TaxTMI Updates e-Newsletter
Dec 23,2016

Penalty under section 271(1)(c) of the Income Tax Act - unexplained cash credit under section 68 of the Income Tax Act - onus on assessee to prove source of monies/entries in books - evidentiary value of assessment findings in penalty proceedings - penalty is a civil liability; wilful concealment not essential for imposition - revised return filed after queries does not necessarily absolve from penalty - principles of natural justice - opportunity to cross examine adverse witnesses

Penalty under section 271(1)(c) of the Income Tax Act - statement recorded under section 132(4) - evidentiary value of assessee's own statement - Levy of penalty under section 271(1)(c) on the addition of Rs. 5,58,372 made by estimating income at 10% of turnover - HELD THAT: - The assessee had stated in his statement recorded under section 132(4) that net profit from the business was around 10% and the net profit declared in the return was 9.53%, which corresponds to the approximate figure given in the 132(4) statement. The Assessing Officer's addition of the difference was founded solely on the assessee's own 132(4) statement and no independent defect or deficiency was pointed out by the AO to show concealment or furnishing of inaccurate particulars. On that basis the Tribunal held that penalty under section 271(1)(c) is not attracted in respect of this addition and directed deletion of the penalty imposed. [Paras 6]

Penalty in respect of the addition of Rs. 5,58,372 is deleted.

Penalty under section 271(1)(c) of the Income Tax Act - unexplained cash credit under section 68 - onus on assessee to prove source of receipts - revised return filed after queries does not absolve from penalty - penalty is a civil liability; evidentiary record before penalty imposing officer - Levy of penalty under section 271(1)(c) on the addition of Rs. 53,86,564 made under section 68 as unexplained cash credit arising from alleged share transactions - HELD THAT: - The assessee stated LTCG from share transactions but failed to produce share certificates, STT challans or demat account during assessment. The AO recorded a statement of the broker admitting that the bills/contract notes were accommodation entries and no actual purchase/sale was undertaken on behalf of the assessee. That statement was confronted to the assessee during assessment. The assessee thereafter filed a revised return increasing business income and altering cash balance; earlier authorities have held that filing a revised return after queries does not relieve liability for penalty. Applying settled law that the onus to prove the source of amounts credited in books lies on the assessee, and that in penalty proceedings the record before the officer is material (penalty being a civil liability where wilful concealment is not an essential ingredient), the Tribunal found the AO's record sufficient to sustain a finding of concealment/inaccurate particulars and confirmed penalty at 100% as directed by the CIT(A). The Tribunal distinguished authorities relied upon by the assessee where cross examination was sought (and denied) or where factual matrices differed. [Paras 6]

Penalty in respect of the addition of Rs. 53,86,564 made under section 68 is confirmed at 100% of the tax sought to be evaded.

Final Conclusion: The appeal is partly allowed: penalty imposed under section 271(1)(c) is deleted insofar as it relates to the addition of Rs. 5,58,372 (income estimated at 10% of turnover), and confirmed insofar as it relates to the addition of Rs. 53,86,564 as unexplained cash credit under section 68, in accordance with the Tribunal's reasoning.

Disallowance under section 40(a)(ia) and retrospectivity of the second proviso - Remand for verification whether recipient included payment in income and discharged tax liability - Deletion of addition on account of balance sheet discrepancy - Exemption under section 10AA - entitlement as measured by assessed business income

Disallowance under section 40(a)(ia) and retrospectivity of the second proviso - Remand for verification whether recipient included payment in income and discharged tax liability - Whether the disallowance under section 40(a)(ia) in respect of payments made without deduction of tax at source should be sustained or the matter remitted for verification in light of the retrospective operation of the second proviso. - HELD THAT: - The Tribunal, following the view of the Delhi High Court in CIT v. Ansal Landmark Townships and the coordinate bench precedent, treated the insertion of the second proviso to section 40(a)(ia) as declaratory/curative and retrospective. The correct course, as applied here, is not to decide disallowance mechanically but to remit the matter to the Assessing Officer for limited factual verification - whether the recipient has taken the related receipts into account in computing taxable income and has discharged tax liability - and, if so, to delete the disallowance. Technical arguments about non-retrospectivity of corresponding rules or lack of a jurisdictional High Court ruling do not permit ignoring higher-court precedent favouring the assessee; conflicting High Court decisions do not permit lower forums to prefer the revenue view where a reasonable construction favouring the assessee exists. Accordingly the matter is remitted to the Assessing Officer for de novo adjudication and verification in accordance with the directions given. [Paras 5, 6]

Matter remitted to the Assessing Officer for limited verification whether the recipient included the payments in income and paid tax; if so, delete the disallowance under section 40(a)(ia).

Deletion of addition on account of balance sheet discrepancy - Whether the addition made on account of a balance-sheet difference (machinery purchase wrongly debited) is sustainable. - HELD THAT: - The Tribunal found that the entry relating to purchase of machinery was explained by the assessee as an accounting error and that the proof of purchase had been filed. Merely because the asset was not reflected in the balance sheet due to an accounting error does not justify making the addition to income. The Tribunal directed deletion of the addition after considering the explanation and material on record. [Paras 11]

Addition of Rs. 4,57,875/- on account of balance-sheet difference deleted.

Exemption under section 10AA - entitlement as measured by assessed business income - Whether exemption under section 10AA should be granted in respect of the assessed business income determined by the Assessing Officer. - HELD THAT: - Relying on binding decisions of higher courts, including the jurisdictional authority, the Tribunal held the issue settled in favour of the assessee and directed the Assessing Officer to grant exemption under section 10AA in respect of the assessed business income as determined in the assessment. [Paras 17]

Assessing Officer directed to grant exemption under section 10AA in respect of assessed business income.

Non-prosecution / abandonment of ground - Disposition of a ground of appeal not pressed by the appellant. - HELD THAT: - Ground no.3 was not pressed by the appellant and accordingly was treated as abandoned. [Paras 13]

Ground no.3 dismissed as not pressed.

Final Conclusion: The appeal is partly allowed: Ground No.1 remitted to the Assessing Officer for limited verification in light of the retrospective effect of the second proviso to section 40(a)(ia); Ground No.2 allowed and the balance-sheet-addition deleted; Ground No.3 dismissed as not pressed; Ground No.4 allowed and the Assessing Officer directed to grant exemption under section 10AA in respect of assessed business income for Assessment Year 2008-09.

Penalty u/s 271AAA - Immunity under 271AAA(2) - Bonafide disclosure - Manner of earning undisclosed income - Statements recorded u/s 132(4) and u/s 131

Penalty u/s 271AAA - Immunity under 271AAA(2) - Manner of earning undisclosed income - Bonafide disclosure - Statements recorded u/s 132(4) and u/s 131 - Whether penalty under Section 271AAA is leviable on additional undisclosed commission income surrendered during assessment proceedings, or the assessee is entitled to immunity under Section 271AAA(2). - HELD THAT: - The assessee initially, during the search, admitted commission income at 0.75% of accommodation bills in a statement recorded u/s 132(4) and explained the modus operandi by which net commission arose after brokerage. Subsequently, during assessment proceedings and a statement recorded u/s 131, the assessee surrendered additional amount by offering gross commission (without claiming out-of-books brokerage) to avoid protracted litigation because brokers who purportedly received out-of-books brokerage were not traceable. The authorities below levied penalty u/s 271AAA on the additional amount on the ground that the enhanced surrender was not explained or substantiated at the time of search. The Tribunal examined whether the requirements of Section 271AAA(2) for immunity were satisfied and found that the assessee had furnished a truthful explanation of the manner of earning the undisclosed commission in the statement recorded at search, had subsequently offered the additional amount when brokers could not be produced, and that the Revenue did not take steps to procure evidence from those brokers. On these facts the Tribunal held that the disclosure was bona fide, the manner of earning had been explained to the extent possible, and the assessee met the conditions for immunity under Section 271AAA(2); consequently the penalty levied by the AO and sustained by the CIT(A) was deleted. [Paras 7, 8]

Penalty under Section 271AAA deleted and immunity under Section 271AAA(2) granted in respect of the additional surrendered commission income.

Final Conclusion: The Tribunal allowed the appeal, held that the assessee's disclosure and explanation met the requirements of Section 271AAA(2), and deleted the penalty imposed under Section 271AAA for AY 2011-12.

Penalty for furnishing inaccurate particulars of income under Section 271(1)(c) - Application of explanation 1 to Section 271(1)(c) - bona fide omission - Inadvertent omission and bona fide disclosure

Penalty for furnishing inaccurate particulars of income under Section 271(1)(c) - Application of explanation 1 to Section 271(1)(c) - bona fide omission - Inadvertent omission and bona fide disclosure - Whether penalty under Section 271(1)(c) is leviable where income was omitted from the original return but later included in revised computation during assessment, taxes and interest paid, and the omission explained as inadvertent and bona fide. - HELD THAT: - The Tribunal found that the assessee had inadvertently omitted salary for two months from a short-term employment and certain bank interest from the original return, and that corresponding TDS amounts were neither claimed nor included initially. On being confronted during scrutiny, the assessee filed a revised computation including the omitted income, claimed the TDS, paid the differential tax with interest, and accepted the assessment order without challenging the quantum. Applying the facts to explanation 1 to Section 271(1)(c), the Tribunal accepted the assessee's explanation as bona fide and attributable to inadvertent omission rather than deliberate concealment. Consequently, the circumstances did not justify the imposition of penalty under Section 271(1)(c), and the penalty was deleted. [Paras 9, 10]

Penalty under Section 271(1)(c) deleted as explanation amounts to a bona fide inadvertent omission covered by explanation 1.

Final Conclusion: The Tribunal allowed the assessee's appeal for assessment year 2010-11 and deleted the penalty imposed under Section 271(1)(c) on the ground that the omission was bona fide and covered by explanation 1 to the section.

Deemed full value of consideration for capital gains under section 50C - reliance on AIR information - remand for fresh inquiry and verification by Assessing Officer - onus on revenue to verify payment from transferee where assessee denies receipt

Deemed full value of consideration for capital gains under section 50C - reliance on AIR information - remand for fresh inquiry and verification by Assessing Officer - Whether the computation of long term capital gain based on the stamp valuation authority value and the registered sale deed should be sustained or the matter should be remitted for fresh verification of payment to the assessee. - HELD THAT: - The record showed a registered sale deed in favour of the transferee and a receipt attached to the deed, and the AO adopted the Stamp Valuation Authority value for computation of capital gain in accordance with the legal principle embodied in section 50C. The assessee, however, denied receipt of any consideration, claimed coercion and inability to produce or procure confirmation from the transferee, and the transaction details originated from AIR information. Given these conflicting facts and the absence of satisfactory verification of whether the alleged consideration was actually paid to the assessee, the Tribunal concluded that it would be appropriate to remit the matter to the Assessing Officer for de novo consideration. The AO is directed to provide the assessee a reasonable opportunity of hearing and make necessary inquiries with the buyer/transferee to ascertain whether payment was made, and to proceed thereafter in accordance with law. Because the primary issue of capital gain is restored for fresh adjudication, remaining grounds raising ancillary contentions have become academic. [Paras 5, 6]

Order of the CIT(A) set aside; the question of capital gain remitted to the Assessing Officer for fresh decision after verification and opportunity to the assessee; remaining grounds dismissed as infructuous.

Final Conclusion: Appeal allowed for statistical purposes by remitting the capital gain issue to the Assessing Officer for de novo decision after verification from the transferee and affording the assessee a reasonable opportunity; other grounds dismissed as academic.

Taxability of DEPB licences on accrual versus on sale - real accrual versus hypothetical income - remand for verification of subsequent-year taxation - disallowance under section 14A read with Rule 8D - presumption that investments were made out of own funds

Taxability of DEPB licences on accrual versus on sale - real accrual versus hypothetical income - remand for verification of subsequent-year taxation - Whether the sale proceeds of DEPB licences granted in the assessment year 2010-11 could be left out of that year's income because the licences were sold and offered to tax in the subsequent year. - HELD THAT: - The Tribunal noted competing authorities: Topman Exports (holding that DEPB face value is chargeable on accrual) and Excel Industries (holding entitlement is taxed in year of utilization/import). The assessee asserted that formalities with Customs (verification/registration) were necessary before the licence became accrued and due and that the entire sale proceeds were offered to tax in the subsequent year. The Tribunal did not decide the legal question on the merits; instead it found that the assessee asserts the gross sale proceeds were taxed in the subsequent year and that the tax effect would be neutral if verified. Given this factual contention and the need for verification of whether the total income from sale of the licences was in fact subjected to tax subsequently, the Tribunal set aside the addition and remanded the matter to the Assessing Officer to verify, after giving the assessee opportunity of being heard, that the entire income from sale of the licences was taxed in the subsequent year.

Addition relating to DEPB licences set aside and remitted to the AO for verification whether the entire sale proceeds were subjected to tax in the subsequent year; matter restored for fresh verification with opportunity to the assessee.

Disallowance under section 14A read with Rule 8D - presumption that investments were made out of own funds - Whether the disallowance of Rs. 9,12,886 made by the AO under Section 14A read with Rule 8D was sustainable in view of the assessee's contention that the investments yielding exempt income were made out of its own funds. - HELD THAT: - The Tribunal examined the assessee's audited financial statements showing own funds substantially in excess of investments capable of yielding exempt income. Applying the principle that, absent contrary evidence, a presumption arises that investments were made out of own funds, and having regard to Bombay High Court precedents relied upon, the Tribunal held the AO's additional disallowance under Rule 8D(2)(ii) was not sustainable on the facts. The Tribunal accepted that the assessee had already made a suo-moto disallowance under Rule 8D(2)(iii) and that no case was made out to sustain the further disallowance of interest computed by the AO.

Addition of Rs. 9,12,886 under Section 14A read with Rule 8D deleted.

Final Conclusion: Appeal partly allowed: addition pertaining to DEPB licences remanded to the AO for verification of taxation in the subsequent year; disallowance under Section 14A read with Rule 8D of Rs. 9,12,886 deleted.

Depreciation - 'used' requirement for allowance under section 32(1) - commissioning and trial run as prerequisite to 'ready to use' state - passive user versus active user for eligibility to depreciation - block of assets - valuation at year-end for depreciation and capital gains computation - special provision for computation of capital gains in case of depreciable assets (s.50) - year end aggregation - business connection and taxability of commission to non resident agents - capitalization of pre commissioning expenditure as part of asset cost

Depreciation - 'used' requirement for allowance under section 32(1) - commissioning and trial run as prerequisite to 'ready to use' state - passive user versus active user for eligibility to depreciation - Eligibility of depreciation claim in respect of the new windmill alleged to have been commissioned on 31.03.2010 - HELD THAT: - The Court applied the settled test that an asset must be "used" for the purposes of business to qualify for depreciation under section 32(1). Trial run and mere connection to the grid do not ipso facto establish commissioning or production; commissioning must be regularized by compliance and approval from the competent electrical authority. A trial run is a testing phase antecedent to a 'ready to use' state and may disclose defects; passive user is recognised where an asset previously in use is temporarily idle, but where the asset is a first production unit the business itself is not regarded as set up until successful commissioning. On the facts the only document was a commissioning certificate stating interconnection and that the machine was under trial run until commercial operation was declared; a temporary authorization expressly required compliance and regularisation which was not produced and there was no evidence of any electricity generation. Applying the authorities cited, the Tribunal found that trial run/connection by 31.03.2010 did not establish use for business and therefore depreciation could not be allowed for the year. [Paras 2, 3, 4]

Depreciation claim in respect of the new windmill as at 31.03.2010 disallowed; asset was not 'used' for business in the relevant year.

