carried out January-March 2007 for the launch of the Kannada edition and that income arising from that activity was offered to tax in the same year. The Tribunal considered the authorities relied upon by the assessee and observed that advertisement and publicity expenses are ordinarily revenue in nature where incurred for earning business income and do not necessarily create a capital asset merely because they promote sales. Finding that the AO and the CIT(A) failed to demonstrate that any capital asset or enduring proprietary advantage was created for the assessee by these promotional expenses, and noting that income from the relevant activity was accounted in the same year, the Tribunal concluded that the expenses were incurred for the purpose of earning business income and were revenue in nature and thus allowable. [Paras 6, 7]

Expenditure on promotion/publicity of the Times of India Kannada edition is revenue expenditure allowable as business expenditure and the addition is deleted.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2007-2008, holding that the publicity expenses were revenue in nature and deductible as business expenditure; the additions made by the authorities below were set aside.

Addition under section 68 as unexplained credit - exemption under section 10(38) of the Income tax Act - twin conditions for exemption under section 10(38): transfer of long term capital asset and transaction chargeable to STT on recognised stock exchange - genuineness of share transactions evidenced by demat records, contract notes, bank routing and STT payment - preponderance of probability / human probability test for detecting accommodation entries - admissibility of statements not confronted or cross examined

Exemption under section 10(38) of the Income tax Act - genuineness of share transactions evidenced by demat records, contract notes, bank routing and STT payment - addition under section 68 as unexplained credit - Whether addition under section 68 could be sustained where the assessee produced documentary evidence of purchase and sale through recognised stock exchange, demat transfer, broker contract notes, bank payments and proof of STT, and thereby satisfied conditions for exemption under section 10(38). - HELD THAT: - The Tribunal found that the assessee produced cogent documentary evidence - share certificates/transfer forms or demat statements, broker debit/contract notes, bank statements showing payment and receipt, and proof of STT - which were not rebutted by independent inquiry. Authorities below acted on investigation wing information and entry operator statements without confronting those materials to the assessee or undertaking enquiries to displace the documentary proof. Applying precedent of various Benches of the Tribunal and the jurisdictional High Court, where transaction formalities (demat transfer, trading on a recognised exchange, routing through banking channels and payment of STT) are established and not shown to be bogus on record, the provisions of section 68 are not attracted and exemption under section 10(38) must be allowed. The Tribunal therefore set aside the additions made u/s 68 and allowed the exemption claim. [Paras 8, 9]

Addition under section 68 deleted and exemption under section 10(38) allowed where documentary evidence of genuine trading through recognised exchange, demat transfer and STT payment was on record and not rebutted.

Admissibility of statements not confronted or cross examined - preponderance of probability / human probability test for detecting accommodation entries - Whether statements and investigation reports relied upon by the Assessing Officer could be read against the assessee when those materials were not confronted to the assessee and no opportunity of cross examination was afforded. - HELD THAT: - The Tribunal held that statements recorded by the Investigation Wing and other inquiry materials which were neither placed before the assessee during assessment proceedings nor subjected to cross examination could not be treated as determinative evidence against the assessee. The Assessing Officer's reliance on such uncontradicted investigation material, without specific evidence linking the assessee to the alleged racket or disproving the documentary proof of the transactions, rendered the drawing of adverse inference on mere probability insufficient. The Tribunal applied the principle that adducing suspicion is not a substitute for proof when the assessee has produced consistent documentary evidence of genuine transactions. [Paras 8]

Investigation statements not confronted to the assessee and not cross examined could not be read as conclusive evidence to sustain additions; therefore the additions based on such material were set aside.

Final Conclusion: All appeals allowed: additions made under section 68 were deleted and exemption under section 10(38) upheld for the assessment years in dispute, the Tribunal finding the assessee's documentary proof of genuine share transactions on record and holding that unconfronted investigation material could not sustain the additions.

Reassessment under section 147 read with section 143(3) of the Income-tax Act - addition based on estimated gross profit on presumed unaccounted sales - reconciliation of purchases with Form 26AS - books not rejected under section 145(2) - burden on Assessing Officer to rebut reconciliation/evidence

Addition based on estimated gross profit on presumed unaccounted sales - reconciliation of purchases with Form 26AS - books not rejected under section 145(2) - Whether the addition of Rs. 46,11,148/- made by the Assessing Officer by applying a gross profit rate on estimated unaccounted sales (derived from a difference between purchases in books and Form 26AS) was sustainable. - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that the Assessing Officer's addition was founded solely on an estimate of gross profit calculated from an alleged difference in purchases as per Form 26AS and the books. The assessee furnished a reconciliation explaining the variance by reference to correct Form 26AS figures, trade/quantity credit notes and an excise department certificate showing unlifted stocks; the books were not rejected under section 145(2). The CIT(A) examined these documentary explanations and accepted that the differences were satisfactorily explained, holding that the AO had not rebutted the explanation and had relied only on Form 26AS to make an estimated addition. Given that the AO did not displace the reconciliation or reject the books, the estimate of unaccounted sales and corresponding gross profit addition was unsustainable. The Tribunal noted that a minor residual difference had already been accepted and added by the CIT(A) and that the Revenue did not controvert the CIT(A)'s findings. [Paras 10, 11, 12]

The addition of Rs. 46,11,148/- on account of estimated gross profit was deleted; the Revenue's appeal against that deletion is dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal declines to interfere with the CIT(A)'s deletion of the gross-profit-based addition, while noting that a minor difference in purchases was sustained by the CIT(A) and is not under challenge before the Tribunal.

Tax Deducted at Source (TDS) liability on payments which accrue or arise in India - Characterisation of payments as royalty, training fees or survey fees for TDS purposes - Section 68 unexplained cash credits - burden to prove identity, genuineness and creditworthiness - Admissibility of additional evidence and Rule 46A - Remand for fresh adjudication where appellate admission of evidence is challenged - Section 40A(3) disallowance for cash payments and onus on the assessee to substantiate payments

Tax Deducted at Source (TDS) liability on payments which accrue or arise in India - Characterisation of payments as royalty, training fees or survey fees for TDS purposes - Whether additions under section 40(a)(ia) for non-deduction of tax in respect of training fees, royalty payments and survey fees were sustainable. - HELD THAT: - The Tribunal observed that identical contentions in respect of training fees and royalty payments had been decided in favour of the assessee by the Tribunal in subsequent orders for other assessment years, and there was no contrary decision of a higher authority nor any change in material facts. Relying on those consistent Tribunal decisions, the Tribunal confirmed the deletion of additions relating to training fees and royalty payments. Although the CIT(A) had confirmed addition in respect of survey fees for the impugned year, the Tribunal noted that survey-fee issues for AY 2008-09 and AY 2012-13 (raised by Revenue) had been decided in the assessee's favour by the Tribunal; on this basis and in the absence of distinguishing facts or adverse precedent, the Tribunal deleted the addition for survey fees as well. [Paras 4]

Additions on account of training fees, royalty payments and survey fees under section 40(a)(ia) deleted; grounds of assessee allowed and revenue's grounds dismissed in this regard.

Section 68 unexplained cash credits - burden to prove identity, genuineness and creditworthiness - Admissibility of additional evidence and Rule 46A - Remand for fresh adjudication where appellate admission of evidence is challenged - Whether the addition of unsecured loans as unexplained cash credits under section 68 should be sustained or whether the CIT(A)'s acceptance of additional evidence should be upheld. - HELD THAT: - The Tribunal recorded that the assessee obtained loans from 106 parties and failed during assessment to furnish sufficient documentary evidence to establish the three ingredients of section 68 (identity, genuineness and creditworthiness) in a number of cases: PAN/address details were missing for some lenders, 38 confirmations were unsigned by lenders, and financial documents were largely absent. The CIT(A) admitted additional evidence and deleted substantial part of the addition, but the Revenue challenged that admission as violative of Rule 46A. Given the factual lacunae in proof and the challenge to the appellate admission procedure, the Tribunal set aside the CIT(A)'s findings and remitted the matter to the AO for fresh adjudication. The assessee was directed to substantiate the loans with requisite documentary evidence and the interest consequence is to follow the AO's findings. [Paras 4]

Findings of the CIT(A) set aside and matter remitted to the AO for readjudication on merits with direction to consider identity, genuineness and creditworthiness of lenders; consequential interest to be adjudicated accordingly.

Section 40A(3) disallowance for cash payments and onus on the assessee to substantiate payments - Remand for fresh adjudication where factual verification is lacking - Whether the deletion by the CIT(A) of additions under section 40A(3) for alleged cash payments was sustainable. - HELD THAT: - The Tribunal noted that the CIT(A) deleted the addition principally because the AO had not called for further details, but held that such procedural lapse did not justify deletion without verifying the factual matrix. The onus to substantiate the assessee's case remained with the assessee and the CIT(A) erred in effectively shifting that onus to the AO. In view of these considerations, the Tribunal remitted the matter to the AO to verify the submissions made before the CIT(A) and re-adjudicate the claim as per law, directing the assessee to substantiate its contentions. [Paras 4]

Matter remitted to the AO for verification and fresh adjudication of the section 40A(3) disallowance; revenue's ground allowed for statistical purposes.

Final Conclusion: Cross appeals partly allowed: additions for training fees, royalty and survey fees under TDS provisions deleted; additions under section 68 and corresponding interest remitted to the AO for fresh adjudication after directing the assessee to produce requisite evidence; addition under section 40A(3) remitted to the AO for verification and re-adjudication.

Bogus purchases - onus on assessee to prove genuineness of purchases when revenue possesses adverse investigative material - exclusion of statements recorded behind the back of the assessee unless opportunity to cross-examine is afforded - estimation of deemed profit as alternate relief in cases of suspected accommodation entries - disallowance under section 14A read with Rule 8D - deduction of employer's provident fund contribution where contribution not deposited within statutory time

Bogus purchases - onus on assessee to prove genuineness of purchases when revenue possesses adverse investigative material - exclusion of statements recorded behind the back of the assessee unless opportunity to cross-examine is afforded - estimation of deemed profit as alternate relief in cases of suspected accommodation entries - Whether purchases from three suppliers could be treated as wholly bogus and disallowed in toto, and if not, what relief is appropriate. - HELD THAT: - The Tribunal held that where the Assessing Officer relies on adverse information and investigative statements (here from the Maharashtra Sales Tax Department), the initial burden shifts to the assessee to substantiate the genuineness of purchases. Statements recorded behind the back of the assessee are excluded unless the assessee is given an opportunity to cross-examine, but even excluding such material the assessee must produce sufficient independent corroboration. The assessee produced purchase bills, ledger entries, bank payments and certain confirmations, but the Tribunal found this evidence inadequate to discharge the onus because there were no corresponding entries from the suppliers and the material produced was mainly internal to the assessee. However, the Tribunal accepted the alternative contention that where sales (and quantities sold) are not disputed, the appropriate relief is to estimate and add the element of extra profit earned from such transactions rather than disallow full purchases. Applying this remedial principle and having regard to precedents estimating deemed profit, the Tribunal directed that an additional profit at the rate of 5% over and above the profit already disclosed by the assessee on the allegedly bogus purchases be assessed and added to the total income. [Paras 8]

Partly allow; purchases not disallowed in toto but directed AO to make an addition by estimating additional profit at 5% over and above the profit disclosed by the assessee on those purchases.

