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Commissioner Of Service Tax Versus Japan Airlines International Co. Ltd.

Whether the Custom, Excise and Service Tax Appellate Tribunal (CESTAT) in an appeal under Sub-Section (2) and (2A) of Section 86 of the Finance Act, 1994 read with applicable provisions of the Central Excise Act, 1944, can examine and go into the question of application of mind on merits by the Committee of Chief Commissioners or Commissioners - Held that:- There is no gainsaying that, as in the case, of quasi-judicial function carried out by statutory authorities, even in respect of administrat .....

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Vs. Crabtree, 1974 LCR 120 that the decision of an administrative, quasi- judicial or even a judicial authority should not represent an “inscrutable face of a sphinx”.

Therefore, while one cannot but agree with the proposition that there should be material on record which reflects the reasons as to why the Revenue wishes to prefer an appeal, what does not flow from that, is that, the Committee of Commissioners should necessarily give their own reasons if they otherwise agree with the .....

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the administrative decision of the kind involved, as indicated above, requires the Committee of Commissioners to look at errors of fact and / or law in the order passed by the adjudicating authority only from the point of view of the Revenue i.e. as to whether the revenue should prefer an appeal. At this stage, the Committee of Commissioners is, neither addressing nor adjudicating upon the stand taken by the respondent/assessee. While, the decision of the Committee of Commissioners has conseque .....

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order of the Committee of Commissioners did not validly take place (by which we would understand that a meeting was not convened) in terms of Section 86(2) of the Finance Act. The Division Bench by a short order permitted the petitioner / assessee to raise the said objection by way of a preliminary issue before the Tribunal. - this approach is inconsistent with the purpose and the object for which Section 86(2) has been incorporated in the Finance Act. As articulated hereinabove, the role of the .....

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BLE MR. JUSTICE S. RAVINDRA BHAT & HON BLE MR. JUSTICE SANJIV KHANNA & HON'BLE MR. JUSTICE RAJIV SHAKDHER For the Petitioner : Ms. Sonia Sharma, Sr. Standing Counsel with Mr. Vijay Chandra Jha, Advocate For the Respondent : Mr. J.K. Mittal and Mr. Rajveer Singh, Advocates ORDER RAJIV SHAKDHER, J 1. A Division Bench of this court vide order dated 15.12.2014 referred the two questions of law for consideration by a larger bench in order to, broadly, resolve the apparent conflict betwee .....

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ibunal (CESTAT) in an appeal under Sub-Section (2) and (2A) of Section 86 of the Finance Act, 1994 read with applicable provisions of the Central Excise Act, 1944, can examine and go into the question of application of mind on merits by the Committee of Chief Commissioners or Commissioners? (2). In case the aforesaid question is answered in affirmative, i.e., against the Revenue and in favour of the assessee, then, whether the decision of the Committee of the Chief Commissioners or Commissioners .....

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), preferred an appeal to this court under Section 35 G of the Central Excise Act, 1944 (in short the C.E. Act). 2.2 The grievance of the Revenue emanated from the fact that the Tribunal had rejected its appeal, albeit erroneously, on the ground of maintainability, and not, on merits. 2.3 The Tribunal, evidently, took the view that the decision taken to institute the appeal before it, by the Committee of commissioners, was taken, without due application of mind. While coming to this conclusion, .....

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ated 18.09.2013, there is a reference by the Tribunal to a judgment of its own Division Bench in CST Delhi Vs. L.R. Sharma and Co., reported in 2013 -TIOL -944-CESTAT-DEL (final order No.56165/2013 dated 26.04.2013), which in turn, relied upon the judgment of the Division Bench of this court in Kundalia Industries case. 2.6 Thus, the grievance of the Revenue in so far as the order of the Tribunal is concerned, is limited to the aforesaid aspect. 2.7 However, the appeal before the Tribunal was pr .....

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ns levelled were of the following nature : (i). that it had not complied with the provisions of Rule 6(3) of CENVAT Credit Rules, 2004 (in short the CENVAT Rules) during the period 2008-2009; (ii). that it had wrongly availed CENVAT Credit on services which were not used for providing taxable output services; (iii). there was non-payment of service tax on excess baggage; and (iv). lastly, it had failed to provide information and data with respect to value of air tickets purchased prior to 01.05. .....

