TaxTMI 
TaxTMI 
2026 (8) TMI 790
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....ncome tax returns and the ST-3 returns. The appellant had availed CENVAT credit on input services used exclusively for trading activity; and they had availed common input service credit (such as telephone and courier services) used for both trading and taxable services without reversing the proportion attributable to trading as provided in the CENVAT Credit Rules, 2004 (Rules). After issue of SCN dated 23.04.2014 and following due process the Adjudicating Authority confirmed the duty for the period October 2008 to June 2012 and ordered recovery of irregularly availed CENVAT credit, along with interest and imposed penalties under relevant provisions of the Finance Act 1994 (Act). On appeal, the Commissioner (Appeals) partly allowed the appeal by reducing the demand on common input service credit. Aggrieved by the Order, the appellant is now before this Tribunal. 3. The learned Advocate Shri Shiva Kumar G appeared for the appellant and Ld. Authorized Representative Smt. G. Krupa appeared for the respondent. Submissions made by the Appellant 3.1 Shri Shiva Kumar G the Ld. Counsel for the appellant stated as follows, in his oral and written submissions: A. Issue 1 - Short P....
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....f goods sold, whichever is more. Without prejudice, if trading is treated as exempt even before 31.03.2011, the same clarificatory valuation must apply for that earlier period as well. The Department has adopted total trading turnover, whereas the Appellant submits that only 10% of cost, and not total sale value, can be taken even up to 31.03.2011. This approach is supported by Mahindra Holiday & Resorts India Ltd. (2018 (9) TMI 316) and TFL Quinn India Pvt. Ltd. (2016 (6) TMI 230), which held that the post-01.04.2011 formula provides the most rational basis even for earlier periods. B.4 Limitation for CENVAT Credit Reversal The demand up to March 2012, forming the major part of the case, is time-barred. The extended period is unavailable for the following reasons: (a) No allegation in the SCN for the period up to 31.03.2011 • Paragraph 10 of the SCN (Type Set, p. 118) alleges knowledge only from 01.04.2011, and repeats that date twice. • There is no allegation of suppression for any prior period. • Under H.M.M. Limited (1995 (1) TMI 70), suppression must be specifically pleaded in the SCN; otherwise the extended period fails. ....
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....clearly established and remains recoverable with interest and penalty. D. The assessee has admitted the short payment of of Rs. 81,812/- and contests only limitation. The plea of limitation on this issue and in general, as averred by the Appellant is devoid of merit. Since trading is not at all an activity or a service covered by the CENVAT scheme even prior to the introduction of clarificatory explanation, the question of any confusion on interpretation with competing legal provisions was not demonstrated. The discrepancy was within the assessee's own knowledge, and suppression of the information in the returns was with an intention to evade payment of tax hence the extended period of demand under the proviso to Section 73(1) squarely applies. E. Trading is not a service and is hence not an eligible output activity for availment of CENVAT credit. Credit attributable to trading is plainly inadmissible. F. The assessee neither exercised the statutory option under rule 6(3) of the Rules, nor paid the prescribed amount, nor reversed proportionate credit under rule 6(3A). Having failed on every count, it cannot now resist recovery. Its payment of Rs. 10,41,791/- towards tradin....
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.... credit 65,172 45,90,068 46,55,240 (b) Short payment of tax - 81,812 81,812 Total Demand as per OIO - 46,71,880 47,37,052 Demand in OIA (a) CENVAT credit 65,172 42,50,723 43,15,895 (b) Short payment of tax - 81,812 81,812 Total Demand as per OIA 65,172 43,32,535 43,97,707 Tax paid (incl. under protest) (a) CENVAT credit 37,68,180 (b) Short payment of tax 81,812 Total Demand paid 38,49,922 We take up the issues for discussion; Analysis 6. We find that the SCN dated 23.04.2014 covers the period October 2008 to June 2012. Prior to 28.05.2012, the normal period under Section 73(1) of the Act, was one year from the relevant date as indicated under Section 73(6) of the Act. With effect from 28.05.2012, the Finance Act, 2012 extended the normal limitation period from 'one year' to 'eighteen months'. Even by applying the extended period of eighteen months, the entire demand in the SCN falls beyond the normal limitation period and can be sustained, if at all, only by invok....
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....of the events, a proper threefold scrutiny would be necessitated: first, whether the demand is sustainable on merits; second, whether it falls beyond the normal period of limitation; and third, whether the Department has established, by cogent evidence, deliberate suppression or willful misstatement with intent to evade Service Tax. Accordingly, the merits of the demand must be examined first. Only if the demand survives on merits does the question of examining the valid invocation of the extended period arise. We hence proceed accordingly." (emphasis added) 6.3 In the current appeal the issue has been pleaded to be an interpretational one based on an explanation being introduced by the appellant. However it is Revenues case that there was never an ambiguity in the law and the appellant has tried to enrich himself at the cost of the exchequer. The issue cannot be determined on the face of the record and would require examination of facts. We proceed to examine the issues involved on merits. Short payment of Service Tax 7. We find that the short payment of Service Tax due to difference between the value of taxable service shown by the Appellant in the ST-3 Return and in ....
