Custom, Excise & Service Tax Tribunal
Bangalore International Airport Ltd vs Commissioner Of Central Tax, Bangalore ... on 18 August, 2025
Service Tax Appeal No. ST/21236/2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 21236 of 2017
(Arising out of Order-in-Original No. BLR-EXCUS-004-COM-02-2017-18 dated
09.05.2017 passed by the Commissioner of Central Excise & Service Tax,
Bengaluru IV Commissionerate, Bengaluru.)
Bangalore International Airport Ltd.,
BIAL Alpha-2, Admin Block,
Kempegowda International Airport,
Bengaluru - 560 300. ..........Appellant(s)
Versus
The Commissioner of Central Tax,
Bengaluru - IV Commissionerate,
Ground Floor, HMT Bhavan,
Ganga Nagar,
Bengaluru - 560 032. ........Respondent(s)
APPEARANCE:
Mr. Harish Bindhu Madhavan, Advocate; Ms. Disha. G, Advocate and Ms. Arathi, Advocate for the Appellant.
Mr. M.A. Jithendra, Asst. Commr. (AR) for the Respondent.
CORAM:
HON'BLE MR. P.A. AUGUSTIAN, MEMBER (JUDICIAL) HON'BLE MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 21246 / 2025 DATE OF HEARING: 19.02.2025 DATE OF DECISION: 18.08.2025 PER : P.A. AUGUSTIAN The issue in the present appeal is whether the Appellant is eligible to avail the CENVAT credit related to goods involved in Airport expansion project activities carried out by M/s L & T for the Appellant.Page 1 of 15
Service Tax Appeal No. ST/21236/2017
2. Appellant is providing Airport service and had completed the construction of the Airport in the year, 2008. Thereafter in 2011, they had entered into an agreement with M/s Larson & Turbo for the Terminal-I expansion work. As per the terms of the contract, it is a works contract and the M/s L & T had agreed to pass on the assessee the CENVAT credit of 16.75 by way of excise duty, CVD and service tax. As regarding the import duty and for claiming the benefit of CVD, it was agreed that the import will be made on built to ship model and while issuing the purchase order for import, name and reference to the Appellant should be clearly mentioned in the consignee address, ship to address. As per the conditions, the contractor shall reflect the output service tax payable by him under the contract separately and not bundle it into the price. The contractor shall ensure that inputs service credit tax shall be correctly availed of the service tax paid by the contractor and such input credit shall not form part of the pricing to the employer. It is further stated that no service tax would be payable to the contractor for the portion of the works relating to civil construction as these services are exempted vide Notification No. 42/2010-ST dated 28.06.2010. It is further stated that the contractor shall also ensure that the sub-contractors for the civil construction portion shall not charge any service tax on the contractor in terms of the above-mentioned Exemption Notification.
3. Accordingly, entire amount of Rs. 796.00 crores received by the Contractor M/s L & T from the Appellant was exempted from service tax in the hands of the Contractor. But the Contractor as per the agreement had made the Cenvat credit available to the assessee on the items imported under project import and the main items which were part of construction and also capital goods and inputs by way of arrangement that the Cenvat Credit of CVD and Excise duty were transferred to Appellant by ensuring that Appellant's name and reference are mentioned in the consignee address in the Bills of Entry and the invoices for import and procurement of the said items. But, as per the agreement, the Contractors were required to pass on to the assessee, the Cenvat Page 2 of 15 Service Tax Appeal No. ST/21236/2017 credit of Rs. 16.75 crores, but at the end of the contract they were not able to transfer the entire cenvat credit which they had agreed Since they were not able to transfer the Cenvat credit of Rs. 10.58.79.357/- to the assessee during the whole process of construction, a Credit Note was issued by L & T Construction Buildings & Factories to BIAL Bangalore vide Ref No CB-1 & T-L- 000 GN-089 dated 19.01.2015 for an amount of Rs. 10 58.79 357/ for deducting from the money payable to the Contractor on account of the CENVAT shortfall under Clause 4 of section 3 of Volume 2 of the contract. Hence, the balance amount of Cenvat of Rs. 6.17 crores should have been transferred by the Contractor to the assessee, but the Contractor had totally transferred the credit of Rs 7.41 crores in the form of CVD duty and Excise duty as there was an increase in the excise duty from 10.3% to 12.36% over the period. When the agreement was made the excise duty was 10% and the calculations were made on 10.3% with regard to the transfer of credit, but during the Budget 2012, the excise duty was raised from 10.3% to 12 36% and hence the credit passed on increased from the agreed 6.17 crores to 7.41 crores. The total amount of Cenvat Credit transferred by the Contractor to the assessee and availed by the assessee during the year 2012 and 2013 is Rs 7,41,66,950/-as detailed in the Table below :-
Sl. Annexure to the Amount of Cenvat Credit passed SCN on by the Contractor L&T and No. availed by the employer BIAL (in Rs.) 1 Annexure A-1-CVD 2,11,55,860/-
2 Annexure-A-2-ED 2,85,75,159/-
3 Annexure-A-3-CVD 2,44,35,931/-
Total 7,41,66,950/-
3.1. Since availing the said CENVAT credit as ineligible credit, proceedings were initiated and Adjudication authority as per impugned order has confirmed the demand on duty and also imposed penalty under Section 78(1) of the Finance Act, 1994.