Block of assets - valuation at year-end for depreciation and capital gains computation - special provision for computation of capital gains in case of depreciable assets (s.50) - year end aggregation - Characterisation of gain on sale of old windmill as short term or long term where a new windmill in the same block was acquired on 31.03.2010 - HELD THAT: - Sections 32(1), 43(6) and rule 5 require that depreciation and the composition of a block of assets be determined with reference to assets 'used for the purposes of the business at any time during the previous year' and that the written down value and aggregates for s.50 computations be as at the end of the year. An asset purchased but not qualifying as 'used' in the year does not enter the block and should be reflected as capital work in progress. Since the Tribunal found the new windmill was not in use at year end, it did not form part of the block and could not be taken into account to convert the surplus on sale into short term capital gain under s.50; the transfer retains its character and, if beyond the prescribed holding period, will be a long term capital gain. [Paras 5, 6]

Gain on sale of the old windmill cannot be treated as short term capital gain by reason of the subsequent acquisition, because the newly acquired windmill did not form part of the block at year end; the character of the gain stands accordingly (long term where applicable).

Business connection and taxability of commission to non resident agents - business connection involves real and intimate relation between activities in and outside taxable territory - Whether the commission paid to foreign sales agents was taxable in India for failure to deduct tax at source - HELD THAT: - Applying the established test from R. D. Aggarwal and subsequent authorities, the existence of a business connection is a factual inquiry into whether activities in India contributed to the non resident's income. Here the agents solicited orders and performed services outside India; no part of the service was rendered in India and there was no permanent establishment of the agents in India. The factual matrix did not establish a business connection in India that would render their commission taxable or require deduction under section 195 or attract disallowance under section 40(a)(i). Circular guidance referred to by the assessee was consistent with this factual approach. [Paras 7, 8]

Commission paid to foreign agents is not taxable in India and no disallowance for failure to deduct tax at source is warranted; assessee succeeds on this point.

Claim for damaged goods - necessity of reliable evidence; trade discount character - Treatment of the claim for damaged goods which the AO disallowed for lack of proof - HELD THAT: - The Tribunal noted deficiencies in the assessee's evidence: absence of consignment details, no returns, unverifiable e mails and consignments relating to earlier years. On candid admission before the Bench that the amounts represented post supply concessions and reductions accepted in trade (commercial expediency), the Tribunal held the nature of the claim was materially altered and ought to be examined afresh. Given the evidentiary gaps and the changed character of the claim (trade discount), the matter was restored to the assessing officer to examine and decide whether the claim is admissible under the relevant heads (for example s.37(1) or s.36(1)(vi)) with definite findings of fact. [Paras 9, 10, 11]

Matter remanded to the Assessing Officer for fresh examination and definitive factual findings on the claim for damaged goods.

Capitalization of pre commissioning expenditure as part of asset cost - depreciation at the rate applicable to the class of asset once capitalized - Whether development rights, erection and commissioning expenditure and transportation expenditure form part of cost of the windmill qualifying for depreciation at the prescribed rate - HELD THAT: - It is settled that expenditure incurred up to commissioning of a plant is to be capitalized as part of the cost of the asset. The Tribunal accepted that development rights, erection and commissioning charges and transportation expense incurred to bring the windmill to the condition and location necessary for its intended use form part of the asset's cost. Accordingly, once the asset is commissioned and in use, depreciation at the rate applicable to that class of asset (80% for windmills as asserted) would apply to the capitalized cost. The Tribunal therefore accepted the assessee's claim treating those components as part of the asset cost for depreciation purposes. [Paras 14, 15]

Development rights, erection and commissioning expenditure and transportation charges are capitalized as part of the windmill cost and are eligible for depreciation accordingly.

Allowability of business travel expenses - proof and apportionment - Allowability of foreign travel expenditure of the partner's wife who accompanied him on business trips - HELD THAT: - The wife was neither a partner nor an employee, but the Tribunal accepted there was some evidentiary basis to hold she contributed to business discussions and assisted in the commercial activity (samples, design discussion). Recognising the difficulty of direct proof for every claim and the mixed personal business nature of accompanying family members, the Tribunal held the expenditure was not shown to be wholly and exclusively for business and therefore allowed the claim in part. On the facts a 50% apportionment was considered appropriate and reasonable. [Paras 16, 17]

Foreign travel expenditure of the partner's wife allowed to the extent of 50%.

Final Conclusion: Revenue appeal partly allowed: depreciation claim on the new windmill for AY 2010 11 disallowed; STCG treatment in respect of sale of old windmill rejected where the newly acquired windmill did not form part of the block at year end; disallowance of foreign agent commissions reversed. Assessee appeal partly allowed: pre commissioning costs capitalized for depreciation; foreign travel expenditure of partner's wife allowed to the extent of 50%. Claim for damaged goods remanded to the Assessing Officer for fresh examination and factual findings.

Penalty under section 271(1)(c) - Bona fide and inadvertent mistake - Exemption under section 10(38) and Securities Transaction Tax (STT) - Explanation 1 to section 271(1)(c) - Deletion of penalty where particulars of income are not inaccurate

Penalty under section 271(1)(c) - Bona fide and inadvertent mistake - Exemption under section 10(38) and Securities Transaction Tax (STT) - Explanation 1 to section 271(1)(c) - Deletion of penalty where particulars of income are not inaccurate - Whether penalty under section 271(1)(c) for claiming exemption of long term capital gains on buyback shares (where STT was not paid) is sustainable where the assessee disclosed full particulars, retracted the claim during assessment, and explained the claim as an inadvertent bona fide mistake. - HELD THAT: - The assessee had disclosed the long term capital gain on sale of 537 Ranbaxy shares (sold under buyback, no STT) in the return but had claimed exemption under section 10(38). On detection, the assessee withdrew the claim during assessment, paid the tax with interest, and explained the claim as an inadvertent bona fide mistake. The Tribunal examined precedent where penalties were deleted where a bona fide clerical or inadvertent error was rectified by the assessee before completion of assessment and where full particulars had been furnished. Although the transaction (buyback without STT) rendered the gain taxable and therefore the exemption claim was legally untenable, the Tribunal found that the particulars of income were not inaccurate and that the assessee's explanation fell within the ambit of a bona fide mistake. Consequently, Explanation 1 to section 271(1)(c) did not sustain imposition of penalty in the circumstances of the case. Reliance on decisions holding that mere unsustainable claims do not automatically attract penalty where disclosure was complete and the error was bona fide supported deletion of penalty.

Penalty levied under section 271(1)(c) is deleted as the claim was an inadvertent bona fide mistake, full particulars were furnished and the assessee rectified the position during assessment.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2009-10 and set aside the penalty of Rs. 81,030/- under section 271(1)(c), holding that the assessee's inadvertent bona fide mistake and full disclosure took the case out of the scope of penalty provisions.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Reimbursement payments and tax deduction obligation - Application of section 40(a)(ia) to amounts 'payable' versus 'paid' by year-end - Allowable handling loss for valuation of closing stock

Disallowance under section 40(a)(ia) for failure to deduct tax at source - Reimbursement payments and tax deduction obligation - Application of section 40(a)(ia) to amounts 'payable' versus 'paid' by year-end - Disallowance under section 40(a)(ia) is not attracted in respect of transportation reimbursement payments which were paid by the assessee by the end of the accounting year. - HELD THAT: - The Tribunal accepted the assessee's case that amounts claimed were reimbursements paid to M/s SSTA Logistics (I) Pvt. Ltd. which had itself paid the transporters and raised debit notes for reimbursement. Following coordinate Bench decisions and the view of the Allahabad High Court (with SLP dismissed by the Supreme Court), the Tribunal held that section 40(a)(ia) applies to amounts remaining payable at year-end and not to payments already made during the previous year. The Assessing Officer was directed to verify the assessee's claim and allow the expenditure to the extent payments are established to have been made within the accounting year. [Paras 7, 8]

Payments made as reimbursements and settled by the end of the accounting year are not disallowable under section 40(a)(ia); AO to verify and allow expenditure to the extent of payments made.

Allowable handling loss for valuation of closing stock - Handling loss on iron ore while loading, unloading and storage is allowable but fixed by the Tribunal at 0.95% for valuation of closing stock. - HELD THAT: - The Assessing Officer rejected the claimed handling loss as nil. The CIT(A) accepted that handling loss inevitably occurs and allowed 0.90% after considering evidence including a public sector undertaking's admitted loss of 0.84%. On appeal the Tribunal agreed there is handling loss and, taking the totality of facts and the interest of justice into account, adjusted the allowable handling loss to 0.95% (between the parties' claim of 0.99% and CIT(A)'s 0.90%), directing recomputation of closing stock accordingly. [Paras 14, 15]

Handling loss for valuation of closing stock fixed at 0.95%; recompute closing stock applying this rate.

Final Conclusion: The assessee's appeal is partly allowed: the disallowance under section 40(a)(ia) is deleted to the extent reimbursements were paid by year-end subject to verification by the AO; the allowable handling loss is fixed at 0.95% and the closing stock is to be recomputed accordingly.

Maintainability of appeal based on tax effect threshold - allocation of group administrative expenses - business expenditure and commercial expediency - disallowance of interest on advances and requirement of factual verification of interest free funds - remand for fresh factual and documentary verification

Maintainability of appeal based on tax effect threshold - Appeal filed by the Revenue is not maintainable as the tax effect is below the threshold prescribed in CBDT Circular No. 21/2015. - HELD THAT: - The Tribunal examined the computation of tax effect in respect of the additions deleted by the CIT(A) and found the tax amount to be Rs. 5,84,503/-. Applying CBDT Circular No. 21/2015 dated 10.12.2015, which renders appeals by the Revenue not maintainable where the tax effect is below the prescribed limit, the Tribunal concluded that the Revenue's appeal could not be entertained. [Paras 2, 3]

Revenue's appeal dismissed as not maintainable for want of requisite tax effect.

Allocation of group administrative expenses - business expenditure and commercial expediency - Disallowance of administrative expenses made by the Assessing Officer was not justified and is to be set aside in part; the assessee's claim for administrative expenses is allowable. - HELD THAT: - The Tribunal found that the AO's proportionate disallowance (allowing only 1/8th) was incorrect as the seven group companies had independent business setups and were separately assessed. The record showed group administrative expenses aggregate and recoveries from group companies (approximately Rs. 45.91 lakhs), and a statement with rationale was placed before authorities. The Tribunal also noted that the administrative expenses are fixed overheads incurred according to the business setup and reduced by 7% over the previous year, with similar income levels. On these facts the Tribunal held there was no justification for the disallowance made by the AO and directed that the disallowance be set aside consistent with the appellate direction already given by CIT(A). [Paras 5, 6, 7, 8, 9]

Assessee's appeal allowed in part by overturning the AO's disallowance of administrative expenses.

Disallowance of interest on advances and requirement of factual verification of interest free funds - remand for fresh factual and documentary verification - Question of disallowance of interest expenses relating to advances is remitted to the Assessing Officer for fresh adjudication after factual verification; no final appellate finding on merits was made. - HELD THAT: - The AO disallowed interest attributable to funds advanced on which the assessee had not accounted interest, treating such expenditure as not incurred for business. The assessee relied on accounting principles and judicial decisions to contend that interest need not be recognized where recovery or realization is doubtful. The Tribunal observed that the assessee did not place sufficient material to show that recovery of principal or interest was doubtful, and it was necessary to ascertain whether interest free funds were available and whether the borrowers' position justified non recognition of interest. In the interest of justice the Tribunal remitted the matter to the AO to verify availability of interest free funds used for advances, to examine the borrowers' position, and to decide afresh applying the judicial precedents and documents to the facts of the case. [Paras 10, 11, 12, 13, 18]

Issue remanded to the Assessing Officer for fresh consideration and decision after factual verification.

Final Conclusion: The Tribunal dismissed the Revenue's appeal as not maintainable under CBDT Circular No. 21/2015; it allowed the assessee's challenge to the disallowance of administrative expenses and set aside the AO's disallowance; and it remanded the question of disallowance of interest on advances to the Assessing Officer for fresh factual verification and adjudication.

Taxability of borrowed service charges - Fees for Technical Services - Fees for Included Services - Article 12 - Mutual Agreement Procedure - Binding effect of MAP resolution

Taxability of borrowed service charges - Fees for Technical Services - Fees for Included Services - Article 12 - Mutual Agreement Procedure - Binding effect of MAP resolution - Whether borrowed/loaned service charges received by the assessees for AY 2010-2011 constitute taxable Fees for Technical Services / Fees for Included Services under Article 12, or are non taxable in view of the Mutual Agreement Procedure resolutions and earlier Tribunal decisions. - HELD THAT: - The Tribunal analysed that the question of characterization of borrowed service charges had been repeatedly adjudicated in favour of the assessees in earlier Tribunal decisions concerning group entities and that the Competent Authority (MAP) had resolved the issue by holding such borrowed service charges not taxable as 'royalty' or 'FIS'. The Revenue had earlier withdrawn multiple High Court appeals after recording that the issue was resolved under MAP. The Assessing Officer in the impugned assessments had substantially relied on a predecessor assessment order and declined to accept the MAP outcome for the year, treating the receipts as FTS/FIS. The Tribunal found that (a) the language of Article 12 in the relevant DTAAs is common, (b) the MAP resolution and the Tribunal's prior favourable orders for the group are applicable where facts are similar, and (c) the Revenue's conduct in withdrawing High Court appeals demonstrates that the issue was considered resolved under MAP. Accordingly, the Tribunal directed the AO to grant relief to the assessees after verification of the factual position confirming that the issues have already been resolved under the Mutual Agreement Procedure, and allowed the appeals. [Paras 6, 8, 9]

Appeals allowed; AO directed to grant relief after verification that the borrowed service charges for AY 2010-2011 have been resolved as non taxable under the Mutual Agreement Procedure and earlier Tribunal rulings.

Final Conclusion: The Tribunal allowed all ten appeals for AY 2010-2011, holding that borrowed/loaned service charges are not taxable as FTS/FIS where facts are similar and the issue has been resolved under the MAP; the AO is directed to grant relief after factual verification of the MAP resolution.

Transfer pricing methods under Section 92C - Most appropriate method - Statistical benchmarking not permitted - Customs duty and working capital adjustments in comparability analysis - Dispute Resolution Panel's powers in transfer pricing proceedings - Remand to Assessing Officer/Transfer Pricing Officer

Transfer pricing methods under Section 92C - Most appropriate method - Statistical benchmarking not permitted - Whether the Dispute Resolution Panel/Transfer Pricing Officer could resort to a statistical method outside the methods prescribed under Section 92C for determining the arm's length price. - HELD THAT: - The Tribunal found that Section 92C prescribes the methods to be adopted for transfer pricing adjustments and that the DRP/TPO must select the most appropriate method from those prescribed. In the present case the DRP resorted to a statistical method not one of the Section 92C methods. The DRP therefore travelled beyond the statutory scheme by applying a non-prescribed statistical benchmarking technique instead of determining and applying an appropriate method under Section 92C. The Tribunal held that the DRP was expected to identify and apply a method from Section 92C and not to adopt an external statistical method for benchmarking the international transactions. [Paras 9]

DRP/TPO erred in resorting to a statistical method outside Section 92C; matter remitted for determination afresh by applying an appropriate method under Section 92C.