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....97,207 Proportionate area premises used for service activity 41% 33% CENVAT credit relating to service activity 5,04,582 3,29,078 9. Revenue has resisted the Appellants plea regarding partial use of rented premises for taxable services as being wholly unsupported. It is their contention that no reliable material was produced before issuance of the show cause notice. Hence the rejection of the Appellants contention in the impugned order calls for no interference. 9.1 It is settled law that the initial burden to establish taxability rests upon the Revenue. [K.P. Varghese Vs The Income Tax Officer, Ernakulam. [1981 AIR 1922 / 1982 SCR (1) 629]. However, when the Department provides the foundational facts necessary to attract the charging provision by way of a SCN, the burden shift to the assessee to establish any exemption, exclusion or other benefit claimed. In the present case, the appellant produced layout plans before the Original Authority showing distinct areas for sales and service, thereby meeting the allegation in the notice that the premises were not used exclusively for trading. The burden, therefore, shifted back to the Revenue. Revenue neither veri....
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.... 10.2 On examining the issue we agree with Revenue that trading is not an eligible output activity for availing CENVAT credit and credit attributable thereto is inadmissible. The Hon'ble Delhi High Court in Lally Automobiles, (which was affirmed by the Hon'ble Supreme Court), held that input credit is admissible only to the extent inputs/input services are used for providing output services. Trading is not a service. A deemed fiction was created by naming 'trading' as an exempted service by way of explanation in rule 2(e) of the Rules with effect from 01.04.2011. However, prior to creation of such fiction, there was no scope at all even to consider the trading activity to be covered under the credit scheme. Hence where an assessee undertakes both taxable services and trading, credit attributable to trading must be excluded. On the issue of invocation of the extended period, the Revenue has relied upon the decision of the Hon'ble Delhi High Court in Lally Automobiles. As the said judgment contains definitive findings on the issue, it is dealt with separately. Formula for computing credit of Service Tax on trading activity 11. Further the Appellant has disputed the formula for....
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....deemed exempted service and Rule 6(3D)(c) of CENVAT Credit Rules clearly provided for the formula to arrive at the amount that has been reversed. However, for the period prior to 1.4.2011, there was much confusion as to whether trading is an exempted service or can be considered as service at all. In Ruchika Global Interlinks Vs. Commissioner of Central Excise - 2017-VIL-323-MAD-ST, the jurisdictional High Court has held that the trading is to be considered as an exempted service prior to 1.4.2011 also. After going through the records and hearing the submissions made by both sides, we find that the Tribunal in the case of TFL Quinn India (supra) has adopted the formula that has been laid in CENVAT Credit Rules with effect from 1.4.2011 to be more appropriate to be applied for the period prior to 1.4.2011 also. We find ourselves in agreement with such view of the Tribunal. Therefore, in our view, the appellant is required to reverse the credit as per the formula in Rule 6(3D)(c) of CENVAT Credit Rules, 2004 in respect of trading. However, the said amount has to be quantified. The appellant also contends that they have reversed the said amount pertaining to trading. This requires ver....
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....ly, the apportionment as provided in Rule 6(3)(c) would get triggered. This is apparent, upon a bare perusal of Rule 6(3)(c) the relevant part of which is as follows. RULE 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. - (1) xxxx (2) xxxx (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely :- (a) xxxx (b) xxxx (c) The provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of Service Tax payable on taxable output service 11. Having regard to the rule, position and given the admitted fact that no separate accounts were maintained by the appellant, with regard to the taxable and non-taxable services, clause (c) of sub-rule (3) of Rule 6 of 2004 Rules would apply." (emphasis added) Rule 6(3)(c) of the Rules provides the substantive mechanism for discharge of obligation in respect of common credit attribu....
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....put-service tax credit on an output which is neither a service nor excisable goods. There is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation, the only correct legal position appears to be that it is for the assessee to segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availing credit. This cannot be done in advance as it may not be possible to foretell the quantum of trading activity as compared with taxable activity. The obvious solution would be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of Service tax of output service. 17. In the present case, the assessee's argument that there is no mechanism to reverse credit, once taken, in the opinion of this Court, cannot be accepted. The assessee was well aware of the exact nature and extent of its service tax liability. It was ....
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....ted against the Judgment of Delhi High Court. The judgment is extracted below: "Delay condoned. We have heard Learned Counsel appearing for the appellant and perused the impugned order passed by the High Court of Delhi. In our considered view, the reason assigned by the High Court in passing the impugned order needs no interference as the same is in consonance with law. Accordingly, there is no merit in the appeal and [it] is dismissed." (emphasis added) The judgment having examined the merits of the Hon'ble High Court order found that the reason assigned by the High Court in passing the impugned order needed no interference as the same is in consonance with law. Its correctness cannot be doubted by a subordinate Authority. An authoritatively determined question of law by a High Court governs future cases involving the same or analogous issues, under its jurisdiction. When that receives the studied approval of the Apex Court it is binding on all courts and Tribunals etc within the country. Consequently, a person cannot claim the benefit of an earlier contrary decision after the Supreme Court has authoritatively declared the law. Unless t....
