Legal Updates

Taxation Of Startups – Angel Tax: Complete Guide

MASTI

This is a guide to the levy of “angel tax” on start-ups. It summarizes the legislative amendments made to the Income-tax Act 1961 and also the various circulars and instructions issued by the CBDT.

What is “angel tax”?

Section 56(2)(viib) (Section) of the Indian Tax Laws (ITL) (popularly known as the “angel tax” provisions) is an anti-abuse provision which applies when a CHC issues shares (including preference shares) to a resident at a premium and receives consideration which is in excess of the FMV of the shares. The excess amount so received is deemed as income from other sources in the hands of the CHC in the year of issue of the shares.

• Rule 11UA of the Income Tax Rules (Valuation Rules) prescribes the valuation methodology for determining the FMV of various types of assets (including unquoted equity shares), not only for the purposes of the angel tax provision, but also for other anti-abuse provisions involving transfer of assets without consideration or at a value less than the FMV.

• The FMV of unquoted equity shares for the purpose of the angel tax provision read with Rule 11UA is the higher of the following:

Net asset value as reflected in the audited balance sheet of the CHC (break-up value method)

OR

The DCF value as determined by a Category-I MB or Accountant

OR

The value that the company is able to substantiate to the satisfaction of the Tax Authority, basis the holding of various intellectual property rights (IPRs) like goodwill, know-how, patents, copyrights etc.

• In case of unquoted shares and securities other than equity shares in a company not listed in any recognized stock exchange, as per Rule 11UA, the FMV is the estimated open market value as may be determined by a Category I MB or Accountant. This rule applies to both angel tax and other anti-abuse provisions.

• Prior to the Valuation Notification, the term “Accountant” was defined as under:

• For angel taxation: In case of valuation of unquoted equity shares, an Accountant is a Fellow CA who is not appointed as a tax auditor under the ITL or as a statutory auditor under the Companies Act, 2013.

• For other anti-abuse provisions: Any CA in practice who can act as an Authorized Representative for the taxpayer and fulfils the independence criteria as prescribed under the ITL.

• Changes brought about by the Valuation Notification are as follows:

• The Valuation Notification has withdrawn the option given to the taxpayer to obtain a valuation report from a CA for determining the FMV of unquoted equity shares based on the DCF method for the purpose of the angel tax provision. As a
consequential amendment, it has also omitted the definition of “accountant”.

• Thus, where the taxpayer wishes to rely on the DCF method, it can now obtain a DCF valuation report only from a Category 1 MB. A valuation report from a practising CA will no longer be a valid compliance for the angel tax provision.

• However, it may be noted that the above change applies only to the valuation of unquoted equity shares required for the angel tax provision by adopting the DCF method option. For shares other than unquoted equity shares (like preference
shares), the taxpayer continues to have the option to obtain a valuation report from either a Category I MB or a CA. The changes in Rule 11UA are depicted in the table at Annexure.

• The aforesaid amendment comes into force from the date of publication in the official gazette i.e., 24 May 2018.
• Exemption from the angel tax provision for eligible

DOWNLOAD: Download Guide To Angel Tax On Startups – CBDT Circulars, Notifications, Press Note, Instructions

“start-ups”

• The angel tax provision does not apply to shares issued by a venture capital undertaking to a venture capital fund or a venture capital company[“Venture capital undertaking”, “venture capital fund” and “venture capital company” shall have meaning as assigned under Explanation(c) to Section 10(23FB) of the ITL].

• In addition, the provision does not apply when shares are issued to a class or classes of persons as notified by the CG. Pursuant to exercise of this power, the CG issued the following notifications with corresponding reference to the DIPP notifications.

• The additional conditions imposed by the 2018 DIPP Notification for start-up companies are:

• A cap of INR100m on the aggregate of paid-up share capital and share premium post issue of shares.

• Requirement to furnish a valuation report obtained from a Category I MB specifying the FMV of the shares, in accordance with Rule 11UA.

• As per the 2018 DIPP Notification, the conditions required to be fulfilled by the investor are, either:

• Average returned income of INR2.5m or more for the preceding three financial years.
OR

• Net worth of INR20m or more on the last date of the preceding financial year.

• The Start-up Notification aligns with the 2018 DIPP Notification and provides that where shares are issued at premium for a consideration in excess of the FMV, the angel tax provision shall not apply on such consideration received from an investor by a start-up company, in accordance with the approval granted by the IMB under the 2018 DIPP Notification.

• This change comes into force retrospectively from 11 April 2018, being the date on which the 2018 DIPP Notification was issued/published in the official gazette.

Key amendments of Finance (No. 2) Bill, 2019 relating to Angel tax on startups

Withdrawal of exemption and automatic levy of penalty where start-ups breach condition for angel tax exemption

► FB 2019 proposed to introduce claw back provision for “angel tax” exemption availed of by start-up companies in the event of breach of any of the notified conditions. “Angel tax” refers to taxation of excess premium received by a closely-held company from a resident investor (i.e., consideration received in excess of fair market value of shares). But, the claw back was proposed for the whole premium (consideration received in excess of face value of shares), instead of only excess premium.

► At the enactment stage, the claw back is restricted to only excess premium over fair market value, but with a more onerous consequence that such claw back shall be deemed to be misreported income attracting penalty @ 200% of the excess premium.

Angel tax exemption extended to issue of shares to all sub-categories of Category-I AIFs

► FB 2019 proposed to extend exemption from angel tax currently available for investment by a Venture Capital Company or a Venture Capital Fund (being a sub-category of Category-I AIF) in a Venture Capital Undertaking to investment by Category-II AIFs also. This left out other sub-categories of Category-I AIFs like infrastructure fund, social venture fund, SME fund etc.

► At the enactment stage, the exemption is extended to all sub-categories of Category-I AIFs. Thus, investment by any entity in Category-I or Category-II AIF in a Venture Capital Undertaking (including a recognized start-up) will now be exempt from angel tax.

CBDT notifies exemption for start-ups from ups from “angel tax” as per relaxations notified by DPIIT

Notification No. 13 of 2019 dated 5 March 2019 was issued by the Central Board of Direct Taxes (CBDT) in relation to exemption to start-ups from taxation of excess share premium received by such start-up companies from a resident investor under an anti-abuse provision of the Indian Tax Laws (ITL) popularly known as the “angel tax” provision.

On 19 February 2019, the Department for Promotion of Industries and Internal Trade (DPIIT) issued a Notification (2019 DPIIT Notification) which substantially relaxed the conditions and procedure for exemption from “angel tax” for start-up companies by adopting a “green channel” process in place of the earlier approval-based process.

In order to claim exemption, the “start-up company” which fulfils the modified conditions[4] has to merely file a self-declaration stating that the eligible start-up has not invested in non-qualifying assets[5] which shall be transmitted by the DPIIT to the CBDT.

In the light of new exemption regime prescribed by the 2019 DPIIT Notification, the present CBDT Notification, as a consequential step, supersedes the earlier CBDT Notification[6] and grants exemption to start-ups from “angel tax” provision if the start-up company complies with the conditions specified in the 2019 DPIIT Notification.

The present CBDT Notification comes into force retrospectively from 19 February 2019, being the date of the 2019 DPIIT Notification.

In relation to past issue of shares, in line with the 2019 DPIIT Notification, the relaxation will not apply to prior years where assessment orders in relation to angel tax have already been passed by the Tax Authority. As per news reports, the CBDT has instructed the Tax Authority not to take coercive action and ensure speedy disposal of such appeals on priority.

But where no such demands are raised or notices are received but assessment orders are yet to be passed, taxpayers can expect relief from angel tax provision by complying with the 2019 DPIIT Notification. If conditions of the 2019 DPIIT Notification are not fulfilled, taxpayers will need to defend their case on merits by justifying the share valuation.

It may also be noted that the present CBDT Notification does not address invocation of broader provisions to treat share investments by non-resident investors as unexplained cash credits.

CBDT lays down administrative mechanism for pending assessments of start-up companies

The Central Board of Direct Taxes (CBDT) issued Circular No. 16/2019 dated 7 August 2019 in relation to the manner of conducting assessment proceedings (including pending assessments as of date), involving angel tax and other issues, in case of start-up companies.

Angel tax, under the Indian Tax Laws (ITL), refers to a tax on premium received by a closely-held company on issue of shares in excess of the fair market value (FMV) of the shares.

Such FMV is determined basis normative valuation rules or the valuation report by a merchant banker or any other basis as substantiated to the satisfaction of the Tax Authority.

With a view to promote the start-up industry, the CBDT issued a notification[3] stating that “start-up” companies which satisfy the conditions prescribed under the notification[4] issued by the Department for Promotion of Industries and Internal Trade (DPIIT) (2019 DPIIT Notification) will be exempt from the levy of angel tax. The 2019 DPIIT Notification, however, did not explicitly provide any relief where the assessment proceedings are pending with the Tax Authority.

► In wake of representations from the start-up industry, through the Budget Speech on 5 July 2019, the Finance Minister had announced that the CBDT shall frame a special administrative mechanism for disposing pending assessments of start-ups and for redressal of grievances. The Finance Minister also assured that, for start-up companies, the Tax Authority shall not conduct inquiry or verification without the approval of the supervisory officer.

► Pursuant thereto and by exercising powers granted to the CBDT under the ITL for proper administration, the CBDT Circular was issued on 7 August 2019 for granting relaxation to start-up companies in relation to the manner of conduct of pending assessments for angel tax and other issues.

► The CBDT Circular was issued in light of various instances where notices for conducting assessment or reassessment have been issued by the Tax Authority before or after the issue of the 2019 DPIIT Notification and where such cases are, presently, pending for disposal.

The relaxation provided by the CBDT is as follows:

► Procedure for completion of pending assessment for recognized start-ups: In case of recognized start-up companies satisfying the conditions for availing angel tax exemption under the 2019 DPIIT Notification, the procedure shall be as follows:

o In case of “limited scrutiny” where the sole issue of applicability of angel tax is being examined, the Tax Authority shall not conduct any verification. The Tax Authority is directed to summarily accept the contentions of recognized start-up companies.

o In case of “limited scrutiny with multiple issues” or “complete scrutiny” where assessment is conducted in case of other issues along with examination of levy of angel tax, the issue of angel tax shall not be pursued by the Tax Authority.

Furthermore, the Tax Authority shall conduct inquiry or verification for other issues only after obtaining the approval of the supervisory officer. Furthermore, in relation to other issues, assessment proceedings shall be conducted as per the procedure laid down under the ITL.

► Procedure for start-up companies not having DPIIT approval: In such cases where the assessment is being conducted for angel tax or other issues, the Tax Authority shall conduct inquiry or verification only after obtaining the approval of the supervisory officer.

Adhering to the promise of the Finance Minister, the CBDT has taken a proactive measure to clear the air on the outcome of assessment proceedings of start-up companies. While this is a welcome move, the said directions are not applicable in relation to the issues of start-up companies which are pending at the appellate level and assessments have already been conducted by the Tax Authority in past years.

CBDT extends Angel tax exemption to start-up companies for completed assessments of past years

The Central Board of Direct Taxes issued Instruction No. F.No.173/354/2019-ITA-1 dated 9 August 2019 (CBDT Instruction) to extend exemption from Angel tax to start-up companies where addition of income in relation to Angel tax is made in assessment orders passed before 19 February 2019.

“Start-up” companies which satisfy the conditions prescribed under the notification[4] issued by the Department for Promotion of Industries and Internal Trade (DPIIT) [5] (2019 DPIIT Notification) are exempt from the levy of Angel tax[6]. The 2019 DPIIT Notification extended the condition-based exemption to past and proposed issue of shares undertaken by start-up companies. However, it did not provide any relaxation where an addition has been made in relation to Angel tax in an assessment order before issue of 2019 DPIIT Notification i.e., prior to 19 February 2019.

In order to mitigate hardship caused to the start-up companies, the CBDT has, on realization of the lacuna, issued a clarification on 9 August 2019 to relieve recognized start-ups where addition is made for Angel tax income in assessment order passed before 19 February 2019. To claim such an exemption, the start-up company is required to submit self-declaration as required in the 2019 DPIIT Notification confirming that all the conditions laid down in the said Notification are fulfilled.

The CBDT clarification follows the CBDT Circular[7] which lays down administrative mechanism for conduct of assessment proceedings (including pending assessments). The present CBDT instruction is a welcome move which directs the Tax Authority to grant Angel tax exemption in case of past years where assessment orders were passed before the date of 2019 DPIIT Notification. The Government of India has been proactive in resolving the concerns faced by the start-ups.

Accordingly, start-up companies which are recognized and have filed requisite declaration to the CBDT may apply for rectification of assessment order passed by the Tax Authority within the time limit prescribed under the ITL. In case of on-going assessment proceedings at appellate level, the present CBDT clarification may help the start-up companies to defend their cases before the relevant authorities.

CBDT forms dedicated cell for start-ups to redress tax grievances

The Central Board of Direct Taxes (CBDT) issued Order dated 30 August 2019 for setting-up of a dedicated cell for start-ups (“Start-up Cell”) to redress the grievances and address the various issues under Indian Tax Laws (ITL), including angel tax. The CBDT Order is issued in light of the announcement made by the Finance Minister in Budget Speech as also at the press meeting held on 23 August 2019.

The Start-up Cell comprises the officials from different hierarchy at CBDT and can be contacted over telephone number (011-23095479/23093070 (F)) and email id (startupcell.cbdt@gov.in).

The CBDT Order is issued to implement the announcement made by the Finance Minister in Budget Speech on 5 July 2019 as also at the press meeting held on 23 August 2019 and is the latest in a series of proactive steps undertaken by CBDT to provide impetus to Start-up industry and clarify the ambiguities under the ITL.

The Start-up Cell comprises the following officials from different hierarchy at CBDT:

Official Designation in Start-up Cell
Member (Income Tax and Computerisation)
Chairman
Joint Secretary -Tax Policy and Legislation-II
Member
Commissioner of Income Tax (ITA)
Member
Director (ITA-I)
Member Secretary
Under Secretary (ITA-I)
Member

The Start-up Cell can be contacted over telephone number (011-23095479/23093070 (F)) and email id (startupcell.cbdt@gov.in) provided in the Order. The official address of the Start-up Cell is located at Room No. 245A, North Block, New Delhi – 110001.

This recent initiative by the CBDT is aimed to ease the compliance issues for start-ups. The CBDT Order is the latest in a series of proactive steps undertaken by CBDT to provide impetus to Start-up industry and clarify the ambiguities under the ITL. Earlier, on 5 March 2019, the CBDT issued a Notification to provide exemption from angel tax to start-ups satisfying the prescribed conditions.

Subsequently, in July 2019, the Finance (No.2) Act, 2019 introduced several measures to ease the tax burden in the hands of start-ups and their promoters[4]. Thereafter, as promised by the Finance Minister in Budget Speech on 5 July 2019, the CBDT laid down a specific administrative mechanism for pending assessments of start-ups involving angel tax and other issues.

The CBDT also extended the benefit of angel tax exemption to start-ups where additions were made in assessment orders passed before 19 February 2019. Also, in a press meeting on 23 August 2019, the Finance Minister announced a blanket relaxation from angel tax to start-ups registered with Department for Promotion of Industry and Internal Trade. These measures are expected to address the tax issues of start-ups and improve ease of doing business for such entities.

Continuity of Erstwhile Incentives under GST Regime: Bombay High Court (Nagpur Bench) Judgement

MASTI

In K. M. Refineries & Infraspace Pvt Ltd WRIT PETITION NO. 2209 OF 2018, the Nagpur Bench of the Bombay High Court, has rendered an important decision on the continuity of the erstwhile incentives in the GST regime.

The judgement addresses the concerns that with the introduction of the GST, the incentives offered by the government to promote development in backward areas may have been curtailed.

The judgement in K. M. Refineries & Infraspace Pvt Ltd directs the state authorities to implement the incentive scheme as amended up-to-date with a discretion to modify the scheme to bring it in line with the new tax structure under the General Sales Tax scheme, but without reducing or restricting the benefits as conferred.

M/s PDS Legal, a well known firm of Advocates & Solicitors has summarized the key takeaways of the decision of the Bombay High Court in K. M. Refineries & Infraspace Pvt Ltd as follows.

Facts

K. M. Refineries & Infraspace Pvt Ltd., set up a factory unit at village Dabha, Tahil Nandgaon Khandeshwar, District Amravati in view of the incentives offered under the state government scheme intending to have industries at disperse places all over Maharashtra under the “New Package Scheme of Incentives, 1993” (Incentive Scheme).

The Incentive Scheme would offset the increased cost of production and the Petitioner would be able to compete with other similar industries in marketing its products at affordable rates, without causing any loss to the Petitioner. Under the Incentive Scheme, monetary and other incentives in the nature of tax subsidy or tax exemption at the rates prescribed in the scheme and other benefits were given.

On introduction of the GST, the benefits under the scheme were claimed to have been curtailed and the government stated that the benefits would be available in terms of the Government Resolution dated 12.06.2018. This was challenged by the Petitioner inter alia invoking doctrine of promissory estoppel.