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review, a decision was taken to file an appeal before the Tribunal. 4. Broadly, the grounds articulated by the Revenue, in the review notes, to establish reasons as to why an appeal was required to be instituted, were as follows:- (i). First, the adjudicating authority had imposed a nominal penalty of ₹ 5,000/- evenwhile returning a finding in its favour, to the effect, that the respondent / assessee had wrongfully availed of CENVAT credit amounting to ₹ 1,09,70,221/- qua input serv .....

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posed) qua excess baggage though confirmed, was held to have been paid, without ascertaining, as to whether the amount, towards this demand, was actually deposited by the respondent / assessee. According to the Revenue, the respondent / assessee was liable to penalty on this account, as well. 4. In this context and, at this stage, it would be relevant to note, the manner, in which, the decision taken, to file the appeal before the Tribunal evolved. 4.1 In the first instance, the Inspector (Revie .....

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e placed before the Deputy Chief Commissioner clearly spelt out, amongst other aspects, the issue pertaining to the purported failure of the adjudicating officer to impose a minimum penalty of ₹ 1,09,70,221/- in respect of wrongful credit of CENVAT by the respondent / assesse. 4.3 This note was put up before the Additional Deputy Commissioner on 11.04.2013 who, independently, came to a similar view, which is, that the adjudication order had to be reviewed for reasons stated therein. 4.4 Ba .....

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ntral Excise (Delhi Zone) and Mr. P.S. Pruthi, Chief Commissioner of Central Excise (Chandigarh Zone). A copy of this note has been placed on record both by the Revenue as well as by the respondent/assesse. 5. Therefore, when the appeal was moved before the Tribunal, a preliminary objection was taken by the respondent / assessee that it was not maintainable, as there was no application of mind by the Committee of Chief Commissioners (which comprised of Mr. B.K. Bansal and Mr. P.S. Pruthi) in con .....

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nst the subject adjudication order. 7. It is in this background that we are called upon to answer the questions of law referred to us for consideration. 8. To assist us in the matter, the Revenue was represented by Ms. Sonia Sharma, Advocate, while the respondent/assesse was represented by Mr. J.K. Mittal, Advocate. 8.1 It was the submission of Ms. Sharma that the reference had to be answered in favour of the Revenue in as much as the Tribunal failed to appreciate that the Committee of Commissio .....

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priate / desirable to prefer an appeal, was erroneous, in as much as, every such aspect was reflected in the notes of the subordinate officers, which was placed before the Committee of Commissioners. The fact that the Committee of Commissioners appended their signatures to the note was, according to her, sufficient compliance of the provisions of Section 86(2) of the Finance Act. The learned counsel submitted that such an exercise implicitly recognized due application of mind by the Committee of .....

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In support of her submissions, Ms. Sharma relied upon the following judgments :- Collector of Central Excise, Calcutta Vs. Berger Paints India Ltd., (1990) 2 SCC 349; Commissioner of Central Excise Vs. Ufan Chemicals, 2012 Law Suit (All) 2539; Commissioner of Service Tax Vs. LR Sharma, 2014 (4) AD (Del) 733; LR Sharma Vs. Commissioner of Service Tax, SLP 14544/2014 and 14545/2014; LR Sharma Vs. Commissioner of Service Tax, Review Petition No.2521 and 2522/2014 and LR Sharma Vs. UOI, 2011 (22) ST .....

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ulminated with the signatures of the Chief Commissioner of Central Excise (Delhi Zone), who appended his signature on the note sheet on 15.04.2013. Similarly, the second review order, the learned counsel stated, culminated with the signatures of Mr. P.S. Pruthi, Chief Commissioner, Central Excise (Chandigarh Zone); who appended his signatures on 26.04.2013. The learned counsel contended that thereafter, a third review order was prepared. In so far as this review order was concerned, while it car .....

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ndigarh Zone), on 26.04.2013. 9.3 The learned counsel thus submitted that the facts clearly demonstrated that each Chief Commissioner had taken a decision independently of the other, and that, there was no inter-se consultation between the members of the Committee. 9.4 It was submitted that the function discharged by the Committee of Commissioners being a quasi-judicial function, it had to necessarily meet, consult and give reasons, as to why a decision had been taken to institute an appeal befo .....