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.... above, it is clear that the position was clarified by the Government by insertion of Explanation only with effect from 1.4.2011 that the trading activity will be Exempted Services. The Explanation is clarificatory in nature and can be held to be applicable even for the past period. Thus, at the relevant period of time, viz., from April 2009 to March 2011, the Assessee was, obviously, under bona fide belief in view of the conflicting decisions of the Tribunals during that period and taking the trading activity as Exempted Services, availed the CENVAT Credit which is sought to be reversed and recovered by the Department invoking the extended period of limitation. Such a bona fide belief cannot be held to be done with ulterior purpose for evading the Duty and therefore, the extended period of limitation would not be available to the Revenue Authority in view of the aforesaid decision rendered by the Hon'ble Supreme Court. (emphasis added) We find that the judgment of the Hon'ble Delhi High Court and its affirmation by the Hon'ble Supreme Court in Lally Automobiles (supra), were not brought to the notice of the Hon'ble High Court. 11.8 Further Revenue has relied upon the ....
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....for discussion in Larsen & Toubro Ltd. Vs Commissioner Service Tax, Delhi [2013-TIOL-1458-CESTAT-DEL], Justice G. Raghuram, then President, CESTAT, speaking for the Bench stated as under: "14. On principle and in the light of the observations of the Delhi High Court in Puri (P.C.) [Puri (P.C.) Vs Commissioner of Income Tax - (1985) 151 ITR 0584 / ILR 1984 DELHI 134], we are of the considered view that wherever pursuant to a conflict opinion in a decision by a Division Bench, the conflict is referred to a third member of this Tribunal for resolution, the resultant judgment must be considered the judgment of a full Bench, as if it were a judgment of a Larger Bench (three Ld. Member) sitting en banc." (emphasis added) As per a well-accepted norm of judicial discipline a Bench of lesser quorum, as in the case of this Bench, is bound to follow the view taken by Bench of larger quorum, in a case whose ratio covers the legal issue involved in the impugned matter, as in the case of the Dorma India (supra) Order, particularly as it is founded on the High Court judgment in Lally Automobiles (supra), which authoritatively settles the question of law involved and has been affirm....
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....ivity of LPG cylinders sold in their brand name as well as for providing output services of packing and storing LPG for BPCL, this Tribunal while setting aside the demand for the extended period on the ground of limitation, has however sustained the demand for the normal period. The appellants have not shown that the aforementioned Final Order has been set aside and thus, inter se the parties, the same has attained finality. In such circumstances, in the light of the decisions of the Honourable High Courts of Madras and Delhi as well as the Tribunal decisions cited above, we find that the Tribunal decisions relied on by the appellants for seeking relief, cannot come to the aid of the appellants in this case." (emphasis added) Hence the appellant's reliance on the above decision on the issue of invocation of the extended period is misplaced and is of no assistance in the facts of the present case. Interest 15. It is seen that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon'ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CX], in a case....
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....ction. [Also see: JK Steel Vs Union of India - 1978 (2) E.L.T. (J355) / Sanjana Vs Elphinestone Spinning & Weaving Mills - 1978 (2) E.L.T. (J399)]. The Hon'ble Supreme Court in Dharampal Satyapal Ltd. Vs Dy. Commissioner of Central Excise [2015 (320) ELT 3 (SC)] clarified that not every procedural lapse vitiates proceedings; the decisive test is whether prejudice is caused. In any case as discussed above the provision is seen satisfied in this case. However, the penalty imposed in the impugned order, would have to be re-worked out in the light of our findings above. 16.2 Penalty under section 77(2) of the Act has been imposed for not declaring the correct taxable value in the ST-3 return. The section is a residuary section which states that any person, who contravenes any of the provisions of this Chapter or any rules made there under for which no penalty is separately provided in this Chapter, shall be liable to a penalty which may extend to ten thousand rupees. The Act does not contain a separate provision which specifically carries a penalty for "not declaring the correct taxable value" in the ST-3 return. Hence recourse to the residuary provision in a case involving suppress....
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....ed Brother Shri. M. Ajit Kumar, Member (Technical). I wholly agree with the final outcome recorded in paragraph 17(ii) and 17 (iii), and also with the finding in paragraph 17(i) that the impugned order disallowing CENVAT credit attributable exclusively to trading activity is to be upheld, as well as the necessity to re-quantify the demand by applying the formula prescribed under rule 6(3D) (c). However, given that the demand has been upheld for the extended period by Ld. Member (Technical) in the order, with respect, my concurrence is limited to that expressed above as I am of the view, for reasons elaborated below, that extended period of limitation cannot be invoked and the demand is to be confined to the normal period. I am also of the view that penalty is not imposable in the instant case and therefore, while agreeing with the directions given to the Original Authority for denovo proceedings, the said directions, in my opinion, are to be confined only to the demand within the normal period along with applicable interest due thereon as elucidated infra. 19. To appreciate whether the extended period of limitation could have been invoked, it would therefore be appropriate to re....
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....ighteen months", the word "five years" has been substituted. 22. The "relevant date‟ has been defined in section 73 (6) of the Finance Act as follows: "73 (6) For the purposes of this section, "relevant date" means, - (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of s....