Disallowance under section 14A read with Rule 8D - Whether the disallowance computed under section 14A read with Rule 8D in respect of the small amount should be contested by the assessee. - HELD THAT: - The assessee chose not to press the ground relating to the small disallowance computed under section 14A read with Rule 8D at the hearing. Given the de minimis nature of the amount and the assessee's decision not to pursue it, the Tribunal did not adjudicate the substantive correctness of the disallowance. [Paras 3]

Ground not pressed by the assessee and therefore rejected.

Deduction of employer's provident fund contribution where contribution not deposited within statutory time - application of jurisdictional High Court precedent - Whether deduction under the Act is allowable for employer's provident fund contribution which was not deposited within the time limit prescribed under the Provident Fund and ESI enactments. - HELD THAT: - Relying on binding precedent of the jurisdictional High Court, the Tribunal reaffirmed that if the employer's contribution to provident fund is not deposited within the time limits prescribed under the respective statutory enactments, such contribution is not an allowable deduction under the Act. The Tribunal found the precedent directly applicable and adverse to the assessee's claim. [Paras 4]

Ground rejected in view of the jurisdictional High Court decision; deduction disallowed.

Final Conclusion: Appeal partly allowed: the Tribunal declined to sustain a total disallowance of the purchases but directed the Assessing Officer to make an addition by estimating an additional profit at 5% over and above the profit already disclosed by the assessee on the impugned purchases; the small disallowance under section 14A/Rule 8D was not pressed and rejected, and the claim for PF contribution deduction was denied following binding jurisdictional precedent.

Application of section 50C - Effect of prior transfer and registration on subsequent valuation under section 50C - Computation of long term capital gains - Adoption of Valuation Officer (DVO) report for determining fair market value - Time bar and dismissal of cross objection

Application of section 50C - Effect of prior transfer and registration on subsequent valuation under section 50C - Whether the provisions of section 50C could be invoked in respect of the transaction where the assessee had already transferred right, title and interest in the land by earlier agreements and a registered society formation/registration in 1987. - HELD THAT: - The Tribunal accepted the factual finding that the purchasers had acquired rights by agreement dated 11.10.1986 and the society was registered on 26.03.1987, with bylaws and documents indicating an obligation on the assessee to convey the property to the society and that possession and rights had effectively passed to the members. On that basis the principal transfer of the land was held to have occurred in 1987. The Tribunal agreed with the view of the CIT(A) that where the principal transfer had already taken place earlier, the later receipt by the assessee could not be treated as a fresh transfer attracting section 50C; therefore the statutory deeming/valuation under section 50C (which was not in force at the time of the earlier transfer) could not be applied to tax the same land again. The Tribunal confirmed the CIT(A)'s conclusion that the additional amount received in the later transaction represented facilitation/consideration in relation to the earlier transfer rather than a fresh transfer within the meaning of section 50C, and accordingly section 50C did not apply. [Paras 4, 6]

Section 50C not applicable because the land had been transferred earlier (registered in 1987); the AO cannot invoke section 50C for a subsequent receipt on the same land.

Computation of long term capital gains - Adoption of Valuation Officer (DVO) report for determining fair market value - Whether capital gains should be computed with reference to the DVO determined market value adopted by the AO or with reference to the amount actually received by the assessee, as directed by CIT(A). - HELD THAT: - The Tribunal noted that the DVO had determined a market value for the property and the AO computed long term capital gains on that basis. However, having held that the principal transfer occurred in 1987 and that the later receipt was not a fresh transfer, the Tribunal endorsed the CIT(A)'s direction that the AO should compute capital gains only with regard to the amount actually received by the assessee (the additional amount referred to by CIT(A)), rather than on the DVO value adopted by the AO. The Tribunal therefore confirmed the CIT(A)'s instruction to compute capital gains with reference to the sum identified by the CIT(A) as received by the assessee. [Paras 3, 6]

Capital gains to be computed with reference to the amount actually received by the assessee as directed by CIT(A), and not on the DVO value adopted by the AO.

Time bar and dismissal of cross objection - Whether the assessee's cross objection (CO) should be admitted despite delay of 430 days. - HELD THAT: - The Tribunal recorded that the cross objection was delayed by 430 days and the assessee failed to furnish any reasonable cause to justify the delay. In the absence of satisfactory explanation the Tribunal dismissed the cross objection as unadmitted. [Paras 7]

Cross objection dismissed as time barred for want of satisfactory explanation.

Final Conclusion: The order of the CIT(A) deleting the addition under section 50C was confirmed; capital gains are to be computed with reference to the amount actually received as directed by the CIT(A); the Revenue appeal is dismissed. The assessee's cross objection was dismissed as time barred.

Transaction value as assessable value - price actually paid or payable - rejection of transaction value where price is not sole consideration or parties are related - onus on Department to prove undervaluation by contemporaneous imports - necessity for speaking reasons and material to enhance assessable value - remand for fresh adjudication where Assessing Officer fails to examine requisite evidence

Transaction value as assessable value - price actually paid or payable - necessity for speaking reasons and material to enhance assessable value - onus on Department to prove undervaluation by contemporaneous imports - Validity of the Tribunal's setting aside of the Assessing Officer's enhancement of assessable value and restoration of the declared transaction value. - HELD THAT: - The Court affirmed the established principle that, as a general rule under Section 14 read with the Customs Valuation Rules, the assessable value is to be derived from the price actually paid or payable for the particular transaction. Departures from the declared transaction value are permissible only on the bases enumerated in Rule 4(2) - for example, where the price is not the sole consideration or where related-party transactions exist - and require cogent reasons supported by contemporaneous material. The adjudicating authority must gather and examine evidentiary material (such as evidence of contemporaneous imports at higher prices) and record reasons demonstrating why the invoice price is unacceptable. Where the Assessing Officer rejected declared transaction value without undertaking the requisite exercise or without placing corroborative material, the Tribunal was justified in setting aside the enhancement and restoring the declared value. The Court relied on the principles laid down in Eisher Tractors Ltd., South India Television and related precedents, and on the Tribunal's finding that the Original Authority had not made the necessary examination or produced contemporaneous evidence to rebut the invoice price. [Paras 10, 11, 12, 13, 14]

The Tribunal rightly set aside the enhancement and restored the assessable value as declared in the Bills of Entry because the Assessing Officer failed to undertake the necessary evidentiary examination and give cogent reasons supported by material to reject the transaction value.

Remand for fresh adjudication where Assessing Officer fails to examine requisite evidence - rejection of transaction value where price is not sole consideration or parties are related - Whether the Tribunal should have remanded the matters to the Assessing Officer instead of allowing the appeals outright. - HELD THAT: - The Court considered the Revenue's submission that, because the Assessing Officer had not examined departmental evidence or undertaken the statutory exercise to determine whether the price was the sole consideration, the proper course would have been remand for fresh investigation. The Court explained that the Tribunal's observations must be read in context: the Tribunal concluded the assessing authority had not shown any of the requisite material or reasons to displace the invoice price. Absent such material, there was no warrant to enhance value; hence remand was unnecessary where the record lacked the evidentiary basis required by law. Prior decisions of this Court including Prabhu Dayal Prem Chand show that enhancement based solely on external indices (e.g., LME bulletin) without corroborative contemporaneous import data cannot sustain a demand. Given the absence of such material before the AO, the Tribunal was justified in allowing the appeals rather than remanding. [Paras 5, 6, 7, 14]

Remand was not required; in the absence of requisite material or reasons to reject the declared price, the Tribunal permissibly allowed the appeals and restored the declared transaction value.

Final Conclusion: Appeals dismissed. The Tribunal correctly set aside the orders enhancing assessable value and restored the declared transaction value because the Assessing Officer lacked cogent, contemporaneous material and reasons to reject the invoice price; remand was unnecessary in those circumstances.

Summary order. Petition admitted and the following substantial questions of law have been framed for consideration: (A) whether the Tribunal was justified in upholding confiscation and imposing redemption fine and penalties under section 114(1) and section 114AA of the Customs Act, 1962; and (B) whether the Tribunal was justified in relying upon Notification No.67 dated 23.1.2003 issued under rule 11 of the Export (Quality Control and Inspection) Act, 1963, which was not specified as a restriction under Serial No.45AA of Notification No.55(RE-2008)/2004-2009 as amended by Notification dated 17.8.2010 bearing No.57/2009-2014 issued by DGFT.

Investigation into alleged export irregularities - direction to cooperate with investigation - time-bound completion of investigation - attachment of property pending investigation - issue of show-cause notice upon completion of investigation

Direction to cooperate with investigation - investigation into alleged export irregularities - Petitioners were directed to appear before the competent authority and cooperate with the ongoing investigation. - HELD THAT: - The Court recorded that the Department has been investigating alleged illegalities in the petitioners' export claims and that the petitioners had not fully cooperated. To enable completion of the inquiry, the petitioners (or any of them summoned) must appear before the competent authority to give their statements. The date for recording such statement is to be communicated by the concerned authority and in any event shall not be later than 20th December, 2018. The petitioners' counsel accepted that they would cooperate and appear as required. [Paras 3]

Petitioners directed to appear and give full cooperation in the investigation, with statements to be recorded by 20th December, 2018.

Time-bound completion of investigation - issue of show-cause notice upon completion of investigation - Respondents were directed to endeavour to complete the investigation expeditiously and, if justified, issue a show-cause notice preferably by 31st March, 2019. - HELD THAT: - The Court observed that it did not possess full details of the investigation and hence refrained from imposing a rigid timeframe, but taking note of the Department's statement that the investigation was at an advanced stage, the authorities were directed to attempt to complete the inquiry as expeditiously as possible. If, upon completion, a case for further proceedings is made out, the authorities may issue a show-cause notice; this is to be done preferably by 31st March, 2019. [Paras 4]

Respondents directed to endeavour to complete investigation and, if warranted, issue show-cause notice preferably by 31st March, 2019.