Customs duty and working capital adjustments in comparability analysis - Dispute Resolution Panel's powers in transfer pricing proceedings - Remand to Assessing Officer/Transfer Pricing Officer - Whether the adjustments for customs duty and working capital made (or refused) by the DRP/TPO were correctly addressed and whether reliance on the DRP's earlier order for assessment year 2009-10 was permissible. - HELD THAT: - The Tribunal observed that the DRP had relied on its earlier directions in the assessee's case for AY 2009-10 and declined to allow customs duty and working capital adjustments without independent fresh determination. Having examined the earlier Tribunal order in I.T.A. No.852/Mds/2014 (AY 2009-10), the Tribunal concluded that the DRP cannot merely follow its prior order but must reconsider the issues in the present assessment year. The Tribunal held that, given the identical controversy, the matter requires reconsideration in accordance with the directions given earlier by this Tribunal and that the DRP/TPO should determine these comparability adjustments afresh after appropriate reference and opportunity to the assessee. [Paras 10, 11]

Orders of lower authorities set aside and the entire issue (including customs duty and working capital adjustments) remitted to the Assessing Officer with direction to refer to the Transfer Pricing Officer and decide afresh in accordance with law after giving the assessee a reasonable opportunity.

Final Conclusion: Appeal allowed in part: the Tribunal set aside the orders of the lower authorities for AY 2010-11 and remitted the transfer pricing issues (including the propriety of statistical benchmarking and adjustments for customs duty and working capital) to the Assessing Officer/Transfer Pricing Officer for fresh determination in accordance with Section 92C and prior directions of this Tribunal, after affording the assessee a reasonable opportunity.

Release of seized goods on payment of redemption fine and furnishing of bond - re-export subject to redemption fine and penalty - jurisdiction of revisional authority where officer is of equal rank - parity of rank doctrine in exercise of revisionary power - effect of departmental re organisation on revisional competence

Release of seized goods on payment of redemption fine and furnishing of bond - re-export subject to redemption fine and penalty - Direction to release the gold bars/jewellery permitted for re export by the appellate orders subject to payment of redemption fine and penalty and furnishing of a bond securing departmental interest. - HELD THAT: - The Court noted that the Commissioner (Appeal I) had partly allowed the petitioners' appeals permitting re export of the seized gold subject to payment of redemption fine and penalty. The Department had not implemented those appellate orders and the petitioners remained unable to re export the goods. Having regard to the appellate relief already granted and the absence of a subsisting impediment to its implementation, the Court held that the goods could not be retained indefinitely. The Court therefore directed release of the gold within one week of payment of the redemption fine and penalty and on execution of a bond to secure the Department's interest so that departmental rights remain protected pending any further lawful proceedings. [Paras 2, 4, 5]

Release of the gold bars/jewellery ordered within one week upon payment of redemption fine and penalty and furnishing of a bond securing the Department's interest.

Jurisdiction of revisional authority where officer is of equal rank - parity of rank doctrine in exercise of revisionary power - effect of departmental re organisation on revisional competence - Competence of the Central Government revisional authority to entertain revision against the order passed by the Commissioner (Appeal) where the revisional officer is of the same rank as the appellate authority. - HELD THAT: - Relying on the decision of the Division Bench of the Punjab & Haryana High Court in NVR Forgings (as recorded) and noting that the Supreme Court dismissed the SLP and review, the Court observed that a Joint Secretary level officer (the revisional authority) who is of equal cadre to a Commissioner cannot validly exercise revision over orders passed by an officer of the same rank. The respondents accepted this legal position and said remedial measures were being taken. The Court recorded that if re organisation by the Central Government remedies the parity defect, the revisional authority may thereafter be competent to proceed, but as on date the revisional authority lacked jurisdiction to impede implementation of the appellate orders. [Paras 3, 4]

As on date, the revisional authority lacks jurisdiction to exercise revision over the orders of the Commissioner (Appeal) due to parity of rank; remedial re organisation may alter that position.

Final Conclusion: Writ petitions disposed by directing release of the gold within one week on payment of redemption fine and penalty and execution of a bond; the Court observed that the revisional authority presently lacks jurisdiction because of parity of rank, subject to any future departmental re organisation that may cure the defect.

Vishesh Krishi and Gram Udhyog Yojana (VKGUY) - Denial Entity List (DEL) - deposit as condition for quashing administrative order - remand for fresh adjudication limited to interest and fiscal penalty - admission of liability by deposit

Deposit as condition for quashing administrative order - admission of liability by deposit - Quashing of the impugned order dated 07.11.2016 on condition of unconditional deposit by the petitioner and treatment of the claimed principal demand as admitted. - HELD THAT: - The Court recorded the petitioner's unconditional offer to deposit the amount representing benefit availed under VKGUY after the deletion of "Spices" and accepted the respondent's concurrence to the conditional arrangement. In view of the agreed unconditional deposit to be made within ten days, the Court set aside the impugned common order dated 07.11.2016 and directed that the deposited amount shall be treated as an admission of liability in respect of the principal demand. The Court required the petitioner's representative to appear before the First Authority for further proceedings after deposit and prescribed timelines for such appearance and for the authority to pass fresh orders. The Court expressly refrained from deciding the merits on interest and fiscal penalty.

Impugned order quashed and set aside on condition of unconditional deposit within ten days; deposited sum to be treated as admitted liability and the First Authority to proceed thereafter.

Remand for fresh adjudication limited to interest and fiscal penalty - Denial Entity List (DEL) - Remand of show cause proceedings to the First Authority limited to determination of interest and fiscal penalty and consideration of removal of the petitioner's name from the DEL. - HELD THAT: - Having treated the principal demand as admitted on deposit, the Court remanded the matter to the First Authority to adjudicate afresh only on the aspects of applicable interest and the fiscal penalty, and to consider any application by the petitioner for removal from the DEL. The remand was made subject to the timelines fixed by the Court: petitioner to appear within two weeks of deposit and the First Authority to decide within two weeks thereafter. The Court did not express any view on the merits of interest, penalty or DEL removal and confined the exercise to fresh adjudication in accordance with law and on merits.

Proceedings remanded to First Authority to decide, within prescribed timelines, only on interest, fiscal penalty and any application for removal from the DEL; no merits expressed by this Court on those aspects.

Final Conclusion: Petitions partly allowed: on unconditional deposit of the admitted amount within ten days the impugned order dated 07.11.2016 is quashed and set aside; the principal demand is treated as admitted and the matter is remanded for fresh adjudication limited to interest, fiscal penalty and consideration of removal from the DEL in accordance with the timelines fixed by the Court; no order as to costs.

Draw samples and testing at National Test House - detention of imported goods - release of detained goods on furnishing bank guarantee and bond - act in accordance with the provisions of the Customs Act, 1962 - show cause notice and departmental enquiry - safeguard duty

Draw samples and testing at National Test House - act in accordance with the provisions of the Customs Act, 1962 - Replacement of the expression "finally assess the bill of entry" with direction to act in accordance with the provisions of the Customs Act, 1962 and continuation of the direction to draw samples and get them tested. - HELD THAT: - The learned single Judge had directed that samples be drawn from detained coils (both labelled and unlabelled lots) and tested at the National Test House, and ordered that on receipt of the test report the respondents shall "finally assess the bill of entry" and pass appropriate orders within two weeks. To avoid any future controversy whether the phrase "finally assess the bill of entry" bars the Department from taking further action in accordance with law, the Court substituted those words with the clear direction that the Department shall "act in accordance with the provisions of the Customs Act, 1962." The other directions in paragraph 9 (sample-drawing and testing at the National Test House at the petitioner's expense and provision of the report to the petitioner) were retained. [Paras 4, 9]

The expression "finally assess the bill of entry" is replaced by "act in accordance with the provisions of the Customs Act, 1962" while retaining the sample-drawing and testing directions.

Detention of imported goods - release of detained goods on furnishing bank guarantee and bond - safeguard duty - Release of the detained goods imported under Bill of Entry No.3371951 subject to specified security and participation in the departmental enquiry. - HELD THAT: - The detention purpose had largely been achieved because the test report was available to the Department; what remained was protection of the Department's interest for recovery of any duty, including safeguard duty. In view of the value and the proposed safeguard duty liability, the Court directed release of the detained 86 coils on fulfilment of conditions: (1) furnishing an unqualified bank guarantee from a nationalised/scheduled bank for the specified sum; (2) execution of an appropriate bond in favour of the Department; and (3) prompt participation by the importer in the enquiry initiated by the show cause notice. Release is subject to the outcome of that enquiry. [Paras 6, 7]

Detained goods under Bill of Entry No.3371951 shall be released on fulfilment of the bank guarantee, bond and participation in the enquiry, and remain subject to the enquiry's outcome.

Show cause notice and departmental enquiry - act in accordance with the provisions of the Customs Act, 1962 - Permissible continuation of departmental proceedings and the parties' remedies despite the directions for testing and conditional release. - HELD THAT: - The Court noted that a comprehensive show cause notice had been issued on 17.10.2016 and expressly declined to express any opinion on whether the test report fully matches the standards claimed by the importer. The Court left questions as to classification, gradation and any contrary contentions to the adjudicating authority and to the parties to pursue available remedies under law, while ensuring that goods shall not continue to be detained unnecessarily. The substituted direction to act in accordance with the Customs Act, 1962 preserves the Department's statutory powers to proceed. [Paras 3, 5]

Departmental proceedings pursuant to the show cause notice may continue and the parties may pursue remedies in law; the Court has not expressed any view on classification or test results.

Final Conclusion: The writ appeal is disposed by substituting "act in accordance with the provisions of the Customs Act, 1962" for the phrase "finally assess the bill of entry", retaining the sample-drawing and testing directions, and directing conditional release of the detained goods on furnishing the prescribed bank guarantee and bond and participation in the departmental enquiry; release remains subject to the enquiry's outcome.

Provisional release under Section 110A of the Customs Act, 1962 - Maximum Retail Price (MRP) / Retail Selling Price (RSP) declaration - label declaration requirement for small containers - bond and bank guarantee as security pending adjudication - departmental discretion pending adjudication - counter affidavit cannot supply fresh reasons or improve an impugned order

Label declaration requirement for small containers - departmental discretion pending adjudication - Scope of earlier direction regarding requirement to declare MRP/RSP on imported containers of varying sizes and the respondents' duty in that regard. - HELD THAT: - The Court had previously directed the respondents to examine whether MRP or RSP must be declared on the labels of the imported Axe Oil containers of 3ml, 5ml, 10ml, 28ml and 56ml and, if smaller quantities did not require such declaration, to order release of those items, while leaving the respondents discretion to pass appropriate orders in respect of larger quantities. The present order records that the respondents failed to appreciate that limited scope and issued an omnibus direction without clarity as to which containers the securities were intended to secure. The Court did not adjudicate on the substantive question of whether MRP/RSP must be declared for the smaller containers; instead it reiterated the limited scope of its earlier direction and preserved the department's discretion to decide classification and other merits during adjudication. [Paras 3, 4, 6]

Respondents must adhere to the Court's earlier direction to examine the MRP/RSP requirement for different container sizes; substantive merits remain open to the department during adjudication.

Provisional release under Section 110A of the Customs Act, 1962 - bond and bank guarantee as security pending adjudication - counter affidavit cannot supply fresh reasons or improve an impugned order - Whether the impugned omnibus security conditions imposed by the respondents justify continued non-release of the consignment and what interim security should be furnished for provisional release. - HELD THAT: - The respondents imposed a bond of Rs. 20 lakhs and a bank guarantee of Rs. 5 lakhs by an omnibus order, without clarifying whether such security related only to larger containers. The Court rejected the revenue's request to file an improved counter affidavit on the ground that a counter affidavit cannot be used to add reasons or substitute the impugned order. Balancing the delay in detention since June 2016 against protection of revenue interest, the Court adjusted the interim security to a bond of Rs. 20,00,000 and a reduced bank guarantee of Rs. 2,50,000, and directed provisional release under Section 110A of the Customs Act, 1962 upon compliance within one week, while expressly leaving classification and adjudication issues open to the department. [Paras 4, 5, 6]

Petitioner to execute the specified bond and furnish the specified bank guarantee; on compliance, respondents to provisionally release the goods under Section 110A within one week, without prejudice to departmental adjudication on merits.

Final Conclusion: The writ petition is disposed by directing provisional release of the imported consignments upon the petitioner executing a bond of Rs. 20,00,000 and furnishing a bank guarantee of Rs. 2,50,000 within one week; the Court did not decide the substantive question of MRP/RSP labelling for smaller containers and left classification and adjudication open to the department, while refusing to permit the revenue to cure its impugned omnibus order by fresh affidavits.

Grant of interim stay of demand - requirement of pre-deposit for stay - prima facie case - balance of convenience - irreparable hardship - classification of goods - reliance on administrative circular - expeditious disposal of pending appeals

Grant of interim stay of demand - requirement of pre-deposit for stay - prima facie case - balance of convenience - irreparable hardship - classification of goods - reliance on administrative circular - Whether the petitioner was entitled to an interim stay of the order-in-original without making the pre-deposit directed by the Commissioner (Appeals). - HELD THAT: - The Court applied the established tripartite test for grant of interim stay - prima facie case, balance of convenience and irreparable hardship. On prima facie case the Court noted that an identical import in the petitioner's own case had been allowed by the Commissioner (Appeals) in Order-in-Appeal No.580/2013 dated 04.04.2013 and that Circular No.13/2013 dated 05.04.2013 of the Central Board of Excise and Customs prima facie supported the petitioner's classification of the goods under CTH 85437099. Those factors also favoured balance of convenience. Although the petitioner did not plead financial inability, the Court held that, in view of the prior favorable appellate order and the administrative circular, the petitioner would suffer irreparable hardship if compelled to pre-deposit the entire differential duty before contesting the appeal. The Commissioner (Appeals)'s exercise of discretion to require full pre-deposit was therefore set aside insofar as it prevented grant of stay without condition, and the stay of the order-in-original was ordered until disposal of the appeals. [Paras 6, 7, 8, 9]

Impugned orders directing full pre-deposit as a condition for stay set aside; stay of the order-in-original granted without deposit until the appeals are heard and disposed of.

Expeditious disposal of pending appeals - Whether the appeals pending before the Commissioner (Appeals) should be directed to be disposed of expeditiously. - HELD THAT: - The Court noted the appeals had been pending since 2013 and, having granted interim relief, directed the first respondent to decide the appeals on merits and in accordance with law as expeditiously as possible. A target of preferably three months from receipt of the copy of this order was specified to ensure prompt adjudication. [Paras 9]

First respondent directed to dispose of the appeals on merits and in accordance with law, preferably within three months from receipt of this order.