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.... as the case may be." 21. The meaning of the words 'wilful misstatement' and 'suppression of facts' has been a subject matter of judicial scrutiny in various Supreme Court judgments which are necessary to be discussed before proceeding to the merits of this case. However, these words have been interpreted as given in Sections 28 of the Customs Act, 1962 (hereinafter referred to as "the Customs Act") and 11A of the [Central] Excise Act, 1944 (hereinafter referred to as "the Excise Act"). In order to determine if the same interpretation extends to Section 73 of the Act the following decisions of the Supreme Court have to be looked at. In the case of Uniworth Textiles Ltd. v. Commissioner of Central Excise, Raipur [(2013) 9 SCC 753 = 2013 (288) E.L.T. 161 (S.C.)] the Supreme Court discussed its previous judgments to determine the applicability of the proviso to Section 28 of the Customs Act for extension of limitation period for issuing notice for payment of duties that have not been levied, short-levied or erroneously refunded. The relevant paragraphs of the judgment are excerpted below: "9. The show cause notice was issued on 2-8-2001, more than six months after th....
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....Customs Act like Section 73 of the Act (in this case) relates to notice for payment of duty that has not been levied, short-levied or erroneously refunded. The proviso to Section 28 of the Customs Act and the proviso to Section 73(1) of the Act, both set out conditions for extension of limitation period for issuing of a Show Cause Notice. The difference between the two sections lies in the insertion of conditions of 'fraud' and 'contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of Service Tax' in Section 73 of the Finance Act, 1994. In Uniworth (supra), the Supreme Court discussed the interpretation of the proviso of a similar provision in Section 11A of the Excise Act and held that it is pair materia to the proviso to Section 28 of the Customs Act. The relevant paragraphs are excerpted below: "13. This Court, in Pushpam Pharmaceuticals Co. v. Collector of Central Excise, Bombay [1995 Supp (3) SCC 462], while interpreting the proviso of an analogous provision in Section 11A of The Central Excise Act, 1944, which is pari materia to the proviso to Section 28 discussed above, made the following observations: ....
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....rrect to say that there can be a suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Misstatement or suppression of fact must be wilful. The aforesaid observations show that the words "with intent to evade payment of duty" were of utmost relevance while construing the earlier expression regarding the misstatement or suppression of facts contained in the proviso. Reading the proviso as a whole the Court held that intent to evade duty was essentially before the proviso could be invoked. 55. Though it was sought to be contended that Section 28 of the Customs Act is in pari materia with Section 11A of the Excise Act, we find there is one material difference in the language of the two provisions and that is the words "with intent to evade payment of duty" occurring in proviso to Section 11A of the Excise Act which are missing in Section 28(1) of the Customs Act and the proviso in particular.... 56. The proviso to Section 28 can inter alia be invoked when any duty has not been levied or has been short-levied by reason of collusion or any wilful misstatement or suppressi....
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....se acts. And, therefore, in Uniworth (supra), the judgments of the Supreme Court interpreting the proviso to Section 11A of the Excise Act were applied in the interpretation of the proviso to Section 28 of the Customs Act. 25. The meaning of the phrase pari materia has been explained in an American case in the following words: "Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things. The word par must not be confounded with the word simlis. It is used in opposition to it - intimating not likeness merely but identity. It is a phrase applicable to public statutes or general laws made at different times and in reference to the same subject." [United Society v. Eagle Bank, (1829) 7 Connecticut 457, p. 470, as cited in CRAIES, Statute Law, p. 134 (7th Edition)]. The provisos to Sections 11A of the Excise Act, 28 of the Customs Act and Section 73 of the Finance Act, refer to the same class of persons, i.e., persons from whom tax has been not been levied, or has been short-levied or erroneously refunded. The subject matter of these provisos is issuance of a Show Cause Notice in order to collect such tax. Further, there seem....
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....m the relevant date. On the other hand, the demand for duty in relation to extended period is mentioned in the proviso to Section 11A (1). Under that proviso, in cases where excise duty has not been levied or paid or has been short-levied or short-paid or erroneously refunded on account of fraud, collusion or wilful misstatement or suppression of facts, or in contravention of any provision of the Act or Rules with the intent to evade payment of duty, demand can be made within five years from the relevant date. In the present case, we are concerned with the proviso to Section 11A (1). 24. In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay [(1995) 6 SCC 117], this Court held that intention to evade duty must be proved for invoking the proviso to Section 11A (1) for extended period of limitation. It has been further held that intent to evade duty is built into the expression "fraud and collusion" but misstatement and suppression is qualified by the preceding word "wilful". Therefore, it is not correct to say that there can be suppression or misstatement of fact, which is not wilful and yet constitutes a permissible ground for invoking the proviso to Sec....
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....tended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention. 28. In the present case, the Revenue argues that appellant wilfully suppressed the value of taxable services and thus did not discharge its liability of paying the Service Tax on same. The contention of the appellant is that the appellant was under a bona fide belief that the appellant was not liable for payment of Service Tax for the Mandap Keeping and Management, Maintenance and Repair Services. The appellant has supported the non-payment of Service Tax for Mandap Keeper Services by Notification No. 12/2003-S.T. It also states that, during the enquiry itself, it paid Service Tax on the sale of the above-mentioned items for the periods 2004-05 and 2005-06 with interest and had also started paying Service Tax on these items regularly from April, 2006. The same has been also acknowledged by the DGCEI in the SCN. 29. As regards management, maintenance and repair services the appellant claimed that it was unaware of the development under Section 65(105)(zzg) of....