Attachment of property pending investigation - investigation into alleged export irregularities - The Court declined to order lifting of the attachment on the petitioners' immovable property at this stage. - HELD THAT: - Petitioners sought an order for lifting the attachment of an immovable residential unit effected by the authorities. Having directed cooperation and a timetable for steps in the investigation, and without full details of the inquiry before it, the Court found it inappropriate to direct release of the attachment at present and therefore did not disturb the provisional measures taken by the Department. [Paras 5]

Prayer for lifting the attachment refused at this stage; attachment to remain.

Final Conclusion: Writ petition disposed of by directing petitioners to cooperate with the ongoing investigation (statements to be recorded by 20th December, 2018) and directing the authorities to endeavour to complete the investigation and, if justified, issue a show-cause notice preferably by 31st March, 2019; the request to lift the attachment of the immovable property was declined at this stage.

Pre-notice consultation - show cause notice - recovery of duties under Section 28 of the Customs Act - preliminary consultative letter cum demand notice - benefit of reduced penalty by early payment - obligation to follow Section 28 procedure for crystallised recovery

Pre-notice consultation - show cause notice - recovery of duties under Section 28 of the Customs Act - Impugned communication dated 30.10.2018 is a pre-notice consultation under the second proviso to clause (a) of sub section (1) of Section 28 of the Customs Act and not a formal show cause notice initiating recovery proceedings. - HELD THAT: - Clause (a) to sub section (1) of Section 28 contemplates service of a show cause notice requiring the person chargeable to show cause why duties, interest or erroneously refunded amounts should not be recovered. The second proviso requires the proper officer to hold a pre notice consultation with the person chargeable before issuing such a notice. The communication in question, which sought payment of differential duty with interest, production of import documents and offered the option of lower penalty by early payment, performs the function of the pre notice consultation prescribed by the proviso. That communication does not constitute the formal show cause notice contemplated by clause (a) and does not itself crystallise recovery; if the authority elects to proceed further, the statutory procedure under Section 28 must be followed and the petitioner will have opportunity to raise contentions before the proper officer in that process. In view of this clarification, no further order was required. [Paras 4, 6, 7]

The communication is a pre notice consultation and not a show cause notice; if recovery is pursued, the procedure under Section 28 must be followed and the petitioner may raise its contentions at that stage.

Final Conclusion: Petition disposed of after holding that the impugned consultative letter cum demand notice is a pre notice consultation under the proviso to clause (a) of sub section (1) of Section 28 of the Customs Act and does not amount to a crystallised recovery; statutory Section 28 procedure must be followed if the authority seeks recovery and the petitioner may contest matters before the proper officer.

Bona fide purchaser for value without notice - fraudulently obtained DEPB scrips - liability under Customs Act for recovery of duty from transferee - extended limitation under proviso to Section 28 of the Customs Act - prospective effect of cancellation of licence/scrip

Bona fide purchaser for value without notice - fraudulently obtained DEPB scrips - liability under Customs Act for recovery of duty from transferee - prospective effect of cancellation of licence/scrip - extended limitation under proviso to Section 28 of the Customs Act - Whether the Tribunal correctly held that no recovery can be made from an importer who purchased DEPB scrips in good faith for value without notice of the fraud by the original seller, and whether cancellation of DEPB operates only prospectively so as not to affect imports made earlier. - HELD THAT: - The court accepted the foundational facts that the assessee purchased the DEPB scrips in the open market, paid value, and was not party to or shown to have notice of the fraud by the original holder. In these circumstances the Tribunal was held to have correctly followed the precedent in Vallabh Design Products (as affirmed by the Supreme Court) and other decisions including Taparia Overseas, which recognise that benefits legitimately availed by a bona fide transferee cannot be denied when the transferee had no knowledge of the fraud. The court observed that cancellation of a licence/scrip operates prospectively and does not retroactively invalidate imports effected before cancellation. Further, the court noted that the extended period under the proviso to Section 28 could not be invoked where the assessee was not accused of misrepresentation, collusion or suppression of facts, and the six month period under Section 28 had already expired in relation to the imports in question. Having regard to these conclusions and the absence of any material suggesting the assessee's complicity, no question of law arose warranting interference with the Tribunal's decision. [Paras 6, 7, 8, 9]

Tribunal's finding that the assessee, being a bona fide purchaser without notice of fraud, was not liable to have benefits denied or dues recovered and that cancellation operates prospectively is affirmed; no interference warranted.

Final Conclusion: The appeal is dismissed; the Tribunal's allowance in favour of the assessee is affirmed.

Classification of goods under Customs Tariff - Vending machine, other than automatic - Refrigerating/display furniture incorporating refrigerating equipment - Principal (predominant) purpose test for classification - Note 4 to Section XVI - unitary machine classification by function - Note 7 to Chapter 84 - machine used for more than one purpose treated by principal purpose - Rule of specificity in tariff interpretation

Classification of goods under Customs Tariff - Vending machine, other than automatic - Refrigerating/display furniture incorporating refrigerating equipment - Principal (predominant) purpose test for classification - Note 4 to Section XVI - unitary machine classification by function - Note 7 to Chapter 84 - machine used for more than one purpose treated by principal purpose - Rule of specificity in tariff interpretation - Imported Beverage Cooler SC-80 classified under Heading 8418 69 30 as a vending machine other than automatic, and not under Heading 8418 50 00 - HELD THAT: - The tribunal examined the product literature and found that, besides providing cooling, the imported machine is equipped to fix large beverage bottles upside-down and dispense measured quantities through tap-like outlets; the dispensing function is undisputed. Heading 8418 50 00 covers furniture for storage and display incorporating refrigerating equipment, whereas sub-heading 8418 69 30 specifically covers vending machines other than automatic. Applying Note 4 to Section XVI and Note 7 to Chapter 84, the machine must be classified according to the function appropriate to the whole unit and, where a machine serves more than one purpose, by its principal purpose. The authorities below correctly held that the dispensing (vending) function is the predominant feature given the small storage capacity and design of the machine, and that the term 'vending machine' in the tariff includes machines other than automatic vending machines. The rule of specificity requires adopting the more appropriate, specific tariff entry (8418 69 30) over the more general storage/display entry (8418 50 00). [Paras 6, 7, 8, 9]

The classification under sub-heading 8418 69 30 is upheld and the appeals are dismissed.

Final Conclusion: The tribunal upheld the lower authorities' classification of the imported Beverage Cooler SC-80 as a 'vending machine other than automatic' under Heading 8418 69 30, applying the principal-purpose test and tariff Notes; both appeals were rejected.

Scheme of Amalgamation and Arrangement - public interest - tax avoidance / impermissible avoidance agreement (GAAR) - compliance with Income Tax provisions - SEBI (Substantial Acquisition of Shares and Takeovers) Regulations - open offer obligation - reduction of shareholding tiers / simplification of shareholding structure - use of Securities Premium and reduction of capital under Section 52 and Section 66 - sanctioning power of the Tribunal

Scheme of Amalgamation and Arrangement - public interest - sanctioning power of the Tribunal - Whether the proposed Scheme should be sanctioned by the Tribunal - HELD THAT: - The Tribunal examined the scheme whereby the transferor (Gabs) holding equity in the transferee (Ajanta Pharma) would be merged and the transferee would issue equivalent shares to the transferor's shareholders (the common promoters). On the material before it the Bench found the scheme chiefly benefits the four shareholders of the transferor who are common promoters and results in a substantial benefit to them (market value of shares far exceeding the transferor's paid-up capital and book value). The Tribunal concluded that the scheme, as presented, would permit the common promoters to obtain a large private benefit without corresponding benefit to the wider body of transferee shareholders and without satisfying intervening statutory obligations; therefore the scheme is unfair and unreasonable and is not in the public interest. Having regard to these determinative considerations the Bench declined to sanction the scheme. [Paras 36, 37, 38, 40, 55]

Scheme not sanctioned as it is unfair, unreasonable and not in the public interest

Compliance with Income Tax provisions - tax avoidance / impermissible avoidance agreement (GAAR) - Validity of Income Tax Department objections and their effect on sanctioning the Scheme - HELD THAT: - The Income Tax Department objected that the amalgamation would result in significant tax loss to the exchequer (DDT on distribution and capital gains or business profit tax) and that the scheme may amount to an impermissible avoidance agreement or round trip financing. The Tribunal found the Department's objections to be prima facie valid and of sufficient gravity that the crucial issue of tax liability ought to be settled before any sanction is granted. The Bench observed that any transfer effected by the scheme must comply with applicable tax law and that the petitioners had not provided adequate details or an undertaking to address the tax consequences relied upon by the Income Tax Department. [Paras 21, 37, 39, 50]

Income Tax objections are meritorious; tax implications must be resolved prior to sanction

SEBI (Substantial Acquisition of Shares and Takeovers) Regulations - open offer obligation - reduction of shareholding tiers / simplification of shareholding structure - Whether the scheme complies with takeover/open offer obligations under the SEBI SAST Regulations - HELD THAT: - The Bench analysed promoter and concert party holdings and the effect of allotting transferee shares to the transferor's shareholders (who are common promoters). It noted that the scheme, as structured, contains no provision for complying with Regulation 3 (and related provisions) of the SEBI SAST Regulations and that by sanctioning the scheme as proposed the common promoters could escape obligations to make an open offer. The Tribunal observed that the petitioners have not demonstrated compliance with takeover regulations and that prima facie the common promoters would be required to comply with the SAST regime. [Paras 51, 52, 53]

Scheme fails to provide for compliance with SEBI SAST Regulations; open offer obligations must be addressed

Treatment of post appointed date share allotment - Scheme of Amalgamation and Arrangement - Treatment of 700 equity shares allotted by the transferor after the Appointed Date - HELD THAT: - The Tribunal noted that 700 equity shares were allotted by the transferor on 18.03.2017, after the appointed date of 01.04.2016. The scheme did not explain the treatment of these shares or the large securities premium credited on account of the allotment. The Bench held that because the scheme fails to account for these allotments and the related securities premium, those 700 shares would not be entitled to receive new transferee shares under the scheme unless their treatment is properly explained and regularised. [Paras 25, 27]

700 shares allotted after the appointed date are not entitled under the scheme unless proper treatment is furnished

Use of Securities Premium and reduction of capital under Section 52 and Section 66 - accounting treatment and auditor certificate - Whether accounting treatment and statutory certifications required under Sections 52/66 and applicable Accounting Standards have been furnished - HELD THAT: - The Regional Director had recommended compliance with accounting standards and a certificate from auditors that the accounting treatment conforms with the Accounting Standards under Section 133. The petitioners filed an auditor's certificate with the Tribunal and gave undertakings to comply with accounting standards and statutory requirements, including utilisation of securities premium as envisaged in the scheme. The Tribunal recorded these filings and undertakings but treated them as insufficient to cure the scheme's other fundamental infirmities (tax, SEBI compliance and disproportionate promoter benefit). [Paras 10, 15, 16, 17]

Auditor certificate and undertakings filed, but do not obviate the scheme's substantive defects

Final Conclusion: The Tribunal refused to sanction the proposed Scheme of Amalgamation and Arrangement: it concluded the scheme principally benefits the common promoters, risks substantial loss to the public exchequer by avoiding tax, fails to provide for compliance with SEBI takeover obligations and leaves unexplained post appointed date share allotments; accordingly the scheme is unfair, unreasonable and not in the public interest and cannot be sanctioned in its present form.