Final Conclusion: Writ petitions allowed; impugned orders requiring full pre-deposit for grant of stay set aside and stay of the order-in-original granted until disposal of the appeals; first respondent directed to decide the appeals on merits expeditiously, preferably within three months.

Conveyance confiscation for smuggling - Knowledge of owner, agent or person in charge - Redemption fine and penalty reduction

Conveyance confiscation for smuggling - Knowledge of owner, agent or person in charge - Confiscation of the seized truck was legally justified under the Customs Act as the conveyance was used in smuggling with requisite knowledge of the persons responsible. - HELD THAT: - The Tribunal applied the statutory test that a conveyance is liable for confiscation only when it was used in smuggling with the knowledge of the owner, his agent or person in charge. The material reproduced in the record includes the driver's statement that he agreed, with the consent of the vehicle owner, to carry 150 bags of fertilizer to Sitamarhi after being requested by a trader and that he fled when the vehicle was detained. Nobody came forward to claim the seized goods. On these findings the Tribunal accepted that the noticees had conscious knowledge of the loading of Urea on the seized vehicle and accordingly sustained confiscation of the truck. The Tribunal therefore found the statutory requirement of knowledge under Section 115(2) to be satisfied and upheld confiscation. [Paras 6, 7]

Confiscation of the truck is justified as the conveyance was used in smuggling with the requisite knowledge of the owner/agent/person in charge.

Redemption fine and penalty reduction - Quantum of redemption fine and penalty imposed on the appellant was excessive and liable to be reduced. - HELD THAT: - While sustaining confiscation, the Tribunal found the redemption fine and penalty imposed by the Adjudicating Authority excessive in relation to the value of the Urea of Indian origin reflected in the record. Exercising its powers to moderate the monetary consequences, the Tribunal reduced the redemption fine and the penalty to appropriate lesser amounts as a just and proportionate outcome of the confirmed confiscation. [Paras 7]

Redemption fine and penalty reduced; the impugned order modified accordingly.

Final Conclusion: Confiscation of the truck upheld on finding of knowledge of the owner/agent/person in charge; redemption fine and penalty moderated by the Tribunal and the appeal disposed of in those terms.

Remand for de novo adjudication - burden of proof shifting in customs smuggling cases - appreciation of investigative evidence - confiscation for smuggling

Remand for de novo adjudication - appreciation of investigative evidence - Adjudicating Authority's dropping of proceedings was erroneous and the matter is remanded for fresh adjudication. - HELD THAT: - The Adjudicating Authority failed to appreciate material facts and documentary evidence gathered during investigation, including discrepancies in purchase invoices, inconsistencies between books/transactions and statements of the principal noticee, a lapsed trading licence and inability to identify the hired godown. These shortcomings led the Tribunal to conclude that the Authority did not properly evaluate determinative circumstances indicative of smuggling. In view of these lacunae and the need for fresh consideration of the evidence after affording opportunity of hearing to the noticees, the Tribunal directs a de novo adjudication by the Commissioner of Customs, Patna. [Paras 6, 7, 8]

The appeal is allowed by way of remand to the Commissioner of Customs, Patna for de novo adjudication after hearing the noticee respondents.

Burden of proof shifting in customs smuggling cases - confiscation for smuggling - Circumstances may arise where the burden to prove that goods are not smuggled shifts to the noticee respondents. - HELD THAT: - Relying on the principle stated in earlier Supreme Court decisions, the Tribunal observed that direct evidence of smuggling may be absent yet several determinative circumstances can lead to the conclusion that seized goods are smuggled. Where investigations reveal such circumstances, the evidential burden may shift from the Customs Authority to the noticees to explain the anomalies. The Tribunal found that the investigation in this case disclosed such circumstances (discrepancies in invoices, unsupported bookkeeping entries, lapsed licence and failure to identify premises), warranting fresh adjudication with this legal principle in mind. The Tribunal referenced Kanungo & Co. Vs. Collector of Customs, Calcutta and Collector of Customs, Madras Vs. D. Bhoormull as articulating this rule. [Paras 7]

The principle that the burden of proof can shift to noticees in appropriate circumstances is affirmed and should be applied in the de novo adjudication.

Final Conclusion: The Revenue's appeal is allowed by way of remand; the Commissioner of Customs, Patna is directed to undertake de novo adjudication after giving the noticee respondents an opportunity of hearing, to be completed within four months from receipt of this order.

Remand for fresh adjudication - Examination of relevant documents - Rule 4(3) of the Customs Valuation Rules, 1988 - Related parties valuation - Transaction value and inclusion of technical knowhow fees

Remand for fresh adjudication - Examination of relevant documents - Order of the Commissioner(Appeals) allowing the Revenue's appeal without remitting the matter to the adjudicating authority is not maintainable. - HELD THAT: - The Commissioner(Appeals) allowed the Revenue's appeal solely on the ground that the adjudicating authority had not properly examined the relevant documents. The Tribunal finds that, while the Commissioner(Appeals) correctly noted deficiencies in the adjudicating authority's examination, he did not himself examine the factual and legal issues and therefore should have remanded the matter for fresh consideration rather than deciding the appeal in favour of the Revenue. In these circumstances the appellate order is unsustainable and must be set aside.

Order of the Commissioner(Appeals) allowing the Revenue's appeal is set aside and found not maintainable; matter remanded.

Rule 4(3) of the Customs Valuation Rules, 1988 - Related parties valuation - Transaction value and inclusion of technical knowhow fees - Adjudicating authority must re-examine the documents and re-adjudicate the declared transaction value in accordance with Rule 4(3) CVR, 1988, including consideration of the related-party relationship and alleged technical knowhow fees. - HELD THAT: - The adjudicating authority had accepted the declared transaction value without proper examination of the documents relating to the collaboration and the lump-sum technical knowhow payment. Given the relationship between the parties and the alleged payments to the foreign collaborator, the declared value ought to be examined under Rule 4(3) of the Customs Valuation Rules, 1988, with reference to the relevant tests and documents. The Tribunal directs the original authority to grant personal hearing, examine all documents submitted by the appellant and any further documents as may be required, and pass a de novo adjudication applying the correct legal tests under Rule 4(3). The fresh adjudication is to be completed within the period specified by the Tribunal.

Matter remanded to the original adjudicating authority to decide afresh after examining all documents and applying Rule 4(3) CVR, 1988, with personal hearing and completion within three months.

Final Conclusion: The Commissioner(Appeals) order allowing the Revenue is set aside; the matter is remitted to the original adjudicating authority for de novo adjudication after examination of all documents and hearing, to be completed within three months from receipt of this order.

Transaction value - contemporaneous imports - standing order as guideline not mandate - PLATT price not substitute for transaction value - burden on Revenue to prove invoice price incorrect - requirement to establish identical composition for mixed floor sweepings - Rule 5 and Rule 8 Customs Valuation Rules, 1988

Transaction value - burden on Revenue to prove invoice price incorrect - Validity of rejecting the declared invoice price and replacing it with an enhanced value where the department has not proved that the invoice price was incorrect or tainted by extra-commercial considerations. - HELD THAT: - The adjudicating authority cannot discard the invoice price as the transaction value unless the Department adduces cogent evidence showing that the price declared is not the actual price paid or payable or is influenced by extra-commercial considerations. The Commissioner(Appeals) applied settled principles that the onus lies on the Revenue to establish under-valuation and that only upon such proof would recourse to other rules of the Customs Valuation Rules be permissible. The impugned assessment enhanced value without any finding of fraud, non-genuineness of the invoice, or documentary evidence showing the declared price was not the real transaction value; therefore the enhancement was unsustainable. [Paras 4, 6]

The rejection of the declared invoice price was not justified; the transaction value declared by the importer must be accepted in absence of proof to the contrary.

Standing order as guideline not mandate - PLATT price not substitute for transaction value - Rule 5 and Rule 8 Customs Valuation Rules, 1988 - Whether the Standing Order and PLATT quotations could be applied to fix assessable value of mixed floor sweepings in place of the declared transaction value. - HELD THAT: - The Standing Order and PLATT prices serve as guidelines and cannot supplant the declared transaction value in the absence of doubt about the invoice price. PLATT quotations are not transaction prices based on actual deals and, particularly for mixed floor sweepings, cannot be mechanically applied. The adjudicating authority relied on PLATT and the Standing Order without establishing the prerequisites for departing from Rule 4 (transaction value) and without demonstrating that Rule 5-8 applied; such reliance was held to be legally untenable. [Paras 4, 6]

Application of the Standing Order and PLATT prices to enhance the assessable value was improper where the Department failed to show the invoice price was suspect.

Contemporaneous imports - requirement to establish identical composition for mixed floor sweepings - Whether contemporaneous import transactions could be relied upon to reject the transaction value without proving that those imports were of identical goods in composition, quality and commercial level. - HELD THAT: - For mixed floor sweepings, composition varies from consignment to consignment; therefore contemporaneous imports cannot be compared unless it is established that the consignments are identical in nature, composition and commercial level. The Department produced contemporaneous Bills of Entry but failed to show identity of composition, quantity parity and other relevant commercial factors. The Commissioner(Appeals) correctly held that, without laboratory or examination records demonstrating identical composition or predominance of a specific polymer, contemporaneous imports are not a reliable basis to reject the declared price. [Paras 4, 6]

Contemporaneous imports cannot be used to displace the declared transaction value unless the Department proves the consignments are identical in composition and other relevant commercial respects.

Final Conclusion: The Commissioner(Appeals) correctly set aside the enhanced assessment: in absence of proof that the invoice price was incorrect, without laboratory/examination evidence as to composition of mixed floor sweepings and without reliable identity with contemporaneous imports, enhancement based on PLATT/standing orders was unsustainable; Revenue's appeal is dismissed and the impugned assessment orders are set aside.

Right of inspection and supply of copies under Section 163 of the Companies Act, 1956 - doctrine of ejusdem generis in construing "any other person" - qualification of "any other person" as one having commercial interest in the company - limited disclosure regime applicable to private limited companies

Right of inspection and supply of copies under Section 163 of the Companies Act, 1956 - doctrine of ejusdem generis in construing "any other person" - qualification of "any other person" as one having commercial interest in the company - Whether the petitioner, who is not a member, debenture holder or a person having commercial interest in the companies, is entitled to inspect the register of members and obtain copies under Section 163 of the Companies Act, 1956. - HELD THAT: - The Tribunal found as an admitted fact that the petitioner is neither a member nor a debenture holder of the respondent companies and has not claimed any commercial interest in them. The phrase "any other person" in Sub section (2)(b) of Section 163 must be read in the context of the preceding Sub section (2)(a) which refers to members and debenture holders. Applying the doctrine of ejusdem generis, the expression "any other person" is to be understood as referring to persons of the same genus - that is, persons who have a commercial or similar interest in the company (for example bankers, creditors or customers). Consequently, a stranger without such interest does not fall within the category entitled to inspect and obtain copies under Section 163. The petitions were therefore dismissed on the ground that the petitioner is not qualified to seek relief under Section 163. The Tribunal expressly did not decide the effect of Section 610(B) (inserted later) on public inspection, since the dismissal was founded solely on lack of qualification under Section 163.

Petitions dismissed; petitioner not qualified under Section 163 to claim inspection or copies as he is not a member, debenture holder or a person having commercial interest in the companies.

Final Conclusion: The Company Petitions are dismissed on merits: the petitioner, being neither a member nor a debenture holder nor a person with commercial interest, is not entitled to inspect the register of members or to obtain copies under Section 163 of the Companies Act, 1956; the Tribunal did not adjudicate the impact of Section 610(B).

Sanction of scheme of amalgamation - transfer and vesting of assets and liabilities - appointed date as effective date - successor liability for pending proceedings - compliance with statutory requirements and filing of certified copy with Registrar of Companies - dissolution without winding up - court sanction not to preclude action for statutory violations

Sanction of scheme of amalgamation - transfer and vesting of assets and liabilities - compliance with statutory requirements and filing of certified copy with Registrar of Companies - dissolution without winding up - court sanction not to preclude action for statutory violations - Sanction of the Scheme of Amalgamation between the Transferor Company and the Transferee Company under Sections 391 to 394 of the Companies Act, 1956, and consequential directions. - HELD THAT: - The Court examined the Scheme, the approvals of the respective boards, the dispensation of shareholder and creditor meetings, and the absence of unresolved objections from the Regional Director and the Official Liquidator. Finding no impediment to sanction, the Court granted sanction to the Scheme whereby the Transferor Company's entire business, assets and liabilities would stand transferred and vested in the Transferee Company and the Transferor Company would be dissolved without winding up. The Court directed compliance with statutory requirements, including filing a certified copy of the sanctioning order with the Registrar of Companies within thirty days, and clarified that the sanction does not exempt compliance with stamp duty, taxes, permissions or prevent subsequent action for any statutory violations against concerned persons. [Paras 27, 28, 29, 30, 31]

Scheme sanctioned; Transferor Company to be dissolved without winding up; compliance and filing directions issued; sanction subject to existing law and not a bar to statutory action.

Appointed date as effective date - Validity of the Appointed Date as defined in the Scheme (Appointed Date equated to the Effective Date). - HELD THAT: - The Regional Director had contended that the Scheme did not specify an Appointed Date. The Scheme, however, defines the Appointed Date to mean the Effective Date, namely the date when approvals in terms of the Scheme are received and the certified copy of the Court's order is filed with the Registrar of Companies. The Court held that the Appointed Date is clearly set out in Clause 1.4.4 of the Scheme and thus the Regional Director's objection in this regard was satisfied. [Paras 16, 17, 18, 20]

Appointed Date as defined in the Scheme (being the Effective Date) is valid and the Regional Director's objection on this point stands satisfied.

Successor liability for pending proceedings - official liquidator observations - Resolution of the Official Liquidator's observations regarding disputed tax demands and impleading of the Transferee Company. - HELD THAT: - The Official Liquidator noted disputed demands from tax authorities and observed that the Transferee Company was not impleaded as petitioner. The Transferor Company explained that the disputed tax demands are subject to appeals and proceedings and that, under the Scheme, the Transferee Company will be the successor entity in respect of pending proceedings and assessments. The Court found these explanations satisfactory and recorded that the Official Liquidator's observations were met. [Paras 21, 22, 23, 24]

Official Liquidator's observations satisfied; Transferee Company will succeed to pending proceedings as provided in the Scheme.

Final Conclusion: The Scheme of Amalgamation between Augere Wireless Broadband India Private Limited and Bharti Airtel Limited is sanctioned under Sections 391-394 of the Companies Act, 1956; the Transferor Company shall stand dissolved without winding up subject to statutory compliance and the Court's order must be filed with the Registrar of Companies; costs awarded to be deposited as directed.