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rned counsel relied upon the Revenue s own instructions contained in circular dated 23.11.2012, issued by the Central Board of Excise and Customs (in short the Board). It was thus, contended by the learned counsel that, the circular, in any event, would be binding on the Revenue. 9.6 In context of the submissions made hereinabove, the learned counsel relied upon the following judgments :- CCE, Delhi-1 Vs. Kundalia Industries, 2012 (279) ELT 351 (Delhi); CCE, Delhi-III Vs. B.E. Office Automation .....

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ve exercised its power to institute the appeal in the Tribunal. ..86. (1). Any assesse aggrieved by an order passed by a Commissioner of Central Excise under section 73 or section 83A or an order passed by a Commissioner of Central Excise (Appeals) under section 85, may appeal to the Appellate Tribunal against such order within three months of receipt of the order (1A)(i). The Board may, by notification in the Official gazette, constitute such Committees as may be necessary for the purposes of t .....

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ioners of Central Excise differs in its opinion against the order of the Commissioner of Central Excise, it shall state the point or points on which it differs and make a reference to the Board which shall, after considering the facts of the order, if is of the opinion that the order passed by the Commissioner of Central Excise is not legal or proper, direct the Commissioner of Central excise to appeal to the Appellate Tribunal against the Order. (2A). The Committee of Commissioners may, if he o .....

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order, if is of the opinion that the order passed by the Commissioner of Central Excise (Appeals) is not legal or proper, direct any Central Excise Officer to appeal to the Appellate Tribunal against the order. Explanation - For the purposes of this sub-section, jurisdictional Chief Commissioner means the Chief Commissioner having jurisdiction over the concerned adjudicating authority in the matter... 10.1 A bare perusal of the aforesaid section would show that while sub-section (1) of Section 8 .....

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ise under Section 73 or Section 83A of the Finance Act. If, the Committee of Commissioners, comes to such a conclusion then, it is mandated to direct the Commissioner of Central Excise to prefer an appeal to the Tribunal. 10.2 Under sub-section (1A)(i), the Board is empowered by a notification published in the Official Gazette to constitute the Committee of Commissioners. Sub-clause (ii) of sub-section (1A) of Section 86 provides that the Committee so constituted shall either comprise of two Chi .....

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that the order of Commissioner of Central Excise, is not legal or proper. 10.4 Under sub-section (2A) of Section 86, an identical methodology is provided where the Committee of Commissioners objects to any order passed by the Commissioner of Central Excise (Appeals), under Section 85 of the Finance Act. 10.5 Beyond this, the Section does not state as to the manner in which Committee of Commissioners have to arrive at a decision as to whether an appeal should be preferred against the order of Com .....

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involve aspects which, cannot even make out a statable case before the Tribunal. 10.6 Barring such cases the Revenue, ordinarily, should have the liberty to assail an adjudication order which, in its wisdom, is against its interest. We may, however, add a note of caution, which is that, our observation as to what could be a frivolous and/ or futile appeal is not exhaustive. 10.7 The submission made before us by Mr. Mittal that the Committee of Commissioners should not only meet and consult but s .....

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asi-judicial function. We have read the instructions. The instructions merely highlight the manner in which decisions were being taken in the past by the Committee of Commissioners, it does not in any way convey that the function discharged by the Committee of Commissioners is imbued with attributes of a quasi-judicial process. 10.9 In our view, the duty discharged by the Committee of Commissioners is purely administrative and, cannot be, categorized as a quasi-judicial function since, it does n .....

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mmissioners, in our view, does not have the attributes of a quasi-judicial function. 10.10 Furthermore, the instruction issued by the Revenue, is largely pivoted on the decision of the Division Bench of this court rendered in Kundalia Industries s case, which in any event, is the subject matter of the instant reference. For the reasons that we would give hereafter, it would be clear that the approach commended in Kundalia Industries case does not find favour with us. 11. Therefore, having regard .....

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n appeal is to be preferred. It may be a wholesome circumstance to have a meeting and consultation between the members of the Committee but, the absence of the same, cannot render a decision taken by them open to challenge as long as they concur with each other and, there is, material placed before them for reaching such a conclusion. 11.2 The facts of this case show that Mr. B.K. Bansal, Chief Commissioner of Central Excise (Delhi Zone), appended his signatures to the note sheet on 15.04.2013, .....