Aggrieved by said order, present appeal is filed.
Page 3 of 15Service Tax Appeal No. ST/21236/2017
4. When the appeal came up for hearing, the Learned Counsel for the Appellant submits that in terms of Notification No. 42/2010 ST dated 28.06.2010 and Notification No. 25/2012 ST dated 20.06.2012 payment of service tax is exempted in respect of the construction activities done within the airport, that accordingly the service tax was not required to be charged by the person who is providing the services of construction, erection, commissioning or installation woks in the Airport, that L&T has availed the benefit of the exemption on the works contract executed by them at the airport and the exemption is not provided to BIAL as a service receiver. The Learned Counsel also draw our attention to the detail breakup of CVD against capital goods, CVD on inputs for the period from October, 2013 to March, 2015. The Learned Counsel also draw our attention to the excise tax invoices issued showing the name and address of the consignee as Appellant and also the Bill of Entry and the challan evidencing payment of customs duty, clearly showing the name of the assessee remitter as Bangalore International Airport. Thus, by no stretch of imagination, the exemption cannot be held as availed by Appellant to deny the CENVAT and credit availed by them. Appellant have availed the credit of goods which are used for the purpose of erecting the terminal of airport and the goods supplied under the said contract would be either capital goods or inputs for BIAL and therefore, the whole contention of denying Cenvat credit in the hands of BIAL based on the argument that such services is exempt is not sustainable.
5. The Learned Counsel further submits that Appellant had used the goods consigned to them and are used in provision of service and hence are rightly eligible for the benefit of CENVAT credit. The goods in dispute have been procured for the Terminal expansion project which is required to be undertaken by the Appellant in order to accommodate the increased passenger traffic. The nature of goods disputed under inputs is of furniture lights, speakers which are used exclusively for the provision of output services. The credit has been availed on capital goods which are covered under Page 4 of 15 Service Tax Appeal No. ST/21236/2017 the Chapter Heading defined in the definition of Capital goods giving the nexus between the inputs and capital goods with the provision of output services credit cannot be denied in the hands of Appellant.
6. The Learned Counsel for the Appellant relied on the breakup of the demand of Rs. 7,41,66,950/- as appended below:-
Break-up of the total demand Amount (In INR)
A-Goods which are alleged 2,44,35,931
as inputs in para 4 of audit
memo and later classified
in the audit report as
inputs
1) Project imports 16,30,716
2) Furniture 45,28,309
3) Lights 1,82,76,906
B-Goods qualify to be 7,241
treated as 'Other inputs'
C-Goods qualify to be 4,97,23,777
capital goods
Local procurement of capital 2,85,67,917
goods
Import procurement of capital 2,11,55,860
goods
Total 7,41,66,950
7. The Learned Counsel also draw our attention to the Section 2(k) of the CENVAT Credit Rules, 2004 where the input is defined as all the goods used in the factory by the manufacturer of the final products or as per the Rule 4, all goods used for providing any output services. But exclude certain category. Thus, the goods which are used for providing output services can be classified under inputs unless they are specifically fall under the exclusion clause. Since the goods on which the inputs benefit is claimed by the Appellant is not listed as per the above said exclusion clause, the Appellant had rightly availed the CENVAT credit on input.