Sanctioning of scheme of arrangement - amalgamation - dispensation of statutory shareholders' and creditors' meetings under Section 391(1) of the Companies Act, 1956 - compliance with SEBI Delisting Regulations - compliance with Reserve Bank of India guidelines regarding NBFC status - liability for pre existing income tax demands on amalgamation - preservation of books and records under Section 396A of the Companies Act, 1956

Sanctioning of scheme of arrangement - amalgamation - Sanction of the Scheme of Arrangement effecting amalgamation of the transferor companies with the transferee company as filed in Exhibit C. - HELD THAT: - The petitions filed by the transferor companies and the transferee company seeking sanction of the Scheme of Arrangement in the nature of amalgamation were heard after admission, service and consideration of reports of the Official Liquidator and the Regional Director and after the petitioners filed explanatory affidavits addressing the observations. The court, after considering the material on record and the undertakings given by the petitioners, concluded that the Scheme may be sanctioned. [Paras 16]

The Scheme at Exhibit "C" is sanctioned and the prayers in the Company Petitions are granted.

Dispensation of statutory shareholders' and creditors' meetings under Section 391(1) of the Companies Act, 1956 - Validity of dispensing with the convening of meetings of equity shareholders and unsecured creditors where consent letters were obtained. - HELD THAT: - Applications were preferred seeking directions to dispense with the meetings of equity shareholders and unsecured creditors upon production of consent letters from all concerned. The Court, by separate orders dated 23.8.2016, allowed the applications and dispensed with the meetings as required under the provisions of Section 391(1) of the Companies Act, 1956. Compliance with the admission orders including publication and service was recorded. [Paras 3]

The applications to dispense with the requisite meetings were allowed and the meetings were dispensed with.

Compliance with SEBI Delisting Regulations - compliance with Reserve Bank of India guidelines regarding NBFC status - liability for pre existing income tax demands on amalgamation - preservation of books and records under Section 396A of the Companies Act, 1956 - Satisfaction of the Court with petitioners' replies to observations of the Regional Director and directions as to statutory compliances and preservation of records. - HELD THAT: - The Regional Director had raised observations regarding delisting post compliances required under SEBI regulations, possible NBFC status and RBI compliance, and existing income tax demands in respect of a transferor company. The transferee and transferor companies filed explanatory affidavits undertaking to comply with applicable securities laws, RBI guidelines, and to accept liability for statutory demands post amalgamation; further undertakings were given regarding compliance with relevant provisions of the Income Tax Act and to preserve books and records. The Court found the explanations sufficient and satisfactory but issued mandatory directions that the petitioners shall preserve books of accounts, papers and records and not dispose of them without prior permission of the Central Government and that they shall not be absolved from any statutory liability. [Paras 15]

Petitioners' responses to the Regional Director are accepted as satisfactory; petitioners are directed to preserve records and comply with statutory requirements and remain liable for pre existing and future statutory demands.

Professional fees and Official Liquidator's fees - Payment of professional charges to the Assistant Solicitor General and fees to the Official Liquidator in respect of the petitions. - HELD THAT: - As part of the order sanctioning the Scheme, the Court directed payment of specified professional charges to the Assistant Solicitor General and payment of fees to the Official Liquidator for each petition, recording the obligation of the petitioners to make such payments. [Paras 17]

Petitioners directed to pay the professional charges to the Assistant Solicitor General and the fees to the Official Liquidator as ordered.

Final Conclusion: The High Court sanctioned the Scheme of Arrangement for amalgamation after recording service, statutory reports and satisfactory undertakings; it directed preservation of records, compliance with applicable SEBI, RBI and Income Tax requirements and ordered payment of professional fees, and disposed of the petitions.

Export of services - business auxiliary services - place of provision of services - service tax not leviable on marketing services provided in India to foreign principals - longer period of limitation

Export of services - business auxiliary services - place of provision of services - service tax not leviable on marketing services provided in India to foreign principals - Whether marketing/commission services performed in India for foreign principals amounted to export of services and therefore were not exigible to service tax. - HELD THAT: - The Tribunal, following the Larger Bench decisions in Microsoft Corporation (I) (P) Ltd. Vs. CST New Delhi and Paul Merchants Ltd. Vs. CCE Chandigarh , held that marketing operations undertaken in India on behalf of foreign principals, which were not at the behest of any Indian customer and were provided to foreign recipients, constitute export of services. The ratio adopted is that procurement of orders in the Indian market on behalf of a foreign principal does not amount to a taxable service provided in India; consequently such activity is to be treated as export of services and not liable to service tax. The Tribunal applied this settled principle to the facts of the appellant, rejecting the view that the services were taxable as business auxiliary services in India despite commission being received in foreign currency. The invocation of extended limitation for raising demand did not alter the substantive conclusion that the services were exports and not exigible to service tax.

Impugned demand, interest and penalty set aside; appeal allowed and consequential relief granted to the appellant.

Final Conclusion: The appellate order allowing the appeal was founded on the Tribunal's application of Larger Bench precedents concluding that marketing/commission services performed in India for foreign principals are export of services and not subject to service tax; the impugned demand, interest and penalty were set aside and the appeal allowed with consequential relief.

Refund of service tax under Notification No.41/2007-ST - transport of goods - transport of empty containers - port services - time-bar / limitation on refund claims

Refund of service tax under Notification No.41/2007-ST - transport of goods - transport of empty containers - Service tax paid on to-and-fro freight charges claimed in relation to export of goods is admissible for refund under Notification No.41/2007-ST. - HELD THAT: - The Tribunal found that the transporter's invoice claimed to-and-fro freight charges in connection with transportation of export goods, and no specific prohibition in Notification No.41/2007-ST excludes such freight from refund. Relying on the Tribunal's earlier decision in M/s Garware Polyester Ltd., which allowed refund of service tax on transport of empty containers used for stocking export goods, the Appellate Tribunal held that service tax on to-and-fro freight claimed by the appellant is refundable since it relates to transport of export goods and is covered within the scope of the notification. [Paras 5, 6]

Service tax on to-and-fro freight charges is admissible for refund.

Port services - refund of service tax under Notification No.41/2007-ST - Service tax paid on charges such as THC, bill of lading charges, inland haulage, documentation, SB, palletization, handling and weighment is eligible for refund as port services. - HELD THAT: - The Tribunal observed that classification of the listed charges as falling within the ambit of port-related services is not res integra in view of the line of Tribunal decisions cited by the appellant. Applying those precedents, the Appellate Tribunal concluded that the specified charges represent services provided within the port/port-related ambit and therefore qualify for refund under the relevant notification. [Paras 5, 6]

Service tax on the listed port-related charges is eligible for refund under the category of port services.

Time-bar / limitation on refund claims - Rejection of part of the refund claim on the ground of limitation is sustainable. - HELD THAT: - Although the appellant did not press the limitation point before the Tribunal, the Appellate Tribunal noted that part of the refund claim was barred by time and upheld the authorities' rejection on this ground. The Tribunal therefore sustained the rejection insofar as it was founded on limitation. [Paras 5, 6]

Rejection of the refund claim on limitation grounds is sustainable.

Final Conclusion: The appeal is disposed of by allowing refund of service tax on to-and-fro freight and on specified port-related charges, while upholding the rejection of the portion of the claim barred by limitation.

Mining Services - Site formation and clearance, excavation and earthmoving and demolition services - Composite works contract - Essential character test - Classification of composite services

Mining Services - Composite works contract - Essential character test - Site formation and clearance, excavation and earthmoving and demolition services - Classification of composite services - Whether the services rendered by the appellant under the contract with Tata Steel constitute "Mining Services" and, if so, whether the composite contract could be vivisected to levy service tax earlier as Site Preparation/Cargo Handling services. - HELD THAT: - The Tribunal examined the contract terms and materials on record and found that the contract required the appellant to undertake site preparation, making holes for blasting, excavation of rejects and incidental ore, segregation and cleaning of Mixed/Hard Ore at face using appellant's machinery, certification of ore quality by the company's representative, and transportation of material to dump yards and stockyard. The contract provided a single composite rate with no breakup for individual activities. Scientific material on the nature of ores in the region supported that items described in the contract (lateritised hard ore, flaky/friable ore, mixed ore) are categories of ore and not merely overburden. Applying the principle that composite services must be classified according to the service giving them their essential character, and relying on precedent including the Tribunal decisions in M. Ramakrishna Reddy and Associated Soapstone and the ratio in Larsen & Toubro distinguishing composite works contracts from service contracts simpliciter, the Tribunal held that the essential character of the appellant's contract is mining. Where a contract is a comprehensive composite works contract covering extraction, segregation and related operations, it cannot be split and treated as site formation or cargo handling for periods prior to mining services being brought into the tax net. The CBEC Circulars cited are guidelines and do not mandate vivisection of a composite contract which on facts has mining as its essential character. The adjudicating authority's reliance on decisions concerning separable service contracts was found not to apply to the present composite-contract facts. The Tribunal therefore set aside the demand on merits without addressing time-bar or penalty issues. [Paras 5, 6, 7]

Appeal allowed; Order in Original dated 10.10.2011 set aside and activities under the composite contract held to amount to Mining Services (the service giving the contract its essential character), which were chargeable to service tax only from the date Mining Services were introduced into the Service Tax net.

Final Conclusion: The appeal succeeds on merits: the appellant's contract is a composite works contract whose essential character is Mining Services and therefore the activities cannot be taxed earlier as Site Preparation/Cargo Handling services for the period in dispute; the adjudicating order confirming the demand is set aside.

Re-quantification of service tax liability - exempted cleaning services - production of cost accountant's certificate - remand for fresh adjudication - penalties under Sections 76 and 78 of the Finance Act, 1994 - waiver of penalty under Section 80 of the Finance Act, 1994

Re-quantification of service tax liability - exempted cleaning services - Whether the service tax liability requires re-quantification after excluding cleaning services held to be non taxable by the first appellate authority. - HELD THAT: - The Tribunal observed that the short levy arose from calculation/quantification errors and that certain supplies identified in Annexure A may be exempted cleaning services. The Tribunal noted that cleaning services provided to Assam University and Kendriya Vidyalayas were held non taxable by the first appellate authority (against which Revenue did not appeal), and that other entries in Annexure A may likewise be cleaning services. Since the controversy primarily concerns re quantification of taxable receipts after excluding exempt supplies, the matter was remanded to the adjudicating authority for fresh determination following appropriate verification and opportunity of personal hearing to the respondent.

Remanded to the adjudicating authority for re quantification of service tax liability after determining the extent of exempted cleaning services, with opportunity of personal hearing.

Production of cost accountant's certificate - Whether the appellant should furnish a cost accountant's certificate to demonstrate the extent of cleaning services excluded from taxable receipts. - HELD THAT: - The Tribunal directed that the appellant should produce a cost accountant's certificate before the adjudicating authority to demonstrate the extent of exempted (cleaning) services allowed by the first appellate authority in the list contained in Annexure A. This direction is procedural and intended to enable accurate quantification of taxable receipts in the remand proceedings.

Appellant directed to produce a cost accountant's certificate in the adjudication on remand to establish the extent of exempted cleaning services.

Penalties under Sections 76 and 78 of the Finance Act, 1994 - waiver of penalty under Section 80 of the Finance Act, 1994 - Status of imposition or waiver of penalties under Sections 76 & 78 and applicability of Section 80. - HELD THAT: - The Tribunal kept the question of imposition of penalties under Sections 76 and 78, and the applicability of Section 80, open for the adjudicating authority to consider in the remand proceedings. The Tribunal did not decide these matters on merits and left them to be deliberated upon after re quantification and hearing.

Penalties and the applicability of Section 80 left open for fresh consideration by the adjudicating authority in the remand proceedings.

Final Conclusion: The Revenue's appeal is allowed by way of remand: the matter is sent back to the adjudicating authority for re quantification of service tax after the appellant produces a cost accountant's certificate and the respondent is given personal hearing; issues of penalties under Sections 76 and 78 and the applicability of Section 80 are kept open for fresh adjudication.

Time-barred appeal - date of receipt - service of order on reviewing authority - Central Excise review procedure - authority for review - remand for fresh adjudication

Time-barred appeal - date of receipt - service of order on reviewing authority - Central Excise review procedure - authority for review - Whether the appeal filed by the Revenue before the First Appellate Authority was time barred. - HELD THAT: - The Tribunal examined the review procedure under Central Excise and held that the proper officer for review is the Jurisdictional Commissioner (or the RRA section functioning under the Commissioner), not subordinate officers such as an Assistant Commissioner or Range Superintendent whose offices are distinct and who are not obliged to forward the order to the Reviewing Authority. An inquiry dated 07.06.2012 found that the Order in Original dated 29.03.2010 and its corrigendum dated 10.05.2010 were not received in the RRA section or the CCE Cell of the Reviewing Authority. Given those findings and the recorded practice when the regular Commissioner was unavailable, the Tribunal accepted 18.11.2011 as the date on which the Reviewing Authority received the Order in Original. Counting from that date, the appeal filed on 02.02.2012 fell within the prescribed three month period and therefore was not time barred. [Paras 4]

The appeal before the First Appellate Authority was not time barred as it was filed within three months of the date of receipt of the order by the Reviewing Authority.

Remand for fresh adjudication - Relief to be granted once the Tribunal found the appeal to be timely. - HELD THAT: - Having concluded that the departmental appeal was filed in time, the Tribunal set aside the First Appellate Authority's order which had rejected the appeal as time barred and directed that the appeal be restored to its original number. The Tribunal did not decide the substantive merits of the departmental demand; instead it remanded the matter to the First Appellate Authority for disposal on merits after restoration. [Paras 5]

Order in Appeal dated 20.05.2013 is set aside; the appeal is restored and remitted to the First Appellate Authority to be decided on merits.

Final Conclusion: The Tribunal held that the departmental appeal was timely filed because the Reviewing Authority received the impugned order on 18.11.2011; it set aside the First Appellate Authority's order rejecting the appeal as time barred, restored the appeal to its original number and remanded the matter for fresh adjudication on merits.

Taxability of co-insurance (coinsurance) arrangements - service tax liability of co-insurers where lead insurer collects premium - no separate taxable service between lead insurer and co-insurers - avoidance of double taxation on the same consideration - penalties under the Finance Act, 1994 - effect of amendment to the definition of "insurer" effective 01.05.2006

Taxability of co-insurance (coinsurance) arrangements - service tax liability of co-insurers where lead insurer collects premium - no separate taxable service between lead insurer and co-insurers - avoidance of double taxation on the same consideration - Co-insurers' proportionate share of premium is not separately taxable as a service by the co-insurer where the lead insurer collects the entire premium and has discharged service tax on it, because no separate service is rendered by the lead insurer to the co-insurers. - HELD THAT: - The Tribunal noted that the dispute arose after the amendment to the definition of insurer effective 01.05.2006, but observed that the question is not res integra. The appellate record and the agreement between insurers show that the lead insurer collects the full premium from the insured and allocates shares to co-insurers according to their assumed risk. The only service in relation to the insurance contract is between the co-insurers collectively and the policyholder; there is no distinct service provided by the lead insurer to co-insurers except minor administrative acts. Where the lead insurer has collected the entire premium and discharged service tax on it, taxing the proportionate share received by each co-insurer would amount to taxing the same consideration twice. The Tribunal also took note of departmental acceptance of a similar view in LTU Chennai's Order-in-Original (dated 09.04.2008) and an internal clarification by the Commissioner, Service Tax-I, Mumbai, accepting the distinction between co-insurance and reinsurance and recognising the co-insurance position adopted by the lead insurer. On these grounds the Tribunal held that the co-insurer's share is not separately taxable as a service rendered by the co-insurer to the lead insurer or vice versa. [Paras 4, 5]

Demand of service tax on the proportionate premium received by the appellant as co-insurer is set aside.