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he signatures of both, Mr. B.K. Bansal and Mr. P.S. Pruthi. 11.4 In our opinion, though, no inter se meeting, in the physical sense, was held by the two Chief Commissioners, there is sufficient material, on record, to establish, that there was, a convergence of views. 11.5 The question, which, thus arises, is this : would the absence of a physical meeting and / or a face-to-face consultation, render the decision taken on 26.04.2013, by the Committee of Commissioners, illegal? In our view, the an .....

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g that, as in the case, of quasi-judicial function carried out by statutory authorities, even in respect of administrative decision, reasons ought to be given. The purpose behind seeking reasons is not only to do away with the allegation that the conclusion reached is arbitrary and / or unfair but, is also insisted upon, to enable the aggrieved party, as also, a superior authority (which could be a statutory authority or court or Tribunal) to ascertain as to what weighed with a decision making a .....

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that, the Committee of Commissioners should necessarily give their own reasons if they otherwise agree with the reasons already on record. In the facts of the case, the record itself shows, to which, we have made a reference above, as to why the Revenue was desirous of preferring an appeal. The reasons set out were cogent and substantial. As to whether the reasons recorded would finally persuade the Tribunal to hold in favour of the Revenue is not what concerns the Committee of Commissioners. Th .....

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olved, as indicated above, requires the Committee of Commissioners to look at errors of fact and / or law in the order passed by the adjudicating authority only from the point of view of the Revenue i.e. as to whether the revenue should prefer an appeal. At this stage, the Committee of Commissioners is, neither addressing nor adjudicating upon the stand taken by the respondent/assessee. While, the decision of the Committee of Commissioners has consequences, in as much as, the adjudicating author .....

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h a view already on record that an appeal should be filed. 12.5 In order to appreciate this aspect of the matter, it may be relevant to note that even while discharging judicial functions, often, courts and/or tribunals reject an appeal against the order-in-original or even a review without giving reasons because it agrees with the underlying reasons. Such a decision of the appellate / reviewing forum, if challenged before a superior forum, may get set aside for reconsideration, not always on ac .....

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ere is an objection raised as regards the maintainability of the appeal is, to examine, as to whether, a decision has been taken by the officers, who ought to form part of the Committee of Commissioners. Once, the record shows that a decision has been taken to file an appeal then, in our opinion, it is beyond the remit of the Tribunal to either examine the sufficiency of the material or the appropriateness / desirability of instituting the appeal ; as these are aspects with respect of which, res .....

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ribunal, will entertain the appeal and adjudicate upon the same on merits; albeit in accordance with law. 12.8 The view that we have taken above is also the view that has been taken by a Division Bench of this court in L.R. Sharma-1 s case, of which, one of us (S. Ravindra Bhat, J.), was a member. The Division Bench in that case examined the issue threadbare and made the following observations in paragraphs 7 and 8. ..7. The Court has considered the submissions of the parties. The scope of enqui .....

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Court must view the deliberation by the concerned authority in context. In this case, the respective Superintendents of the two Chief Commissioners prepared detailed notes concerning the facts, law applicable and the need for a reconsideration of the order of the Commissioner. This is not disputed. Equally, it is not disputed that these notes were placed before the Chief Commissioners. The fact that this was done independently for the two Chief Commissioners, who did not sit together, is, as ind .....

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portant to view the proceedings as a whole - detailed notes considering the issue of appeal were prepared by those in the office of the Chief Commissioner delegated with such tasks, and the final decision or approval was taken by the Chief Commissioner. Short of requiring the Chief Commissioner himself to record independent reasons, there is no deficiency in the administrative action. Indeed, the rationale for Section 86(2) was considered by the Supreme Court in Collector of Central Excise v. Be .....

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of the terms of the rules and the purpose intended to be served, the appeal was competent and was duly filed in compliance with the procedure as enjoined by the rules. It has to be borne in mind that the rules framed therein were to carry out the purposes of the Act. By reading the rules in the manner canvassed by Dr. Pal, counsel for the respondent, before us which had prevailed over the tribunal, in our opinion, would defeat the purposes of the rules. The language of the relevant Section and t .....