Corporate Insolvency Resolution Process - Operational Creditor - Notice of Demand under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Failure to raise a valid Notice of Dispute - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Suspension of Board's powers under Section 17 of the Insolvency and Bankruptcy Code, 2016 - Co-operation duties of management under Section 19 of the Insolvency and Bankruptcy Code, 2016

Operational Creditor - Notice of Demand under Section 8 of the Insolvency and Bankruptcy Code, 2016 - Failure to raise a valid Notice of Dispute - Sufficiency of demand notice service and absence of a valid dispute to defeat the Section 9 petition - HELD THAT: - The Tribunal found that the Operational Creditor issued a demand notice and proved service by producing the tracking report showing delivery to the Corporate Debtor. The Corporate Debtor did not file a Notice of Dispute in response to the demand notice; instead an affidavit was filed conceding inability to satisfy the claim. On the material before the Tribunal the Corporate Debtor had not established a pre-existing dispute sufficient to bar admission of the petition under Section 9 of the Code. [Paras 2, 6]

Demand notice was duly served and no valid Notice of Dispute was filed; this did not prevent admission of the Section 9 petition.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - Admissibility of the Section 9 application and initiation of CIRP against the Corporate Debtor - HELD THAT: - Having considered the agreement, invoices, proof of service of the demand notice and the affidavit filed by the Corporate Debtor admitting inability to meet the claim, the Tribunal concluded that the statutory pre-conditions for admitting the Section 9 petition were satisfied. The Tribunal therefore admitted the petition and ordered commencement of the Corporate Insolvency Resolution Process. [Paras 6, 8]

The Section 9 petition is admitted and CIRP is initiated against the Corporate Debtor.

Appointment of Interim Resolution Professional - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Suspension of Board's powers under Section 17 of the Insolvency and Bankruptcy Code, 2016 - Co-operation duties of management under Section 19 of the Insolvency and Bankruptcy Code, 2016 - Appointment of the proposed IRP, commencement of moratorium, suspension of the Board and duties of co-operation - HELD THAT: - The Tribunal accepted the Operational Creditor's nomination of Miss Sarita Duck as Interim Resolution Professional and noted her registration certificate. On admission of the petition the moratorium under Section 14 commenced from the date of the order. Consequent to admission, the powers of the Board stood suspended under Section 17 and the IRP was directed to take charge of the affairs of the Corporate Debtor. The Tribunal directed that the Board, its personnel, employees and associated professionals shall fully cooperate with the IRP and that the IRP shall perform duties as prescribed, and report the status of the CIRP. The order was also to be communicated to the Operational Creditor, Corporate Debtor, the IRP and IBBI. [Paras 7, 8, 9]

Miss Sarita Duck is appointed as IRP; moratorium commences; Board's powers suspended; management and personnel must cooperate with the IRP.

Final Conclusion: The Tribunal admitted the Section 9 petition filed by the Operational Creditor, having found the demand notice duly served and no valid dispute, initiated CIRP against the Corporate Debtor, appointed the nominated Interim Resolution Professional, ordered commencement of the moratorium and suspension of the Board's powers, and directed co-operation with the IRP.

Existence of dispute - demand notice under Section 8(2) of the Insolvency and Bankruptcy Code, 2016 - pre existing dispute - commencement of corporate insolvency resolution process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Existence of dispute - demand notice under Section 8(2) of the Insolvency and Bankruptcy Code, 2016 - pre existing dispute - Whether a pre existing dispute in relation to the invoices was made out by the corporate debtor such as would bar admission of the Section 9 application. - HELD THAT: - The Tribunal examined the correspondence relied upon by the corporate debtor and observed that no objection to quality or a dispute was raised before issuance of the demand notice, nor was any reply sent within ten days as contemplated by Section 8(2) of the Code. The corporate debtor had not produced contemporaneous documentary evidence establishing a pre existing dispute; it relied only upon a reply dated 30.04.2018 and a synopsis filed subsequently. The Tribunal found that the reply did not satisfy the requirement of having brought the dispute to the operational creditor's notice within the statutory timeframe or demonstrate a dispute existing prior to the demand notice. Consequently, the statutory condition for withholding admission on the ground of a pre existing dispute was not met.

No pre existing dispute was established; the defence of dispute under Section 8(2) is rejected.

Commencement of corporate insolvency resolution process - admission of Section 9 petition - Whether the Section 9 petition by the operational creditor should be admitted and CIRP initiated. - HELD THAT: - Having concluded that there was no pre existing dispute and that the operational creditor had issued the demand notice and followed statutory steps, the Tribunal held that the Section 9 application was maintainable and merited admission. The Tribunal therefore ordered commencement of the corporate insolvency resolution process to be completed ordinarily within 180 days from the date of the order.

Section 9 petition is admitted and CIRP is ordered to commence.

Appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of an Interim Resolution Professional and imposition of moratorium consequent to admission of the petition. - HELD THAT: - The petitioner had not recommended an IRP; the Tribunal appointed an IRP from the IBBI list and directed him to submit consent and assume charge. The Tribunal declared the moratorium operative from the date of the order until completion of the CIRP and specified the statutory prohibitions (instituting or continuing suits, transferring or encumbering assets, enforcing security, and recovery of property) as well as directions regarding public announcement, claim submissions and cooperation with the IRP in terms of the Code.

IRP appointed, moratorium declared and directions issued for management and conduct of CIRP.

Final Conclusion: The Tribunal found no pre existing dispute under Section 8(2) of the IBC, admitted the Section 9 petition, ordered commencement of the corporate insolvency resolution process, appointed an Interim Resolution Professional and declared the moratorium with consequential directions for the conduct of the CIRP.

Specificity of show cause notice - classification of receipts as taxable or exempted services - burden of proof on the Revenue to establish taxability - abatement and supply of goods affecting tax liability - confirmation of demand

Specificity of show cause notice - classification of receipts as taxable or exempted services - burden of proof on the Revenue to establish taxability - Whether a demand for service tax can be confirmed solely on the basis of payments received from the service receiver without classifying those receipts as attributable to taxable services - HELD THAT: - The Tribunal held that the Revenue's case rested only on aggregate payments made by the service receiver and there was no independent finding or evidence that those payments were consideration for taxable services. The show cause notice did not disclose any classification linking the receipts to specific taxable services. Mere receipt of payments by the respondent did not lead inevitably to the conclusion that the consideration related exclusively to taxable services, particularly where the assessee asserted that some activities were exempt and some involved supply of goods. In the absence of evidence or specific classification in the notice, the demand could not be sustained. [Paras 6]

Demand confirmed solely on the basis of payments without classification cannot be upheld; Revenue failed to discharge the burden to establish taxability.

Abatement and supply of goods affecting tax liability - classification of receipts as taxable or exempted services - confirmation of demand - Whether the Commissioner (Appeals) was justified in setting aside the demand except to a small amount after examining documents showing non taxable activities, abatement, material supply and certified contract details - HELD THAT: - The Tribunal noted that Commissioner (Appeals) examined the documents on record, including a chart certified by the Chartered Accountant detailing various contracts, a certificate from the Trade Tax Authority regarding tax deposited, and applied the abatement available under the relevant notification while recognising supplies of material. The Commissioner (Appeals) also sought verification from the jurisdictional officer (who did not respond) and proceeded to classify activities and conclude that many receipts pertained to non taxable activities. Given the lack of specific classification in the show cause notice and the material before the Commissioner (Appeals) indicating non taxable components and abatement, the appellate authority's decision to set aside the demand except for a nominal amount was sustainable. [Paras 5, 6]

Commissioner (Appeals) rightly set aside the demand except to the limited extent; his order does not warrant interference.

Final Conclusion: Revenue's appeal is dismissed and the order of the Commissioner (Appeals), which set aside the demand except to a nominal extent, is upheld.

Eligibility to avail cenvat credit - availment of cenvat credit under Rule 6(3) of the Service Tax Rules, 1994 - refund under Section 11B - limitation computed with reference to date of payment under Explanation B(f) to Section 11B - powers of Commissioner (Appeals) to act as adjudicating authority under Section 35A(3) - appellate authority granting relief not expressly claimed by borrowing spirit of Order 7 Rule 7 CPC

Eligibility to avail cenvat credit - availment of cenvat credit under Rule 6(3) of the Service Tax Rules, 1994 - refund under Section 11B - Entitlement of the appellant to avail cenvat credit in respect of amounts for which a refund claim under Section 11B was rejected as time-barred. - HELD THAT: - The Tribunal accepted the factual findings of the adjudicating authority that the refund claim related to service tax paid for the period April 2013 to March 2014 and that payment was made partly by cash and partly by adjustment against cenvat credit. The adjudicating authority had held Rule 6(3) of the Service Tax Rules, 1994 to be applicable to such a situation. Noting reported decisions relied on by the appellant and the absence of any embargo in Notification No.9/2009-ST against taking credit after refusal of refund, the Tribunal found that the appellant was entitled to avail cenvat credit for the refused refund. The Tribunal further held that the Commissioner (Appeals), empowered under Section 35A(3) to make further enquiry and pass such order as he thinks just and proper (and acting in that capacity as an adjudicating authority as recognised by the Supreme Court), may grant appropriate relief; and, by invoking the spirit of Order 7 Rule 7 CPC, the appellate forum could grant relief not expressly prayed for where necessary for just adjudication. Applying these principles, the Tribunal allowed the appeal in part and permitted availment of cenvat credit in respect of the refused refund claim, subject to the temporal limitation on the period of availment specified in the order.