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.... the provisions of Section 76, Section 77 or Section 78, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure." 31. The provisions relating to penalty have been discussed by various Benches of the Appellate Tribunals [Sangam Palace v. CCE, 2006 (2) S.T.R. 537; Eta Engineering Ltd. v. CCE, 2006 (3) S.T.R. 429; Vinaya Travels v. Commissioner of Service Tax, Bangalore, 2009 (13) S.T.R. 31 and Majestic Mobiles v. CCE, 2008 (11) S.T.R. 609 (Tri.)]. In the present case, the appellant was under a bona fide belief that it was not liable to pay Service Tax for the Mandap Keeper Service and Management, Maintenance and Repair Services as discussed earlier. The conduct of the appellant of prompt payment of Service Tax during the enquiry and after gaining knowledge about its liability to pay Service Tax, is sufficient reason to believe that the assessee did not have an intention to evade the payment of Service Tax. Therefore, no penalty can be imposed on the appellant." (emphases supplied) 24.Without multiplying authorities suffice to say, similar views have be....
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....he very fact that trading was "clarified" as exempt from 01.04.2011 shows that the issue was of interpretation. It is in this background, that it needs to be examined whether the plea of bonafide belief, and the plea that the issue was interpretational, and therefore extended period cannot be invoked, needs to be evaluated. 27.It is apposite to note that as early as in 1989, the Apex Court has in Padmini Products v CCE, 1989(43) ELT 195 (SC) held that mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act. Again, when there were divergent views of High Courts whether an activity amounted to manufacture, the Apex Court in Jaiprakash Industries v CCE, 2002 (146) ELT 481 (SC) found that there was bonafide doubt in view of the divergent views and held that provisions of Section 11A for invoking extended period of limitation was not attracted. This position in law was reiterated by the Apex Court in its decision in Continental Foundati....
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....s used in trading and taxable output service. This itself brings out the bona fide belief of the appellant that they were under the impression that their activity is an exempted service and would be able to avail credit by following the procedures under Rule 6 (2) and (3). Further, they have been filing Service Tax returns regularly and they have been subjected to periodical audit. Even in CERA audit, the said objection was not raised on the availment of credit on common input services used for trading and taxable outcome service. In such circumstances, the appellant cannot be saddled with intention to evade payment of Service Tax. There is no other evidence brought out by the department to conclude that the appellant is guilty of suppression of facts with intent to evade payment of service tax so as to invoke extended period of limitation. We therefore conclude that the show cause notice is time-barred. 6. In the result, the impugned order is set aside and the appeals are allowed on the ground of limitation, with consequential relief, if any.'' 6. From the above, it is clear that the position was clarified by the Government by insertion of Explanation only with e....
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....at Credit Rules 2004, has inserted the following explanation in Rule 2(e), namely, "Explanation.- For the removal of doubts, it is hereby clarified that "exempted services" includes trading". Thus, it is pellucid that the Legislature itself has acknowledged that the issue was not free from doubt and hence the conscious usage that the Explanation is for the removal of doubts, and that "it is hereby clarified". When the statute itself inherently acknowledges that the issue is one that is debatable and had to be clarified by way of insertion of an explanation, I am of the view that the demand for the extended period of limitation cannot be invoked. 30. At this juncture, it is also apposite to note that in the decision of the Delhi High Court in Lally Automobiles the issue that arose, as is evident from the first question framed therein, is "Whether the Customs, Excise and Service Tax Appellate Tribunal was right in holding that the appellant is not entitled to set-off or benefit of service tax credit on the entire amount paid, but on the proportionate amount as substantial part of business of the appellant was trading and hence exempt?". It was the contention of the appellant there....
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....Delhi High Court is that unlike the Lally Automobiles case, in the instant case, all the details were available in the appellant's books of accounts and the said contention of the appellant remains uncontroverted. In fact, the SCN in its reliance on documents has relied on the Appellant's Balance sheet, income tax returns, ST-3 returns, file containing original cenvat documents as well as the statements showing the amount of cenvat credit taken on various inputs/input services/capital goods during the period from October 2008 to June 2012 in quantifying the ineligible credit. That apart, it is also a pertinent fact that the plea of bonafide belief and the matter being prone to interpretation given the existence of divergent Tribunal decisions which states that no reversal is warranted prior to 31.03.2011, never arose for the consideration of the Delhi High Court in the case of Lally Automobiles supra nor did an occasion arise for examination of such contentions in the light of applicable statutory provisions for invoking the extended period of limitation. Thus, in so far as invoking the extended period of limitation is concerned, these fact and circumstances of the Appellant's case....
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....iance placed upon the Gujarat High Court judgment by the Department is well founded as it is a judicial pronouncement construing the same exemption notification with which we are concerned with in the present matter before us. It is not possible to accept the argument that since the Gujarat High Court judgment has not taken note of the Andhra Pradesh High Court decision and since the Gujarat High Court had gone into the intendment behind the exemption notification which is not permissible, and for these reasons the Tribunal could take a different view. Apart from the aspect of propriety of such an exercise by the Tribunal, because the concept of per incuriam is not applicable in such situation as between statutory Tribunal and a High Court, it is also relevant to note that there are decisions of the Supreme Court as in the case of The Tata Oil Mills Co. Ltd. v. Collector of Central Excise, reported in 1989 (43) E.L.T. 183 that both the objects and the language of the exemption notification have to be considered. The Gujarat High Court had clearly indicated while construing the Notification No. 38/78-C.E. that for the purposes of the exemption, the final product should be only regen....