Judgement of the Bombay High Court

The High Court on analysis of the Scheme and the law has held:-

(a) The scheme had the object of making an effort to ensure the even distribution of industrial units across the state of Maharashtra so that employment is provided to larger sections of the society and there occurs equal distribution of wealth and means of production, to the common benefit of inhabitants of state.

(b) A promise is given by the state to the industries that, if the industries come out of their secure shells in Mumbai-Thane-Pune industrial belt and set up their industrial units in diffused virgin pastures of the state, spread out in rural and remote areas, the industrial units would be eligible for various incentives offered in the Incentive Scheme. These incentives are meant for offsetting the additional investment and increase in cost of production of the industrial units so that the goods and services could be produced at competitive rates and without incurring any losses.

(c) The Petitioner having changed its position and having made investments, has forged a legal relation with the state, and therefore, now the state would be bound by the promise that it gave to the Petitioner through the Incentive Scheme.

(d) The doctrine of promissory estoppel clearly applies here and would forbid the government from taking any decision of not completely implementing the Incentive Scheme or reducing the incentives to the detriment of the Petitioner and to that extent the decision would have to be held as illegal.

(e) The object and purpose of the Incentive Scheme is in consonance with the ideals held aloft by the directive principles of State policy contained in Part – IV of the Constitution of India, in particular, Article 39(c) which provides that that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. Taking away or reducing the benefits of the Scheme would be contrary to the object and purpose of the Directive Principles of State Policy.

The High Court held that the reduction under the Incentive Scheme in the name of new policy of GST is clearly not permissible and the Incentive Scheme that was in operation on the date of issuance of Eligibility Certificate would have to be enforced against the state. The state would modify the Incentive Scheme in such a way that it is consistent with the new tax structure and at the same time it also does not result in reducing or restricting the benefits which have been conferred upon an industrial unit like that of the Petitioner under the Incentive Scheme.

Conclusion

The decision invokes both the principles of promissory estoppel and the Directive Principles of State policy to hold the state good to its promise when the assessee has acted on such a promise. The decision resonates the principles laid down by the Hon’ble Supreme Court in Manuelsons Hotels Private Limited v. State of Kerela ((2016) 6 SCC 766) on application on doctrine of promissory estoppel.

The principles laid down would apply to other states and to the area based incentives offered under the erstwhile central excise law, where upon finding curtailment in the promised incentives/benefits assessees may consider approaching respective High Courts to claim continuity of such promised incentives / benefits even under the GST regime.

DOWNLOAD: Download judgement of the Bombay High Court

DOWNLOAD: Download expert summary by M/s PDS Legal

Text of Judgement of the Bombay High Court in K. M. Refineries and Infraspace Pvt. Ltd vs. The State of Maharashtra WRIT PETITION NO. 2209 OF 2018

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
WRIT PETITION NO. 2209 OF 2018
M/s K. M. Refineries and Infraspace Pvt.
Ltd., a Company through its Director, Shri
Vishnu Prasad Sankle, having Office at
Survey No.30/2, Dabha, Tq. Nandgaon
Khandeshwar, Distt. Amravati.
… PETITIONER
V E R S U S
1. The State of Maharashtra
through Principal Secretary, Department of
Industries, Energy and Labour, Mantralaya,
Mumbai – 32.
2. The Director of Industries Maharashtra
State having Office at Directorate of
Industries, New Administrative Building,
2nd Floor, Opposite Mantralaya, Madam
Cama Road, Mumbai – 32.
3. The General Manager,
District Industries Centre, Amravati.
4. The Joint Commissioner of Sales Tax
(Adm.), Amravati Division, Amravati. … RESPONDENTS
Mr. Firdos Mirza a/w Mr. Gaurav V. Kathed, Advocate for Petitioner.
Mr. K. L. Dharmadhikari, AGP for Respondent Nos.1 & 4.
CORAM : SUNIL B. SHUKRE AND
S. M. MODAK, JJ.
DATE : JULY 16, 2019
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ORAL JUDGMENT – [PER SUNIL B. SHUKRE, J.]
. Heard. Rule. Rule made returnable forthwith. Heard finally
by consent.
2. The facts of this Petition appear on quite a narrow canvass.
Suffice it to say, for the purposes of this Petition that the Petitioner – a
registered Company dealing in manufacture of Vegetable Oil and Allied
Oil products, fired by the enthusiasm created by the Government scheme
intending to have industries at disperse places all over Maharashtra under
‘New Package Scheme of Incentives, 1993’ (for short, ‘Incentive Scheme’),
set up a factory unit at village Dabha, Tahil Nandgaon Khandeshwar,
District Amravati with the hope that the incentives offered under the
Incentive Scheme would offset the increased cost of production and the
Petitioner would be able to compete with other similar industries in
marketing its products at affordable rates, without causing any loss to the
Petitioner – Company.
3. Under the Incentive Scheme, monetary and other incentives
in the nature of tax subsidy or tax exemption at the rates prescribed in the
scheme and other benefits were given. The document of Incentive Scheme
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required that the Eligibility Certificate be issued by the Implementing
Agency and invariably the Implementing Agency would be the concerned
District Industries Centre headed by an officer of the rank of General
Manager.
4. The Petitioner made an application for issuance of the
Eligibility Certificate by the District Industries Center, Amravati. The
Petitioner was found eligible for getting the certificate, and therefore, by
the final order issued on 20th March 2017, the General Manager, District
Industries Centre, Amravati issued the Eligibility Certificate which was
valid for nine years. Under the Incentive Scheme, the date from which the
Eligibility Certificate shall take effect for availing of the sales tax
incentives was to be specified by the Commissioner of Sales Tax.
5. In the instant case, the Eligibility Certificate reached the table
of the Commissioner of Sales Tax for specifying the date from which the
incentives to be given to the Petitioner were to take effect. The
Commissioner of Sales Tax prescribed the effective date, but, while doing
so, curtailed the validity period by about three years by his order passed
on 10th August 2017. The Petitioner has taken an exception to such
curtailment of the validity period by filing this Petition. The Petitioner has
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also raised another grievance in this Petition. He submits that incentives
given in the Incentive Scheme have been substantially reduced by new
policy prescribing new tax structure of the State and according to him,
this violates principle of promissory estoppel.
6. It is the submission of the learned Counsel for the Petitioner
that the curtailment of validity period is not permissible under the
Incentive Scheme. It is also his submission that, even if new tax structure
has come into being it would have no adverse impact on the monetory
incentives given under the Incentive Scheme by virtue of the Application
of the doctrine of ‘Promissory estoppel’. The law consistently laid down by
the Hon’ble Apex Court right from the case of M/s Motiram Padampat
Sugar Mills Company Limited V/s State of Uttar Pradesh and others,
(1979) 2 Supreme Court Cases 409, reiterated in the case of Gujarat
State Financial Corporation V/s M/s. Lotus Hotels Pvt. Ltd. (1983) 3
Supreme Court Cases 379, would demonstrate it, submits learned
Counsel.
7. Mr. Dharmadhikari, the learned AGP for Respondent Nos.1 &
4 submits that even if there is any change in the tax structure, the
Petitioner would not be entitled to receive the original tax benefits as
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provided under the Incentive Scheme of 1993 and whatever benefits that
might be conferred upon the Petitioner would be made available only in
terms of Government Resolution recently issued on 12th June 2018 and
also the other instructions that have been issued so far or would be issued
from time to time. He points out that under the new tax structure which
has a centralized system of Sales Tax under the name General Sales Tax
(for short, ‘GST’ for the sake of convenience), there is no provision for
grant of any exemption from GST, and therefore, the assesse or the tax
payer is liable to first pay the GST and at the most eligible units would get
refunds based on Eligibility Certificates as provided under the Government
Resolution dated 12th June 2018.
8. We have gone through the document of the Incentive Scheme
of 1993, placed on record. It elaboratively speaks of the incentives to be
given to the Industries. The object of the Incentive Scheme is to achieve
dispersal of the industries outside MumbaiThanePune
industrial belt and
to attract industries to underdeveloped and developing areas of the State.
The Incentive Scheme was originally introduced in 1964 and was
amended from time to time. One of the significant amendments, was in
the year 1993. It extended the period of Incentive Scheme to 30th
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September 1998. Another significant amendment was made in the year
2007 vide Government Resolution dated 30th March, 2007. It appears that
the Incentive Scheme has been further extended by few more Government
Resolutions and there is no dispute about the fact that the Incentive
Scheme came to be extended for further periods from time to time and it
was in operation when the impugned order was passed by the
Commissioner of Sales Tax. In fact, there is no document placed on record
which shows that the Incentive Scheme has been superseded by any other
scheme or policy. Be that as it may, the fact remains that the scheme had
the object of making an effort for ensuring even distribution of industrial
units across the State of Maharashtra so that the employment is provided
to larger sections of the society and there occurs equal distribution of
wealth and means of production, to the common benefit of inhabitants of
State.
9. The Incentive Scheme as modified from time to time
envisages giving of promotional and financial incentives. The financial
incentives include the tax exemptions, cash subsidies for payment of tax
interest, subsidies, various matters and other exemptions. The
promotional incentives include Industrial Promotion subsidy, refund of
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Octroi/Entry Tax (in lieu of Octroi) and the like. The promotional and
financial incentives could be availed of only upon the industry qualifying
itself in terms of the eligibility conditions prescribed in the scheme. The
industry is required to obtain an Eligibility Certificate from the
Implementing Agency, which is defined to be the concerned District
Industries Centre. The decision of the Implementing Agency as per clause 3.1(
1), though subject to such directions as the Government may issue
from time to time in this regard, is final and binding on the Eligible Unit.
Clause 3.1 (3) prescribes that the Commissioner of Sales Tax shall endorse
the Eligibility Certificate issued by the Implementing Agency and it shall
be his duty to specify the date of effect of eligibility for the incentives
under the Incentive Scheme.
10. The provisions contained in clause 3.1
would clearly show
that it is for the Implementing Agency to decide about the issuance of
Eligibility Certificate which decision is final and it is for the Commissioner
of Sales Tax to specify the date from which the Eligibility Certificate shall
take effect. These provisions further indicate in clear terms that there is no
authority given to the Commissioner of Sales Tax to modify, enlarge or
curtail the validity period decided by the Implementing Agency and the
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only power which has been given to him is as regards specification of a
particular date from which the Eligibility Certificate shall take effect. But
by the impugned order dated 10th August, 2017, the curtailment has been
done, which is beyond the powers of the Commissioner of Sales Tax. This
order, therefore, would have to be quashed and set aside.
11. Apart from the curtailment of the period of Eligibility
Certificate, the Petitioner has yet another grievance. The grievance is
about reduction of the incentives offered under the Incentive Scheme
which is in detriment to the interest of the Petitioner and also the larger
societal interest. The Petitioner submits that no reduction of the incentives
already offered under the Incentive Scheme in operation on the date on
which the Eligibility Certificate was issued could have been made and if it
has been made now, it would be in violation of the principle of promissory
estoppel.
12. The learned Counsel for Petitioner submits that it is well
settled law that the promise solemnly given by the State cannot be
withdrawn to the detriment and the disadvantage of the person, who has
acted upon it and suffered liabilities. According to the learned AGP, even
if there is reduction in the incentives, it would not ultimately affect the
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Petitioner in adverse manner, and therefore, there is no breach of the
principle of promissory estoppel. In order to resolve the issue so raised, it
would be necessary for us to first understand the doctrine of Promissory
estoppel.
13. An insightful exposition of the doctrine of promissory estoppel
could be found in the case of M/s. Motilal Padampat Sugar Mills Co.
Ltd. V/s State of Uttar Pradesh and Others reported in (1979) 2
Supreme Court Cases 409. The observations of the Hon’ble Apex Court
appearing in Paragraph No.24 are relevant and they are reproduced thus :
“24. This Court finally, after referring to the decision in the
Ganges Manufacturing Co. V. Sourujmull1, Municipal
Corporation of the City of Bombay v. Secretary of State for
India2 and Collector of Bombay v. Municipal Corporation of
the City of Bombay3, summed up the position as follows :
Under our jurisprudence the Government is not exempt
from liability to carry out the representation made by
it as to its future conduct and it cannot on some
undefined and undisclosed ground of necessity or
expediency fail to carry out the promise solemnly made
by it, nor claim to be the judge of its own obligation to
1 (1880) ILR 5 Cal 669
2 (1905) ILR 29 Bom 580
3 1952 SCR 43
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10/24 915.wp.2209.18
the citizen on an ex parte appraisement of the
circumstances in which the obligation has arisen.
The law may, therefore, now be taken to be settled as a result of
this decision, that where the Government makes a promise
knowing or intending that it would be acted on by the promisee
and, in fact, the promisee, acting in reliance on it, alters his
position, the Government would be held bound by the promise and
the promise would be enforceable against the Government at the
instance of the promisee, notwithstanding that there is no
consideration for the promise and the promise is not recorded in
the form of a formal contract as required by Article 299 of the
Constitution. It is elementary that in a republic governed by the
rule of law, no one, howsoever high or low, is above the law.
Everyone is subject to the law as fully and completely as any other
and the Government is no exception. It is indeed the pride of
constitutional democracy and rule of law that the Government
stands on the same footing as a private individual so far as the
obligation of the law is concerned : the former is equally bound as
the latter. It is indeed difficult to see on what principle can a
Government, committed to the rule of law, claim immunity from
the doctrine of promissory estoppel. Can the Government say that
it is under no obligation to act in a manner that is fair and just or
that it is not bound by considerations of “honesty and good faith”?
Why should the Government not be held to a high “standard of
rectangular rectitude while dealing with its citizens”? There was a
time when the doctrine of executive necessity was regarded as
sufficient justification for the Government to repudiate even its
contractual obligations; but, let it be said to the eternal glory of
this Court, this doctrine was emphatically negatived in the Union
of India v. IndoAfghan
Agencies1 case and the supremacy of the
rule of law was established. It was laid down by this Court that the
Government cannot claim to be immune from the applicability of
the rule of promissory estoppel and repudiate a promise made by it
on the ground that such promise may fetter its future executive
action. If the Government does not want its freedom of executive
action to be hampered or restricted, the Government need not
make a promise knowing or intending that it would be acted on by
the promisee and the promisee would alter his position relying
upon it. But if the Government makes such a promise and the
promisee acts in reliance upon it and alters his position, there is no
reason why the Government should not be compelled to make good
such promise like any other private individual. The law cannot
acquire legitimacy and gain social acceptance unless it accords
with the moral values of the society and the constant endeavour of
the Courts and the legislature must, therefore, be to close the gap
between law and morality and bring about as near an
approximation between the two as possible. The doctrine of
promissory estoppel is a significant judicial contribution in that
direction. But it is necessary to point out that since the doctrine of
promissory estoppel is an equitable doctrine, it must yield when
the equity so requires. If it can be shown by the Government that
1 (1968) 2 SCR 366
having regard to the facts as they have transpired, it would be
inequitable to hold the Government to the promise made by it, the
Court would not raise an equity in favour of the promisee and
enforce the promise against the Government. The doctrine of
promissory estoppel would be displaced in such a case because, on
the facts, equity would not require that the Government should be
held bound by the promise made by it. When the Government is
able to show that in view of the fats as have transpired since the
making of the promise, public interest would be prejudiced if the
Government were required to carry out the promise, the Court
would have to balance the public interest in the Government
carrying out a promise made to a citizen which has induced the
citizen to act upon it and alter his position and the public interest
likely to suffer if the promise were required to be carried out by the
government and determine which way the equity lies. It would not
be enough for the Government just to say that public interest
requires that the Government should not be compelled to carry out
the promise or that the public interest would suffer if the
Government were required to honour it. The Government cannot,
as Shah, J., pointed out in the IndoAfghan
Agencies case, claim
to be exempt from the liability to carry out the promise “on some
indefinite and undisclosed ground of necessity or expediency”, nor
can the Government claim to be the sole judge of its liability and
repudiate it “on an ex parte appraisement of the circumstances”. If
the Government wants to resist the liability, it will have to disclose
to the Court what are the facts and circumstances on account of
which the Government claims to be exempt from the liability and it
would be for the Court to decide whether those facts and
circumstances are such as to render it inequitable to enforce the
liability against the Government. Mere claim of change of policy
would not be sufficient to exonerate the Government from the
liability: the Government would have to show what precisely is the
changed policy and also its reason and justification so that the
Court can judge for itself which way the public interest lies and
what the equity of the case demands. It is only if the Court is
satisfied, on proper and adequate material placed by the
Government, that overriding public interest requires that the
Government should not be held bound by the promise but should
be free to act unfettered by it, that the Court would refuse to
enforce the promise against the Government. The Court would not
act on the mere ipse dixit of the Government, for it is the Court
which has to decide and not the Government whether the
Government should be held exempt from liability. This is the
essence of the rule of law. The burden would be upon the
Government to show that the public interest in the Government
acting otherwise than in accordance with the promise is so
overwhelming that it would be inequitable to hold the Government
bound by the promise and the Court would insist on a highly
rigorous standard of proof in the discharge of this burden. But
even where there is no such overriding public interest, it may still
be competent to the Government to resile from the promise “on
giving reasonable notice, which need not be a formal notice, giving
the promisee a reasonable opportunity of resuming his position”
provided of course it is possible for the promisee to restore status
quo ante. If, however, the promisee cannot resume his position, the
promise would become final and irrevocable. Vide Emmanuel
Avodeji Ajaye v. Briscoe.”
14. Two propositions of law emerge from the above observations.
Firstly, once the promise is solemnly given by the State with an intention
that when acted upon, it would create a legal relation and acting on it the
promisee has changed his/her position and incurred liability, the State
must be held as bound by the promise, except when owing to change of
circumstances or subsequent developments larger public interests demand
that the promise be not enforced against the State lest newly established
balance of equities would tilt against the Government or larger public
interest. Secondly, the doctrine is equitable in nature, and therefore, it
must yield when the equity so requires. But, that does not mean that the
Government can claim to be exempt from the liability to carry out the
promise on some indefinite and undisclosed ground of necessity or
unacceptability and that the Government will have to disclose the facts
and circumstances on account of which the Government seeks its
exemption from the liability. Thus, the exemption to the Government can
be granted only on the basis of facts and circumstances of each case and
the burden to establish a case for exemption would be upon the
Government.
15. The principle of promissory estoppel has now been firmly
entrenched in India with its consistent reiteration and following in the
later cases. One of such cases is that of Gujarat State Financial
Corporation V/s M/s. Lotus Hotels Pvt. Ltd. Reported in (1983) 3
Supreme Court Cases 379.
16. Now, if we look at the Incentive Scheme, one feature of the
Scheme that would prominently strike us is that of a promise given by the
State to the industries. The promise is that, if the industries come out of
their secure shells in MumbaiThanePune
industrial belt and set up their
industrial units in diffused virgin pastures of the State, spread out in rural
and remote areas, the industrial units would be eligible for various
incentives offered in the Incentive Scheme. These incentives are meant for
offsetting the additional investment and increase in cost of production of
the industrial units so that the goods and services could be produced at
competitive rates and without incurring any losses.