Appeal allowed in part; appellant entitled to avail cenvat credit for the refused refund claim for April 2013 to March 2014, with the period of availment to commence after the statutory appeal period is over.

Final Conclusion: The Tribunal modified the Commissioner (Appeals) order and allowed the appellant to avail cenvat credit in respect of the refund claim rejected as time-barred (period April 2013 to March 2014); availment to commence after the statutory appeal period.

Classification of services between mining service and goods transport agency service - bundling of services and applicability of negative list regime from 01.07.2012 - appropriation/confirmation of service tax paid under mining service

Classification of services between mining service and goods transport agency service - bundling of services - Transport of coal within the mining area is to be classified as goods transport agency (GTA) service and not subsumed under mining service. - HELD THAT: - The Tribunal had examined the two separate contracts for loading and transportation and, relying upon the Apex Court authority cited in the earlier order, held that amounts received for transportation fall under GTA services and not mining services. For the period after 01.07.2012 (when the negative list regime applied) there is no need for separate classification language and the activity of transportation from the coal face to the railway siding continues to enjoy the benefit of GTA classification rather than being bundled into mining service. The present order affirms the earlier Tribunal conclusion setting aside the demand insofar as it sought to treat transportation as mining service. [Paras 6, 8, 10]

Demand insofar as it seeks to treat coal transportation as mining service is set aside; transportation is classified as GTA service.

Appropriation/confirmation of service tax paid under mining service - Service tax already paid by the appellant under the loading agreement classified as mining service is confirmed and the adjudicating authority's appropriation of that paid amount is upheld. - HELD THAT: - The appellant had paid service tax under the mining service category for coal loading (the undisputed part). That payment was not challenged in the original appeal. The earlier Tribunal order, while addressing classification of transportation, inadvertently set aside the mining-service component relating to loading. The present Bench finds this to be a mistake apparent on the record and clarifies that the service tax paid for loading remains confirmed; the appropriation by the original adjudicating authority is therefore maintained. The ROM is allowed to modify the earlier order to this extent. [Paras 7, 9, 10]

The paid service tax for coal loading classified under mining service is confirmed and its appropriation is upheld; the earlier order is modified accordingly.

Final Conclusion: The Tribunal's earlier decision classifying coal transportation as GTA service is maintained, but that order is modified to confirm and uphold the appropriation of the service tax paid by the appellant in respect of coal loading under mining service for 2012-2013; the ROM application is allowed to that extent.

Service Tax liability for Transport of Goods by Road (GTA) services - liability of consignor/consignee to pay service tax - registration as SSI unit and exemption from Service Tax - limitation bar for extended period - penalties under Section 77 - remission of penalty under Section 80

Service Tax liability for Transport of Goods by Road (GTA) services - liability of consignor/consignee to pay service tax - registration as SSI unit and exemption from Service Tax - limitation bar for extended period - Validity of demand for service tax on GTA services for the stated periods and whether the demand for the extended period is barred by limitation - HELD THAT: - The Tribunal examined the appellant's registration history and correspondence indicating that the factory was registered as an SSI unit and had earlier been registered for service tax. It was noted that GTA services became taxable with effect from 01.01.2005 and that the appellants had later discharged the service tax demand along with interest for the period 2011-2012 and for April-June 2012. The Tribunal found no element of fraud, collusion, or willful mis-statement or suppression with intent to evade tax, and observed that the appellant had been confused by prior communications regarding SSI exemption. In light of these facts and the absence of culpable conduct, the Tribunal held that the demand for the extended period could not be sustained and set aside the extended period demand as barred by limitation. [Paras 5]

Demand for the extended period on GTA services is set aside as barred by limitation.

Penalties under Section 77 - remission of penalty under Section 80 - Validity of penalties imposed under Section 77(1)(a) and Section 77(2) and whether remission under Section 80 is warranted - HELD THAT: - Having found no fraud, collusion or willful suppression and taking into account that service tax for certain periods had been discharged, the Tribunal exercised the power under Section 80 to remit penalties. The Tribunal therefore concluded that the conditions for imposing the penalties under Section 77(1)(a) and Section 77(2) were not established in a manner that would preclude remission under Section 80. [Paras 5]

Penalties under Section 77(1)(a) and Section 77(2) are set aside by invoking Section 80.

Final Conclusion: The impugned order is set aside; the appeal is allowed insofar as the extended period demand is quashed as time-barred and the penalties under Section 77(1)(a) and Section 77(2) are remitted under Section 80, while the appellant had already discharged the service tax liability for 2011-2012 and April-June 2012.

Denial of Cenvat credit for procedural infirmities - Receipt of goods and payment of duty as condition for Cenvat credit - Proviso to sub rule (2) of rule 9 of the Cenvat Credit Rules, 2004 - allowance of credit despite missing particulars

Receipt of goods and payment of duty as condition for Cenvat credit - Denial of Cenvat credit for procedural infirmities - Whether denial of Cenvat credit on Tippers was justified where the assessee produced excise invoices from the manufacturer evidencing payment of central excise duty and documents showing receipt of goods - HELD THAT: - The Tribunal examined the records and found that the assessee produced supporting excise tax invoices issued by M/s Tata Motors evidencing payment of central excise duty on the specific chassis and engine numbers of the Tippers, as well as invoices evidencing purchase of an Excavator from a registered excise dealer. The Tribunal observed that judicial precedents of the Supreme Court, High Courts and Tribunals establish that where it is conclusively shown that duty has been paid and the goods have been received by the assessee, denial of credit solely on the ground of procedural irregularity is not justified. The documents produced (annexures R/4, R/5, R/6 and R/8) and financing/No Objection Certificates supported receipt of goods and payment of duty, negating the basis for denial on procedural grounds. [Paras 6, 7]

Denial of Cenvat credit on the ground of procedural infirmities was set aside and credit allowed as duty was paid and goods were received.

Proviso to sub rule (2) of rule 9 of the Cenvat Credit Rules, 2004 - allowance of credit despite missing particulars - Whether Cenvat credit could be allowed despite invoices not containing all prescribed particulars under the proviso to sub rule (2) of rule 9, CCR, 2004 - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had accepted that the proviso to sub rule (2) of rule 9 contains an inbuilt leniency permitting the Deputy/Assistant Commissioner to allow Cenvat credit where documents do not contain all particulars but details of duty are accounted for in books and records. The assessee's invoices, together with excise invoices from the manufacturer and evidence of financing and NOCs, met the threshold contemplated by the proviso, thereby justifying allowance of credit notwithstanding certain missing particulars in the supplier's documents. [Paras 6]

Cenvat credit permitted under the proviso to sub rule (2) of rule 9, CCR, 2004 as the requisite duty details were accounted for and supporting excise evidence was produced.

Final Conclusion: The impugned orders denying Cenvat credit are set aside; the appeal is allowed and Cenvat credit in respect of the goods in question is permitted with consequential relief, the Tribunal relying on production of excise invoices evidencing payment of duty and receipt of goods and the proviso to rule 9(2) CCR, 2004.

Cenvat credit for input service - date of payment, presentation and realization of cheque - payment deemed on presentation subject to realization - penalty not imposable where payment realized and no intention to evade - extended period of limitation

Cenvat credit for input service - date of payment, presentation and realization of cheque - payment deemed on presentation subject to realization - Availing of cenvat credit was permissible on the basis of cheque presentation/realisation in the facts of the case. - HELD THAT: - The Tribunal examined Rule 4(7) of the Cenvat Credit Rules, 2004 which links allowance of credit to the date on which payment of the value of input service and service tax is made as indicated in the invoice/bill/challan. The Tribunal further relied on Rule 6(2A) of the Service Tax Rules, 1994 that treats the date of presentation of a cheque as the date of payment subject to realization. The records showed that none of the cheques issued by the appellant were dishonoured and were subsequently realized. Applying these provisions and consistent with the coordinate-bench precedent relied upon by the Tribunal, the date of presentation (with subsequent realization) was to be treated as the relevant date for taking credit; thus the credit availed by the appellant was not irregular.

Credit availed on the basis of cheques which were presented and realized is valid and the demand on that ground is unsustainable.

Penalty not imposable where payment realized and no intention to evade - extended period of limitation - The demand and penalty confirmed by the lower authorities were set aside as not justified in the circumstances; contention on invocation of extended limitation was not sustained in view of accepted payment. - HELD THAT: - The Tribunal noted that penalties were imposed on the premise of irregular availment of credit due to a temporal gap between cheque presentation and realization. However, where cheques were eventually encashed and there was no evidence of dishonour or intent to evade payment, imposition of penalty was held unjustified. The appellant had maintained records and disclosed figures in returns; in these circumstances the extended period contention lost relevance because the foundational allegation of suppression/irregular credit was rejected.

Impugned demand and equal penalty set aside; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the orders of the lower authorities and held that cenvat credit was validly availed where cheques were presented and realized, and that the demand and penalty were not sustainable in the absence of dishonour or intent to evade.

Cenvat credit - input service - nexus between input services and manufacture of final product - classification of supply as supply of tangible goods versus hiring of services - follow the ratio of precedent

Cenvat credit - input service - nexus between input services and manufacture of final product - follow the ratio of precedent - Admissibility of cenvat credit in respect of the listed input services - HELD THAT: - The Tribunal examined whether the services for which credit was taken were input services having requisite nexus or relation to manufacture and sale of goods. The appellant's counsel relied on a series of earlier decisions of this Tribunal and High Courts holding the services in question to be input services. The Revenue affirmed the impugned order denying credit. The Tribunal observed that the services relied upon have repeatedly been held to be input services in the cited precedents and that the services were used in relation to overall manufacturing and sale of the goods. Applying the ratio of those precedents, the Tribunal concluded that the services are input services and that cenvat credit is admissible.

The impugned denial of cenvat credit in respect of the listed input services is set aside and credit is allowed.

Classification of supply as supply of tangible goods versus hiring of services - input service - cenvat credit - Characterisation of the invoice recorded as 'rent-a-cab' and entitlement to credit - HELD THAT: - On review of the invoice for the item described under the head 'rent-a-cab', the Tribunal found that the transaction was in substance a supply of tangible goods used for organizing a medical camp connected with product promotion, and not a hire of cab services. Given that the supply was used in connection with the appellant's business activities related to manufacture and sale, the Tribunal treated the transaction as an input service (or otherwise admissible for credit) and allowed credit accordingly.