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.... 1983 (13) E.L.T. 1342 (S.C.) was brought to the notice of the Larger Bench, but, was not adverted to sufficiently in the course of discussion. In the East India Commercial Co. case, one of the questions for consideration was whether the interpretation given by the Calcutta High Court to Section 167 of the Sea Customs Act, 1878 would be binding on authorities functioning within the jurisdiction of the High Court and the Supreme Court held that "it is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. ........We, therefore, hold that the law declared by the highest Court in the State is binding on authorities or Tribunals under its superintendence.........". This decision has been followed by the Bombay High Court in CIT v. Godavaridevi Saraf reported in 1978 (2) E.L.T. (J 624). 10.1 In the case of U.P. Laminations v. Collector of Central Excise, Kanpur reported in 1988 (35) E.L.T. 398 (T), the Tribunal has followed the Supreme Court judgment in the case of East India Commercial Co. case and set aside the show cause notice issued against the appellants therein as ....
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....nd claims are filed invoking Notifications granting exemption based upon total value/quantity of clearances during a financial year have to be implemented by the authorities within their jurisdiction with reference to assessees within such jurisdiction. The respondents/assessees in the two appeals viz. M/s. Kashmir Conductor and M/s. Laldee (P) Ltd. are not situated in the jurisdiction of either of the above two High Courts and, therefore, will be bound by this Larger Bench order." 38.It is also apposite to note that in 2016, a three-member bench of the South Zonal Bench of the CESTAT at Bangalore in the case of J.K. Tyre Industries Ltd. v. Asst. Commr. Of C. Ex. Mysore 2016 (340) E.L.T. 193 (Tri. - LB) looked into the issue of whether a jurisdictional tribunal must adhere to the order of the jurisdictional HC. It first relied on the aforementioned paragraphs in Kashmir Conductors and then stated the following: "17. Learned Departmental Representative Shri Ajay Saxena, has brought to our notice that the Hon'ble High Court of Chhattisgarh in Commissioner of Central Excise v. Shanti Processors Ltd. - 2016 (331) E.L.T. 234 (Guj.) and in Commissioner of Central Excise, Raip....
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....the Single Member Bench in Dr. Reddy's Laboratories Ltd. (supra) and of the Division Bench in Bharat Heavy Electricals Ltd. (supra), that the decision of the Hon'ble Karnataka High Court in Bill Forge Pvt. Ltd. is per incuriam, do not represent the correct and authorized application of the per incuriam principle. These decisions are accordingly overruled, to that extent. 20. The decision of the Larger Bench in Kashmir Conductors (supra) has been referred to and approved by the Hon'ble Supreme Court in Collector of Central Excise v. Rallis India Ltd. - 2002 (142) E.L.T. 19 (S.C.). The decision of the Hon'ble Karnataka High Court in Bill Forge Pvt. Ltd. being the decision of the jurisdictional High Court and in the context of the fact that the entire cause of action, the transactions in issue, the territory within which the appellant-assessee conducts its business and has its registered office and whereat proceedings were initiated and culminated, constitutes the operative law, for the parties to this appeal. Though the Hon'ble High Courts of Madras, Bombay and Chhattisgarh are seen to have taken a contrary view, have distinguished and were not persuaded to accept the ratio ....
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....endence and they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such a proceeding. If that be so, the notice issued by the authority signifying the launching of proceedings contrary to the law laid down by the High Court would be invalid and the proceedings themselves would be without jurisdiction." 40.In this regard, the decision of the Honourable High Court of Bombay in CEAT Ltd v CCE, Nashik, 2015 (317) ELT 192 (Bom) also bears relevance. Relevant portions are as under: "34. Before parting, we would reproduce the following conclusion in the impugned order of the Tribunal. The attention of the Tribunal was invited to the order passed by it in the case of Ispat Industries Ltd. and Tata Motors Ltd. and further the order of this Court upholding the same. Yet, the Tribunal observes as under :- "We also note that the judgments of this Tribunal in the case of Ispat Industries Ltd. and Tata Motors Ltd. which were upheld by Hon'ble Bombay High Court are per incuriam as the details of various Rules as also the judgment of the Hon'ble Supreme Court, Hon'ble High Court of Karnataka and other judgments of this Tribunal were not b....
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....it the label per incuriam. That label is relevant only to the right of an appellate Court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate Court or to the right of a judge of the High Court to disregard a decision of the Court of Appeal." 36. We would expect the Tribunal to be more careful and guarded hereafter. We say nothing more." 41. It is also seen that the Honourable Apex Court in South Central Railway Employees CO-OP Credit Society Employees Union v. B. Yashodabai and others, [2014] 12.S.C.R 370, has held in para 16 & 17 as under: "16. We are of the view that it was not open to the High Court to hold that the judgment delivered by this Court in C.A. No.4343 of 1988 was per incuriam. 17. If the view taken by the High Court is accepted, in our opinion, there would be total chaos in this country because in that case there would be no finality to any order passed by this Court. When a higher court has rendered a particular decision, the said decision must be followed by a subordinate or lower court unless it is distinguished or overruled or set aside....." 42. Further, in Mary ....