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8. As regarding project import, the Learned Counsel submits that all goods imported under CTH 98.01, capital goods are eligible for CENVAT credit as per proviso to Rule 3 of the CENVAT Credit Rules, 2004. The goods falling under the said CTH would be eligible irrespective of actual nature of goods. The Learned Counsel for the Appellant also relied on the decision of the Tribunal in the matter of M/s. Visteon Automative Systems India Pvt. Ltd., and the Circular No. 490/56/99-CX dated October 25, 1999.
9. As regarding the claim on furniture and fittings, the Learned Counsel submits that it is used for providing amenities to the passengers in the Airport and as per the Circular No. 943/4/2011- CX dated 29.04.2011, goods such as furniture and stationery used in an office within the factory are goods used in the factory and are in relation to manufacturing business and hence the credit of the claim is allowed. As regarding the input credit on lights and lighting equipment, the Learned Counsel submits that the expenses are included for the provision of lighting arrangements within the Airport, since this is an essential requirement in the Airport and the same is eligible. Other inputs, the amount involved is only Rs. 7,241/- and expense incurred on rubber mounding which are essential in the Airport and hence eligible for availing credit. As regarding procurement of light and demand of Rs. 1,82,76,906/- as service tax, Learned Counsel relied on the decision of the Tribunal in the matter of M/s ICICI Lombard General Insurance Company Ltd vs Commissioner of Service Tax, Mumbai (2016-TIOL-367-CESTAT-MUMBAI where it is held that:-
"6.2 As regards the Cenvat credit availed on the Furniture and Fittings, we find that the said humiture and fittings are nothing but tables and chairs which were procured by appellant during the relevant period. It is a common knowledge that any insurance company is required to have chairs and tables to render services to their clients. In our considered view, the said tables and chairs are used for rendering services of general insurance. accordingly, the appeal filed by the appellant on this issue needs to be allowed and we do so".Page 6 of 15
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10. The Learned Counsel further submits that the demand is also unsustainable on the ground that out of the amount of Rs.2,44,43,174/- demand pertains to Rs.24,43,593/- pertains to procurement made under the project import and the issue was considered in the audit and demand to the extent of Rs.2,44,35,931/- had also been alleged in the hands of Appellant as ineligible credit availed on inputs. While said allegation was made at the stage of audit memo, based on the submission made by the Appellant on the eligibility on the credit of such procurement in the hands of Appellant, said demand was dropped at the stage of show-cause notice.
11. The Learned Counsel also draw our attention to the finding in the impugned order and submits that the finding of the Adjudication authority as the goods though consigned to Appellant, are actually procured and utilised by the contractor in execution of works contract of civil construction which is exempted from payment of service tax is factually wrong and unsustainable. In terms of Rule 2(a) of the CCR, 2004 all the goods falling under CTH 82.84 85.90 including components and spares and pollution control equipment used for providing output service will become capital goods. Further in terms of Rule 2 (10) of the CCR, 2004 input service means any service used by provider of output service for providing output service and include services used in relation to modernization renovation or repairs of premises of provider of output service etc., but excludes service portion of the execution of works contract and services used for construction or execution of works contract of a building or a civil structure or a part thereof.
12. As regarding invoking the extended period of limitation, the Learned Counsel submits that there is no suppression of facts to invoking the extended period of limitation.