17. Relying upon such a promise and assurance given by the
State, the Petitioner has opened its industrial unit at village Dabha by
making substantial investment. The Petitioner has acted upon the promise
and the promise had been given by the State with an intention to create
legal relation. The Petitioner having changed its position and having made
investments, has forged a legal relation with the State, and therefore, now
the State would be bound by the promise that it gave to the Petitioner
through the Incentive Scheme and which it confirmed it by issuing the
Eligibility Certificate.
18. It would be clear from the facts stated and the discussion
made by us thus far that the doctrine of promissory estoppel clearly apply
here and would forbid the Government from taking any decision of not
completely implementing the Incentive Scheme or reducing the incentives
to the detriment of the Petitioner and to that extent the decision would
have to be held as illegal. Once a promise has been solemnly given with
an intention that it would be acted upon and which has been indeed acted
upon and liabilities suffered by the promisee, the State cannot be
permitted to backtrack on the promise and change its position so as to
cause loss to the promisee. There can be an exception to the application of
the principle of promissory estoppel, but, the facts and circumstances
necessary for exempting the Government from its liability do not exist on
record and the reply of the State also does not convincingly point out any
such exceptional facts and circumstances warranting toning down or
withdrawing of its promise, much to the disadvantage of the Petitioner. If
the State has to reverse its promise, it must demonstrate specifically the
facts and circumstances showing that enforcing of the promise against it
would be highly iniquitous. The Government cannot change its stand
merely upon its ipse dixit. There must be in existence justifiable facts and
circumstances to change the decision or otherwise the State must give full
effect to the decision, which in the present case is to be found in the
Incentive Scheme. This is the essence of the rule of law.
19. In the earlier paragraph, we have found that the Incentive
Scheme has been framed by the State with a view to ensure equal
distribution of wealth and means of production to the common benefit of
citizenry of the State. The ostensible purpose was to encourage setting up
of industrial units across the State of Maharashtra so that the employment
is made available to greater sections of the society and the economy of the
State as a whole stands to gain. The object and purpose of the Incentive
Scheme is in consonance with the ideals held aloft by the directive
principles of State policy contained in Part – IV of the Constitution of
India, in particular, Article 39(c). Article 39(c) lays down thus :
“39. Certain principles of policy to be followed by the State –
The State shall, in particular, direct its policy towards securing –
(a) …………………………………………………………………………….;
(b) …………………………………………………………………………….;
(c) that the operation of the economic system does not result in
the concentration of wealth and means of production to the
common detriment;
(d) ……………………………………………………………………………..;
(e) ……………………………………………………………………………..;
(f) ……………………………………………………………………………..”
20. Though the earlier decisions of the Hon’ble Supreme Court
indicated that the courts were hardly concerned with the directive
principles, they being not justiciable or enforceable in the courts of law
like the fundamental rights, the duty of the courts in relation to the
directive principles of the State policy came to be stressed much in later
decisions, especially after 13member
Bench in Keshavananda V/s State
of Kerala, (1973) 4 SCC 225. This case laid down certain broad
propositions as regards fundamental rights, such as –

(i) There is no disharmony between the directives and the fundamental
rights, because they supplement each other in achieving the
common goal and establishing a welfare of State;
(ii) Fundamental rights cannot be enjoyed fully unless conducive
atmosphere for their enjoyment is created, which is possible only
when the directive principles are implemented;
(iii) Parliament is competent to abrogate any of the fundamental rights
by amending the Constitution in order to enable the State to
implement the directive principles;
(iv) Though the mandate of Article 37 is directed at the State, the courts
are also bound by the mandate, within the parameters of the
Constitution or any other statute under their consideration; and
(v) The courts have a duty while interpreting the Constitution and
statutes to harmonise the social objective underlying the directive
principles with the individual rights.
21. In the case of Centre of Legal Research V/s State of Kerala
reported in AIR 1986 SC 1322, the Hon’ble Apex Court held that the
Court may issue suitable directions so that the Government may perform
its duty to implement the directive principles of State Policy.

22. In the case of Sheela V/s Union of India, reported in 1986
SC 1773, the Hon’ble Apex Court had taken a similar view in order to
enforce the legislation passed to protect children. The Hon’ble Apex Court
has also struck down an executive order or law for violating the directive
principles (See – Cf. Ashwathanarayana V/s State of Karnataka, (1989)
Supp. (1) SCC 698; A. I. Bank Officers V/s Union of India, (1989) 4 SCC
96).
23. The law so crystallized in relation to the status of the
directive principles of State Policy would tell us that if there is any action
of the State or any executive order made by the State which dilutes or
abridges the mandate of the directives, the Court in exercise of power of
judicial review can annul the action or the executive order. The only
condition necessary for doing so would be that the executive order or the
law underlying the impugned action or order should have a reasonable
nexus with the directive principles or should be made for implementing
the directive principles and this has to be ascertained by examining nature
and character of the basic executive order or the law. Sometimes, even the
basic law or order could be in derogation of the directives. In that event
also, the court would have the power to strike down the same. A useful
reference in this regard may be made to the observations of the Hon’ble
Apex Court in paragraph Nos.3, 4 and 5 of Tinsukhia Electric Supply Co.
Ltd. V/s State of Assam and Others, reported in (1989) 3 Supreme
Court Cases 709. For the sake of convenience, we reproduce here a
portion from the relevant observations made in paragraph No.5, which
reads as follows :“
5. Whenever a question is raised that the Parliament or the
State legislature have abused their powers and inserted a
declaration in a law for not giving effect to securing the Directive
Principles specified in Article 39(b) and (c), the court can and must
necessarily go into that question and decide. See the observations of
Justice Mathew in Kesavananda Bharati Case at page 855 of the
report (SCC p.896). If the court comes to the conclusion that the
declaration was merely a pretence and that the real purpose of the
law is the accomplishment of some object other than to give effect
to the policy of the State towards securing the Directive Principles
as enjoined by Articles 39(b) and (c), the declaration would not
debar the court from striking down any provision therein which
violates Article 14, 19 or 31………………………………………………….”
24. The interpretation given by the Hon’ble Apex Court as regards
the status of the directive principles of State Policy, in our considered
opinion, applies to the facts and circumstances of the present case. The
Incentive Scheme, as stated earlier, has been framed ostensibly to achieve
one of the directives contained in Article 39(c) for ensuring equal
distribution of wealth and means of production. Specific incentives to the
industries have been offered and many of the industries have also availed
of those incentives by setting up their industrial units situated in various
parts across the State of Maharashtra. These units have been established
by making substantial investment and even at the risk of increase in the
expenditure on account of transportation, marketing and the like. Thus,
these units have suffered liabilities with the hope that the increased cost of
production would be evened out appropriately by the incentives given to
them.
25. Now, midway through the operation of the Incentive Scheme,
many of the incentives are being taken away or reduced and if this is
permitted, it would certainly adversely affect not only the industrial units,
but also the whole process of achieving the directive of Article 39(c) that
operation of economic system does not result in the concentration of
wealth and means of production to the common detriment. Such
reduction under the Incentive Scheme in the name of new policy of GST is
clearly not permissible and the Incentive Scheme that was in operation on
the date of issuance of Eligibility Certificate would have to be enforced
against the State. The only liberty that could be granted to the State
would be of modifying the Incentive Scheme in such a way that it is
consistent with the new tax structure under the General Sales Tax Scheme
and at the same time it also does not result in reducing or restricting the
benefits which have been conferred upon an industrial unit like that of the
Petitioner under the Incentive Scheme.
26. In the result, we find that this Petition deserves to be allowed
and it is allowed accordingly.
27. The impugned order dated 10th August 2017 is hereby
quashed and setaside
and the Commissioner of Sales Tax or any
authorized Officer is directed to specify the effective date of the Eligibility
Certificate without curtailing the validity period in terms of clause –
3.1(3) of the Incentive Scheme within a period of four weeks from the
date of receipt of this Judgment.
28. The Respondents are directed to implement the Incentive
Scheme as amended uptodate
with a discretion to modify the scheme so
as to bring it in line with the new tax structure under the General Sales
Tax scheme, but without reducing or restricting the benefits as conferred
upon the Petitioner under the Incentive Scheme within a period of eight
weeks from the date of receipt of this Judgment.
29. Rule is made absolute in these terms. No order as to costs.
JUDGE JUDGE

Condonation of delay – Words “sufficient cause” should receive liberal construction

MASTI

The question of what is “sufficient cause” for condonation of delay was considered in STERLITE INDUSTRIES (INDIA) LTD. vs. ADDITIONAL COMMISSIONER OF INCOME TAX by the ITAT, MUMBAI ‘D’ BENCH.

The Judges were Rajpal Yadav, J.M. & A.K. Garodia, A.M.

The Counsel who argued the condonation of delay application were S.K. Tulsiyan & Ms. Sapana Verdia, for the Assessee and Ajoy Kumar Singh, for the Revenue.

The cross-objections of the assessee were time-barred by 3 yrs., 101 days and 2 yrs., 217 days, respectively.

The Tribunal, therefore, first dealt with the petition for condonation of delay in filing the cross objections.

In order to explain the delay, the assessee submitted that the grounds set out in the memorandum of cross-objections are similar to the issues involved in earlier years forming part of the consolidated appeals pending before the Tribunal, i.e., whether interest expenditure incurred on the borrowed funds for financing of expansion of existing business is allowable or not.

In these assessment years learned CIT(A) had allowed such expenses partly for some of the units, however disallowed with regard to aluminium smelter projects at Orissa and paper project at Vyara.

It was also been pleaded that assessee was under bona fide belief that such a relief can be claimed by invoking r. 27 of the ITAT Rules and, therefore, cross-objections were not filed when memorandum of Departmental appeal was received by the assessee.

In support of its contention, the assessee filed the affidavit of Mr. Tarun Jain, director of the company.

On the strength of such explanation learned counsel for the assessee prayed that the delay in filing the cross-objection be condoned.

The Departmental Representative on the other hand, opposed the prayer of assessee and contended that assessee failed to give any plausible explanation for not filing the cross-objection in time.

The Tribunal held that Courts and quasi judicial bodies are empowered to condone the delay if a litigant satisfies the Court that there were sufficient reasons for availing the remedy after expiry of the limitation.

Such reasoning should be to the satisfaction of the Court.

It was noted that The expression “sufficient cause or reason” as provided in sub-s. (5) of s. 253 of the IT Act is used in identical position in the Limitation Act and the CPC.

Such expression has also been used in other sections of the IT Act, such as, ss. 274, 273, etc. The expression “sufficient cause” within the meaning of s. 5 of the Limitation Act as well as similar other provisions, the ambit of exercise of powers thereunder has been subject-matter of consideration before the Hon’ble Supreme Court on various occasions.

In the case of State of West Bengal vs. The Administrator, Howrah Municipality AIR 1972 SC 749, the Hon’ble Supreme Court while considering the scope of expression “sufficient cause” for condonation of delay has held that the said expression should receive a liberal construction so as to advance the substantial justice when no negligence or inaction or want of bona fide is imputable to party.

In the case of N. Balakrishnan vs. M. Krishnamurthy , AIR 1998 SC 3222, there was a delay of 883 days in filing an application for setting aside the ex parte decree for which application for condonation of delay was filed.

The trial Court having found that sufficient cause was made out for condonation of delay condoned the delay. However, the Hon’ble High Court reversed the order of the trial Court. The Hon’ble Supreme Court while restoring the order of the trial Court has observed in paras 8, 9 and 10 as under :

“8. The appellant’s conduct does not on the whole warrant to castigate him as an irresponsible litigant. What he did in defending the suit was not very much far from what a litigant would broadly do. Of course, it may be said that he should have been more vigilant by visiting his advocate at short intervals to check up the progress of the litigation. But during these days when everybody is fully occupied with his own avocation of life, an omission to adopt such extra vigilance need not be used as ground to depict him as a litigant not aware of his responsibilities, and to visit him with drastic consequences.

9. It is axiomatic that condonation of delay is a matter of discretion of the Court. Sec. 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. Length of delay is no matter, acceptability of the explanation is the only criterion. Sometimes, delay of the shortest range may be uncondonable due to a want of acceptable explanation, whereas in certain other cases, delay of a very long range can be condoned as the explanation thereof is satisfactory.

Once the Court accepts the explanation as sufficient, it is the result of positive exercise of discretion and normally the superior Court should not disturb such finding, much less in revisional jurisdiction, unless the exercise of discretion was on wholly untenable grounds or arbitrary or perverse. But it is a different matter when the first Court refuses to condone the delay.

In such cases, the superior Court would be free to consider the cause shown for the delay afresh and in its own finding even untrammeled by the conclusion of the lower Court.

10 ……….. The primary function of a Court is to adjudicate the dispute between the parties and to advance substantial justice. The time-limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause.” (Emphasis, italicised in print, added)

The Hon’ble Supreme Court further observed that rules of limitation are not meant to destroy the rights of the parties. They are meant to see that parties do not resort to dilatory tactics, but seek the remedy promptly. The Hon’ble Court further observed that refusal to condone the delay would result in foreclosing a suitor from putting forth his cause.

There is no presumption that delay in approaching the Court is always deliberate. The Hon’ble Supreme Court in SLP [Civil No. 12980 of 1986, decided on 19th Feb., 1987, in the case of Collector, Land Acquisition & Ors. vs. Mst. Katiji & Ors. (1987) 62 CTR (SC)(Syn) 23] has laid down the following guidelines :

1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.

3. “Every day’s delay must be explained” does not mean that a pedantic approach should be made, why not every hour’s delay, every second’s delay. The doctrine must be applied on a rational commonsense pragmatic manner.

4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.

5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.

6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. Making a justice-oriented approach from this perspective; there was sufficient cause for condoning the delay in the institution of the appeal. The fact that it was the “State” which was seeking condonation and not a private party was altogether irrelevant.

In the case of Nand Kishore vs. State of Punjab (1995) 6 SCC 614, the Hon’ble Supreme Court has condoned the delay of 31 years almost under the similar circumstances. There the petitioner has joined service in the erstwhile Patiala State in May, 1941. On the formation of Pepsu State, he was taken as an assistant w.e.f. 1st Sept., 1956.

Subsequently, Pepsu State was merged with State of Punjab. He was integrated as an assistant in the Punjab Civil Secretariat at Chandigarh in the food distribution branch. He completed 10 years qualifying service. However, he was compulsorily retired on 6th Jan., 1961.

He challenged this order of retirement by way of writ petition in the Punjab & Haryana High Court. The writ petition was dismissed on 2nd Feb., 1962. In the writ petition the petitioner had not challenged validity of r. 5.32 of the Punjab Civil Service Rules, Vol. II.

Subsequently, this rule was challenged by some other employees and the Hon’ble Supreme Court has taken the view that it was not permissible for a State while reserving to itself the power of compulsory retirement by framing rules prescribing a proper age of superannuation to form another one giving it the power to compulsorily retire a Government servant at the end of 10 years’ service. According to the Hon’ble Supreme Court that rule cannot fall outside Art. 311(2) of the Constitution.