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....ld the decision that has followed Lally Automobiles not govern the facts and circumstances of this case and are therefore distinguishable as inapplicable. Thus, I am of the considered view that the Judgement of the Honourable High Court of Madras in Asst.Commr. of GST & C.Ex, Chennai v. Shriram Value Services Pvt Ltd, 2019 (368) ELT 928 (Mad), is applicable in the instant case and respectfully following the same I am of the view that the extended period of limitation is not invokable in the instant case. The reliance in this regard on the decision of this Tribunal in SHV LPG India Pvt Ltd v. Commr.of GST & Central Excise, Chennai South, 2025 (3) TMI 65 is therefore apposite. It is also noticed that the Tribunal in its decision in Shree Balaji Industrial Products Ltd v Commr of Cus & C.Ex, Jaipur, 2019 (270) ELT 280 (Tri-Del), has held that "However, we find that admittedly the appellant was recording the entire activity in their balance sheet which is a proper document. As such according to the settled law, it cannot be said that the appellant suppressed anything with a mala fide intention. Apart from that, we also agree with the Learned advocate that there was confusion in the fie....
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....20 October, 2009. The show cause notice shall hence have to be confined to the normal period of limitation excluding the extended period. 25. As far as the penalty is concerned, we are of the considered view that there was no warrant for the imposition of the penalty as the dispute in the present case essentially turned on the interpretation of the statutory provisions and their inter-play with the circular issued by the CBEC. Finally, we also order and direct that the view of the Tribunal on the applicability of the provisions of Section 65(86b) of the Finance Act, 1994 as amended has been reversed by this Court. On remand in pursuance of the impugned order of the Tribunal, the adjudicating officer shall abide by the above directions." The decision in Uniflex Cables Ltd v CCE, Surat II, 2011 (271) ELT 161 (SC) is also in similar vein. 48. In these circumstances, the aforesaid decision in Bharat Hotels Ltd v. Commissioner of C.Ex (Adjudication), 2018 (12) GSTL 368 (Del.); wherein the ingredients required to invoke the extended period of limitation as per the statutory provisions were examined and it was held that the burden is on the Revenue to prove an intenti....
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.... founded upon the assessee's intent and conduct, necessarily involve the determination of mixed questions of fact and law. Such issues cannot, by their very nature, be disposed of by invoking the doctrine of demurrer. In any event, it is not open to the Revenue to invoke the plea of demurrer so as to foreclose the assessee's defence, for such an approach would be inconsistent with the statutory scheme, which expressly contemplates the issuance of a show cause notice, the filing of a reply thereto, and the grant of a reasonable opportunity of hearing. Equally, the burden of establishing the existence of the jurisdictional facts necessary to justify invocation of the extended period of limitation rests squarely upon the Revenue. 52. Furthermore, no plea founded upon the doctrine of demurrer was either specifically raised by the Revenue in the proceedings or urged during the course of arguments before us. The discussion on the doctrine of demurrer is, therefore, not germane to the determination of the issues arising in the present appeal. The controversy before us, as borne out from the grounds of appeal and the submissions advanced by the parties, is confined to the sustai....
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.... question, it is impermissible for the Tribunal to follow the reasoning of any other authority, ignoring the said decision. Consequently, the question framed in the separate Order, though undoubtedly of general importance, does not, in my respectful opinion, arise for consideration. For the reasons already recorded in my order, I am, therefore, unable to persuade myself to concur with the conclusion reached by my ld. Brother. My reasons for taking a different view are recorded hereinafter. 57. As stated by my learned Brother, Shri Ajayan T.V., Member (Judicial), in his order in Indian Oil Corporation Ltd. v. Commissioner of GST & Central Excise [Interim Order Nos. 02 to 04/2026, dated 10.06.2026]: "64. Therefore, undoubtedly it should be the continuous endeavour of this Tribunal to be aware of the decisions of the coordinate benches of this Tribunal as well as that rendered by higher judicial forums on any issue in law so as to adhere to judicial discipline and not to render decisions at variance with the view that has already been taken earlier, unless the circumstances so compellingly warrant so as to necessitate a reference to the Hon'ble President. This becomes an i....
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....been considered and affirmed by the Hon'ble Supreme Court in a Civil Appeal and "in consonance with law" cannot be construed as a dismissal in limine. The dismissal was on merits, with the Hon'ble Supreme Court expressly approving the reasoning adopted by the High Court. The declaration of law so affirmed, having received the imprimatur of the Hon'ble Supreme Court, is binding on all courts and tribunals. In Kunhayammed Vs State of Kerala [(2000) 6 SCC 359], it was held by the Apex Court that where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. [Also see: V. M. Salgaokar Vs CIT - (2000) 243 ITR 383] 58.3 This being so, the value of such pronouncements lies not merely in adjudicating the dispute before the Court but also in laying down the governing principle for future cases. In such circumstances, it would not be open....