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ict the case of the Revenue before the CESTAT. By allowing appeals such as the present one, and inquiring into minute details of the authorization provided under Section 86(2), the result is the addition of another layer of litigation in the matter on the legality of the authorization. This runs contrary to the very purpose of Section 86(2), if the authorization under that section - which is to remove additional litigation - is the cause of further disputes. Therefore, given the underlying ratio .....

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ers also involved in the process. The cases relied upon by the Respondent are of no assistance. Neither Kundalia (supra), which concerned authorization under Section 35 of the Central Excise Act, 1944 (requiring the Chief Commissioners to be of the opinion that the order in question is illegal and improper, as opposed to only objecting to the order under Section 86(2)), nor ITC Limited (supra), deal with the standards for review under Section 86(2) or the law as laid down in Berger (supra). In f .....

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he another Division Bench in the case of Kundalia Industries but also the decision of the Supreme court in the case of Collector of Central Excise Vs. Berger Paints. It would be pertinent to note that against the decision rendered by the Division Bench in LR Sharma-1, the matter was carried to the Supreme Court, which dismissed the Special Leave Petition in limine vide order dated 07.07.2014, passed in SLP No.14544-14545/2014. As a matter of fact, a review petition bearing no.2521-2522/2014, was .....

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tral Excise Act). The two decisions have taken, a diametrically, opposite view. While in Kundalia Industries s case, the Revenue s appeal was rejected on the ground that the Committee of Commissioners had only appended their signatures to a note prepared by subordinate officers, which, articulated a need for filing an appeal before the Tribunal, the Division Bench of the Allahabad High Court, allowed the appeals of the Revenue despite the fact that the Committee of Commissioners had acted on the .....

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under the provisions of Section 35B(2) of the Central Excise Act. The language used in Section 35B(2) of the Central Excise Act though not identical, we must confess, is broadly, similar to the language used in Section 86(2) of the Finance Act. Having said that, what appeals to us, is the view taken by the Supreme Court in Berger Paint s case, which was rendered in the context of Rule 9 of the Customs, Excise and Gold (Control) Appellate Tribunal (Procedure) Rules, 1982 (in short the 1982 Rules) .....

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eal or revision, four copies (one of which shall be a certified copy) of the order passed in appeal or in revision and four copies of the order of the original authority. Explanation: "Copy for the purpose of this Rule shall mean a true copy certified by the appellant or appellant's representative to be a true copy. (2) In an appeal filed under the direction of the Collector or the Administrator or the Central Board of Excise and Customs, one of the copies of the order appealed against .....

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d. The Supreme Court ruled, that as long as there was an application of mind (by which it did not mean separate reasons) in respect of the issue qua which the appeal arose and due authority was given by the Collector, the appeal was competent. On these grounds, the Supreme Court reversed the judgment and order of the Tribunal. 14. Having regard to the judgment rendered in Berger Paints s case (which has been followed by a Division Bench of this court in LR Sharma-1 s case, as also, by the Divisi .....

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view, do not state, the correct position in law. As a matter of fact, the decision rendered by another Division Bench of the Allahabad High Court, in Devson Steels, accords, with a view taken by us. 15. Before we conclude, we may also refer to a decision dated 02.11.2012, rendered by a Division Bench of this court in : WP(C) 6918/2012, titled : LR Sharma and Co. Vs. Commissioner of Service Tax and Ors. (hereafter referred to as LR Sharma-2). 15.1 As is obvious, this was a decision rendered in a .....

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Notification: Companies (Restriction on number of layers) Rules, 2017

Highlight: Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - he disclosure made by the assessee is voluntary in nature, in the revised return - no penalty

Highlight: Reopening of assessment - notice u/s 148 issued on the directions of JCIT / CIT - a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions u/s 147

Highlight: MAT - Adjustment to book profit - computation u/clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules.

Highlight: Addition on account of alleged suppression of service value received - the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained

Notification: Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL

Notification: Seeks to amend notification No. 12/2017-UTT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017

Notification: Seeks to amend notification No. 11/2017- UTT(R) to reduce CGST rate on specified supplies of Works Contract Services

Highlight: Liability to pay duty on import of software - Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL - the appellant is to be considered as the importer



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