After this decision, the petitioner, Nand Kishore, filed a civil suit which travelled upto the Hon’ble Supreme Court and while hearing the appeal, the Hon’ble Court had advised the petitioner to challenge the order of the High Court passed on the writ petition in 1962. Taking into consideration the injustice to the employee the Hon’ble Court has condoned the long delay of 31 years and decided the appeal on merit.

Keeping in mind the above authoritative pronouncement of the Hon’ble Supreme Court, it is an admitted position that the words “sufficient cause” appearing in sub-s. (5) of s. 253 of the Act should receive a liberal construction so as to advance substantial justice.

Thus, if we advert towards the facts of the present case then it would reveal that circumstances are very close to the situation considered by the Hon’ble Supreme Court in the case of Nand Kishore (supra). It must be remembered that in every case of delay there can be some lapse of the litigant concerned. That alone is not enough to turn down the pleas and to shut the doors against him.

If explanation does not smack mala fide or does not put forth as a dilatory strategy, the Court must show utmost consideration of such litigant. As observed by the Hon’ble Supreme Court in the case of N. Balakrishnan (supra), the length of delay is immaterial, it is the acceptability of the explanation and that is the only criteria for condoning the delay.

Therefore, taking into consideration the overall facts and circumstances the Tribunal condoned the delay in filing the cross objection and proceed to decide the controversy on merit.

Download judgement on condonation of delay for sufficient cause

Penalty under section 271(1)(c) is invalid if charge is vague

MASTI

A Bench of The Income Tax Appellate Tribunal Pune Bench “B”, Pune, comprising of Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM had to decide appeals relating to different assessment years against penalty levied under section 271(1)(c) of the Income Tax Act, 1961.

The lead case was Uttam Bhagwanrao Patil & Ors ITA Nos.1718 & 1719/PUN/2017

In the bunch of appeals filed by / against different assessee, the common thread was the issue raised against levy of penalty for concealment under section 271(1)(c) of the Act.

Majorly the appeals were filed by assessee as they are aggrieved by the aforesaid levy of penalty and in some cases, appeals are also filed by Revenue against order of CIT(A) in deleting the same.

In the bunch of appeals, the Assessing Officer while completing assessment proceedings had initiated penalty proceedings for concealment under section 271(1)(c) of the Act.

In some of the assessment orders while recording satisfaction for initiating the aforesaid penalty proceedings, the Assessing Officer has failed to mention the limb on account of which the assessee was held to have erred i.e. whether it is concealment of income or furnishing of inaccurate particulars of income.

In some of the cases, the Assessing Officer while recording satisfaction has initiated penalty proceedings for the default of both i.e. furnishing of inaccurate particulars of income and / or concealment of income.

In some of the cases, the Assessing Officer mentioned that penalty proceedings need to be initiated for furnishing inaccurate particulars of income in view of Explanation (1) to section 271(1)(c) of the Act.

Explanation (1) deals with concealment of income.

In some of the cases, though the Assessing Officer had initiated penalty proceedings for one of the limbs i.e. either for furnishing inaccurate particulars of income or for concealing the income but while levying penalty, the same has been levied on alternate limb i.e. in case the penalty proceedings are initiated for furnishing inaccurate particulars of income but while levying penalty, the Assessing Officer comes to a finding that the same is to be levied for concealment of income or vice-versa.

The Assessing Officer in some cases also levied penalty for default of both of the limbs of section 271(1)(c) of the Act or no limb is mentioned in the penalty order.

The Tribunal had to consider the question that where the Assessing Officer has failed to mention specific charge for initiating penalty proceedings and/or if he has recorded satisfaction for initiating penalty proceedings for non fulfillment of one of the limbs of section 271(1)(c) of the Act and while levying penalty either penalty is levied for the default of both the limbs or there is mention of none of the limbs or there is mention of contrary limb as to what it was initiated for, then whether penalty levied in such cases can be sustained in the eyes of law?

It was noted that the issue stands covered by number of decisions of Pune Bench of Tribunal, wherein this issue has been decided in line with the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom).

In respect of appeals filed by Revenue, the assessee – respondent has similarly pleaded.

However, the learned Departmental Representative for the Revenue placed reliance on the orders of Assessing Officer / CIT(A) and find justification in the aforesaid levy of penalty for concealment under section 271(1)(c) of the Act.

The Tribunal has already adjudicated the issue in number of cases in turn, relying on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra), wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty.

In the facts of the said case, the Tribunal had deleted penalty imposed under section 271(1)(c) of the Act by holding that initiation of penalty proceedings by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty was for concealment of income.

The grievance of Revenue before the Hon’ble High Court was that there was no difference between furnishing of inaccurate particulars of income and concealment of income.

The Hon’ble High Court held as under:-

“6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC) [relied upon in Manjunath Cotton & Ginning Factory (supra)] – wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in section 271(1)(c) of the Act, carry different meanings/connotations.

Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice.”

9. The Hon’ble Goa Bench of Bombay High Court in a latest decision in the case of Pr.CIT Vs. New Era Sova Mine & Ors. in Tax Appeals Nos.70, 69 of 2018 & 6 of 2019, judgment dated 18.06.2019 applying the ratio laid down in CIT Vs. Shri Samson Perinchery (supra) have also similarly held.

Applying the said principle laid down by the Hon‟ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra), it transpired that in cases of levy of penalty under section 271(1)(c) of the Act, the Assessing Officer should be clear as to which of the two limbs of said section are attracted or has been contravened and for initiating penalty proceedings give show cause accordingly.

It cannot be the case of Revenue that initiation would be on one limb i.e. for furnishing inaccurate particulars of income and imposition of penalty on the other limb i.e. concealment of income or vice-versa.

The charge against assessee should be clear and specific in order to allow the assessee to meet the case of Revenue of concealing the income or filing inaccurate particulars of income.

In the absence of such show cause notice being issued to the assessee, penalty proceedings cannot stand.

Similarly, while levying penalty, the Assessing Officer should be clear as to which limb of section / charge has not been fulfilled by assessee to make him liable for levy of penalty for concealment of income.

The Tribunal held that coming to present set of appeals, in such scenario, where the Assessing Officer has failed to mention specific charge as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee and give proper show cause notice to the assessee in this regard, then the levy of penalty in such circumstances suffers from infirmity.

Similarly where the Assessing Officer has recorded satisfaction in the assessment order as to both limbs of section 271(1)(c) of the Act and initiated penalty proceedings, such order also suffers from infirmity.

Where no charge is mentioned in assessment order, then also for non recording of proper satisfaction, the initiation of penalty proceedings is not as per law and the penalty order passed in such cases thus, cannot be upheld.

Where, in some cases, penalty has been levied for non fulfillment of both limbs of section 271(1)(c) of the Act and / or for one of the limbs for initiating, for other limb for levy and in some cases, no limb is mentioned, such orders levying penalty under section 271(1)(c) of the Act cannot stand in the eyes of law.

The Tribunal accordingly, deleted penalty levied under section 271(1)(c) of the Act.

Consequently, appeals filed by assessee was allowed. Following the same parity of reasoning, the appeals filed by Revenue were dismissed for non fulfillment of conditions laid down in section 271(1)(c) of the Act for recording of satisfaction or levying penalty as per section.

Download ITAT Judgement

Corruption In Tax Departments Will Not Be Tolerated: Prime Minister Narendra Modi

MASTI

Prime Minister Narendra Modi gave an interview to the Economic Times in which he talked at length about the menace of corruption in the income-tax and indirect taxes department.

He explained the Government would no longer tolerate corruption amongst Government officials.

Q. Amid a sustained crackdown on corruption, there is also concern about some actions by investigative agencies and tax authorities. What steps are being taken to allay such fears?

A. For the vast majority of income-tax payers, considerable progress has been made — today refunds are credited to bank accounts automatically within weeks without any need for the taxpayer to go and pursue it with the officer.

This has benefited literally crores of people and many have appreciated this.

We are starting faceless assessment of income-tax return. This will eliminate human interface to a large extent.

For tax evaders, we gave an amnesty scheme before demonetisation. Those who failed to use it may have suffered.

If we look at the number of searches in one year, it is not even 1,000. During 2017-18, number of groups where search operation took place was 582, and in 2018-19 it was 980.

When you see this number in the context of total number of tax payers, it will not be even 0.02%.

So you can understand how scarce these actions are.

However, it is a fact that some black sheep in the tax administration may have misused their powers and harassed taxpayers, either by targeting honest assesses or by taking excessive action for minor or procedural violations.

We have recently taken the bold step of compulsorily retiring a significant number of tax officials, and we will not tolerate this type of behaviour.

I have also instructed the revenue secretary to come up with measures to ensure that honest taxpayers are not harassed and those who commit minor or procedural violations are not subjected to disproportionate or excessive action.

The post of member (taxpayer services) will be activated in both the CBIC and CBDT by posting a very senior officer for this charge. They will be responsible for improving taxpayer services and will keep a watch on grievance redressal.

In order to reduce litigation and to effectively reduce taxpayer grievances and litigation, the monetary limits for filing of appeals by the tax authorities have been increased significantly.

This limit used to be Rs 25 lakh for appeal in Supreme Court, Rs 20 lakh for High Courts and Rs 10 lakh for income tax appellate tribunals.

In the last one year, these limits with respect to income tax cases have been increased to Rs 2 crore for SC, Rs 1 crore for HCs and Rs 50 lakh for appellate tribunals.

This will reduce pendency in higher courts and will allow departments to concentrate on litigation involving complex legal issues and high tax effect.

ITAT President Appointment Notification

MASTI

No.14/6/2018–EO(SM-II)

Information Note (05.10.2018)

The Appointments Committee of the Cabinet (ACC) has approved the appointment of Justice Pradipkumar Premshankar Bhatt, former Judge, Gujarat High Court, to the post of the President in the Income Tax Appellate Tribunal (ITAT).

2. Necessary communication in this regard has been sent to the Department of Legal Affairs.

CBEC Circular On Orders Of Supreme Court, High Courts And CESTAT Accepted By The Department

MASTI

 Circular No. 1063/2/2018-CX
F. No. 116/2/2018-CX 3
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
New Delhi, North Block

16th of February, 2018
To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners of Central Tax & Central Excise (All)
Web-master, CBEC

Madam/Sir,

Sub: Orders of Supreme Court, High Courts and CESTAT accepted by the Department and on which no review petitions, SLPs have been filed– reg.

Field formations send SLP & CA proposals to the Board. Many of them after examination are not approved and such decisions of High Courts & Tribunals thus attain finality. It has been decided to disseminate such information to the field formations. Attention is invited to sixty three orders of different High Courts summarized in this Circular which have been accepted by the Department. In fourteen of these orders, Hon’ble High Courts have decided various questions of law. In the rest forty nine cases the Hon’ble High Courts have delivered judgments on the basis of some settled case law or have decided points of facts or have dismissed the appeal on monetary grounds. The said orders have been complied in this Circular so that cases pending in the field can be expeditiously decided, if the questions of law or facts involved are identical.

2. The Circular has two parts, namely Part I and Part II, where Part I comprises of the orders of various High Courts in which points of law have been decided and Part II comprises orders which have been decided on facts or have been dismissed on monetary limits. All the orders have been accepted by the Department and against them no SLP etc has been preferred in the Hon’ble Supreme Court.

3. This exercise has been undertaken as an endeavour to reduce litigations so that cases on similar questions of law or identical case on facts pending in your jurisdictions can be decided. Page 2 of 29

PART I:

1. (a) Decision of the Hon’ble High Court of Rajasthan dated 29.02.2016 in the case of Savitri Concast Ltd. in DB C.W.P 4784/2012, 5285/2012 & 5286/2012,

(b) Decision of Hon’ble Punjab & Haryana High Court dated 14.09.2015 passed in CEA No. 20 of 2015 in the case of Commissioner, Central Excise Commissionerate, Chandigarh-I vs M/s Quality Steels, Mandigobindgarh,

(c) Decision of the Hon’ble High Court of Gujarat dated 13.10.2015 in Tax Appeal No. 1581 of 2007 in the case of M/s Kohinoor Dyg & Ptg Mills (P) Ltd., Surat.

1.1 Department has accepted the aforementioned decisions where the Hon’ble High Courts dismissed the departmental appeals relying on the decision of the Hon’ble Supreme Court dated 24.11.2015 in the case of M/S Shree Bhagwati Steel Rolling vs Commissioner of Central Excise & Others.

1.2 In the case of M/S Shree Bhagwati Steel Rolling vs Commissioner. Of Central Excise & Others, the Hon’ble Supreme Court examined the question of law whether interest and penalty provisions under rules 96 ZO, 96 ZP and 96 ZQ which were framed to effectuate the provisions of section 3A of the Central Excise Act, 1944 are consistent with the provisions of the Act and held that they are ultra vires. An excerpt from the judgment is reproduced below,

“…imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96ZO, 96 ZP and 96 ZQ without authority of law. We, therefore, uphold the contention of the assessees in all these cases and strike down rules 96ZO, 96 ZP and 96 ZQ insofar as they impose a mandatory penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act.”
2. (a) Decision of the Hon’ble High Court of Gujarat dated 08.01.2016 in the matter of Commissioner of Central Excise vs Dashion Ltd in Tax Appeal No. 415 of 2013 & 662 of 2014 [2016-TIOL-111-HC-AHM-ST],
(b) Decision of the Hon’ble High Court of Rajasthan dated 08.02.2016 in the matter of Commissioner Central Excise Commissionerate, Jaipur vs National Engineering Industries Ltd CEA No. 3/2016 [2016-TIOL-922-HC-RAJ-CX]
2.1 Department has accepted the judgments where the Hon’ble High Courts dismissed the Department’s appeal inter alia holding that substantial benefit cannot be denied because of procedural irregularity.
2.2 In the case of Dashion Ltd. the assessee was engaged in manufacture of water treatment plant and other connected items and was availing benefit of CENVAT credit on the duty paid on inputs, capital goods and input services as permissible under CENVAT Credit Rules, 2004. The assessee had five manufacturing units and had its registered office at Vatva, Ahmedabad. The assessee was also providing several taxable services such as erection and commissioning, repairing and maintenance of water treatment plant, etc.
2.3 The revenue authorities, during scrutiny of the records of the assessee, noticed that it was availing the credit of service tax paid for various services by one unit for the purpose of clearance of other unit. After gathering details from the assessee, the adjudicating authority issued show cause notice calling upon the assessee as to why the CENVAT credit of service tax on input service should not be recovered with interest and penalties. In the show cause notice itself, the adjudicating authority had referred to sub-rule (3) of Rule 15 of the Rules of 2004 as basis for such proposal. Two primary objections of the Department were that the assessee had not registered itself under the Service Tax (Registration of Special Category of Persons), Rules 2005 and that the tax credit from one unit was utilized for discharging tax liability of another unit instead of pro rata distribution amongst different units. The adjudicating authority confirmed the duty demands with interest and penalties.
2.4 Therefore, the points of law examined were that the assessee had utilized credit from one unit for the purpose of duty liability of its other unit without pro rata distribution by the input service distributor and further the assessee had not registered itself under the Service Tax (Registration of Special Category of Persons), Rules 2005.
2.3 Hon’ble High Court dismissed the department’s appeal holding that such view was not sustainable as there was no previous restriction of this nature under Rule 7 of the CENVAT Credit Rules, 2004. Further non-registration of ISD is only a procedural irregularity for which substantial benefit of CENVAT credit cannot be denied when all the necessary records have been maintained by the respondent. Page 4 of 29

3. Decision of the Hon’ble High Court of Allahabad dated 27.04.2016 in the matter of M/s Bhushan Steel Ltd CEA No. 32/2016.

3.1 Department has accepted the aforementioned order of the Hon’ble High Court of Allahabad where the Hon’ble High Court upheld the decision of the CESTAT on the point of law that CENVAT credit of duty availed in excess and not proportionate to the assessable value of raw materials in terms of section 4 of the Central Excise Act, 1944, received by the party from their vendor is admissible to the manufacturer.

3.2 The issue that was examined in the order was that in case of sales of HR Coils by Tata Steel Limited to Bhusan Steel Ltd., the practice was that manufacturer, Tata Steel Limited, Jamshedpur stock transfers the goods to its own depot at Ghaziabad, situated in the premises of the consignment agent by issue of an invoice on which purportedly excise duty and education cess is paid. Bhushan Steel purchases the said HR Coils from the depot of Tata Steel Limited on issue of dispatch advice cum invoice, which bears a much lower price than the price shown on the invoice for removal of goods from the factory on stock transfer to depot. However, while availing the CENVAT credit, Bhushan Steel had taken credit on the basis of full amount shown on the invoice issued to Tata Steel depot on stock transfer.

3.3 CESTAT decided in favour of the party holding that supplier had not claimed any refund on account of reduction in price, relying on CBEC Circular No. 877/15/2008-CX dated 17.11.08 and Hon’ble Supreme Court decision in CCE vs MDS Swithchgear Ltd. [ 2008 (229) ELT 485 (SC)]. The Hon’ble High Court upheld the decision of the CESTAT and dismissed the departmental appeal.