13. The Learned Authorised Representative (AR) for the Revenue reiterated the finding in the impugned order and submits that as per Rule 2(a) of the CCR, 2004, all the goods falling under CTH 82 Page 7 of 15 Service Tax Appeal No. ST/21236/2017 84 85.90 including components and spares and pollution control equipment used for providing output service will become capital goods. Further in terms of Rule 2(1) of the CCR, 2004 input service means any service used by provider of output service for providing output service and include services used in relation to modernization renovation or repairs of premises of provider of output service etc., but excludes service portion of the execution of works contract and construction services used for construction or execution of works contract of a building or a civil structure or a part thereof. From the above statutory provisions, it is clear that the Cenvat credit of duty/tax paid on the inputs, capital goods and input services are available to a service provider for provision of output service. The said provisions exclude the credit related to the construction activities under works contract of a building or a civil structure. However, in the instant case, the Cenvat credit proposed to be denied is the credit availed on the inputs/capital goods imported/procured by the contractor of the works contract of civil structure of Airport Terminal building under EPC project. Further it is a fact that all such goods are procured by the contractor and used in execution of work contract of building/civil structure. Thus, the goods in respect of which the disputed Cenvat credit is availed have not been used by the assessee since the same were used by their EPC contractor in execution of works contract of construction of civil structure. Hence, assessee cannot avail the credit of duties/taxes paid in respect of the goods which are not used by them for provision of output service in as much as the provisions clearly state that only the goods or services used for provision of output service are eligible for availing the Cenvat credit. Though the goods were consigned to the assessee , the said arrangement is only for the convenience of the parties concerned to have the delivery of the goods at the place/site of construction and the same cannot be taken as the goods have been procured by the assessee and are used for provision of service instead said goods are used by the contractor in construction/erection of building/civil structure during the provision of his service i.e., construction of building/civil structure Hence, the contention of the assessee that Page 8 of 15 Service Tax Appeal No. ST/21236/2017 the goods are received by them in relation to the service provided is not acceptable.
13. Heard both sides. We have considered the nature of contract and details of goods procured on behalf of the Appellant by the Contractor. As per Section 2(k) of the CENVAT Credit Rules, 2004, input is defined as all the goods used in the factory by the manufacturer of the final products or as per the Rule 4, all goods used for providing any output services. But exclude certain category. The EPC contract include execution of work comprising design, engineering, procurement, construction, erection, installation, setting to work, testing, pre commissioning and completion of the works detailed in the Employers requirement in the contract. But from the above contract, no presumption can be drawn that all the goods and services procured and utilised in execution of works contract will become part of the building/civil structure transferred to the assessee on completion of construction. It is true that as per the provisions of the CCR 2004, in the instant case, the credit is available only to the contractor who utilised the goods in question in execution of works contract for construction of building/civil structure and not to the assessee.
14. The Commissioner in the impugned order denied the cenvat credit on the ground that the credit is in respect of the goods used in the construction activity undertaken by the contractor viz. L & T Constructions on behalf of the appellant. He observed that in terms of Rule 2(k) of the Cenvat Credit Rules, 2004 (CCR, 2004) "input" excluded "any goods used for (a) Construction or execution of works contract of a building or a civil or a part thereof; or structure; and (b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of section 66E of the Finance Act, 1994;
15. In view of the above provisions, the Commissioner observed as follows:
Page 9 of 15Service Tax Appeal No. ST/21236/2017 "In the instant case, the Cenvat credit proposed to be denied is the credit availed on the inputs/capital goods imported/procured by the contractor of the works contract of civil structure of Airport Terminal building under EPC project. Further, it is a fact that all such goods are procured by the contractor and used in execution of work contract of building/civil structure. I find that the said fact has been admitted by the assessee and there is no dispute in this regard. In other words, the goods in respect of which the disputed Cenvat credit is availed have not been used by the assessee since the same were used by their EPC contractor in execution of works contract of construction of civil structure. Hence, I find that the assessee cannot avail the credit of duties/taxes paid in respect of the goods which are not used by them for provision of output service in as much as the provisions clearly state that only the goods or services used for provision of output service are eligible for availing the Cenvat credit".