The item misdescribed as 'rent-a-cab' is in substance supply of tangible goods used for promotional medical camp and is eligible for cenvat credit.

Final Conclusion: The Tribunal, following earlier judicial decisions, allowed cenvat credit in respect of the services listed in the statement of demand, including the item labeled 'rent-a-cab' which was treated as supply of tangible goods used for a medical camp; the impugned order denying credit is set aside and the appeal is allowed.

Eligibility of CENVAT credit on input services - nexus with manufacturing activity - allowability of credit on debit and credit card services - verification and remand to adjudicating authority - evidentiary verification of documents produced before the Tribunal

Allowability of credit on debit and credit card services - nexus with manufacturing activity - Credit availed on debit and credit card services - HELD THAT: - The Tribunal examined the reasons recorded by the authorities for disallowing the CENVAT credit on debit and credit card services, namely that such services lacked nexus with manufacturing activity. The appellant explained that service tax on card transactions arose when customers used cards to make payments and that such activity is connected to the appellant's manufacturing activity. The Tribunal found the disallowance on the stated ground incorrect and accepted the appellant's explanation that the card-related services are related to the manufacturing activity and hence eligible for credit. [Paras 8]

Credit on debit and credit card services is allowed.

Eligibility of CENVAT credit on input services - nexus with manufacturing activity - evidentiary verification of documents produced before the Tribunal - verification and remand to adjudicating authority - Credit availed on air travel agent services and hotel/accommodation services - HELD THAT: - The appellant produced minutes of meetings and lists of participants before the Tribunal to show that air travel and hotel services were availed for official purposes (attendance at LSPM meetings for production planning) and not for personal consumption. The Tribunal observed that these documents, if verified, would indicate use for official purposes and therefore potential eligibility for CENVAT credit as per the authority relied upon by the appellant. However, because the documents were not verified by the adjudicating authority, the Tribunal concluded that the question of eligibility requires fresh factual verification and remanded the issue to the adjudicating authority for that purpose. [Paras 7, 9]

Matter remanded to the adjudicating authority to verify whether air travel and hotel services were availed for official purposes and, if so, to allow credit.

Verification and remand to adjudicating authority - eligibility of CENVAT credit on input services - Errors in calculation of credit confirmed in the Order-in-Original with respect to the impugned services - HELD THAT: - The appellant pointed out numerical errors in the quantum of credit recorded in the Order-in-Original for the services under challenge. The Tribunal noted these discrepancies and directed that the adjudicating authority reconsider the calculation errors. The reconsideration is confined to the services impugned in this appeal and those remanded by the Commissioner (Appeals). [Paras 9]

Calculation errors to be reconsidered by the adjudicating authority; matter remanded for correction and fresh computation as necessary.

Final Conclusion: The appeal is partly allowed and partly remanded: credit on debit and credit card services is allowed; eligibility of credit on air travel agent and hotel services and the corrected calculations for the impugned items are remanded to the adjudicating authority for verification and fresh computation, with consequential relief if justified.

CENVAT credit on inputs - goods whose value is included in the final product - definition of "input" - packing/combination into gift packs as part of manufacture - Rule 16(1) of the Central Excise Rules, 2002 - credit on duty paid goods brought to factory

CENVAT credit on inputs - definition of "input" - goods whose value is included in the final product - packing/combination into gift packs as part of manufacture - Purchased fireworks which are combined into gift packs and whose value is included in the assessable value of the final product qualify as "inputs" eligible for CENVAT credit. - HELD THAT: - The definition of "input" for the relevant periods covers (i) all goods used in the factory by the manufacturer of the final product and (ii) any goods cleared along with the final product the value of which is included in the value of the final product. The words refer to goods used "by the manufacturer" and do not restrict eligibility to goods used "for the manufacture". Where bought-out goods are incorporated into the final clearance (here, gift combo boxes) and their value is included in the assessable value of the cleared product, duty suffered on those bought-out items is absorbed in the value of the final product and falls within the CENVAT scheme's objective of avoiding cascading. Reliance on Tribunal and High Court authorities (including Manick Machinery Manufacturers) supports that items supplied along with the final product for sale or clearance, even if not directly participating in the manufacturing process, may constitute inputs and attract credit if their value is included in the final product cleared by payment of duty. Applying this principle to the facts, the fireworks purchased from sister concerns/outside manufacturers, combined into gift packs and valued in the assessable value, qualify as inputs and credit cannot be denied on that ground. [Paras 5, 7]

The CENVAT credit availed on fireworks purchased from other manufacturers and included in the assessable value of the gift packs is admissible; the demand on this ground is set aside.

Rule 16(1) of the Central Excise Rules, 2002 - credit on duty paid goods brought to factory - re-made/re-conditioned/refined paradigm under Rule 16 - Rule 16(1) is not attracted to the facts where the goods were purchased by the manufacturer and their value included in the assessable value of the cleared final product; Rule 16 applies to duty-paid goods brought into the factory for re-making, refining or reconditioning. - HELD THAT: - Rule 16 addresses the situation where duty-paid goods are brought into a factory for re-making, refining, re-conditioning or similar reasons; it prescribes recordal and entitlement to take credit as if received as inputs, and contains a proviso for payment where the process does not amount to manufacture. In the present case the goods in question were not goods previously removed on which duty had been paid and subsequently brought back to the factory for re-processing; rather, they were purchased by the manufacturer and their value was included in the assessable value of the final product cleared on payment of duty. Consequently the factual matrix does not engage the scenario contemplated by Rule 16(1), and invocation of Rule 16 by the authorities was not proper. [Paras 6, 7]

Rule 16(1) is inapplicable to the facts and cannot sustain the demand; the invocation of Rule 16 is rejected.

Final Conclusion: The demands and penalties confirmed by the authorities for the periods 2013 - 14 to 2014 - 15 and May 2015 to December 2015, insofar as they relate to denial of CENVAT credit on fireworks purchased from sister concerns/outside manufacturers and packed into gift boxes (whose value was included in the assessable value), are set aside; Rule 16(1) was improperly invoked.

Prospective application of amended Rule 3(5B) of the CENVAT Credit Rules, 2004 - reversal of CENVAT credit on provisions for slow-moving / non-moving / obsolete inputs - effect of book provision/write-off in Books of Account on CENVAT credit liability - remand for verification of reversal for subsequent tax periods

Prospective application of amended Rule 3(5B) of the CENVAT Credit Rules, 2004 - reversal of CENVAT credit on provisions for slow-moving / non-moving / obsolete inputs - Whether amended Rule 3(5B) applies to require reversal of CENVAT credit on the opening balance of provisions as on 01.04.2007 - HELD THAT: - The Tribunal examined earlier decisions of High Courts and Benches of the Tribunal which held that the amendment introducing sub-rule (5B) is prospective and that mere book provisions or write-offs in the balance sheet prior to amendment do not, without more, justify reversal where inputs remain available and usable. Applying those authorities to the facts, the Tribunal found that a large part of the provisions represented opening balances as on 01.04.2007 and that the amendment could not be applied retrospectively to demand reversal of credit on that opening balance. The determinative reasoning is that Rule 3(5B) could not be pressed into service for periods antecedent to its insertion simply because a provision was shown in the accounts; reversal requires applicability of the rule to the relevant period and evidence that inputs were incapable of use where such a finding is material. [Paras 5, 8]

Amended Rule 3(5B) is prospective; no demand for reversal of CENVAT credit on the opening balance as on 01.04.2007.

Reversal of CENVAT credit on provisions for slow-moving / non-moving / obsolete inputs - remand for verification of reversal for subsequent tax periods - Whether credit availed for additional provisions made for 2008-09 and 2009-10 (up to August 2009) is liable to reversal under Rule 3(5B) - HELD THAT: - The Tribunal noted that the Show Cause Notice included additional provisions made for the later periods which fall within the scope of Rule 3(5B) after its insertion. Rather than adjudicate those specific periods on the record before it, the Tribunal remanded the matter to the adjudicating authority to verify the additional provisions for 2008-09 and 2009-10 up to August 2009 and, if found hit by the rule, to quantify and demand the appropriate reversal. The remand is for factual and verificatory determination of reversals for those periods only. [Paras 9]

Remanded to the adjudicating authority to verify and, if warranted, demand reversal of credit for 2008-09 and 2009-10 up to August 2009.

Final Conclusion: The appeal is partly allowed: reversal of CENVAT credit on the opening balance as on 01.04.2007 is set aside because the amendment (Rule 3(5B)) is prospective; matters relating to additional provisions for 2008-09 and 2009-10 up to August 2009 are remanded for verification and appropriate demand if exigible.

Input service - CENVAT credit - Real Estate Agency Service - used directly or indirectly in or in relation to the manufacture of final products and clearance - amended Rule 2(l) of the CENVAT Credit Rules, 2004

Input service - used directly or indirectly in or in relation to the manufacture of final products and clearance - Real Estate Agency Service - amended Rule 2(l) of the CENVAT Credit Rules, 2004 - CENVAT credit - Whether the service rendered by M/s. CBRE in identifying a buyer and facilitating sale of the assessee's factory land qualifies as an input service eligible for CENVAT credit under the amended definition in Rule 2(l). - HELD THAT: - The amended Rule 2(l) contains an inclusive part and an exclusive part; an eligible input service must be used, directly or indirectly, in or in relation to the manufacture of final products and their clearance. The role performed by M/s. CBRE was limited to acting as a real estate agent to identify a purchaser and complete the sale of the factory land. That service is not a financing or banking service nor is it shown to have been used in or in relation to the manufacture of final products or their clearance. Reliance on the broader concept of "business activity" does not satisfy the statutory test, which focuses on connection with manufacturing. Earlier Tribunal decisions cited by the assessee were found inapposite on these facts. Applying the determinative statutory test, the service is properly characterised as Real Estate Agency Service and therefore not an eligible input service for CENVAT credit.

The service by M/s. CBRE does not qualify as an input service under the amended Rule 2(l); the first appellate authority's findings are sustained and the appeal is dismissed.

Final Conclusion: The CESTAT upheld the Commissioner (Appeals) in holding that the fees paid to M/s. CBRE for facilitating sale of the factory land are for Real Estate Agency Service and do not qualify as input service for CENVAT credit under the amended Rule 2(l); the appeal is dismissed.