Penalties under the Finance Act, 1994 - Penalties imposed on the appellant under the Finance Act, 1994 were not sustainable in the circumstances and were set aside. - HELD THAT: - Having concluded that the co-insurer's share was not a separate taxable service where the lead insurer had collected and paid service tax on the entire premium, the Tribunal found no justification for imposing penalties on the appellant under the relevant penal provisions of the Finance Act, 1994. The impugned order imposing equal penalty and penalty under the penal provisions was therefore reversed along with the substantive demand. [Paras 6]

Penalties imposed under the Finance Act, 1994 are set aside.

Final Conclusion: The appeal is allowed: the demand of service tax on the co-insurer's share of premium is quashed and the penalties imposed are set aside; the impugned order stands deleted.

Definition of manufacture under Section 2(f) of the Central Excise Act, 1944 - identifiable and marketable new product - conversion of ores into concentrates amounts to manufacture - extended period for assessment and one year limitation due to bona fide doubt - penalty for bona fide mistake not sustainable

Definition of manufacture under Section 2(f) of the Central Excise Act, 1944 - identifiable and marketable new product - Activities of crushing, grinding, washing and gravity separation of High Carbon Ferro Chrome (HCFC) Slag amount to manufacture and attract central excise duty insofar as the recovered HCFC is a new, identifiable and marketable product distinct from the slag. - HELD THAT: - The Tribunal found that the raw material (HCFC Slag) and the resultant HCFC fall under different tariff headings and that the processes of crushing, grinding, washing and gravity separation produced HCFC as an identifiable product having independent marketability. Consequently, the yardstick in the definition of 'manufacture' in Section 2(f) is satisfied. The subsequent insertion of Chapter Note 4 (relating to conversion of ores into concentrates) is not decisive for the period in question and does not alter the conclusion that the assessee's operations produced a distinct product. Reliance was placed on the reasoning in S.N. Sunderson (endorsed by the Supreme Court) to support the conclusion that such physical processes producing a different marketable commodity amount to manufacture. [Paras 6, 7]

Liability to central excise duty on clearance of HCFC is confirmed on the ground that the operations constitute manufacture.

Extended period for assessment and one year limitation due to bona fide doubt - Extended period for invoking duty beyond one year from the date of the show cause notice cannot be invoked owing to doubtfulness of coverage, and duty is therefore confirmed only for one year from the show cause notice. - HELD THAT: - The Tribunal noted that the question whether the processes amounted to manufacture was not free from doubt. In view of this bona fide doubt, the Revenue could not invoke the extended period of limitation beyond one year from the date of the show cause notice. Consequently, while duty liability is upheld, it is restricted to the one-year period. [Paras 7]

Duty confirmed only for a period of one year from the show cause notice; extended period cannot be applied.

Penalty for bona fide mistake not sustainable - Penalties imposed on the appellants are not sustainable and are set aside because non-payment of duty was a bona fide mistake. - HELD THAT: - Given the Tribunal's finding that the issue of whether the process amounted to manufacture was doubtful, the assessee's failure to pay duty was held to be a bona fide mistake. In such circumstances, imposition of penalties was inappropriate and therefore annulled. [Paras 7]

All penalties imposed on the appellants are set aside.

Remand for quantification - Quantification of central excise liability for the one-year period is remanded to the original authority for determination after affording opportunity of hearing. - HELD THAT: - The Tribunal remanded the matter to the Commissioner of Central Excise, Customs & Service Tax, BBSR-I to compute and quantify the duty liability applicable for the one-year period, directing that this exercise be completed within four months from receipt of the order and after giving the appellant an opportunity to be heard. [Paras 8]

Matter remanded to the original authority for quantification of duty for one year within four months after opportunity of hearing.

Final Conclusion: Appeal partly allowed: duty liability for manufacture of HCFC from HCFC Slag upheld but confined to one year from the show cause notice; penalties set aside; matter remanded to the Commissioner for quantification of duty for the one-year period within four months after affording opportunity to the assessee.

Fraudulent availment of CENVAT credit - corroboration of private records and statements - remand for reconsideration of clandestine clearance

Fraudulent availment of CENVAT credit - corroboration of private records and statements - The demand confirmed on account of alleged fraudulent availment of CENVAT credit was set aside. - HELD THAT: - The Tribunal reviewed the Commissioner(Appeals)'s examination of the evidence relied upon by the Department - private records seized from the factory, statements of the store-in-charge Shri G. Suresh and the statements of dealers. The Commissioner(Appeals) had noted rivalries in management and that the principal appellant had attributed culpability to other directors, creating potential collusion and doubt about the provenance of evidence. It was observed that statutory records and stock reconciliations at the time of search showed no discrepancies, and the case rested solely on private records and oral statements. The Commissioner(Appeals) found the store-in-charge was not a technical witness able to assess chemical consumption, that recollection of specific invoices amid many transactions was inherently unreliable, and that no further investigation was conducted into dealers (who were not made co-noticees), their accounts, or transport evidence. Quantification of inputs and outputs for the period was not carried out to establish mismatches necessary to prove fraudulent credit. On these bases the Tribunal found no fault with the appellate authority's conclusion that the evidence was insufficient to establish fraudulent availment of CENVAT credit and upheld the setting aside of the demand. [Paras 5, 6, 7, 8]

Appeal dismissed insofar as it challenged the setting aside of the demand for fraudulent availment of CENVAT credit.

Remand for reconsideration of clandestine clearance - The question of duty confirmed on clandestine clearance of goods was remanded to the adjudicating authority for reconsideration. - HELD THAT: - The Commissioner(Appeals) conducted a detailed review and concluded that the matter concerning clandestine removal of bulk drugs required reconsideration by the adjudicating authority. That remand was recorded by the appellate authority and left open for fresh adjudication rather than being finally decided on merits in the appeal before the Tribunal. [Paras 2, 5]

Issue remanded to the adjudicating authority for fresh consideration.

Final Conclusion: The Tribunal dismissed the Department's appeal challenging the setting aside of the demand for fraudulent availment of CENVAT credit, upholding the Commissioner(Appeals)'s finding of insufficient evidence; the separate issue of clandestine clearance was remanded to the adjudicating authority for reconsideration.

Valuation under Section 4 of the Central Excise Act - valuation under Section 4A of the Central Excise Act - sales promotion scheme / free distribution - requirement to print maximum retail price under the Standards of Weights & Measures (Packaged Commodities) Rules - applicability of departmental clarification dated 28-2-2002

Valuation under Section 4 of the Central Excise Act - valuation under Section 4A of the Central Excise Act - sales promotion scheme / free distribution - requirement to print maximum retail price under the Standards of Weights & Measures (Packaged Commodities) Rules - Whether goods sold to a purchaser for free distribution under a sales promotion scheme are to be valued under Section 4 of the Central Excise Act and not under Section 4A. - HELD THAT: - The Tribunal applied the decision of the Hon'ble Supreme Court in Jayanti Food Processing (KitKat) to the facts of the present case. The Supreme Court held that where a manufacturer supplies packaged goods to a buyer under a contract and the buyer distributes those packages free as part of a sales promotion scheme, such packages are not required to bear an MRP under the SWM (Packaged Commodities) Rules and hence the goods are not brought within the ambit of Section 4A. The determinative test is whether the package is statutorily required to declare the MRP; absence of such a requirement takes the transaction out of the restricted arena of Section 4A and into the broader valuation under Section 4. The Tribunal further relied on the departmental clarification (circular dated 28-2-2002) and the reasoning in Jayanti Food Processing that instances may arise where notified commodities would be partly assessed under Section 4A and partly under Section 4 depending on the requirement to print MRP. Applying that ratio to the appellant's sale of Maggie Noodles to a buyer for free distribution under a sales promotion scheme, the Tribunal concluded that the valuation must be governed by Section 4 and not Section 4A. [Paras 2, 4]

The impugned order affirming valuation under Section 4A is set aside and the appeal is allowed; the goods are to be valued under Section 4.

Final Conclusion: Applying the ratio of the Hon'ble Supreme Court in Jayanti Food Processing to identical facts, supplies of Maggie Noodles sold to a purchaser for free distribution under a sales promotion scheme are to be valued under Section 4 of the Central Excise Act rather than under Section 4A; the impugned demand is set aside and the appeal is allowed.

Valuation under Section 4A of the Central Excise Act, 1944 - valuation under Section 4 of the Central Excise Act, 1944 - MRP-based valuation with abatement - precedent of Jayanti Food Processing (Supreme Court) approving ITEL ratio

Valuation under Section 4A of the Central Excise Act, 1944 - valuation under Section 4 of the Central Excise Act, 1944 - MRP-based valuation with abatement - precedent of Jayanti Food Processing (Supreme Court) approving ITEL ratio - Refrigerators sold in bulk to soft drink manufacturers are to be valued under Section 4A and not under Section 4. - HELD THAT: - The Tribunal held that the question of whether refrigerators supplied in bulk to bottling/soft drink companies should be valued under Section 4A (MRP-based valuation with applicable abatement) or under Section 4 has been authoritatively settled by the Hon'ble Supreme Court in Jayanti Food Processing (which approved the Tribunal's reasoning in ITEL Industries). The Supreme Court recognised that where goods are packed declaring an MRP and duty has been paid on MRP with applicable abatement, the valuation falls under Section 4A and the analogy with the telephone cases (ITEL) is appropriate. The Court further noted that the Department remains free to act if, on verification, duty was in fact paid on the contract price rather than on MRP, subject to giving the assessee an opportunity to be heard. Applying that binding precedent, the Tribunal declined to re-open the issue and followed the Supreme Court ratio instead of the Revenue's contrary submissions and lower-court decisions relied upon by the Revenue.

The Revenue's appeal is dismissed and the valuation is governed by Section 4A, following the Supreme Court's decision in Jayanti Food Processing.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, holding that the valuation of refrigerators supplied in bulk to soft drink manufacturers is governed by Section 4A (MRP-based valuation with abatement), in view of the Supreme Court's decision in Jayanti Food Processing which endorsed the ITEL ratio; the Department may, however, verify whether duty was in fact paid on contract price and proceed if necessary after affording opportunity.

Ultra vires - compound levy scheme - survival of substantive liability for duty despite omission of scheme rules - non-recoverability of interest and penalty after omission

Ultra vires - compound levy scheme - survival of substantive liability for duty despite omission of scheme rules - non-recoverability of interest and penalty after omission - Whether the demand for duty, interest and penalty is sustainable where Rules 96ZO, 96ZP and 96ZQ (pertaining to the compound levy scheme) were held ultra vires or omitted. - HELD THAT: - The Tribunal examined the effect of the Gujarat High Court and Supreme Court decisions which held that the provisions in the challenged Rules could not validly impose interest and penalty in respect of the compound levy scheme. The Supreme Court in Shree Bhagwati Steel Rolling Mills endorsed Krishna Processors to the extent that Rules prescribing interest and penalty under the compound levy scheme could not be sustained; those remedies were held not available after omission of the scheme provisions. However, the Supreme Court and other High Court decisions clarify that omission of the scheme rules does not extinguish accrued substantive liability to pay duty arising while the scheme was operative. Applying these precedents, the Tribunal held that the levy of duty itself remains legally recoverable, whereas interest and penalty founded on the struck-down or omitted rules cannot be sustained and are to be waived.

Demand for duty is confirmed and sustainable; interest and penalty levied under the invalid/omitted rules are waived; appeal partly allowed to that extent.

Final Conclusion: The Tribunal modified the impugned order by upholding the demand for duty while waiving the interest and penalty imposed under the compound levy scheme rules held ultra vires; the appeal is partly allowed.

Cenvat credit on inputs used in the manufacture of capital goods - user test for classification as capital goods - inputs rendered immovable/embedded to earth and the 'goods' concept - definition of capital goods under the Cenvat Credit Rules - Explanation 2 - inputs used in manufacture of capital goods further used in the factory

Cenvat credit on inputs used in the manufacture of capital goods - user test for classification as capital goods - inputs rendered immovable/embedded to earth and the 'goods' concept - Allowability of Cenvat credit on MS angles, channels, plates and similar steel items used in fabrication of supporting structures for furnace plant and rolling mill - HELD THAT: - The Tribunal applied the user test as articulated by the Supreme Court and subsequent authorities to determine whether steel items used in fabrication of components, accessories or supports for machinery qualify as inputs/capital goods. It accepted that the disputed items were used in fabrication of components of machinery and capital equipment (kiln, conveyor system, raw material processing plant, pollution control equipment, silos etc.) and observed that mere embedding of resultant fabricated structures into the earth or their being part of a support structure does not ipso facto remove them from the category of goods or from being components/accessories of capital goods. The Tribunal relied on precedents favouring eligibility of steel items used in fabrication of capital goods and distinguished the contrary decision of the Allahabad High Court in Daya Sugar on the basis of differing facts. The Tribunal noted the legislative amendment excluding certain construction items with retrospective effect from 7.7.2009 and observed that the present demand relates to the period prior to that amendment. Applying those principles to the undisputed factual finding that the steel items were used in fabrication of capital goods, the Tribunal held that denial of credit on the basis that the fabricated structures became immovable was not sustainable and granted relief to the appellant.

Cenvat credit on the disputed steel items for the period April 2005 to August, 2007 is allowable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the orders denying Cenvat credit, holding that MS angles, channels, plates and similar steel items used in fabrication of components or supports of capital goods (for the period April 2005 to August, 2007) qualify for Cenvat credit pursuant to the user test and applicable authorities.

Entitlement to CENVAT credit on inputs used in fabrication and erection of capital goods - prospective operation of amendment to the definition of "input" (Explanation 2) effected on 07.07.2009 - CENVAT credit for goods used in repair and maintenance of plant and machinery - precedential effect of High Court and Tribunal decisions on retrospective application of statutory amendments

Entitlement to CENVAT credit on inputs used in fabrication and erection of capital goods - prospective operation of amendment to the definition of "input" (Explanation 2) effected on 07.07.2009 - Cenvat credit on steel structural items used for fabrication and erection of technological structures prior to 07.07.2009 is allowable and the amendment by insertion of Explanation 2 on 07.07.2009 cannot be applied retrospectively to deny such credit. - HELD THAT: - The period in dispute is July 2008 to July 2009 and the steel items were used prior to 07.07.2009. Explanation 2, inserted into the definition of "input" by notification dated 07.07.2009, excludes certain construction-related goods from being treated as inputs. The Tribunal relied on the Gujarat High Court's reasoning that the 07.07.2009 amendment was not a clarificatory amendment and, absent any legislative indication that it was declaratory, it must operate prospectively. The Larger Bench's contrary view was held to be based on conjecture regarding legislative intent. Consistent subsequent decisions of this Tribunal applying the Gujarat High Court view were noted. Applying these authorities to the facts, denial of cenvat credit by reference to the post facto amendment was not sustain able for goods used before the amendment's effective date. [Paras 5, 6]

Cenvat credit on the steel structural items used prior to 07.07.2009 is allowed.