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....have no binding force." 59. The Hon'ble Supreme Court in the case of Assistant Collector of Central Excise Vs Dunlop India Ltd. [(1985) 154 ITR 172 (SC)], quoted from the decision of House of Lords as under: "We desire to add and as was said in Cassell & Co. Ltd. v. Broome [1972] AC 1027 (HL), we hope it will never be necessary for us to say so again that "in the hierarchical system of courts" which exists in our country, "it is necessary for each lower tier", including the High Court, "to accept loyally the decision of the higher tiers". "It is inevitable in hierarchical system of courts that there are decisions of the Supreme appellate Tribunal which do not attract the unanimous approval of all members of the judiciary... But the judicial system only works if someone is allowed to have the last word, and that last word, once spoken, is loyally accepted.". . . The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system." [Also see: Union of India Vs Kamalakshi Finance Corporation Ltd. - AIR 1992 SC 711] 60. It is thus clear that once a question of law has been settled by the Hon....
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...., namely, the binding effect of the judgment in Lally Automobiles of the Hon'ble Supreme Court and the consequent applicability of Article 141 of the Constitution, to my mind, have not been specifically discussed in the Order of my ld. Brother, although the judgment is sought to be distinguished. 61.2 It is seen that, in paragraph 31 of his Order, my ld. Brother has observed that the Hon'ble High Court in Lally Automobiles qualified its conclusion by holding that invocation of the extended period was warranted "in the circumstances of the case". With respect, this overlooks that the Hon'ble High Court was exercising jurisdiction under Section 35G of the Central Excise Act, 1944, as made applicable to Service Tax by Section 83 of the Finance Act, 1994, and was answering a substantial question of law, not re-appreciating questions of fact. Any possible doubt in this regard stands dispelled by the subsequent order of the Hon'ble Supreme Court affirming the judgment, observing that the reasons assigned by the High Court need no interference as the same is in consonance with law, which has also been noticed by my ld. Brother. Notwithstanding the above, the matter has ....
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....ce Act, 1994, nor any other contention seeking to dilute or circumvent the law declared by the Hon'ble Supreme Court, can brought to the assistance of the appellant. I am, therefore, constrained, with great respect, to disassociate myself from the views expressed by my learned Brother. 61.4 A three Judge Bench of the Hon'ble Supreme Court in Director Of Settlements, A.P. & Ors Vs M.R. Apparao & Anr [AIR 2002 SC 1598 / 2002 (4) SCC 638], while examining the binding nature of its decision, held as under: "So far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. . . . . The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (see AIR 1970 SC 1002 and AIR 1973 SC 794). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court. A judgment ....
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....ies to understand the basis of the decision and facilitates effective appellate review. The requirement to record reasons has been repeatedly emphasised by the Constitutional Courts. [See: Sanjay Alloys Pvt. Ltd. Vs CCE, Bengaluru, (2021) 377 ELT 812; Sai Raj Enterprises Vs The Additional Director of Foreign Trade & Anr, (2019) 365 ELT 283; M.P. Commodities Pvt. Ltd. Vs State of Gujarat (2023) 70 GSTL 66; B.C. Mohan Kumar Vs Superintendent of Central Goods and Service Tax, (2022) 45 taxmann.com 324 (Madras)], It has repeatedly been held that reasoned orders are an essential component of judicial and quasi-judicial decision-making. 62.2 In the absence of any reasons explaining the applicability of the principle of cum-duty to the facts of the present case, I find myself, with respect, unable to concur with the conclusion reached. Nor am I persuaded that the issue can properly be elevated to the status of a difference of opinion. 63. Accordingly, unless my ld. Brother (Judicial) is inclined to reconsider his opinion in the light of the legal position as emanating for my order and clarified hereinabove, I propose that the following points of difference be formulated for referenc....
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.... the basis upon which the present points of difference have been formulated, a brief clarification of the nature and limits of the present exercise of drawing up the points of difference, becomes necessary. 67.The present exercise is one of limited statutory purpose. Section 129C(5) of the Customs Act, 1962, as made applicable, comes into operation once the Members constituting the Bench have arrived at differing conclusions in their respective orders recorded. At that stage, the statute contemplates the identification and formulation of the precise point or points on which the divergence exists, so that the reference envisaged by law may proceed. The jurisdiction is thus of narrow compass. It is directed not towards a reconsideration of the orders already recorded, but towards distilling, with precision, the questions upon which those orders differ. 68.It follows that the stage of formulating the points of difference is not intended to afford an occasion for either order to be expanded, supplemented, defended or revisited. Each order must speak for itself. Its validity and persuasive force rest upon the reasons which it records. The subsequent formulation of points of differ....
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.....In that view of the matter, I consider it neither necessary nor appropriate to engage with the additional observations subsequently recorded by the Learned Member (Technical) or to revisit the dissent already expressed. At the cost of repetition, it is emphasised that the statutory function presently entrusted to the Members is confined to identifying the questions upon which their orders differ. The consideration of the relative merits of those orders belongs to the process of reference contemplated by Section 129C(5), and not to the present exercise. To engage with those observations would therefore be to depart from the discipline of the statutory process itself and to introduce a procedure for which the Act furnishes no warrant. If such a course were accepted, it would permit successive evaluations of each other's orders, each inviting a further response, thereby postponing rather than facilitating the statutory reference. Such a course would not accord with the statutory scheme, which draws a clear distinction between the formulation of points of difference and the adjudicatory process by which those differences are ultimately resolved. 72. I therefore refrain from exp....