Transaction value - valuation of excisable goods for charging of duty - conversion of volume to 15 C - price at 15 C versus ambient temperature - undervaluation to evade excise duty - application of Section 4(1) of the Central Excise Act

Transaction value - conversion of volume to 15 C - undervaluation to evade excise duty - application of Section 4(1) of the Central Excise Act - Whether converting actual volumes at ambient temperature to notional volumes at 15 C and charging price on that basis for supplies to other oil marketing companies resulted in undervaluation to evade central excise duty, or whether duty paid on the invoice price constituted transaction value under Section 4(1). - HELD THAT: - The Tribunal accepted the appellants' case that supplies to other oil marketing companies were invoiced and duty was paid on the basis of price fixed for volume at 15 C. It was not disputed that the buyer and seller were not related, that the invoice price was the sole consideration, and that no additional consideration was received. Under Section 4(1) the transaction value is the value for charging excise where the price is the sole consideration and the parties are unrelated. Applying that principle, conversion of volumes to 15 C for price fixation did not, by itself, amount to undervaluation or an attempt to evade duty when the declared invoice price constituted the transaction value. The Tribunal's earlier decision in an identical matter (Ambala refinery) so holding, and its subsequent affirmation by the High Court of Punjab and Haryana, were followed. On these bases the impugned demands founded on alleged short payment of duty were held unsustainable. [Paras 6, 7, 8]

The Tribunal set aside the impugned orders confirming demand, holding that duty having been paid on the transaction value declared in invoices (price fixed at 15 C) there was no undervaluation or evasion.

Final Conclusion: Appeals allowed; orders-in-original confirming differential duty, interest and penalties set aside as unsustainable in view of the transaction value principle under Section 4(1) and the authority of the Tribunal and High Court decisions in the identical matter.

Rectification of mistake - non-availment of Cenvat credit of Additional duty under sub-section (5) of Section 3 of Customs Tariff Act - excess availment of refund under Notification No.56/02-CE dt.14.11.2002 - availment of credit on outward transportation of freight charges - relist for fresh hearing

Rectification of mistake - non-availment of Cenvat credit of Additional duty under sub-section (5) of Section 3 of Customs Tariff Act - availment of credit on outward transportation of freight charges - Application for rectification of the Tribunal's order dated 30.08.2018 was allowed and the appeal was directed to be relisted for fresh hearing. - HELD THAT: - The Revenue sought rectification on the ground that the impugned order had addressed the question of availment of credit on outward transportation of freight charges, whereas the true controversy concerned non-availment of Cenvat credit of Additional duty levied under sub-section (5) of Section 3 of the Customs Tariff Act and resultant excess refund under Notification No.56/02-CE dated 14.11.2002. The Tribunal found that the earlier order did not correctly decide the issue raised by the Revenue and, for that reason, permitted the rectification application and directed the Registry to relist the appeal for fresh hearing before a Division Bench when it next resumes.

Rectification application allowed; appeal to be relisted for fresh hearing.

Final Conclusion: The Tribunal allowed the Revenue's application for rectification of its order dated 30.08.2018, concluding that the earlier order had not decided the correct issue, and directed the appeal to be relisted for fresh hearing before a Division Bench.

Rectification of mistake in order - relist for fresh hearing - incorrect decision on the issue

Rectification of mistake in order - relist for fresh hearing - Application for rectification of the Tribunal's earlier order on the ground that the wrong issue was decided. - HELD THAT: - The Revenue applied for rectification of the Tribunal's order dated 30.08.2018 on the ground that the impugned order addressed an incorrect issue (availment of credit on outward transportation of freight charges) instead of the actual controversy (denial of refund of education cess and higher education cess and value addition under Notification No.56/02-CE dated 14.11.2002). The Tribunal accepted that the earlier order did not decide the correct issue and directed that the appeal be relisted for fresh hearing before the next Division Bench. The application for rectification was therefore allowed to enable adjudication of the correct controversy on merits at a fresh hearing.

Applications for rectification of the mistake in the order dated 30.08.2018 are allowed; the appeal is to be relisted for fresh hearing before the next Division Bench.

Final Conclusion: Applications for rectification allowed; the impugned order dated 30.08.2018 is set aside to the extent it decided the wrong issue, and the appeal shall be relisted for fresh hearing before the next Division Bench.

Rectification of mistake apparent on the face of the record - time-bar under Section 35C(2) of the Central Excise Act - maintainability of a second ROM against an order rejecting an earlier ROM - distinction between rectification (ROM) and review/rehearing of merits - mistake apparent on the record cannot include re opening merits or re appreciation of evidence

Time-bar under Section 35C(2) of the Central Excise Act - rectification of mistake apparent on the face of the record - Whether the ROM application filed after about 17 years is maintainable having regard to the statutory six months period under Section 35C(2). - HELD THAT: - Section 35C(2) permits the Tribunal to amend its order to rectify any mistake apparent from the record within six months from the date of the order. The Tribunal noted that even if the date of receipt of the order is taken as the starting point, the present ROM was filed after an inordinate delay of about 17 years. The bench observed that the applicants made no effort for 17 years to ascertain the outcome of the earlier ROM and merely procuring a copy from Registry does not justify treating a belated filing as within time. In these circumstances, and having regard to precedents that the Tribunal, being a creature of statute, must act within the statutory period, the application was held to be barred by limitation and no sufficient cause for condonation was shown. [Paras 6]

ROM application is time barred and not maintainable on the ground of delay.

Maintainability of a second ROM against an order rejecting an earlier ROM - rectification of mistake apparent on the face of the record - Whether a second ROM can be filed seeking rectification of an order which rejected an earlier ROM. - HELD THAT: - The Tribunal examined the scope of Section 35C(2) and earlier authorities holding that there is no provision for filing a ROM against an order deciding an earlier ROM. Citing binding precedent of the Tribunal, the bench held that a second application for rectification of alleged mistake in an order rejecting an earlier ROM is not maintainable, there being no statutory sanction for successive ROMs in respect of the same order. The present application in substance sought recall of the earlier ROM order and therefore was barred by settled law. [Paras 7]

Second ROM against an order rejecting an earlier ROM is not maintainable; the present application is impermissible.

Mistake apparent on the record cannot include re opening merits or re appreciation of evidence - distinction between rectification (ROM) and review/rehearing of merits - Whether the allegations made in the present application disclose a mistake apparent on the face of the record warranting rectification on merits. - HELD THAT: - The Tribunal reviewed the substance of the applicant's plea and found it was essentially a request to revisit the adjudication on confiscation, redemption fine and penalty - matters that arise from merits and argumentation. ROM power is confined to correcting mistakes apparent from the record and cannot be used as a vehicle to review or re argue the appeal. No sufficient particulars were furnished to demonstrate any clerical or apparent error; the quantum of redemption fine and penalty reflected the Tribunal's considered decision and cannot be treated as an apparent mistake. Consequently, even on merits the application did not disclose a ground for rectification. [Paras 8, 9]

On merits the ROM does not disclose any mistake apparent on the record; relief amounts to review and is not entertainable.

Final Conclusion: The miscellaneous application for rectification is rejected as barred by limitation, not maintainable because it seeks a second ROM against an order rejecting an earlier ROM, and in any event fails on merits since it seeks re opening of the Tribunal's decision rather than correction of a mistake apparent on the record.

Improper availing of Cenvat credit on import from SEZ - Imposition of penalty for suppression under Section 78 - Interest and recovery of wrongly availed Cenvat credit - Bonafide reversal and absence of intent to evade duty

Interest and recovery of wrongly availed Cenvat credit - Improper availing of Cenvat credit on import from SEZ - Whether recovery of the wrongly availed Cenvat credit and interest thereon remain maintainable where the credit had been reversed prior to issuance of the Show Cause Notice and Commissioner (Appeals) has set aside demand of interest. - HELD THAT: - The record shows that the Cenvat credit in question had been reversed before issuance of the impugned Show Cause Notice and that Commissioner (Appeals) has already set aside the demand of interest. The proposal for recovery ceases to have practical significance in view of the admitted reversal. Nothing has been placed on record to show any departmental appeal against the finding on interest. The Tribunal finds no infirmity in the Commissioner (Appeals)'s conclusion setting aside interest and observes that the reversal of credit obviates the need for a recovery order to that extent.

The finding of Commissioner (Appeals) setting aside the demand of interest is confirmed and the proposal of recovery has no continuing significance.

Imposition of penalty for suppression under Section 78 - Bonafide reversal and absence of intent to evade duty - Whether penalty under Section 78 can be sustained where the wrongly availed credit was not utilized, was reversed prior to the Show Cause Notice, duty was regularly paid and there is no evidence of fraud, misrepresentation or intent to evade duty. - HELD THAT: - Although the Rules prohibit taking Cenvat credit on import from an SEZ, the mere clarity of a rule does not by itself establish suppression, misrepresentation or fraudulent intent necessary to invoke penalty provisions. The admitted facts are that the credit was not utilized, was reversed even before the Show Cause Notice, and duty was otherwise regularly paid. There is no cogent evidence of any positive act by the appellant with the intent to evade duty. The Commissioner (Appeals) erred in treating the statutory prohibition alone as sufficient to infer suppression and to confirm penalty. In these circumstances the appellant is entitled to the benefit of being bona fide in duty deposition and penalty cannot be sustained.

The confirmation of penalty is set aside and the appeal in respect of penalty is allowed.

Final Conclusion: The Tribunal confirms the Commissioner (Appeals)'s setting aside of interest; holds that recovery has no continuing significance since the credit was reversed prior to the Show Cause Notice; and sets aside the confirmation of penalty under Section 78 for lack of evidence of suppression or intent to evade duty, allowing the appeal.

Assessable value - Amortization of development charges - Valuation of design/art work/photo film supplied free of cost - Interest under Section 11AB - Penalty under Section 11AC and Rule 25 - Extended period of limitation - Appropriation of amounts paid under protest

Assessable value - Amortization of development charges - Valuation of design/art work/photo film supplied free of cost - Whether the cost of design/art work/photo film supplied free by customers was to be included in the assessable value of PCBs and whether amortization as directed by the Tribunal had been correctly applied. - HELD THAT: - The Tribunal held that the matter was not res integra in the appellants' case since an earlier Tribunal order had prescribed the method of valuation by amortizing development/film/drawing charges and the adjudicating authority has applied that method. The adjudicating authority adopted values given by the appellant and computed assessable value by amortising cost per unit area of film/drawing as ordered by the Tribunal. As the earlier Tribunal order was not challenged and had attained finality, the method of valuation followed below was correct and no fault was found with the demand computed on that basis. Having regard to these conclusions, the present challenge to valuation and inclusion of such costs in assessable value was held to have no merit. [Paras 5, 6]

Demand for duty based on the amortized valuation of design/art work/photo film was upheld and the appeal in respect of this ground dismissed.