CENVAT credit for goods used in repair and maintenance of plant and machinery - Cenvat credit on oxygen gas and welding electrodes used for repair and maintenance of plant and machinery within the factory is allowable for the period in question. - HELD THAT: - The Tribunal noted the Chhattisgarh High Court decision in Ambuja Cements Eastern Ltd. allowing credit on oxygen/argan gas and welding electrodes used for repair and maintenance, and observed that this Tribunal has followed the same approach in subsequent cases. Applying that settled position of law to the facts, credit for these inputs used for repair and maintenance within the factory premise was held to be admissible. [Paras 6]

Cenvat credit on oxygen gas and welding electrodes used for repair and maintenance is allowed.

Final Conclusion: The appeal is allowed; the adjudication and the Commissioner (Appeals) order denying cenvat credit are set aside and the cross-objection of the Revenue is disposed of.

Entitlement to use Cenvat credit despite debarring order - Refund of duty paid allowable on merits despite limitation objection - PLA debit versus Cenvat credit adjustment - Interest payable for period of debarment - Infructuous appeal

Entitlement to use Cenvat credit despite debarring order - PLA debit versus Cenvat credit adjustment - Interest payable for period of debarment - Tribunal's prior finding that the assessee was entitled to use accumulated Cenvat credit during the two month period of alleged debarment, and the consequent setting aside of departmental demands with direction to pay interest for that period. - HELD THAT: - The CESTAT, by Final Order No. 594-594/2011-Ex. dated 6.7.2011, held that notwithstanding the departmental view debarring the assessee from using Cenvat credit for two months following default, the assessee was nevertheless entitled to utilise the accumulated Cenvat credit during that period. The Tribunal set aside the departmental orders which sought to debit duty paid using Cenvat to PLA, while directing the assessee to pay interest for the two month period. On the material before the Tribunal and as recorded in the impugned proceedings, this controversy on entitlement and the correctness of the PLA adjustment has been finally determined in favour of the assessee on merits. [Paras 2, 6]

The Tribunal's finding in favour of the assessee on entitlement to use Cenvat credit and on the PLA adjustment (subject to interest for the two month period) is accepted as having been finally decided.

Refund of duty paid allowable on merits despite limitation objection - Infructuous appeal - Revenue's appeal against Commissioner (Appeals) order refusing to upset the Assistant Commissioner's view that refund was allowable on merits is dismissed as infructuous because the refund claim has been decided by the Tribunal and the question of limitation is pending before the High Court. - HELD THAT: - Following the CESTAT's decision on merits in favour of the assessee, the assessee filed a refund claim which the Assistant Commissioner had indicated was allowable on merits but rejected on limitation grounds by order dated 10.10.2006. The Revenue appealed against the Assistant Commissioner's observation that the refund was meritorious. However, because the Tribunal subsequently decided the substantive entitlement in favour of the assessee and the matter of limitation is the subject of proceedings before the High Court of Rajasthan, the Tribunal considers the present Revenue appeal to be rendered infructuous. The Tribunal therefore sees no purpose in adjudicating the Revenue's challenge to the Commissioner (Appeals) order in the circumstances. [Paras 3, 4, 6, 7]

Revenue's appeal is dismissed as infructuous in view of the Tribunal's prior adjudication on merits and the pending High Court proceedings on limitation.

Final Conclusion: The Revenue appeal is dismissed as infructuous: the CESTAT has already decided entitlement to use Cenvat credit and the refund claim on merits in favour of the assessee (with interest directed for the two month period), while the question of limitation is pending before the High Court.

Limitation under proviso to Section 11A - suppression of fact - time-bar of demand - SSI exemption under Notification No. 8/2000-CE

Suppression of fact - SSI exemption under Notification No. 8/2000-CE - Whether the appellant suppressed the fact of affixing another's brand name and thereby delayed disclosure to the Department - HELD THAT: - The Tribunal found that the agreement enabling use of the brand name was produced on 22.02.2001 and that the Department was therefore aware of the appellant clearing the product bearing another's brand during the period 22.02.2001 to 10.08.2001. The appellant had disclosed the arrangement and thereafter, from August 2001, began paying duty without claiming the exemption. The show-cause notice was issued only on 04.11.2003. On these facts the Tribunal held there was no later-uncovered concealment or suppression by the appellant; the facts were brought to the Department's notice prior to and during the clearance period and not unearthed subsequently.

No suppression of fact by the appellant; disclosure to the Department was made prior to and during the relevant clearance period.

Limitation under proviso to Section 11A - time-bar of demand - Whether the demand for duties could be raised despite the lapse of the statutory one year period under the proviso to Section 11A - HELD THAT: - Having concluded there was no suppression, the Tribunal applied the limitation principle under the proviso to Section 11A. Since the Department had knowledge of the material facts during the period of clearances and yet issued the show-cause notice well beyond one year (notice dated 04.11.2003), the demand could not be sustained. The Tribunal observed that, at the latest, the Department could have issued proceedings by 22.02.2002 (one year from disclosure) or upon appellant's payment of duty from August 2001, but failed to do so. Consequently the demand is time barred.

Demand is time barred under the proviso to Section 11A and the appeal is allowed on that ground.

Final Conclusion: The appellant's appeal is allowed: there was no suppression of material facts and the demand raised for the period 22.02.2001 to 10.08.2001 is time barred under the proviso to Section 11A; the impugned order is set aside.

Classification of goods - Classification of bituminous mixtures under CETH 27.15 - Bituminous mixtures, emulsions, suspensions and solutions - Application of precedent / stare decisis

Classification of bituminous mixtures under CETH 27.15 - Bituminous mixtures, emulsions, suspensions and solutions - Application of precedent / stare decisis - Product '2048 Solution' is classifiable under CETH 27.15 and not under CETH 3206.19. - HELD THAT: - Chemical testing established that '2048 Solution' is a dark brown, free-flowing liquid composed of bituminous materials in a medium of volatile organic solvent. The tariff description for CETH 27.15 covers "Bituminous Mixtures (including emulsions, suspensions and solutions) based on natural asphalt, on natural bitumen, on petroleum bitumen, on mineral tar or on mineral tar pitch", thereby encompassing preparations of bituminous materials in volatile organic solvents. The Tribunal followed the ratio of this Bench in Shalimar Paints Ltd. v. Commissioner of Central Excise, Calcutta, where similar preparations were held classifiable under CETH 27.15; that decision was affirmed by the Supreme Court. Applying that precedent and construing the tariff description in light of the product's composition, the Tribunal concluded that the product falls within CETH 27.15.

Allowing the appeal, the order-in-appeal dated 29.01.2007 is set aside and the product '2048 Solution' is held classifiable under CETH 27.15.

Final Conclusion: The Revenue's appeal is allowed; the product '2048 Solution' is held to fall within CETH 27.15 (bituminous mixtures, including solutions) and the first appellate authority's classification under CETH 3206.19 is set aside.

Set aside of confirmed excise demand - repetitive demands - shortage covered within accepted liability - effect of payment prior to Show Cause Notice under Sub section 2A of Section 11A of the Central Excise Act, 1944 - penalty under Section 11AC and Rule 25 - personal penalty on director

Set aside of confirmed excise demand - repetitive demands - shortage covered within accepted liability - The confirmed demands of Rs. 52,955/-, Rs. 62,481/- and Rs. 64,187/- were set aside. - HELD THAT: - The Tribunal found merit in the appellants' submission that the confirmed demands in question were either repetitive of amounts already covered by a larger liability which the appellants were not pressing, or related to a shortage that was subsumed within an accepted liability which had not been pursued. In light of those concessions and the overlap with the not pressed liability, the Tribunal allowed the appellants' contention and set aside the specific confirmed demands noted above.

Confirmed demands of Rs. 52,955/-, Rs. 62,481/- and Rs. 64,187/- are set aside.

Effect of payment prior to Show Cause Notice under Sub section 2A of Section 11A of the Central Excise Act, 1944 - penalty under Section 11AC and Rule 25 - personal penalty on director - Penalties imposed on the manufacturer under Section 11AC and Rule 25 and the personal penalty on the director were set aside. - HELD THAT: - The appellants contended, and the Tribunal accepted, that payment of liability (Rs. 11 lakhs) prior to issuance of the Show Cause Notice brought the proceedings within the scope of Sub section 2A of Section 11A of the Central Excise Act, 1944, whereby proceedings stand concluded on such payment. Applied to the present facts, this conclusion warranted setting aside the penalties imposed on the manufacturer and the personal penalty on the director. The Tribunal therefore modified the Order in Appeal to the extent of cancelling those penalties.

Penalties under Section 11AC and Rule 25 on the manufacturer and the personal penalty on the director are set aside.

Final Conclusion: The Tribunal partially allowed the appeals: the specified excise demands were set aside and the penalties imposed on the manufacturer and the director were quashed, with the impugned Order in Appeal modified accordingly.

Valuation of physician samples - transaction value under Section 4(1)(a) of the Central Excise Act, 1944 - non-application of Section 4A where transaction value is available - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Rule 4

Valuation of physician samples - transaction value under Section 4(1)(a) of the Central Excise Act, 1944 - non-application of Section 4A where transaction value is available - Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Rule 4 - Physician samples cleared by the assessee are to be valued by reference to the transaction value on sale where such transaction value is available, and Section 4A is not attracted in that situation. - HELD THAT: - The Tribunal applied the principle established in the assessee's own earlier decision (Final Order No.52513 of 2016 dated 4.7.2016) that when a transaction value for the impugned goods is available, valuation must follow Section 4(1)(a) of the Central Excise Act, 1944. On that basis, the Tribunal held that the alternate valuation provision under Section 4A does not apply. The Tribunal observed that similar conclusions have been reached in other decisions of the Tribunal, and therefore the Original Authority's valuation under Rule 4 of the Central Excise Valuation Rules, 2000 was not to be sustained where transaction value exists. Having regard to these precedents and the respondent's earlier order, the Revenue's challenge lacked merit.

Appeal by the Revenue dismissed and the Commissioner (Appeals) order setting aside the original demand is maintained.

Final Conclusion: The Revenue's appeal challenging the valuation of physician samples was dismissed; where a transaction value exists, valuation follows Section 4(1)(a) and Section 4A is inapplicable, consistent with the assessee's earlier Tribunal decision and other precedents.

Refund arising from finalisation of provisional assessment - timely filing of refund claim - application of bar of unjust enrichment to provisional assessment refunds - operation of proviso to Rule 9B(5) of the Central Excise Rules, 1944 w.e.f. 25.06.1999 - entitlement to interest on delayed refund after statutory provision came into force

Refund arising from finalisation of provisional assessment - timely filing of refund claim - application of bar of unjust enrichment to provisional assessment refunds - operation of proviso to Rule 9B(5) of the Central Excise Rules, 1944 w.e.f. 25.06.1999 - entitlement to refund of the amount claimed arising from finalisation of provisional assessment on 17.04.1997 - HELD THAT: - The Tribunal found that the four refund claims filed on 26.07.1993 related to assessments provisionally pending for the period January, 1993 to April, 1993 and were pending at the time of finalisation of price lists and provisional assessments on 17.04.1997. Since the proviso to Rule 9B(5) came into force only w.e.f. 25.06.1999, the bar of unjust enrichment enacted by that proviso was not applicable to refunds arising on finalisation of provisional assessments prior to that date. The Tribunal held that under Rule 9B the Assistant Commissioner should have allowed the refunds when finalising the provisional assessments on 17.04.1997, and that the refund claims filed on 26.07.1993 were within six months of payment and therefore timely. Consequently the appellant was held entitled to the refund of the claimed amount arising from finalisation of provisional assessment.

Appeal allowed and the appellant entitled to the refund claimed arising from finalisation of provisional assessment on 17.04.1997; Original Authority directed to pay the refund within sixty days of receipt of the order.

Entitlement to interest on delayed refund after statutory provision came into force - entitlement to interest on the refunded amount from the date the statutory provision for interest on delayed refund came into operation - HELD THAT: - The Tribunal directed that while implementing the refund, the Original Authority shall consider payment of interest on the refunded amount from the date provision for paying interest on delayed refunds became effective in the Central Excise Act, 1944. The appellant had relied on the enactment date of the interest provision in submissions; the Tribunal therefore left computation and payment of interest to the Original Authority in accordance with the statutory commencement of the interest provision.

Original Authority to take into consideration and pay interest on the refund from the date the statutory provision for interest on delayed refunds came into operation.

Final Conclusion: The Tribunal allowed the appeal, directed payment of the refunded amount relating to January, 1993 to April, 1993 within sixty days, and directed the Original Authority to consider and pay statutory interest from the date the provision for interest on delayed refunds came into operation.

Clearance of waste and scrap on job work basis under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - treatment of scrap as intermediate goods versus final product for job work benefit - applicability of standard input output norms for yield calculation - requirement of sample yield studies to rebut claimed recovery percentages - establishment of clandestine removal through evidence versus presumptive calculations

Clearance of waste and scrap on job work basis under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - treatment of scrap as intermediate goods versus final product for job work benefit - RFPL is not required to discharge Central Excise duty on intermediate goods/ingots manufactured as job work where inputs were received under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal applied settled precedent (Wyeth Laboratories Ltd. v. Collector of Central Excise, Bombay (Tribunal LB) and subsequent decisions) holding that goods sent out under the procedure now embodied in Rule 4(5)(a) remain eligible for the job work route so long as the scrap/waste is sent for conversion and returned to the principal for use in manufacture, and is not diverted for other purposes. Where the scrap is processed into ingots and returned and properly accounted for, there is no loss of revenue and no duty liability on the job worker. The adjudicating authority's demand could only be sustained if diversion for purposes other than reconversion were established, which was not the case on the record. [Paras 7]

No duty is leviable on the finished goods processed as job work under Rule 4(5)(a); the demand in respect of such processing is unsustainable.

Applicability of standard input output norms for yield calculation - requirement of sample yield studies to rebut claimed recovery percentages - establishment of clandestine removal through evidence versus presumptive calculations - Standard input output norm of 1 kg lead from 1.07 kg scrap is not universally applicable to the diverse categories of waste and scrap supplied by EIL; the department cannot rely on that norm without sample yield verification, and clandestine removal was not established by presumptive calculations. - HELD THAT: - The Tribunal examined the Foreign Trade Policy/ISRI specifications and concluded that the 1:1.07 input output ratio applies only to high grade, standard lead scraps (with metal content around 97% or more). The appellant received various inferior categories (sump paste, lead dust, scrap oxide, drosses, etc.) with materially lower expected recoveries. Absent any sample yield studies or direct evidence of clandestine clearances, the department's reliance on the standard norm and theoretical calculations to estimate excess production was inappropriate. Consequently the demand and penalties based on such application of I/O norms cannot be sustained. [Paras 9, 10]

The standard I/O norm of 1:1.07 is inapplicable to the non standard scrap received; in absence of sample yield tests or evidence of diversion, the demand and penalties are unjustified.

Final Conclusion: Both appeals are allowed: the adjudicating order dated 21/11/2013 is set aside - no duty liability or penalties are sustained in respect of processing carried out under Rule 4(5)(a), and the department's application of standard I/O norms without sample verification is rejected.