He also observed that :
"The EPC contract include execution of work comprising design, engineering. procurement, construction, erection, installation, setting to work, testing, pre commissioning and completion of the works detailed in the Employers requirement in the contract. Such being the case, the assessee has no claim over the said goods as the work contract is under EPC project and all the goods and services procured and utilised in execution of works contract will become part of the building/civil structure transferred to the assessee on completion of construction. .............Further, it is clearly brought in the SCN that the service provided by the contractor to the assessee in execution of work contract is exempted from payment of service tax in terms of Notification No. 42/2010 ST dated 28.06.2010 and 25/2012 ST dated 20.06.2012 for the entire period of demand and accordingly, the said contractor has not paid any service tax in respect of the EPC project undertaken on behalf of the assessee. It is on record that the contractor has passed on the credit to the assessee as per the contract is totally illegal as the same is not charged or paid by the contractor in respect of his output service to the assessee. Further, the contractor also cannot avail the credit as the service provided by them to the assessee is exempted from payment of service tax. Hence, question of transfer of the credit of duties/taxes paid in respect of the goods procured and used in Page 10 of 15 Service Tax Appeal No. ST/21236/2017 construction activity does not arise for the reasons both as per statute and as per exemption availed by the EPC contractor. I find form records that the assessee has chosen the avenue of consigning the goods in their name just to accommodate the eligibility of Cenvat credit which is illegal as discussed above. I find that the goods in question are not received or used by the assessee for provision of the output service by them. When, the same are not used for provision of service, the question of eligibility of Cenvat credit to the assessee does not arise at all. Hence, I hold that the credit availed by the assessee is illegal and the same is required to be recovered from them as proposed in the SCN.
5.7 The assessee contended that they are eligible to avail the credit of duties paid since the documents are in their name. I find that the contention of the assessee is totally wrong in as much as the goods though consigned to them, are actually procured and utilised by the contractor in execution of works contract of civil construction which is exempted from payment of service tax. Further, the goods in respect of which the Cenvat credit is proposed to be denied in the SCN are actually used in construction of civil structure and are not used for provision of taxable service by the assessee and hence, the same cannot become input to the assessee in terms of CCR, 2004. Further, the assessee has not adduced any convincing evidence that the goods in question have been used for providing taxable service and it is abundantly clear that the goods on which the assessee have availed the credit cannot be termed as inputs within the meaning of CCR, 2004. ............In view of the above, I hold that the Cenvat credit availed by the assessee to the extent of Rs. 7,41,66,950/- is not available to the assessee and the same is liable to be confirmed in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 73 of the Act".
16. It is an admitted fact that the project as a whole was an EPC contract and the Contractor M/s. L & T were the service providers to the appellant. The appellant had entered into the contract with L & T, which states as follows:
"In Schedule 3 of the Conditions of the Contract, containing Schedule of Prices (Page No.154 of the Contract) the Contract Sum (excluding provisional sum) is given as Rs. 796 crores. The Cenvat Credit Page 11 of 15 Service Tax Appeal No. ST/21236/2017 available to the Employer under Excise Duty, CVD and Service Tax is mentioned as Rs. 16,75,33,669 (Sixteen Crores Seventy-Five Lakhs Thirty-Three Thousand Six Hundred and Sixty-Nine Only) and the Contractor's Margin on the Provisional Sum is given as 10%. As per the above details, the amount of Cenvat Credit M/s L&T had agreed to pass on to the assessee i.e. BIAL is Rs 16.75 crores by way of Excise Duty, CVD and Service Tax."
17. In the preamble to the Schedule of Prices at Sl.No.3, it is mentioned as follows:-
"3. Taxation "The Contract Sum shall include all applicable taxes, levies and duties etc..(except those specifically agreed to be excluded and reimbursed on actual basis under this section of contract).
The Contractor shall cooperate and disclose to the Employer all such relevant information with regard to procurement of the material and services so that the Employer is completely informed about the procurement details and its tax implications (if any). The Contractor undertakes to implement the suggestions and options suggested by the Employer with regard to the procurement of goods and services in order to optimize the tax savings for the project and follows the instructions of the Employer's Representative in accordance with the Conditions of the Contract."
3.1 Customs duty on imports "The Contractor shall include all applicable customs duty on imports on project import licence basis, the total customs duty for each cost centre will be shown separately in the below Form A-1 & A-3. The Employer will apply for the import licence for the project and will intimate the Contractor once the licence is obtained.
In order to enable the Employer to avail the CENVAT credit of the CVD paid on imports, the Contractor shall ensure that "Bill to-Ship to" model is followed. While issuing the purchase orders for imports, name and reference of the Employer should be clearly mentioned in the consignee address/ship to address. Also, the PO should direct that the goods be dispatched to the following site (ie, "Bill-to"
Contractor and "Ship-to" Employer site).Page 12 of 15
Service Tax Appeal No. ST/21236/2017 Bangalore International Airport Ltd., Project Office, Bengaluru International Airport, Bangalore 560300 Karnataka, India.