Penalty under Section 11AC and Rule 25 - Extended period of limitation - Sustainability of penalties and invocation of extended period of limitation in the present appeals. - HELD THAT: - The Tribunal noted its earlier finding in the appellants' prior litigation that demands raised for periods which had remained disputed and where there was no intention to evade duty did not justify invocation of extended limitation or penalty; those earlier penalties were set aside. In the present appeals the demands relate to the normal period of limitation. Applying the earlier reasoning, the Tribunal found no merit in the present challenge but did not reopen the settled principle that penalties and extended period were not sustainable where the facts showed no suppression or intent to evade. Consequently, on the facts before it the appeal was dismissed. [Paras 5, 6]

Past finding that penalties and extended period were not sustainable remains applicable; in the present proceedings (which are within normal limitation) the appeal was dismissed and no interference made with the demand and interest confirmed below.

Final Conclusion: The Tribunal dismissed the appeal, holding that the adjudicating authority correctly followed the Tribunal's earlier directions on amortisation and valuation of design/film charges, and that there was no merit in upsetting the duties and interest confirmed for the period 01.01.2008 to 31.12.2009; earlier conclusions on unsustainability of penalties/extended period remain applicable as recorded.

Valuation of inter-unit transfers under Rule 8 of the Valuation Rules - Revenue neutrality in transfers to sister units - Effect of filing of RT-12 returns on suppression and limitation for issuance of show cause notice - Waiver or sustainment of demand and interest in revenue-neutral inter-unit transfers

Valuation of inter-unit transfers under Rule 8 of the Valuation Rules - Revenue neutrality in transfers to sister units - Effect of filing of RT-12 returns on suppression and limitation for issuance of show cause notice - Whether the demand for short payment of central excise duty in respect of removals to sister units could be sustained where the assessee had been filing RT-12 returns and the department issued the show cause notice beyond the normal period alleging suppression. - HELD THAT: - The Tribunal found the facts were covered by earlier coordinate bench decisions, notably Jay Yushin Ltd. and Sundram Fasteners Ltd., which held that where the department was aware of inter-unit transfers and the assessee had been filing returns regularly, there was no suppression of facts. In such circumstances, issuing a show cause notice beyond the normal period alleging suppression was not justified. Further, transfers between related units attract the principle of revenue neutrality, diminishing any inference of intention to evade duty. Applying these precedents and reasoning, the Tribunal concluded that the demand could not be sustained on the ground of suppression or late initiation of proceedings. [Paras 5, 6]

The demand for duty and consequential proceedings were set aside on the ground of limitation and lack of suppression; appeal allowed on limitation.

Final Conclusion: The appeal is allowed on limitation: the demand relating to removals to sister units is set aside in view of the assessee's regular filing of RT-12 returns, the revenue-neutral character of inter-unit transfers, and the delay in issuance of the show cause notice.

Clearance of capital goods as waste or scrap and duty liability under Rule 3(5A) of Cenvat Credit Rules - liability where modvat/cenvat credit was previously availed - burden of proof to produce documentary evidence of non-availing of credit - demand discharge for capital goods procured prior to introduction of capital-goods credit scheme

Clearance of capital goods as waste or scrap and duty liability under Rule 3(5A) of Cenvat Credit Rules - Rule 3(5A) requires payment of duty equal to duty leviable on transaction value when capital goods are cleared as waste or scrap. - HELD THAT: - The Tribunal examined Rule 3(5A) of the Cenvat Credit Rules, 2004 and accepted the Adjudicating Authority's premise that clearance of capital goods as waste or scrap attracts duty equal to the leviable duty on transaction value. The appellate findings show that the statutory prescription operates to create a duty liability on such clearances unless displaced by proof that no credit had been availed earlier in respect of those capital goods. [Paras 4]

The rule applies and gives rise to a duty liability on clearance of capital goods as waste or scrap.

Demand discharge for capital goods procured prior to introduction of capital-goods credit scheme - No duty was payable in respect of machinery, spares or equipment procured before 01.04.1994 where the Adjudicating Authority found that credit on capital goods was not available at the time. - HELD THAT: - The Tribunal noted the appellant's consistent plea that certain waste and scrap derived from capital goods had been brought into the factory before 01.04.1994 when there was no provision for availing credit on capital goods. The Adjudicating Authority had accordingly dropped demands attributable to those items procured prior to the introduction of the modvat/cenvat scheme for capital goods. The Tribunal found no infirmity in that approach. [Paras 4]

Demands relating to items procured before 01.04.1994 were rightly dropped.

Liability where modvat/cenvat credit was previously availed - burden of proof to produce documentary evidence of non-availing of credit - Demand confirmed in respect of those capital goods for which the appellant failed to produce documentary evidence that modvat/cenvat credit had not been availed. - HELD THAT: - The Adjudicating Authority confined confirmed demands to machinery items where the appellant could not produce documentary proof that no modvat/cenvat credit had been availed. The Tribunal upheld this approach, observing that absence of evidence to displace the inference of prior credit justified confirmation of duty, interest and penalty as earlier imposed. [Paras 4, 5]

Demands confirmed for items lacking documentary evidence of non-availment of credit; the impugned order sustaining those demands is upheld.

Final Conclusion: The appeal is dismissed; the impugned order is sustained - demands in respect of capital goods procured prior to 01.04.1994 were dropped, while demands confirmed for items where no documentary evidence of non-availment of modvat/cenvat credit was produced.

Suo moto re-credit of Cenvat credit - reversal and re-credit of cenvat entries - refund under Section 11B - unjust enrichment - penalty under Rule 15(2) of the Cenvat Credit Rules, 2004

Suo moto re-credit of Cenvat credit - refund under Section 11B - unjust enrichment - Whether the respondent could suo moto re-credit Cenvat account for duty paid in cash without filing a refund claim under Section 11B - HELD THAT: - The Tribunal found that duty had been paid twice-once by utilization of cenvat credit and subsequently by cash through PLA-and that the respondent was eligible to have the reversed credit re-credited. The department made no allegation of suppression or intent to evade duty. The Tribunal relied on precedent holding that where Cenvat credit reversed earlier is subsequently held admissible on appeal, the assessee may re-take the admissible credit without following the refund procedure under Section 11B, because the issue relates to admission of credit rather than a cash refund subject to the unjust enrichment doctrine. The decision in Vardhman Acrylics Ltd. and related authority distinguish the Mafatlal line of cases as addressing cash refunds and unjust enrichment, which are not attracted where the reversal was earlier made and the appellate decision establishes entitlement to credit. Consequently, taking of re-credit suo moto in these circumstances was held permissible. [Paras 5, 6, 7]

Suo moto re-credit of the Cenvat account without filing a refund claim under Section 11B was permissible on the facts where credit had been reversed earlier and subsequently held admissible on appeal; the refund/unjust enrichment rules governing cash refunds did not apply.

Penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 - Whether penalty under Rule 15(2) was imposable for taking the re-credit - HELD THAT: - The appellate authority found no intent to evade duty and the department's grounds did not allege suppression with intent. Given that duty had in fact been paid and the assessee was ultimately eligible for the credit, the Tribunal agreed that the facts did not warrant imposition of penalty under the Cenvat Credit Rules. The absence of mens rea and the factual position that the credit was admissible led to the conclusion that penalty should not have been imposed. [Paras 5]

Penalty under Rule 15(2) was not imposable in the circumstances.

Final Conclusion: The Tribunal rejected the revenue appeal: the respondent was entitled to suo moto re-credit of the Cenvat account for duties paid twice (July, 2011 to August, 2012) without filing a refund claim under Section 11B, and no penalty under Rule 15(2) was warranted.

Works contract - application of K. Raheja Development Corporation principles - addition of 20% where value of goods utilised not ascertained - exclusivity of inter-state purchases to a specific contract - acceptance of books of account as evidentiary basis

Works contract - application of K. Raheja Development Corporation principles - Construction activity carried out by the revisionist amounts to a works contract. - HELD THAT: - The assessing authority examined the standard allotment agreement and specific clauses and applied the principles laid down by the Apex Court in K. Raheja Development Corporation to conclude that the developer undertook construction work on behalf of allottees for consideration. The tribunal endorsed the finding of the assessing authority. The High Court found no perversity or error in that conclusion and affirmed the tribunal's finding that the activity falls within the definition of works contract under the U.P. Trade Tax Act, 1948.

Finding that the construction work undertaken by the revisionist is a works contract is affirmed.

Exclusivity of inter-state purchases to a specific contract - acceptance of books of account as evidentiary basis - Whether purchases of materials from outside the State were made exclusively for the construction contract and whether the details in the books of account should be accepted for that purpose is remitted to the Tribunal for fresh consideration. - HELD THAT: - The tribunal's order did not sufficiently adjudicate whether goods imported from outside Uttar Pradesh were exclusively for the specific construction contract; nor did it adequately address the revisionist's contention that accepted books of account establish those facts. Given the lacunae in factual findings and the tribunal's role as the primary fact-finding authority, the High Court directed that these factual aspects be examined afresh by the Tribunal, permitting the revisionist to amend its pleadings to clarify factual positions.

Remitted to the Tribunal for fresh consideration of whether inter-state purchases were exclusively for the contract and the evidentiary weight of the books of account.

Addition of 20% where value of goods utilised not ascertained - Validity of the 20% addition under section 44-B for unascertained value of goods utilised is remitted to the Tribunal for fresh consideration. - HELD THAT: - The tribunal applied section 44-B to permit an increase of 20% over purchase price where the value of goods utilised was not ascertained, but its reasoning on the factual premise for making the addition was brief and cryptic. Because the quantum and justification of the addition depend on the factual determination whether purchases (particularly inter-state imports) were exclusively for the works contract and on the acceptance of books, the High Court remitted the question of the 20% addition to the Tribunal to be reconsidered in light of clarified factual findings.

Remitted to the Tribunal for fresh consideration of the propriety of the 20% addition under section 44-B in light of factual findings.

Final Conclusion: Tribunal's finding that the developer's construction activity constitutes a works contract is affirmed; however, issues regarding whether inter-state purchases were exclusively for the contract and the justification for the 20% addition were remitted to the Tribunal for fresh factual consideration, and the revision is disposed of subject to these observations.