Cenvat credit - requirement of actual receipt of goods for admissibility of credit - claims based solely on invoices - recovery of Cenvat credit on non-existent supplies - admissibility of credit where supplier did not effect import or supply

Cenvat credit - requirement of actual receipt of goods for admissibility of credit - claims based solely on invoices - admissibility of credit where supplier did not effect import or supply - Whether Cenvat credit claimed by manufacturer appellants on the basis of invoices issued by an importer who did not import or supply the goods could be allowed - HELD THAT: - The Tribunal found on record that the original importer, M/s Sulabh Impex Incorporation, Delhi, had not imported the subject goods and that its proprietor admitted issuing Cenvatable invoices without supplying the goods. Those invoices were used by the manufacturer appellants to claim Cenvat credit. The appellants' contention that they had produced a complete chain of documents was considered but rejected in light of the factual finding that the goods were never imported or received. Given the absence of actual receipt/supply of goods and the admission by the supplier that only invoices were issued, the claimed credits were held to be inadmissible as they arose from non existent supplies and resulted in wrong allowance of Cenvat credit. [Paras 4, 5]

Appeals dismissed and the impugned orders sustaining disallowance/recovery of Cenvat credit upheld.

Final Conclusion: The appeals are without substance; the orders in original disallowing/recovering Cenvat credit (on invoices where the supplier did not import or supply goods) are sustained and the appeals are dismissed.

Deduction of tax at source - liability to file returns and pay tax - interest under Section 14(6) - credit by certificate of tax deduction - independent liabilities of contractor and contractee

Liability to file returns and pay tax - interest under Section 14(6) - credit by certificate of tax deduction - independent liabilities of contractor and contractee - Contractor's liability to pay interest for delayed payment of tax even where tax was deducted by the contractee but not deposited on time - HELD THAT: - The statutory scheme places primary liability for payment of tax on the contractor who must file periodic returns and pay the balance of tax due; Section 24 creates a parallel mechanism requiring contractees to deduct and deposit tax and to issue certificates to the contractor. Rule 33 prescribes monthly deduction by the contractee and deposit within fifteen days of month-end, and Rule 49 permits contractors to adjust amounts shown in such certificates against lump-sum quarterly payments. Nevertheless, liabilities to pay interest under Section 14(6) (for failure to pay tax as required by the Act and Rules) and liability to levy penalty on contractees under Section 24(6) are independent. A contractor cannot absolve himself of his return-filed tax and interest obligations merely by relying on presumed deduction by a contractee; the contractor is entitled to credit only upon production and due verification of the certificate of deduction and payment. Where assessment shows delayed deposit by contractee, interest may be levied on the contractor for delayed payment as per returns, and any benefit or refund arising from contractee's belated payment will be considered at assessment or refund proceedings. The Court preserved the distinct remedies against a defaulting contractee (penalty under Section 24) but held that such remedies do not extinguish the contractor's liability to interest under Section 14(6). [Paras 15, 16, 17, 18, 21]

Contractor is liable to pay interest under Section 14(6) for delayed payment of tax despite TDS mechanism; credit is available only on production and verification of the contractee's certificate, and liabilities of contractor and contractee are independent.

Final Conclusion: The appeal is disposed of by affirming that the contractor remains liable to pay tax and interest under the Act for the period 2006-07 notwithstanding deductions by contractees; claim of credit depends on production and verification of deduction certificates and the statutory remedies against contractees are separate and do not absolve the contractor of interest liability.

Assessment and re-assessment for escaped turnover under Section 31 of the Bihar VAT Act - Reason to believe test for reopening assessments - Change of opinion not a ground for reassessment - Deemed assessment under Section 26 of the Bihar VAT Act - Binding effect of Supreme Court decisions under Article 141 - Availability of alternative statutory remedy and scope of writ jurisdiction

Assessment and re-assessment for escaped turnover under Section 31 of the Bihar VAT Act - Reason to believe test for reopening assessments - Change of opinion not a ground for reassessment - Binding effect of Supreme Court decisions under Article 141 - Validity of re-assessment notices issued under Section 31 where reassessment was initiated solely on the basis of the subsequent Supreme Court decision in Nokia India - HELD THAT: - The Court held that Section 31 requires the prescribed authority to be satisfied that reasonable grounds exist to believe that turnover has been under-assessed or escaped assessment. Consistent with the judicial gloss on analogous provisions of the Income-tax Act, reassessment cannot be founded on a mere change of opinion. Where earlier assessments or reassessments under Section 31/33 had been completed and no new material, external to what was already before the authority, came into its possession, initiation of fresh proceedings solely because of the later Supreme Court decision (Nokia) would amount to a mere change of opinion and hence be beyond jurisdiction. The judicial principle in Kelvinator and subsequent authorities - that reopening must be supported by tangible material giving rise to a reason to believe and not by mere change of opinion or subsequent reversal of law - was applied. On this basis the Court quashed the impugned notices/orders in the group of matters which had prior assessment/reassessment on the same materials.

Re assessment notices and demand orders issued under Section 31/33 solely on the basis of the Nokia judgment, in matters which had earlier assessment/reassessment on the same materials, are quashed as based on mere change of opinion and without jurisdiction.

Deemed assessment under Section 26 of the Bihar VAT Act - Availability of alternative statutory remedy and scope of writ jurisdiction - Assessment and re-assessment for escaped turnover under Section 31 of the Bihar VAT Act - Whether writ relief should be granted in cases where there was no prior assessment (deemed assessments) and reassessment proceedings were initiated after the Supreme Court decision - HELD THAT: - The Court distinguished matters where there was no earlier assessment or reassessment. In deemed assessment cases under Section 26/assessment under Section 27, if the authority had not formed an opinion at the time of deemed assessment, issuance of notices under Section 31 subsequent to the Nokia decision does not, by itself, amount to a prohibited change of opinion. Because issues of fact and detailed scrutiny of returns and sales particulars are required to determine liability, the Court held that writ jurisdiction is not the appropriate forum to decide these factual controversies. The petitioners in these matters therefore must pursue statutory remedies before the statutory authorities and tribunals; the Court refused to interfere by writ.

Writ petitions challenging reassessment in cases of deemed assessment are dismissed for want of appropriate forum; petitioners must exhaust statutory remedies, with directions for stay/appeal procedure as indicated.

Final Conclusion: The Court quashed reassessment notices and demand orders in matters where prior assessment/reassessment existed and the only new basis for reopening was the Supreme Court's decision, holding such re-opening to be a mere change of opinion and without jurisdiction. In matters of deemed assessment, the Court declined writ interference and directed petitioners to pursue statutory remedies, permitting them to file appeals and stay applications within a limited period.

Membership card of a stock exchange as an 'asset' for wealth tax purposes - definition of 'asset' under Section 2(e) of the Wealth Tax Act, 1957 - distinction between defaulting and non defaulting member - membership right as a licence or commercial/business right akin to a licence - precedential effect of Supreme Court decisions distinguishing defaulting and non defaulting members - liability to Wealth Tax while continuing to hold membership card

Membership card of a stock exchange as an 'asset' for wealth tax purposes - distinction between defaulting and non defaulting member - definition of 'asset' under Section 2(e) of the Wealth Tax Act, 1957 - membership right as a licence or commercial/business right akin to a licence - Whether the Stock Exchange Card held by the assessee is an 'asset' liable to Wealth Tax under the Wealth Tax Act, 1957 - HELD THAT: - The Court held that the decisions of the Supreme Court in Vinay Bubna and Stock Exchange, Ahmedabad concerned defaulting members whose membership rights vest in the Exchange on default and thus are not assets of the member. Those decisions are therefore not apposite to a case where the assessee continues to hold the card and is a non defaulting member. The Court accepted the Supreme Court's reasoning in MS Techno Shares & Stocks Ltd that the membership right of a non defaulting, continuing member is a commercial right akin to a "licence" (falling within the concept of an intangible/business right) and so has economic value and may be treated as an asset. Applying that principle, and having regard to the Rules/Byelaws analysis in MS Techno and the distinction drawn by earlier Supreme Court authorities, the Court concluded that so long as the assessee continues to hold the membership card and remains a non defaulting member the card is an "asset" within the meaning of Section 2(e) of the Wealth Tax Act, 1957 and is liable to Wealth Tax. [Paras 9, 10, 12, 13]

The Stock Exchange Card held by the non defaulting assessee is an asset within Section 2(e) of the Wealth Tax Act, 1957 and is liable to Wealth Tax.

Final Conclusion: The substantial question is answered in favour of the Revenue and against the assessee: while the member continues to hold the Stock Exchange Card as a non defaulting member, the card is an "asset" liable to Wealth Tax. The appeal is dismissed.

Conviction under Section 138 read with Section 141 of the Negotiable Instruments Act - single transaction rule for concurrent sentences - concurrent running of substantive sentences - default sentence in lieu of fine / imprisonment in default of payment of compensation - limits on imprisonment in default of fine under Section 30 Cr.P.C. - sentence in default of payment of compensation under Section 357(3) Cr.P.C. - charging of offences together under Section 219 Cr.P.C.

Conviction under Section 138 read with Section 141 of the Negotiable Instruments Act - Convictions in the eighteen complaint cases under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 - HELD THAT: - The High Court affirmed the conviction of the revisionists in the eighteen complaint cases. The record shows issuance of multiple cheques on 31.03.2010 to meet a single outstanding liability to the respondent (a government company), presentation and dishonour of those cheques within the statutory period, and service of demand notices; payment was not made within the prescribed time. These facts attract penal liability under Section 138 read with Section 141, and the Court found no ground to interfere with the findings of guilt recorded by the courts below. [Paras 24, 25, 30]

Convictions under Section 138 read with Section 141 upheld.

Single transaction rule for concurrent sentences - concurrent running of substantive sentences - charging of offences together under Section 219 Cr.P.C. - Whether the substantive sentences awarded in the eighteen complaint cases should run consecutively or concurrently - HELD THAT: - The Court accepted that all the cheques issued on the same date were in relation to one single transaction and one cause of action. Applying the principle that offences arising out of a single transaction should attract concurrent substantive sentences (subject to distinctness of offences), the Court held that the substantive sentence awarded by the trial court ought to run concurrently rather than as separate consecutive terms. Reliance was placed on the single transaction approach and relevant authority recognising concurrency of substantive sentences where offences arise from the same transaction. [Paras 25, 30]

Substantive sentence modified so that the revisionist Mr. Satpal Jain shall undergo simple imprisonment for one year (concurrently) in relation to the convictions.

Default sentence in lieu of fine / imprisonment in default of payment of compensation - limits on imprisonment in default of fine under Section 30 Cr.P.C. - sentence in default of payment of compensation under Section 357(3) Cr.P.C. - Validity and quantum of default sentences imposed in each complaint case for non-payment of the compensation/fine - HELD THAT: - The Court examined Section 30 Cr.P.C. which restricts imprisonment in default of fine to one-fourth of the substantive sentence where imprisonment has also been awarded as part of the substantive sentence. The trial court had imposed, in each complaint, a substantive sentence of one year and a default sentence of six months (exceeding the one-fourth limit of three months). Considering statutory limits and the nature of compensation awarded under Section 357(3) Cr.P.C., the High Court held that the default sentence as awarded exceeded the permissible limit and therefore required modification. The Court also noted that the learned Magistrate could have fixed compensation not exceeding twice the cheque amount under Section 138, but preserved the intent to recover government money while ensuring statutory limits on default imprisonment are respected. [Paras 26, 28, 30]

Default sentence in each complaint reduced so that in case of default of payment of compensation, Mr. Satpal Jain shall undergo simple imprisonment for three months in each complaint case.

Sentence in default of payment of compensation under Section 357(3) Cr.P.C. - Compensation awarded and procedural directions regarding recovery and further action - HELD THAT: - The Court maintained the order that the revisionists (company and Mr. Satpal Jain) are liable to pay compensation of Rs. 51 lakhs in each complaint to the respondent within thirty days under Section 357(3) Cr.P.C. The Court directed the respondent to pursue civil remedies as well, subject to limitation, and additionally directed departmental action if civil recovery steps were not taken within the statutory limitation period, observing the public interest element given that the respondent is a government company. [Paras 30, 31]

Revisionists liable to pay compensation of Rs. 51 lakhs in each complaint within thirty days; respondent directed to take civil action and departmental compliance where necessary.

Final Conclusion: Convictions under Section 138 read with Section 141 are affirmed. Substantive imprisonment is ordered to run concurrently: Mr. Satpal Jain to undergo simple imprisonment for one year; the revisionists are jointly liable to pay Rs. 51 lakhs as compensation in each complaint within thirty days. Default imprisonment in each complaint is reduced to three months for Mr. Satpal Jain. The respondent is directed to pursue civil remedies subject to limitation and to take departmental action where necessary.

Validity of Section 145A of the Gujarat Act - Taxation of mobile towers as taxes on lands and buildings - Inclusive meaning of 'land' and 'building' in Entry 49 List II of the Seventh Schedule - Interpretation of a Legislative Entry in the Seventh Schedule - Co-existence of State and Union legislative fields - Occupier liability for property tax

Validity of Section 145A of the Gujarat Act - Taxation of mobile towers as taxes on lands and buildings - Inclusive meaning of 'land' and 'building' in Entry 49 List II of the Seventh Schedule - Interpretation of a Legislative Entry in the Seventh Schedule - Occupier liability for property tax - Levy of tax on mobile towers under the Gujarat Act is constitutionally competent as a tax on lands and buildings and Section 145A is not ultra vires Entry 49 List II. - HELD THAT: - The Court held that the vires of a statute under Entry 49 List II must be tested by the meaning of the constitutional Entry and not by definitions contained in the statute itself. Applying established principles of constitutional interpretation - inclusive, broad and dynamic construction of legislative Entries - the expressions 'land' and 'building' in Entry 49 can reasonably be extended to include structures and appurtenances used for mobile towers. Technical description of a mobile tower (including BTS cabin and ancillary fixtures) and the incidence of the levy (calculated with reference to rateable value of land/building and imposed on the person occupying the premises) demonstrate that the tax is on the use of land or building for telecommunication purposes, not on telegraphy per se. Co-existence of Union and State fields does not preclude State taxation where the subject of the levy falls within Entry 49. Accordingly, the Gujarat High Court's declaration of Section 145A as ultra vires was set aside and the levy upheld. [Paras 24, 28, 30, 31, 33]

The Gujarat High Court's declaration that the levy on mobile towers under Section 145A (read with Section 127(1)(c)) was unconstitutional was set aside; the levy is within the competence of the State under Entry 49 List II.

Retrospective operation of assessment - Quantum of tax - Whether assessments/demands were retrospectively raised and the correctness of the quantum of tax were not adjudicated and are left open for challenge before the appropriate forum. - HELD THAT: - The Court confined its decision to the constitutional competence to levy the tax and did not decide issues relating to retrospective operation of assessments or the quantum demanded. Cellular operators in the Bombay cases were permitted to agitate challenges relating to retrospective assessments and amounts before the appropriate forum. [Paras 33]

Challenges as to retrospective operation of assessments and the quantum of tax are left open to be raised before the appropriate forum.

Final Conclusion: The appeals and writ petitions are allowed to the extent of upholding the competence of the State to levy tax on mobile towers as within Entry 49 List II; the Gujarat High Court's contrary order is set aside. Challenges concerning retrospective assessments and the quantum remain open for adjudication by the appropriate forum.