The responsibility to clear the imported goods on payment of appropriate of customs duty and requisite documents shall be on the Contractor. The Contractor will however ensure that the Bill of Entry shall be in the name of Employer.
3.2 Excise duty on local procurements The Contractor hereby undertakes to procure all major goods (covering middle and high value plant, machinery and equipment) directly from the manufacturer and such goods will be directly shipped from the factory of the manufacturer to the site. Further the Contractor undertakes to intimate/instruct the manufacturer to clearly indicate the following address in the consignees/ship to address in the invoices, transport and other documents.
The Contractor shall reflect the output service tax payable by him under the Contract separately and not bundle it into the price. The Contractor shall ensure that input service tax credit shall be correctly availed of the service tax paid by the Contractor and such input credit shall not form part of the pricing to the Employer.
No service tax would be payable to the Contractor for the portion of the Work relating to Civil construction as these services are exempted vide Notification No. 42/2010-ST dtd. 28-06-2010. Additionally, the Contractor shall also ensure that the sub- contractors for the Civil Construction portion shall not charge any service tax on the Contractor in terms of the above-mentioned exemption notification. In the event service tax exemption is extended to other portion of Work, then the same shall be intimated to the Contractor, and the Contractor shall not change service tax on such portion as well.
4. Cenvat Credit The Contractor shall ensure that the Cenvat credit is made available to the Employer. The Employer shall adjust the short fall in actual Cenvat credit amount from declared amount if any from amount payable to the Contractor. However no additional payment shall be Page 13 of 15 Service Tax Appeal No. ST/21236/2017 made to the Contractor if actual Cenvat credit amount is more than the declared amount.
The condition to Cenvat credit amount billed to the Employer by the Contractor is for:
1) Excise duty amount for those invoices billed to the Contractor with consignee Bangalore International Airport at the following address- BIAL, Administration Block, BIA, Bangalore-560033.
2) Counter veiling duty (CVD) on imports for those imports made with BOE in the name of employer.
3) Service Tax amount The above clauses of the agreement between the appellant and the Contractor clearly show that the contractor is to pass on the credit to the appellant. It is an admitted fact that the contractor is availing the benefit of Notification No.42/2010-ST dated 28.06.2010, hence, the question of availing credit does not arise both on account of the exemption and on account that the activity is construction activity which is specifically excluded for availing cenvat credit, unless and until the output services are also construction service. Therefore, the question of passing on the credit by the contractor to the appellant does not arise. Hence to that extent the impugned order is upheld. However, the appellant at the time of hearing has claimed that some of the inputs/capital goods are in the nature of furniture and lights which are used by the appellant and are also procured in the name of the appellant.
In view of the above, the goods other than used in the construction activity which are furniture/lights or any other goods used for output service if consigned to the appellant, the benefit of cenvat credit cannot be denied.
18. It is also submitted that suppression cannot be invoked in view of the fact that regular audit was undertaken during the relevant period and audit for the period October 2013 to March 2015 was conducted in 2015 and show-cause notice was issued only on 28.07.2016 and regular returns were filed with disclosure of detailed cenvat credit availed hence the question of suppression Page 14 of 15 Service Tax Appeal No. ST/21236/2017 of facts does not arise. We find substantial strength in the above argument considering the fact that regular returns were filed and relevant details were disclosed as is held by the Hon'ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore Vs. Sanmar Speciality Chemicals Ltd. 2016 (43) STR 347 (Kar.). In view of the above, the demand has to be confirmed only for the normal period and the matter needs to be looked into afresh to examine the eligibility of cenvat credit on furniture and light fittings or any other goods used for output service, which were not part of the construction activity and were consigned in the name of the appellant. The matter is remanded to the original authority to re-examine the issues. Needless to say that an opportunity of hearing is to be provided to the appellant and the matter may be decided within a period of 3 months from the date of receipt of this order.
Appeal is allowed by way of remand.
(Order pronounced in Open Court on 18.08.2025.) (P.A.AUGUSTIAN) MEMBER (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) rv Page 15 of 15