4. Decision of the Hon’ble High Court of Gujarat dated 17.12.2015 in the matter of Apar Industries (Polymer Division) vs Union of India in Special Civil Application No. 7815 of 2014 [2015-TIOL-2859-HC-AHM-CUS]

4.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the case of Apar Industries (Polymer Division) vs Union of India in Special Civil Application No. 7815 of 2014. The issue examined in the order is as follows, Manufacturer exporter, M/s Apar Industries (Polymer Division) filed Rebate claims in incorrect format under Rule 19 instead of as required under Rule 18. The same was re-filed correctly but department held that the subsequent filing was time barred. The Hon’ble Court held that the intention of claiming rebate was clear and first application should have been treated by the department as rebate application. Whatever defect arose from the incorrect filing could have been rectified. In such situations, re-submission should be seen as a continuous attempt and therefore in the matter department was directed to examine the rebate claims of the petitioner on merits. Page 5 of 29

5. Decision of the Hon’ble High Court of Rajasthan in Jaipur dated 24.04.2016 in the matter of Balakrishna Industries Ltd. EXCIA No.17/2015

5.1 Department has accepted the aforementioned order of the Hon’ble Court where the Hon’ble Court dismissed the Departmental appeal.

5.2 The issue pertains to violation of provisions of Advance License/ Authorization as provided under Foreign Trade Policy 2004-09 and procedure prescribed under Notification No. 44/2001-CE (NT) dated 26.06.2001. The procedure required that an assessee availing Advance license/Authorization scheme procure raw materials duty free, but in the present case it was found that goods were procured on payment of duty and CENVAT credit was availed subsequently.

5.3 M/s Balakrishna Industries Ltd., the assessee obtained invalidation letters from the DGFT in favour of its suppliers for duty free supply of raw materials. But the assessee procured the goods on payment of Central Excise duty and availed CENVAT credit. This appeared to be in contravention of FTP and also of Notification No. 44/2001-CE (NT) dated 26.06.2001, as the scheme did not permit payment of duty by the supplier manufacturer.

5.4 Further, the supplier of the raw materials also supplied their goods at lower rate against the invalidated authorization (than the rate without invalidation). In this way, they facilitated M/s BKI to take CENVAT credit of duty paid which was in fact part of assessable value.

5.5 After Demand was confirmed assessee went to CESTAT which vide final order dated 23.07.2014 allowed the appeal of the party. Departments’ appeal before the Hon’ble High Court of Rajasthan was dismissed observing that the same issue was decided by the Bombay High Court in CCE, Thane 1 vs OLEFINE Organic Pvt. Ltd which attained finality when the Department’s appeal was dismissed by the Hon’ble Supreme Court.

6. Decision of the Hon’ble High Court of Delhi dated 22.08.2016 in the case of Sun Pharmaceutical Industries Ltd. W(C) No. 7120/2001

6.1 Department has accepted the aforementioned order of the Hon’ble High Court where the Hon’ble Court condoned the time bar which is provided in Section 11B of the Central Excise Act, 1944 for applying for rebate in view of Gujarat High Court’s order in the matter of Choice Laboratories where the Hon’ble Court inter alia held that “Petitioners had bonafide filed their appeal before a forum which lacked jurisdiction.

6.2 The issue examined in the order is as follows, M/s Sun Pharmaceutical Industries Ltd. filed a rebate claim which was rejected by the jurisdictional Deputy Commissioner on the grounds that the time limit for filing rebate in terms of Rule 12 (1) (a) of the Central Excise Rules, 1944, has been prescribed with reference to Section 11 B of the Central Excise Act, 1944, under condition no. (iv) of the notification no. 41/94-CE (NT) dated 22.09.1994, issued under said Rule 12 (1). The limitation period of 6 months for filing rebate as prescribed under said

Section 11 B was absolute and the Act does not have any provision for relaxation to Rules or notification which can transcend, modify or abbreviate the provision of the Act.

6.3 The assessee filed an appeal before the Commissioner (Appeals) against the said OIO. The Commissioner (Appeals) rejected the appeal. The assessee then filed a Revision Application against he said OIA. The JS (RA) rejected the application.

6.4 The assessee then filed a writ petition before the Delhi High Court. The High Court vide order dated 22.08.2016 allowed the appeal of the assessee by condoning the time bar which is provided in Section 11B of the Central Excise Act, 1944 for applying for rebate. The decision of the Hon’ble Court has been accepted by the Department as the point of law has already been decided by the Gujarat High Court in Choice Laboratories where it was held as follows,

“In that view of the matter, it can be stated that the petitioners were prosecuting the remedy before a wrong forum though under bona fide belief. Surely, the time spent in pursuing such remedy cannot be ignored while considering the question of limitation or delay caused in filing the revision application. In the revisional order, we do not find any mention or reference to such proceedings and the detail affidavit on behalf of the petitioners explaining the grounds why the revision was not filed immediately upon availability of the appellate order. As per the Limitation Act, there is a clear distinction between the delay which can be condoned upon sufficient cause being shown and the period which should be excluded for considering limitation. The time spent in prosecuting remedy before a wrong forum under bona fide belief would fall under exclusion clause as per Section 14 of the Limitation Act. Particularly, when the Tribunal directed its registry to return the papers for presentation before appropriate forum and the case of the petitioners is that such documents were not supplied, the entire issue has to be looked from the angle of the petitioners. Petitioners had bona fide filed their appeal before a forum which lacked jurisdiction.”

This view has been reiterated by the Bombay High Court in EPCOS India case also.

7. Decision of the Hon’ble High Court of Gujarat dated 01.10.2015 in the case of M/s Thakkar Tobacco Products Pvt. Ltd in Tax Appeal No. 619 of 2015

7.1 Department has accepted the aforementioned order of the Hon’ble High Court of Gujarat where the Hon’ble Court dismissed the departmental appeal on the question of law, whether manufacturer has the option of suo-moto abatement of duty in the event of closure of factory for a continuous period of 15 days or more without first depositing the duty in terms of rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008, on the following grounds,

a) As per provisions of the Central Excise Act, 1944 and the PMPM Rules abatement is to be granted and the statute does not prescribe any order of abatement to be passed by the any authority such as DC/AC.

b) In the erstwhile Central Excise Rules, 1944, there was an express provision which provides for claim of abatement would be allowed by an order passed by the Commissioner of Central Excise. When the intention of the government is that amount is to be refunded in as specific manner, then an express provision is provided. However the impugned rule does not make any such provision.

c) The Board Instruction from F.No.267/16/2009-CX-8 dated 12.03.2009 is not applicable in the present case as Rule of PMPM rules does not speak of any order of abatement.

8. Decision of the Hon’ble High Court of Karnataka at Bangalore dated 09.04.2015 in the case of M/s PNB Metlife India Insurance Company Ltd., Bangalore.

8.1 Department has accepted the aforementioned order of the Hon’ble High Court of Karnataka. The issue examined in the order was, whether Reinsurance is an input service which is used for providing output service, namely, Insurance and whether CENVAT Credit taken on re-insurance service is admissible. Hon’ble High Court held that re-insurance is a statutory obligation and the same is co-terminus with the Insurance Policy. Issuance of insurance policy by insurer, and then taking of re-insurance by it, is a continuous process. Re-insurance is therefore an input service.

9. Decision of the Hon’ble High Court of Madras dated 20.03.2015 in CMA 828 of 2008 in respect of M/s SESCOT Sheet Metal Works Ltd.

9.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras. The issue examined by the Hon’ble Court was whether unjust-enrichment would apply to State Government undertaking which applied for refund under Notification No. 111/ 88-CE dated 1.3.88. Hon’ble Supreme Court in Mafatlal Industries case referred as [2002-TIOL-54-SC-CX-CB] held that the doctrine of unjust enrichment will not apply to the State, as the State represents the people of the country. Relying on the same Hon’ble High Court observed that department itself accepted that party is a State funded, State controlled and State monitored organisation supplying goods to Civil Supplies Corporation, which is another organ of the State. Such goods are used in relation to Public Distribution System. Hon’ble High Court therefore allowed the party’s appeal.

10. Decision of the Hon’ble High Court of Gujarat dated 28.01.2016 in the case of M/s Ketan Pottery Works & Ors in Special Civil Application 13882 13883/2015 [2016-TIOL-388-HC-AHM-CX]

10.1 Department has accepted the decision of the Hon’ble High Court of Gujarat in the case of M/s Ketan Pottery Works & Ors in Special Civil Application 13882 13883/2015 where the Hon’ble High Court held that the phrase “and Nepal” appearing in Explanation Clause (G) to SSI Notification No.8 of 2003 is unconstitutional with effect from 01.03.2012. Page 8 of 29

10.2 The issue involved was that, under SSI Exemption Notification No. 8/2003 dated 01.03.03, Explanation (G) provided that clearances for home consumption shall include clearances for export to Bhutan and Nepal. Revision of Treaty between India and Nepal made exports to Nepal at par with export to any other country effective from 01.03.12. The term "clearances for home consumption", which included clearances for export to Nepal and Bhutan ought to have been changed by deleting reference to exports to Nepal. However the said notification was not amended due to oversight. The Hon’ble Court held that this will be plainly discriminatory and hence declared the portion "and Nepal" appearing in Explanation Clause (G) to SSI Notification No.8 of 2003 unconstitutional with effect from 01.03.2012.

11. Decision of the Hon’ble High Court of Rajasthan dated 23.04.2016 in the matter of Barijoriwala’s Rolling Mills Pvt. Ltd in DB CWP No. 2/2014 [2016-TIOL-3184-HC-RAJ-CX]

11.1 Department has accepted the aforementioned order of Hon’ble High Court where the Hon’ble High Court lowered the requirement of pre-deposit to 15 per cent of duty or penalty as the case may be, from 25 per cent as was ordered by the CESTAT as the Hon’ble High Court had pronounced same judgment in several other cases.

11.2 The CWP filed by the assessee challenged the CESTAT’s direction to pre-deposit 50% of the duty confirmed in terms of second proviso to Sec 35F of CEA 1944. The Hon’ble High Court directed the assessee to deposit 15% of demand to restore the appeals before CESTAT in light of the fact that Section 35 A of CEA, 1944 was amended by Finance Act 2014 stipulating payment of 7.5% and 10% of duty as pre-deposit for the first and subsequent appeal

PART II

1. Decision of the Hon’ble High Court of Delhi dated 17.09.2015 in the matter of Flevel International vs Commissioner of Central Excise [2015-TIOL-2230-HC-DEL-CX]

1.1 Department has accepted the order of the Hon’ble High Court of Delhi in the matter of Flevel International vs Commissioner of Central Excise [2015-TIOL-2230-HC-DEL-CX] where the Hon’ble Court set aside the order of the CESTAT by inter alia holding that the Department did not concede to the assessee’s request for cross examination and the Hon’ble Court was satisfied that the impugned majority order of the CESTAT on the issue of clandestine removal of 606 ACs by the Appellant without payment of duty suffers from serious errors and, therefore, cannot be sustained in law.

1.2 In the matter, allegation of clandestine clearances of ACs in guise of compressors from 3 units was investigated from the standpoint of eligibility for exemption under Notification No. 75/87-CE dated 1st March 1987. The Hon’ble High Court held that no serious attempts were made to secure presence of witnesses in adjudication proceedings. And, in cases of clandestine removal, a certain standard is expected of the Department before a finding can be reached against an Assessee. No evidence gathered to show procurement of basic raw material for alleged manufacture.

2. Decision of the High Court of Allahabad dated 08.12.2015 in the matter of CCE, Lucknow vs VK Tulsian in Central Excise Appeal No. 13 of 2015 [2016-TIOL-88-HC-ALL-CX]

2.1 Department has accepted the order of the Hon’ble High Court of Allahabad in the matter of CCE, Lucknow vs XYZ in Central Excise Appeal No. 13 of 2015 inter alia holding that the activities of V.K Tulsian is in the nature of money laundering and not specified under rule 26 and 27 of the Central Excise Rules, 2002 so penalty under the said rules would not be attracted.

2.2 On the matter imposition of penalty under rule 26 & 27 of the Central Excise Rules, 2002 on the CA, Sh. VK Tulsian who was alleged to have abetted in evasion of excise duty by issuing a false certificate for the cash seized from gutka manufacturer. The Hon’ble Court held that respondent cannot be said to have acted in a manner so as to hold him an abetter in relation to the commission of any offence as described under Rule 26. Therefore no substantial question of law was involved.

3 Decision of the High Court of Bombay dated 01.02.2016 in the matter of M/s SV Jiwani in Central Excise Appeal No. 252/2014 [2016-TIOL-503-HC-MUM-ST]

3.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the case of M/s SV Jiwani in Central Excise Appeal No. 252/2014 where the Hon’ble High Court had inter alia held on the question framed, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 or whether CENVAT credit can be claimed after discharging the liability in full, that having paid the service tax in full, Revenue is not incurring any loss of revenue, hence the Court should not undertake an academic exercise.

3.2 In the matter the issue that was examined by the Hon’ble Court was that, whether input service credit could have been availed without exercising the options provided in Rule 2A of the Service Tax (Determination of Values) Rules, 2006 after having discharged the tax liability in full. It was held by the Hon’ble Court that that having paid the service tax in full, Revenue has not incurred any loss of revenue hence Court should not undertake an academic exercise.

4. Decision of the Hon’ble High Court of Gujarat dated 28.01.2016 in the matter of Commissioner, Central Excise and Service Tax versus M/s Inducto Steel Ltd

4.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the matter of Commissioner, Central Excise and Service Tax versus M/S.Inducto Steel Ltd in Tax Appeal No. 126/2016 where the Hon’ble High Court while relying upon the decision of the Gujarat High Court in Krishna Processors vs. Union of India, which was subsequently upheld by the Hon’ble Supreme Court in its judgment in Shree Bhagwati Rolling Mills dated 24.11.2015 dismissed the tax appeal of the Department.

4.2 The matter pertained to suppression of annual capacity of furnace by M/s Inducto Steel Ltd engaged in the manufacturing of MS Ingots which were notified under Section 3A of the Central Excise Act, 1944 vide Notification No. 30/1997 dated 01.08.1997.

5. Decision of the Hon’ble High Court of Madras dated 07.10.2015 in Tamil Nadu Co-op. Textile Processing Mills Ltd. CMA No. 3557/2006

5.1 Department has accepted the decision of the Hon’ble High Court of Madras in CMA No. 3557/2006 in the case of M/s Tamil Nadu Co-op Textile Processing Mills Ltd., where the Hon’ble High Court allowed the party’s appeal in the matter involving whether demand for extended period under section 11A of the Central Excise Act, 1944 is maintainable on the grounds of suppression of facts etc. by pronouncing an order whereby the demand for duty was struck down on limitation grounds.

5.2 The Hon’ble High Court of Madras allowed the party’s appeal inter alia on the grounds that though the party was not allowed to process and clear power loom fabrics without payment of duty the percentage of such clearances was a mere 3.3% of the total clearances and the party was not aware of such fabrics being power loom i.e. delivery challans did not mention it.

6. Decision of the Hon’ble High Court of Gujarat dated 29.01.2016 in the case of Rivaa Textiles Industries Ltd. CA 629/2015 and TA No.933/2006

6.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the case of M/s Rivaa Textiles Industries Ltd. in Civil Application (OJ) 629/2015 in Tax Appeal No. 933/2006 where the Hon’ble High Court vide order dated 13.01.2015 in Tax Appeal No. 933 of 2006 dismissed the appeal of the department and also dismissed the Review Petition with the observation that considering the facts and circumstances and the reasons recorded in the earlier judgment no valid ground is made our for review.

6.2 It was examined whether demand for extended period under section 11 A of the Central Excise Act, 1944 is maintainable when from the same investigation already a separate demand for separate period has been raised. Hon’ble High Court of Gujarat dismissed department’s appeal relying on ratio of decision of Hon’ble Supreme Court in the case of Nizam Sugar Factory [2006 (197) ELT 465 (SC)].

7. Decision of the Hon’ble High Court of Madhya Pradesh (Indore Bench) dated 09.05.2016 in the matter of Anant Commodities Pvt. Ltd. & others R.P. No. 131/2016 (arising out of CEA No. 11/2010)

7.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madhya Pradesh where the Hon’ble High Court dismissed the department appeal on monetary limits.
7.2 In the case, assessees filed refund claim in terms of Notification No 41/2007 in respect of Service tax paid on services utilised by them for export of goods. Refund was rejected on few services on the ground that they are not covered under Notification No 41/2007.

Commissioner (Appeal) allowed the party’s appeal and observed that conditions mentioned in the said notification have been fulfilled. On appeal, Hon’ble CESTAT dismissed Department’s Appeal. On further appeal before the Hon’ble MP High Court at Indore, the appeals were disposed of on monetary limit.

8. Decision of the Hon’ble High Court of Delhi dated 02.12.2015 in the case of M/s Vishnu & Co. Pvt. Ltd & Others in CEAC 62/2014 with 73-90/2014.

8.1 Department has accepted the aforementioned order of the Hon’ble High Court of Delhi where the Hon’ble High Court dismissed the departmental appeal holding that there is no substantial question of law involved.

8.2 In the case, the assessee was engaged in the manufacturer of ‘Vimal’ Gutkha/ Pan Masala. DGCEI issued two SCNs alleging suppression of production and clandestine removal. Adjudicating authority confirmed the said demands. On party’s appeal, CESTAT confirmed demand, interest & penalty in respect of one order, setting aside the other order observing inter alia that case was based on ambiguous records maintained by transporters and oral statements of employees of transporters. Therefore there was no linkage showing that goods transported were booked by VPCL and were of Vimal brand gutka and further statements were also retracted in cross examination. Further it was held that clandestine removal cannot be proved on the basis of third party records without any positive evidence to link them to VCPL. Testing was done on a small quantity of product which is unsafe to be relied upon to establish the identity of productand no buyers were identified. On further appeal by the Department before the Hon’ble High Court, the same was dismissed as there was no substantial question of law and also that view taken by CESTAT is based on a thorough analysis of the evidence on record and is a plausible one.

9. Decision of the Hon’ble High Court of Allahabad dated 20.01.2016 in the case of Murari Lal Harish Chand Jaiswal CEA No. 203/2012 [2016 (333) E.L.T. 385 (All.) + Order of HC]

9.1 Department has accepted the aforementioned order of the Hon’ble High Court where the Hon’ble High Court dismissed the departmental appeal holding that on the issue there is no substantial question of law involved.

9.2 The issue is about clandestine removal of tobacco products without maintaining the statutory records. Commissioner confirmed demand of Rs.4.96 crore with equal penalty and penalty on directors. On appeal, CESTAT set aside the order. Department’s appeal was dismissed by the Hon’ble High Court as no substantial question of law arose for consideration.

10. (a) Decision of the Hon’ble High Court of Rajasthan in the matter of Barijoriwala’s Rolling Mills Pvt. Ltd in DB CWP No. 2/2014

(b) Decision of the Hon’be High Court of Rajasthan in the matter M/s M. M. Brothers in DB Excise (ST) Appeal No. 7555/2015 [2016-TIOL-3184-HC-RAJ-CX]

10.1 Department has accepted the aforementioned order of Hon’ble High Court where the Hon’ble High Court lowered the requirement of pre-deposit to 15 per cent of duty or penalty as the case may be, from 25 per cent as was ordered by the CESTAT as the Hon’ble High Court had pronounced same judgment in several other cases.

10.2 The CWP filed by the assessee challenged the CESTAT’s direction to pre-deposit 50% of the duty confirmed in terms of second proviso to Sec 35F of CEA 1944. The Hon’ble High Court directed the assessee to deposit 15% of demand to restore the appeals before CESTAT in light of

the fact that Section 35 A of Central Excise Act, 1944 was amended by Finance Act 2014 stipulating payment of 7.5% and 10% of duty as pre-deposit for the first and subsequent appeal.

11. Decision of the Hon’ble High Court of Rajasthan dated 14.09.2016 in the matter of Dinesh Fragrance Civil Review Petition 133/2016 in CWP No.3243/2015

11.1 Department has accepted the aforementioned order of the Hon’ble High Court of Rajasthan where the Hon’ble High Court allowed the appeal of the assessee upholding the maximum speed of the machine as 700 pouch packing per minute and further directed the department to re determine the duty in accordance with the findings arrived at by the Hon’ble Court.

11.2 Review Petition was filed by the Department. The Hon’ble High Court dismissed the petition as no facts were overlooked while passing order dated 12.04.16. The issue related to production of Pan Masala Pouches with the help of pouch packing machine and paying duty as per Notification No.42/2007-CE dated 01.07.2008 till the issuance of amending Notification No.5/2015-CE & 06/2015-CE both dated 01.03.2015. Department was directed to re-determine the duty based on the packing speed of the machines. Writ Petition was allowed against the Assistant Commissioner’s order determining the monthly duty liability.

12. Decision of the Hon’ble High Court of Punjab & Haryana dated 12.08.2016 in the case of Microtek Forgings CEA No. 32/2016 [2016-TIOL-1866-HC-P&H-CX].

12.1 Department has accepted the order of the Hon’ble High Court where the Hon’ble Court replying on the judgment of the Apex Court in the matters of ‘Maruti Suzuki India Ltd. vs. CCE Delhi, 2014(307) ELT 625(SC) and Super Synotex (India) Ltd. vs. CCE Jaipur, 2014 (301) ELT 273 dismissed the departmental appeal.

12.2 In the case, CESTAT relying on Apex Court decision in the case of ‘Maruti Suzuki India Ltd. vs. CCE Delhi, 2014(307) ELT 625(SC) and Super Synotex (India) Ltd. vs. CCE Jaipur, 2014 (301) ELT 273 had held that amount of sales tax concession retained by the respondent is required to be added in the assessable for levy of Central Excise Duty. However CESTAT held that extended period of limitation would not apply. Deciding the departmental appeal, High Court has held that CESTAT in its order has observed that under Circular dated 30.06.2000 CBEC had clarified that such amount retained by the assessee is not required to be added to the assessable value. This view was negated by Apex court in the above said orders. Since there was no clarity on the issue, the assessee cannot be said to be at fault, hence extended period would not be available to raise the demand. Page 14 of 29

13. Decision of the Hon’ble High Court of Bombay dated 03.11.2014 in WP No. 2920/2014 in the case of JCB India Ltd vs UOI & Ors and WP No. 9431/2014 in the case of Sandvik Asia Pvt. Ltd vs UOI.

13.1 Department has accepted the aforementioned order of the Hon’ble High Court where the Hon’ble Court disposed of the Writ Petitions by relying on its earlier decisions dated 01.09.2014 in case of M/s Alfa Laval (India) Ltd and M/s Sandvik Asia Pvt. Ltd.
13.2 The issue that was examined was whether prior to 22.11.2014, statutory provisions did not prevent the party to first claim the benefit of AIR Drawback and thereafter claim Brand Rate Drawback.

14. Decision of Hon’ble High Court of Gujarat dated 02.12.2014 in the department’s Tax Appeal No. 1274/2014 in the case of M/s Fact Paper Mill Ltd, Morhi.

14.1 Department has accepted the order of the Hon’ble High Court of Gujarat dated 02.12.2014 in the department’s Tax Appeal No. 1274/2014 in the case of M/s Fact Paper Mill Ltd, Morhi, where the Hon’ble High Court dismissed the Departmental Appeal holding that no question of law arose on the matter.

14.2 On the issue, the assessee was manufactures of Paper and Paper Board. Case was booked on allegations of clandestine removal. Demand was confirmed on basis of confessional statement. CESTAT allowed party’s appeal observing that confessional statements had been retracted and the retraction was not dealt with by the adjudicating authority. Further, the installed capacity would not justify any production much in excess of declared production. Departmental went in Appeal before the Hon’ble High Court which held that no question of law arises in the case and therefore dismissed the appeal.

15. Order of Allahabad High Court dated 11.09.2014 passed in Central Excise Appeal No. 276/2006 in the case of Commissioner of Customs & Central Excise, Noida vs M/s Silver Oak Laboratories Pvt. & Ors

15.1 Department has accepted the order of the Hon’ble Allahabad High Court dated 11.09.2014 passed in Central Excise Appeal No. 276/2006 in the case of Commissioner of Customs & Central Excise, Noida vs M/s Silver Oak Laboratories Pvt. & Ors where the Hon’ble High Court dismissed the Departmental Appeal holding that the submission of the learned counsel of the department is erroneous and that rule 57E of the Central Excise rules, 1944 is not applicable in the instant case.

15.2 In the matter the appellant manufactures cosmetic preparations. The Settlement Commission while deciding the application filed under section 127 B of the Customs Act, 1962 ordered for payment of differential CVD and also directed that DRI shall issue a certificate

indicating payment of such differential amount basing on which the appellant could avail CENVAT credit thereof. The legality of CENVAT credit availed, based on the certificate issued by DRI, was questioned by Noida Commissionerate. CESTAT allowed the credit. HC dismissed the Department’s appeal observing that the certificate issued by DRI in consequence of order of Settlement Commission is perfectly legal and held that Rule 57E of CENVAT Credit Rule was not applicable in the instant Case.

16. Decision of Allahabad High Court dated 13.01.2014 in Central Excise Appeal Defective No. 1/2015 in the case of Commissioner of Central Excise, Meerut vs M/s Paramount Pesticides Ltd.

16.1 Department has accepted the decision of the Hon’ble Allahabad High Court dated 13.01.2014 in Central Excise Appeal Defective No. 1/2015 in the case of Commissioner of Central Excise, Meerut vs M/s Paramount Pesticides Ltd., where the Hon’ble High Court held that they did not find any reason to interfere in the impugned order dated 06.03.2014 passed by the Appellate Tribunal. It further held that the appeal fails and it is dismissed with the observation that the Appellate Tribunal will endeavour to decide the matter finally after hearing all the parties concerned within four months from the date of production of certified copy of this order.

16.2 In the case assessee is engaged in manufacture of pesticides. The issue involved was whether after the insertion of third proviso in Section 35C(2A) of Central Excise Act, 1944 w.e.f 10.5.2013, the Tribunal was correct in granting stay beyond specified maximum time limit prescribed in the section. The Central Excise duty was not deposited by the assessee within the prescribed time limit as per Rule 8(3A) of the Central Excise Rule, 2002 the remaining duty should have been paid within the extended one month time limit which the party failed to do. By order in original dated 17.5.2012 demand was confirmed, against which the party filed an appeal in the Tribunal. Tribunal granted stay and also extended it until further orders. Hon’ble HC dismissed the departmental appeal observing, that in the matter there was no reason to interfere.

17. Order of the Hon’ble Bombay High Court order dated 11.03.2015 in CEA No. 65/2005 in the case of Commissioner of Central Excise, Thane-II vs Bright Brothers.

17.1 Department has accepted the order of the Hon’ble Bombay High Court order dated 11.03.2015 in CEA No. 65/2005 in the case of Commissioner of Central Excise, Thane-II vs Bright Brothers where the Hon’ble High Court has upheld the order of Tribunal holding that penalty under section 11AC could not have been imposed as necessary ingredients for section 11 AC are missing and also adjudication order fails to give a categorical finding in reference to the ingredients of section 11AC.

17.2 In the matter assessee is manufacturer of Plastic moulded components of motor vehicle and allegedly undervalued the goods. Demand was confirmed and penalty imposed under section 11AC observing that there were two conflicting orders of the Tribunal and the matter was resolved by a Larger Bench in case of Mutual Industries Ltd. v. CCE [2000 (117) E.L.T. 578 (Tri.)] where it was held that so long as the mould is being used in the manufacture of the finished product it contributes certain value to be added to the value of finished products.

This additional value must necessarily go in assessing the duty payable on the finished product under Excise Law. On appeal by the assessee, Tribunal set aside the penalty imposed under section 11AC and remanded the case for re-quantification of duty. Department contested setting aside of penalty. HC observed that the penalty provisions may be termed as mandatory, but the imposition itself has to precede the satisfaction in terms of Section 11AC. Once there was a scope for entertaining a doubt, and there is no wilful mis-statement or suppression of facts, then, penalty is not called for as the Tribunal did not find anything on record, barring a statement, to conclude that this was a case of suppression.

18. Decision of Hon’ble High Court of Gujarat’s order dated 09.12.2014 in the Tax Appeal No. 1230/2014 in the case of Commissioner of Central Excise and Customs, Rajkot vs M/s Major Cement Pvt. Ltd.

18.1 Department has accepted the decision of the Hon’ble High Court of Gujarat’s order dated 09.12.2014 in the Tax Appeal No. 1230/2014 in the case of Commissioner of Central Excise and Customs, Rajkot vs M/s Major Cement Pvt Ltd where the Hon’ble High Court dismissed the tax appeals of the department and upheld the findings of the tribunal on the grounds that the test report dated 07.05.2008 were unreliable and the statements of the persons relied upon by the department should have been allowed to be cross examined.

18.2 In the case SCN issued on wrong availment of CENVAT Credit, without receipt of ‘pet coke’, on basis of fabricated invoices. SCN indicated drawal of samples on 26.04.08 but this reference was dropped in the corrigendum issued to the SCN. Department relied on report of samples drawn on 03.05.08 from a private lab to suggest that the goods did not confirm to the specification of pet coke. Tribunal held that Samples were not correctly drawn and thus the test report was not reliable. Further the cross examination of the persons whose statements were relied were not allowed by the Department. High Court accepted CESTAT judgement and dismissed departmental appeal.

19. Decision of Delhi High Court dated 28.01.2015 passed in CEAC No. 6/2015 in the case of Commissioner of Central Excise, Delhi-1 vs Kuber Tobacco Products (P) Ltd & Ors

19.1 Department has accepted the order of the Hon’ble Delhi High Court dated 28.01.2015 passed in CEAC No. 6/2015 in the case of Commissioner of Central Excise, Delhi-1 vs Kuber Tobacco Products (P) Ltd & Ors where the Hon’ble High Court held that the Department’s appeal had no question of law involved and was meritless and so being infructuous was dismissed.

19.2 Issue relates to clandestine manufacture and clearance of tobacco products. Commissioner (Appeal) allowed assessee’s appeal observing that revenue had failed to establish any nexus between the ownership of the brand and the manufacturing unit. CESTAT upheld the appellate order observing that certain persons have surfaced during investigation and have claimed the ownership of the said goods. Departmental appeal was dismissed by the High court.

20. Decision of the Delhi High Court dated 25.03.2015 passed in CEAC No. 13/2015 in the case of M/s Dalmia Bharat Sugar and Industries Ltd. vs Commissioner of Central Excise & Service Tax, LTU, New Delhi

20.1 Department has accepted the aforementioned order of the Hon’ble High Court where the Hon’ble High Court allowed the appeal of the assessee in CEAC No. 13/2015 by setting aside the order of the CESTAT and directing the CESTAT to decide the case on merits. In the matter, CESTAT vide stay order No. 50233/2015-EX (DB) dated 20.01.2015 directed the assessee to deposit an amount of Rs 5 crore for compliance with the provision of Section 35F within a period of 8 weeks.

20.2 Commissioner confirmed the demand for non-maintenance of separate accounts of input services used in or in relation to manufacture of dutiable and exempted goods. CESTAT directed the assessee to pre-deposit within 8 weeks. Assessee filed appeal in High Court which was set aside with direction to CESTAT to decide the case on merits.

21. Decision of Hon’ble High Court of Gujarat dated 26.02.2015 in Tax Appeal No. 761 of 2007 in the matter of M/s Bharat Bhai Ajitrai Doshi Director of M/s Magalam Industries Ltd vs CCE, Bharuch

21.1 Department has accepted the aforementioned order of the Hon’ble Court where it was held that the tax appeal is not maintainable and both the CESTAT and the Hon’ble High Court set aside the confiscation under section 111(p) of the Customs Act, 1962 for the reason that notification No. 205/84 was amended declaring “synthetic yarn” as notified goods under section 11B of Chapter IV A of the Customs Act, 1962 vide Notification No. 5/93-Cus (NS) dated 15.1.1993.

21.2 In the case, POY was purchased through Advance intermediate transferable licence under the cover of various DEEC books and bills of entry and the said yarn was allegedly sold in the open market without fulfilling the export obligations. CESTAT opined that confiscation under section 111(p) of the Customs Act, 1962 cannot be upheld since notification no. 205/84 was amended declaring "synthetic yarn" as notified goods under Section 11 (B) of Chapter IVA of the Act ibid vide Notification no. 5/93-Cus (NS) dated 15.01.1993. Hence penalty under Section 112 of the Customs Act, 1962 as imposed on the appellant cannot be upheld as per the decision in the case of S.S. Gupta vs. CC [2001 (132)ELT.441 (Tri.Del)] and accordingly allowed the appeal filed by the party. The Hon’ble High Court of Gujarat in the matter dismissed the appeal of the department as not maintainable.

22. Decision of Bombay High Court dated 30.03.2015 in the case of M/s Kaushal Silk Mills Pvt. Ltd.

22.1 Department has accepted the order of the Hon’ble Bombay High Court dated 30.03.2015 in the case of M/s Kaushal Silk Mills Pvt. Ltd where the Hon’ble High Court held that since in the matter no substantial question of law was involved so no interference in the order of the CESTAT was warranted.

22.2 In the case the price of the grey fabrics were inflated by supplying the bills of various assessees and Grey fabric suppliers who were found to be fake or non-existent. This inflated grey price resulted in availment of excess deemed credit by the processor who in turn passed on the undue benefit to the exporters. In appeal filed by the party, CESTAT held that the processing units did not have the knowledge of the over invoicing of the grey fabrics and the allegation of suppression against them is not sustainable and the extended period of limitation cannot be invoked. Hon’ble High court, deciding the departmental appeal, held that the view taken by the learned Tribunal is neither impossible nor perverse. Since in the matter no substantial question of law arose so the appeal was dismissed.

23. Decision of the Hon’ble High Court of Gujarat dated 23.03.2015 in Tax Appeal No. 816 of 2008 in the matter of M/s Videocon Industries Ltd. Videocon House, Chavaj, Bharuch

23.1 Department has accepted the order of the Hon’ble High Court of Gujarat in Tax Appeal No. 816 of 2008 in the matter of M/s Videocon Industries Ltd. Videocon House, Chavaj, Bharuch where the Hon’ble High Court rejected tax appeal No. 816/2008 and thereby confirmed CESTAT order dated 23.10.2007.

23.2 The issue involved was remission of duty on destruction of final product and credit taken on inputs used in manufacture of such final product. Hon’ble High Court dismissed the departmental appeal relying on its earlier decision in CCE Ahmedabad-II vs Intas Pharmaceuticals Limited [2013(289) ELT 256 (Guj). The Hon’ble Court held that remission application was filed on 09.05.2000, whereas Rule 3(5C) came into force w.e.f 7.9.2007.

24. Decision of the Hon’ble High Court of Rajasthan, Jaipur dated 26.02.2015 in the matter of M/s Shankar Products, behind factory No. 667, Road No. 9 (F) (2), VKI Area, Jaipur.

24.1 Department has accepted the order of the Hon’ble High Court of Rajasthan, Jaipur in the matter of M/s Shankar Products, behind factory No. 667, Road No. 9 (F) (2), VKI Area, Jaipur where the Hon’ble High Court dismissed the appeal of the department and upheld the decision of CESTAT where the CESTAT held that where department had knowledge and had issued an earlier notice on the similar ground, it cannot be said that there was any suppression.

24.2 Department issued a SCN dated 28.08.08 demanding duty for the period April 2004 to June 2008 invoking extended period on ground that the process undertaken by the appellant amounts to manufacture and they had suppressed the relevant facts from the department. On the basis of the same facts another SCN for subsequent period from July 2008 to 4.12.2008 was issued on 6.7.2010 again invoking the extended period, which in view of the Apex Court’s judgement in the case of Nizam Sugar Factory (supra) is not permissible. High Court, Rajasthan dismissed the departmental appeal.

25. Decision of the Delhi High Court dated 13.04.2015 in the matter of CEAC No. 2/2015 in the matter of Commissioner of Central Excise, Delhi-I vs M/s Ambeecee Consolidated Enterprises (India) Pvt Ltd & Ors

25.1 Department has accepted the order of the Delhi High Court dated 13.04.2015 in the matter of CEAC No. 2/2015 in the matter of Commissioner of Central Excise, Delhi-I vs M/s Ambeecee Consolidated Enterprises (India) Pvt Ltd & Ors where the Hon’ble High Court held that in the matter no substantial question of law was involved.

25.2 Assessee was manufacturer of SS Ingots. Unaccounted stock of finished goods was found in the factory. SCN was issued and demand was confirmed. In assessee’s appeal CESTAT followed its earlier decision in case of D.P. Industries, who used to convert these clandestinely removed SS Ingots into flats and also cleared such flats clandestinely. The evidences in case of assessee and DP Industries were same. Hon’ble High Court dismissed the departmental appeal observing that Revenue’s grievance concerns only factual findings based upon appreciation of evidence. It is not disputed that with respect to clandestine removal and the liability sought to be imposed upon the assessee, the evidence between the two units i.e. the assessee and D.P. Industries was common.

26. Decision of the Hon’ble High Court of Gujarat dated 20.07.2015 in Tax Appeal No. 381 of 2015 in the matter of CCE, Rajkot vs M/s Tata Chemicals Ltd., Jamnagar

26.1 Department has accepted the order of the Hon’ble High Court of Gujarat in Tax Appeal No. 381 of 2015 in the matter of CCE, Rajkot vs M/s Tata Chemicals Ltd., Jamnagar where the Hon’ble High Court dismissed the departmental appeal relying on the decision of the Hon’ble Supreme Court in the case of Ranbaxy Pharmaceuticals vs Union of India, (2011) 10 SCC 292.

26.2 In the matter, refund claims of the assessee were rejected by the AC on the grounds that D-3 intimations were not proper. CEGAT in its order dated 13.08.2003 ordered that the D-3 intimations were proper and provisions of Rule 173-L were met, hence there was no deficiency on the part of the assessee. Order of CESTAT was accepted by the department and refund was granted. Assessee claimed interest of Rs. 74 Lakhs from date of filing of refund claim. Tribunal relied upon decision of Apex Court in case of Ranbaxy Pharmaceuticals Limited v. Union of India [2011-TIOL-105-SC-CX] where it has been held that the law to pay the interest commences from the date of expiry of three months from the date of receipt of application and not from the decision. Departmental appeal was therefore dismissed.

27. Decision of the Hon’ble High Court dated 03.09.2014 in the matter of M/s Bajrang Castings Pvt. Ltd and five others in Tax Appeal No. 824 of 2014

27.1 Department has accepted the order of the Hon’ble High Court dated 03.09.2014 in the matter of M/s Bajrang Castings Pvt. Ltd and five others in Tax Appeal No. 824 of 2014 where the Hon’ble High Court held that in the matter that since there was no question of law involved, interference by the Court in the decision of the CESTAT was not warranted.

27.2 In the matter, allegation was availment of CENVAT credit on invoices without actually receiving the goods. Also that non-CENVATable bazar scrap was used in manufacture of MS Ingots. Such irregular credit was used for payment of licit clearances to avoid payment of duty from PLA. CESTAT ordered that demands were based upon the statements of transporters or drivers of the trucks which were not corroborated by any evidence. No investigation was conducted at consignors’ place or at the place where the said goods are alleged to have been supplied. In the absence of cogent evidence the demand is not sustainable. Deciding departmental appeal, High Court observed that there is no perversity in the findings recorded by CESTAT and no substantial question of law arise.

28. Decision of the Hon’ble High Court of Allahabad in CEA No. 181 of 2015 in the matter of CCE Kanpur vs M/s Rajat Industries.

28.1 Department has accepted the order of the Hon’ble High Court of Allahabad in CEA No. 181 of 2015 in the matter of CCE Kanpur vs M/s Rajat Industries where the Hon’ble High Court dismissed the appeal of the department holding that no substantial question of law was involved.

28.2 In the matter, party was working under Pan Masala packing machines (capacity determination and collection of duty rules, 2008). It filed an abatement claim in terms of rule 10 of PMPM Rules for the period when pouch packing machines remained suspended. Claim sanctioned. Department contended that as per rule 10 of PMPM rules and intimation of closure of production is mandatory to be filed at least 3 working days prior to closure of such production, the condition was not met in this case. High Court observed that department after due intimation had reached the premises and had sealed the unit. No substantial question involved, therefore Departmental appeal was dismissed.

29. Decision of Hon’ble High Court of Allahabad dated 25.08.2015 in Central Excise (Defective) Appeal No. 01/2005 in the case of CCE Noida vs M/s Matsushita Television and Audio India Ltd., Noida

29.1 Department has accepted the order of Hon’ble High Court of Allahabad dated 25.08.2015 in Central Excise (Defective) Appeal No. 01/2005 in the case of CCE Noida vs M/s Matsushita Television and Audio India Ltd., Noida where the Hon’ble High Court in the matter involving taking CENVAT credit on photocopy of Bills of Entry the Hon’ble High Court held that the inputs were received in the factory under the cover of a triplicate copy of bill of entry which was subsequently misplaced so upheld the assessees contention.

29.2 In the case, assessee received duty paid goods under triplicate copy of Bill of Entry, which was misplaced. The MODVAT credit was availed on the basis of exchange control copy bill of entry. Department contended as triplicate copy of bill of entry as required under Clause (c) of Sub Rule (3) of Rule 57G could not be subsequently produced by the assessee for defacement, credit was not admissible. Tribunal allowed the credit holding that the said document was verifiable. In departmental appeal HC upheld CESTAT’s decision.

30. Decision of the Hon’ble High Court of Gujarat in Tax Appeal No. 363 of 2015 in the matter of CCE, Rajkot vs M/s Reliance Ports & Terminals Ltd., Jamnagar.

30.1 Department has accepted the order of the Hon’ble High Court of Gujarat in Tax Appeal No. 363 of 2015 in the matter of CCE, Rajkot vs M/s Reliance Ports & Terminals Ltd., Jamnagar where the Hon’ble High Court dismissed the departmental appeal holding that since the questions proposed by the appellant were not subject matter of the show cause notice and also do not arise out of the impugned order of passed by the Tribunal.

30.2 In the matter, CERA pointed irregular availment of CENVAT Credit of service tax paid under section 66A as recipient of "Consulting Engineer" and "Banking Services", etc, which allegedly were not "input services". Credit was also alleged to have been availed on capital goods before their actual installation. Commissioner dropped the demand. Department filed appeal before CESTAT and later the HC. It was held by appellate authority that SCN did put the assessee to show cause as to whether the services are "input services" or whether the capital goods were used for providing "output services". Appeal was dismissed.

31 Decision of the Hon’ble High Court of Allahabad dated 11.08.2015 (in Central Excise Appeal No. 662/2012) in the case of Commissioner of Central Excise, Noida vs M/s Damini Printers Pvt. Ltd., Noida.

31.1 Department has accepted the order of the Hon’ble High Court of Allahabad dated 11.08.2015 dated 11.08.2015 (in Central Excise Appeal No. 662/2012) in the case of Commissioner of Central Excise, Noida vs M/s Damini Printers Pvt. Ltd., Noida where the Hon’ble High Court dismissed the department’s appeal on monetary limits.

31.2 In the case, Hon’ble High Court of Allahabad dismissed Department’s appeal on the grounds monetary limitations for appeal without expressing any opinion on merits. On this issue SC in the case of Commissioner IT vs Suman Dhamija – 2015(325) ELT 11 (SC) held that the monetary policy is not retrospective. However High Courts of Karnataka and Gujarat have also distinguished the SC decision to the effect that the same applies to IT matters where the policy is with specific to the effect that the same shall not govern the cases filed before the date of said policy – 2014(306)ELT153 (Guj), 2011(268) ELT 344 (Kar).

32. Decision of the Hon’ble High Court of Gujarat in the case of M/s Vishnu Pouch Packing Pvt. Ltd in Special Civil Application No. 12154 of 2015

32.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the case of M/s Vishnu Pouch Packing Pvt. Ltd in Special Civil Application No. 12154 of 2015 where the Hon’ble High Court allowed the Special Civil Application filed by VPPL No. 12154/2015 praying to issue a writ of mandamus or order quashing and setting aside the decisions and directions contained in communication dated 30.06.2015 issued by DGCEI to various units of VPPL and fixed the production capacity of PPMs installed and operated at factory premises for relevant period under rule 5 of PMPM rules.

32.2 In the case, recovery of differential duty (Production based duty on Pan Masala) vide letters and not vide proper SCN invoking recovery under section 11A of CE Act was examined and was held to be a breach of principles of natural justice. Party’s Special Civil Application allowed to the effect that there has been violation of principles of natural justice, quashed the said letters and also allowed the department to initiate action under PMPM Rules and section 11A of the CE Act.

33. Decision of Hon’ble High Court of Allahabad dated 13.10.2015 in Central Excise Appeals No. 251-256 of 2015 in cases (a) CCE, Noida vs M/s Dharampal Satyapal Ltd., (b) CCE, Noida vs Shri Chiranjiv Roy Choudhory., (c) CCE vs Rajiv Kumar (d) CCE, Noida vs Sh. Nareshh Dhir € CCE, Noida vs Sh. J.D. Desai and (f) CCE, Noida vs Sh. Amit Singhai.

33.1 Department has accepted the aforementioned order of the Hon’ble High Court of Allahabad which held that in the matter no substantial question of law was involved.

33.2 Court dismissed Department’s appeal on the grounds that Tribunal has found that as per the technical literature the pouch packing machine was a duplex machine having single track with innovation that on the same line, at a time, two pouches are cut and filled resulting in higher production and that the duty is per pouch packing machine per month and not on actual number of pouches produced.

34. Decision of the Hon’ble High Court of Gujarat in the case of M/s Shree Rama Multi-Tech Limited in Misc. Civil Application (OJ) No. 199/2012 in Tax Appeal No. 896/2011.

34.1 Department has accepted the order of the Hon’ble High Court of Gujarat in the case of M/s Shree Rama Multi-Tech Limited in Misc. Civil Application (OJ) No. 199/2012 in Tax Appeal No. 896/2011 where the Hon’ble High Court held inter alia that there was no statutory provision permitting the revenue authorities to direct reversal of credit already taken, the question of imposing any condition for reversal while granting remission of duty in terms of rule 21 of the Central Excise rules would certainly not arise.

34.2 Issue was whether reversal of CENVAT Credit is required on the inputs used in manufacturing the final product when such final product was destroyed and remission of duty was also allowed. Court in its order dt 29.08.12 held that there was no scope of reversal of credit taken prior to September 7, 2007 [date of introduction of sub-rule (5C) of rule 3 of CCR] if the finished product becomes unfit for human consumption, unless any condition has been imposed for remission of duty in terms of Rule 21 making it clear that the credit already taken is to be reversed. Italicized/underlined portion of earlier judgement dt 29.08.12 deleted in review petition filed by the department.

35. Decision of Hon’ble Karnataka High Court in CEA No. 33/2014 in the case of Commissioner of Service Tax, Bangalore vs M/s Vodafone Essar South Ltd.

35.1 Department has accepted the order of the Hon’ble Karnataka High Court in CEA No. 33/2014 in the case of Commissioner of Service Tax, Bangalore vs M/s Vodafone Essar South Ltd where the Hon’ble High Court dismissed the appeal of the Department as not maintainable after observing that the question is to be decided by the Apex Court in an appeal to be filed under Section 35 L (b) of the Act and not by it under Section 35G of the Act.

35.2 In the matter, party filed refund claim for the Service tax paid on service provided to a foreign telecom operator to enable the subscribers of the said foreign telecom operator to avail international inbound roaming facility on the basis of Not. No. 36/2007 -ST dated 15.06.2007. The said refund claim was rejected on grounds that ST was paid before the notification coming into being, besides on issues on merits. High court dismissed departmental appeal on grounds of jurisdiction as issue involved interpretation of notification and that appeal shall lie before the Apex court.

36. Decision of Hon’ble High Court of Madras in CMA No. 4050/2008 in the case filed by the Department against CESTAT Final order No. 479/2008 dated 14.05.2008 in the case of M/s Sakthi Sugars Ltd., Appakudal, Bhavani Taluk & Order of the Hon’ble High Court of Madras in CMA No. 1570/2009 in the case filed by the Department against CESTAT Final order No. 802/2007 dated 26.06.2007 in the case of M/s Sakhti Sugars Ltd., Appakudal, Bhavani Taluk.

36.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras where the Hon’ble Court disposed the appeal of the department as not maintainable after observing that the question is to be decided by the Apex Court in an appeal to be filed under section 35 L (b) of the Act and not by it under Section 35 G of the Act and thus disposed the case with a liberty to the Department to move before the Supreme Court.

36.2 In the matter, allegation was non-payment of Central Excise duty on molasses, which was captively consumed in the factory, by wrongly claiming exemption under Notification No. 67/95-CE dated 16.03.95 as the molasses was used to manufacture Neutral spirit/ rectified spirit which is non-excisable. Exemption under said Notification is available where final products are dutiable. Hon’ble High Court held that as the issue pertains to rate of duty payable, but for the notification, the appeal should be made to the Hon’ble Supreme Court. Departmental Appeal was therefore dismissed.

37. Decision of the Hon’ble High Court of Madras dated 21.11.2014 in CMA No. 2424 of 2007 in case of M/s Vadapalani Press.

37.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras where the Hon’ble High Court pronounced that the issue under consideration is what will be the rate of duty payable, but for the notification in question and held that this appeal is not maintainable under section 35 G of Central Excise Act and for the foregoing reasons did not go into the merits of the question of law raised for consideration.

37.2 The issue involved allegation of wrong availment of SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 against the clearances made under the guise of FORM H sales. Hon’ble High Court dismissed the departmental appeal since issue involved rate of duty and appeal should at the Hon’ble Supreme Court.

38. Decision of the Hon’ble High Court of Madras dated 19.12. 2014 in CMA No. 68/2009 in the case Commissioner of Central Excise vs M/s HCL Peripherals
38.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras where the Hon’ble High Court held that the issue pertains to rate of duty that is payable by the respondent (HCLP) but for the notification in question relying on the following judgments, namely,

(i) Navin Chemicals Manufacturing and Trading Co. Ltd vs Collector of Customs, 1993 (68) ELT3 (SC).

(ii) Commissioner of Central Excise vs Vadapalani Press (2014-TIOL-2208-HC-MAD-CX)
held that the present appeal is not maintainable and the department is at liberty to file appeal before the Hon’ble Supreme Court.

38.2 In the matter, allegation of classifying the Kiosks under CTH 84710000 of CETA, 1985 and availing exemption benefit as applicable to computers was examined. The dispute is whether Kiosks can be classified under CTH 84710000 assigned for Automatic Data Processing Machine and units thereof and whether Kiosks is eligible for full exemption of duty under Notification No. 23/2004 dated 09.07.2004 or not. As issue pertains to rate of duty or valuation, Hon’ble High Court dismissed departmental appeal with liberty to move the Hon’ble Supreme Court.

39. Decision of the Hon’ble High Court of Madras dated 28.08.2014 in CMA No. 463/2007 filed by M/s Emkay Alloys (P) Ltd., against the Final order No. 1425/2005, dated 07.10.2005 of the Hon’ble CESTAT, Chennai

39.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras where the Hon’ble High Court inter alia held that the appeal is partly allowed by way of remand in terms of the order of the Tribunal dated 16.04.2007 made in Final order No. 410/07 in Appeal No. E/158/2007.

39.2 Issue relates to manufacture of Ingots and Billets of non-alloy steel, for which the party was supposed to pay duty under Compounded Levy Scheme as said goods were notified under that scheme w.e.f 01.08.1997 and excise duty was to be discharged on the basis of Annual Capacity of Production. Two ACP Orders (dated 16.09.1997 and 09.07.1998) were issued fixing the duty payable. Party did not discharge the liability and therefore 6 SCNs were issued for different periods. One SCN was based on ACP Order dated 04.05.1998 and rest five were based on ACP Orders issued on 09.07.1998. Commissioner adjudicated all six cases confirming the duty. On appeal CESTAT upheld the demand.

39.3 Later ACP order dated 16.09.1997 was challenged by the assesse and CESTAT in its final order allowed the appeal by way of remand. Against the CESTAT Order wherein the demand by the department was found to be sustainable in law, appeal was filed in Madras HC. The HC pronounced that the consequent to order passed by the Tribunal, SCN dated 04.05.1998 based on ACP order dated 16.09.1997 will have to be reworked and SCN is required to be issued only after appropriate ACP order is passed. Page 26 of 29

40. Decision of the Hon’ble High Court of Karnataka dated 01.04.2015 at Bangalore in CEA No. 58/2014 and CEA No. 03-05/2015 in the case filed by the Department against M/s BEML & Others

40.1 Department has accepted the aforementioned order of the Hon’ble High Court of Karnataka holding that in the matter there is no substantial question of law dismissed the departmental appeal.

40.2 Issue involved was central excise duty liability on goods falling under Chapter 84 w.e.f. 29.04.11 as levied in Finance Act 2011. Assessee paid duty from 01.04.2011, but did not pay duty for the period from 29.04.2010 to 31.03.2011. SCN issued by revenue under extended period which was set aside by the Tribunal since no suppression was involved. Hon’ble High Court dismissed the Departmental appeal as no question of law was involved.

41. Decision of the Hon’ble High Court of Hyderabad dated 17.06.2015 in CEA No. 41/2015 in the case of M/s Sri. Chaitanya Educational Committee, Poranki, Vijaywada.

41.1 Department has accepted the aforementioned order of the Hon’ble High Court of Hyderabad where the Hon’ble High Court dismissed the departmental appeal and confirmed the CESTAT order.

41.2 Issue involved was non-payment of service tax on Taxable Service, namely, Commercial Coaching and Training Services. Demand of Rs. 339736617 was confirmed for period 2011-12. Party filed appeal and CESTAT disposed stay application directing for pre-deposit Rs 6 crore. On same issue party was issued another SCN and Apex court directed the party to deposit one third of the confirmed demand excluding the cess and penalty. CESTAT direction for Rs 6 Cr. is just 20% of the duty. Hon’ble High Court held that view taken by Tribunal is a possible view. Order of pre-deposit is made exercising the discretionary powers and same cannot have any precedent value. Departmental appeal was therefore dismissed.

42. Decision of the Hon’ble High Court of Madras dated 04.06.2015 in CMA No. 3420 & 3421 of 2008 in the case of M/s Dalmia Cements Ltd.

42.1 Department has accepted the aforementioned order of the Hon’ble High Court of Madras where the Hon’ble High Court relying upon the judgment of High Court of Allahabad in the case of Hero Motors of identical nature stated that the Tribunal’s decision does not require any interference.

42.2 In the matter, assessee availed credit on inputs and capital goods used in creation of power plant. The plant was leased to another company. Department was of the view that such goods were deemed to have been removed and party was liable to pay the amount of credit availed in terms of Rule 3(5) of CENVAT Credit Rules 2004. Also, after leasing out the power plant from 15.03.2005 to 15.03.2006, DCL wrongly availed CENVAT credit as these inputs/ Capital goods/input services were not used in the factory of DCL for manufacture of dutiable final product i.e. Cement. Hon’ble High Court of Allahabad decided against the department as the power plant was leased out and not "sold".

43. Decision of the High Court of Hyderabad dated 01.07.2017 for the state of Telangana and the State of Andhra Pradesh in CEA No. 27 of 2004 in the case of M/s Hetero Drugs Ltd., Bonthapally village, Medak District.

43.1 Department has accepted the aforementioned order of the Hon’ble High Court of Hyderabad where the Hon’ble High Court held that in the absence of any perversity of fact and based on the submissions made by the learned standing counsel for the Department the impugned Final Order can’t be interfered with. It also held that in the present appeal there was no challenge with respect to the aspect of the limitation and that the appeal is devoid of merits.

43.2 In the matter, assessee imported r/m to manufacture pharmaceutical drugs engaging a CHA. CHA utilised demand drafts issued by different parties to discharge customs duty liability while clearing the goods from the customs bonded warehouse. Party took credit of CVD. The demand of credit availed on basis of forged/fake documents was confirmed. CESTAT set aside the Commissioner’s OIO stating that Hetero Drugs is not responsible for the alleged acts of their CHA and company has availed the credit of CVD which it tendered by the demand draft. CESTAT also led that there was no knowledge on the part of Hetero Drugs Ltd that the Bill Of Entry being sent to them was fabricated. Department’s appeal dismissed by High Court.

44. Decision of the Hon’ble High Court of Odisha dated 27.07.2015 in WP (C) No. 4494/2010 filed by M/s Scan Sponge Iron Ltd.

44.1 Department has accepted the aforementioned order of the Hon’ble High Court of Odisha where the Hon’ble High Court disposed of the instant writ petition relying on decision of the same court passed in WP (C) No.29680 of 2011 dated 23.04.2013 in case of M/s Vasundhara Metalliks Pvt.Ltd. which was disposed of in terms of the judgment of the Hon’ble High Court of Odisha dated 13.04.2011 in WP (C) No. 16132 of 2010 in case of M/s Aryan Ispat Ltd., wherein Notification No. 32/2006-CE (NT) dated 30.12.2006 was quashed by the Hon’ble High Court of Odisha and declared Rule 12CC of Central Excise Rules, 2002 and Rule 12AA of CENVAT Credit Rules, 2004 as ultra vires to Central Excise Act, 1944 and the Constitution of India and also held that the Notification No. 32/2006 issued under the said rule is not sustainable under law.

44.2 The issue involved was that the assessee, namely, M/s Scan Sponge Iron Ltd was engaged in clandestine removal of finished goods from two factory units. The same was detected during a search. The party filed writ petition in the Hon’ble High Court against the confirmed demand. Hon’ble High Court, based on previous judgement in similar case quashed Notification No 32/2006-CE dated 30.12.2006 and declared rule 12 CC of Central Excise Rules 2002 and Rule 12 A of CENVAT Credit Rules, 2004 as ultra vires to the Central Excise Act 1944.

45. Decision of the Hon’ble High Court of Madras dated 11.06.2015 in CMA No. 1182/2008 in the case of Commissioner of Central Excise vs M/s Integral Coach Factory

45.1 Department has accepted the aforementioned order of the Hon’ble High Court which upheld the CESTAT’s order No. 1106/2007 dated 03.09.2007 and dismissed the Departmental Appeal.

45.2 In the matter, assessee manufactured steel freight containers and passenger coaches for Indian Railways. They sold ferrous and non-ferrous scrap arising out of manufacture without payment of Excise Duty. Although, CESTAT and Hon’ble High Court passed judgements in favour of the party stating that under Notification No. 89/95-CE dated 18.05.1995 scrap arising in the course of manufacture of exempted goods is exempted from the payment of excise duty, the department contested the claim on the grounds that M/s ICF had cleared the components of coaches and containers to private entities on payment of excise duty, which violated two of the three conditions laid down by Notification No. 62/95 CE dated 16.03.1995. Hon’ble High Court approved the finding of Tribunal that so long as the goods manufactured are exempted goods, waste parings, scrap arising in the course of the manufacture of exempted goods would be entitled for exemption as per Notification No. 89 /95-CE dated 18.5.1995.

46. Decision of the Hon’ble High Court of Hyderabad for the State of Telangana and State of Andhra Pradesh dated 08.10.2015 in CEA No. 107/2015 in the case of M/s Bharat Dynamics Ltd [2016-TIOL-33-HC-AP-CX]

46.1 Department has accepted the aforementioned order of the Hon’ble High Court of Andhra Pradesh where the Hon’ble Court dismissed the CEA filed by the Department reiterating and confirming the views expressed by the Tribunal.

46.2 In the matter, allegation was that party took CENVAT credit on inputs used for manufacturing exempted goods in violation of Rule 6 (1) of CENVAT Credit Rules, 2004 and did not pay the interest at the time of reversal of the said credit. On party’s appeal CESTAT held that in March, 2010, party asked the department to clarify if clearance of goods to M/s.B.E.L. is exempted. Pending clarification they took CENVAT credit during Sep’10 to Mar’11 since some of the job workers did not return all the inputs within 180 days till Sep’10 and the party had to reverse the credit. To reverse the credit, they had to take credit. When there was no clarification received from the department till March, 2011, the assessee had no option but to clear two consignments in March, 2011 on payment of excise duty of Rs.90, 94, 851 by utilizing the CENVAT Credit. On getting the clarification from TRU, CBEC in April, 2011, the appellant reversed the entire amount of CENVAT credit. In the circumstances, CESTAT held that it cannot be said that the credit had been taken by the appellant wrongly. When credit is not taken wrongly, the question of payment of interest does not arise in terms of provisions of Rule 14 of CENVAT Credit Rules, 2004. Upholding CESTAT order, Hon’ble High Court held that departmental Appeal is devoid of merits and therefore dismissed it.

4. The aforementioned orders of the various High Courts have been accepted by the Board. It is requested that cases pending in your jurisdictions pertaining to the questions of law or identical case on facts decided in the said orders may kindly be decided expeditiously.

5. Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board. Hindi version will follow.

Shankar Prasad Sarma
Under Secretary to the Government of India

See also: latest Supreme Court of India judgements

Press Release: Sharp increase in prosecutions of tax evaders by Income Tax Department

MASTI

CBDT, Ministry of Finance

Sharp increase in prosecutions of tax evaders by Income Tax Department

Posted On: 12 JAN 2018 2:09PM by PIB Delhi

The Income Tax Department has accorded the highest priority to tackle the menace of black money. With this objective in mind, the Department has initiated criminal prosecution proceedings in a large number of cases of tax offenders and evaders.

Prosecutions have been initiated for various offences including wilful attempt to evade tax or payment of any tax; wilful failure in filing returns of income; false statement in verification and failure to deposit the tax deducted/collected at source or inordinate delay in doing so, among other defaults.

During FY 2017-18 (upto the end of November, 2017), the Department filed Prosecution complaints for various offences in 2225 cases compared to 784 for the corresponding period in the immediately preceding year, marking an increase of 184%. The number of complaints compounded by the Department during the current FY (upto the end of November, 2017) stands at 1052 as against 575 in the corresponding period of the immediately preceding year, registering a rise of 83%. Compounding of offences is done when the defaulter admits to its offence and pays the compounding fee as per stipulated conditions.

Due to the decisive and focused action taken by the Department against tax evaders, the number of defaulters convicted by the courts has also registered a sharp increase during the current fiscal. 48 persons were convicted for various offences during the current year(upto the end of November, 2017) as compared to 13 convictions for the corresponding period in the immediately preceding year, marking an increase of 269%.

A few illustrative cases are highlighted.

A Dehradun Court convicted one defaulter for holding undisclosed foreign bank account and sentenced him to two years of imprisonment for wilful attempt to evade tax and to two years for false statement in verification alongwith monetary penalty for each default respectively.

The Court of CJM, Jalandhar convicted a cloth trader with 2 years rigorous imprisonment for trying to cheat the Department by fabricating affidavits and gift deeds, in connivance with his advocate and witness, with the motive of evading tax. The Court, while awarding the sentence to the trader, also simultaneously awarded one year’s imprisonment to the advocate notarizing the forged affidavit and also to the witness for aiding and abetting the serious offence.

In Bengaluru, the MD of a company engaged in infrastructure projects was found guilty of non-deposit of TDS of over Rs. 60 lakh(within the prescribed time), and was sentenced to rigorous imprisonment of three months alongwith imposition of fine. Similarly, a Mohali resident was held guilty of non-deposit of TDS within prescribed time and sentenced to one year jail alongwith fine.

In another case of Hyderabad, the Director of an infrastructure company was sentenced to rigorous imprisonment of six months and fine for wilful attempt to evade tax. She was simultaneously sentenced to rigorous imprisonment for six months alongwith fine for false statement in verification.

The Economic Offences Court at Ernakulam sentenced an individual to rigorous imprisonment of three months for selling property to evade payment of taxes of about Rs. 76 lakh despite issuance of the tax recovery certificate by the Tax Recovery Officer.

In yet another case reported from Agra, the Special CJM convicted one defaulter with imprisonment of one year & six months for wilful attempt to evade tax and for false statement in verification respectively alongwith fine.

The Income Tax Department is committed to carry forward the drive against tax evasion and action against tax evaders will continue in all earnest in the remaining part of the current Financial Year.

Press Release: Prohibition of Benami Property Transactions Act

MASTI

Income Tax Department steps-up actions under Prohibition of Benami Property Transactions Act : Benami properties of more than Rs. 3,500 crore in more than 900 cases attached

Posted On: 11 JAN 2018 12:54PM by PIB Delhi

Due to intensive efforts undertaken by the Income Tax Department, provisional attachment has been made in more than 900 cases of properties under the Prohibition of Benami Property Transactions Act (the ‘Benami Act’), which came into force w.e.f 1st November, 2016. These attachments include plots of land, flats, shops, jewellery, vehicles, deposits in bank accounts, fixed deposits etc. The value of properties under attachment is more than Rs. 3,500 crore including immovable properties of more than Rs. 2,900 crore.

In five cases, the provisional attachments of Benami properties, amounting to more than Rs. 150 crore have been confirmed by the Adjudicating Authority. In one such case, it was established that a Real Estate Company had acquired about 50 acres of land, valued at more than Rs.110 crore, using the names of certain persons of no means as benamidars. This was corroborated from the sellers of the land as well as the brokers involved. In another case, post demonetization, two assessees were found depositing demonetized currency into multiple bank accounts in the names of their employees, associates etc. to be ultimately remitted to their bank accounts. The total amount attempted to be remitted to the beneficial owners was about Rs. 39 crore. In yet another case, a cash amount of Rs. 1.11 crore was intercepted from a vehicle with a person who denied the ownership of this cash. Subsequently, no one claimed ownership of this cash and it was held to be benami property by the Adjudicating Authority.

Earlier, the Income Tax Department had stepped-up actions under the Prohibition of Benami Property Transactions Act (the ‘Benami Act’. The Act provides for provisional attachment and subsequent confiscation of benami properties, whether movable or immovable.

It also allows for prosecution of the beneficial owner, the benamidar and the abettor to benami transactions, which may result in rigorous imprisonment up to 7 years and fine upto 25% of fair market value of the property.

The Department had set-up 24 dedicated Benami Prohibition Units (BPUs) under its Investigation Directorates all over India in May, 2017 to ensure swift action in respect of Benami properties.

The Department is committed to continue its concerted drive against black money and action against Benami transactions will continue to be intensified.

Press Release: Central Government notifies the Companies (Amendment) Act, 2017

MASTI

Press Information Bureau
Government of India
Ministry of Corporate Affairs

8 -January-2018 11:20 IST

The Central Government notifies the Companies (Amendment) Act, 2017

The Central Government notified the Companies (Amendment) Act, 2017 (Amendment Act) on 3rd January, 2018. The provisions of this Amendment Act shall come into force on the date or dates as the Central Government may appoint by notification(s) in the Official Gazette. A few provisions in the Amendment Act have important bearing on the working of the Insolvency and Bankruptcy Code, 2016 (Code).

Section 53 of the Companies Act, 2013 prohibited issuance of shares at a discount. The Amendment Act now allows companies to issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under the Code or debt restructuring scheme.

Section 197 of the Companies Act, 2013 required approval of the company in a general meeting for payment of managerial remuneration in excess of 11 percent of the net profits. The Amendment Act now requires that where a company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, for such payment of managerial remuneration shall be obtained by the company before obtaining the approval in the general meeting.

Section 247 of the Companies Act, 2013 prohibited a registered valuer from undertaking valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets. The Amendment Act now prohibits a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest or becomes so interested at any time during three years prior to his appointment as valuer or three years after valuation of assets was conducted by him.

The Companies (Amendment) Act, 2017 is available www.ibbi.gov.in and www.mca.gov.in.

Top 5 amendments to the Companies (Amendment) Act, 2017