TaxTMI Updates e-Newsletter
Jan 02,2018

Disallowance under section 14A read with Rule 8D - Attribution of interest to tax-free investments - Deletion of disallowance where no exempt income is earned - Presumption of investment from interest-free funds where reserves exceed investments - Disallowance under section 36(1)(iii) - Taxation of notional interest under section 5 - Tests for recognition of income - reality, liability and probability of realization - Presumption on source of funds for inter-corporate loans

Disallowance under section 14A read with Rule 8D - Deletion of disallowance where no exempt income is earned - Presumption of investment from interest-free funds where reserves exceed investments - Disallowance under section 14A read with Rule 8D for AY 2009-10, 2010-11 and 2011-12 deleted. - HELD THAT: - The Tribunal found that for each impugned year the assessee's opening share capital and reserves & surplus substantially exceeded the investments noted by the AO. The assessee also did not earn any exempt income/dividend in the relevant years, a fact reflected in the profit & loss accounts and admitted in appellate orders. Applying the principle that where adequate interest-free funds are available a presumption arises that investments were made from such funds (as applied in Reliance Utilities & Power Ltd. and followed by the Bombay High Court in HDFC Bank Ltd.), and having regard to authorities holding that section 14A is not attracted where no exempt income is earned (CIT v. Shivam Motors; Cheminvest Ltd.), the Tribunal held there was no jurisdiction for making the section 14A disallowance under Rule 8D. The Tribunal also relied on its earlier bench decision in ITA No. 2189/Mum/2012 for AY 2008-09 where fund flow and availability of own funds were accepted. In view of these factors the impugned disallowances were deleted. [Paras 11, 12]

Disallowances made under section 14A r.w. Rule 8D for AY 2009-10, 2010-11 and 2011-12 are deleted.

Disallowance under section 36(1)(iii) - Taxation of notional interest under section 5 - Tests for recognition of income - reality, liability and probability of realization - Presumption on source of funds for inter-corporate loans - Addition under section 36(1)(iii) and taxation of notional interest under section 5 for AY 2009-10 and 2010-11 deleted. - HELD THAT: - The Tribunal applied the statutory test in section 36(1)(iii) and the requirements laid down by the Supreme Court in Madhav Prasad Jatia regarding borrowed capital, purpose, and interest claim. It applied the presumption from Reliance Utilities that where sufficient interest-free funds exist loans or investments may be presumed to be from those funds. With respect to notional interest under section 5, the Tribunal applied the three-fold test from Excel Industries (reality of accrual, corresponding liability, and probability of realization). The facts showed no provision or receipt of interest by the subsidiary (Gateway), partial repayment only, and practical improbability of realization; accordingly the alleged accrued interest was held to be hypothetical and not exigible to tax. Following these legal principles, the additions made by the AO in both years were deleted. [Paras 20]

Additions under section 36(1)(iii) and impugned taxation of notional interest under section 5 for AY 2009-10 and 2010-11 are deleted.

Final Conclusion: All appeals filed by the assessee are allowed: the section 14A r.w. Rule 8D disallowances for AYs 2009-10, 2010-11 and 2011-12 are deleted, and the additions under section 36(1)(iii)/notional income under section 5 for AYs 2009-10 and 2010-11 are deleted.

Penalty for concealment of income or furnishing of inaccurate particulars under Sec. 271(1)(c) of the Income tax Act - false or fabricated claim of deduction attracting penalty - unproved explanation versus disproved explanation in penalty proceedings - penalty not leviable where explanation is unproved but not disproved - treatment of cash deposits as unexplained cash credit under Sec. 68 - burden on assessee to establish genuineness and details of claimed deduction

Penalty for concealment of income or furnishing of inaccurate particulars under Sec. 271(1)(c) of the Income tax Act - false or fabricated claim of deduction attracting penalty - burden on assessee to establish genuineness and details of claimed deduction - Penalty under Sec. 271(1)(c) upheld in respect of the excess Chapter VIA deduction claimed but not substantiated. - HELD THAT: - The assessee claimed deduction under Chapter VIA but failed to produce supporting documents or even furnish details of the investments constituting the claimed deduction. The Tribunal accepts the view of the lower authorities that there was no bona fide attempt to substantiate the claim and that the absence of even basic particulars raised serious doubts as to the veracity of the claim. On these facts the claim is treated as false and fabricated rather than merely unproved; accordingly the imposition of penalty under Sec. 271(1)(c) in respect of the disallowed amount is sustained. [Paras 8]

Penalty under Sec. 271(1)(c) sustained in respect of the disallowance of the excess Chapter VIA deduction.

Penalty for concealment of income or furnishing of inaccurate particulars under Sec. 271(1)(c) of the Income tax Act - treatment of cash deposits as unexplained cash credit under Sec. 68 - unproved explanation versus disproved explanation in penalty proceedings - penalty not leviable where explanation is unproved but not disproved - Penalty under Sec. 271(1)(c) set aside in respect of cash deposits treated as unexplained cash credit where the assessee's explanation, though unaccepted, was not disproved. - HELD THAT: - The assessee explained that the cash deposits were loans/advances from the HUF of his father and produced a confirmation. The authorities did not accept the explanation and added the amount under Sec. 68, a decision which the assessee did not contest further. However, for imposition of penalty under Sec. 271(1)(c) the Tribunal distinguishes between an explanation that is unproved and one that is disproved. The explanation for the cash deposit, though not accepted by the revenue, was not conclusively shown to be false. Applying the principle that penalty cannot be levied where the facts are equally consistent with the assessee's explanation and the contrary hypothesis, the Tribunal holds that penalty is not maintainable on this count and accordingly sets aside the penalty imposed in respect of the cash deposits. [Paras 9, 10]

Penalty under Sec. 271(1)(c) quashed in respect of the cash deposits added under Sec. 68, because the explanation was unproved but not disproved.

Final Conclusion: Both appeals are partly allowed: the penalty under Sec. 271(1)(c) is upheld insofar as it relates to the false/unsubstantiated Chapter VIA deduction, and is set aside insofar as it relates to the cash deposits treated as unexplained cash credit, with the result that the appeals are partly allowed.

Depreciation under u/s 32(1) - user of asset for the purpose of business - block of assets - conditional deployment of machinery as a business modus operandi - reagent-rental / exclusive purchase obligation

Depreciation under u/s 32(1) - user of asset for the purpose of business - block of assets - reagent-rental / exclusive purchase obligation - Entitlement to depreciation on diagnostic machines installed at customers' premises which were supplied on reagent-rental/conditional basis and reflected in assessee's fixed assets. - HELD THAT: - The Tribunal held that the diagnostic machines, though installed at customers' premises on zero rental/zero deposit basis subject to an obligation on customers to purchase reagents exclusively (and meet minimum guaranteed purchases), were deployed as a purposive and strategic modus operandi in the interest of the assessee's trade. The arrangement was found to be part of the assessee's business activity and the machines constituted items in its "block of assets" as evidenced by schedules and annexures in the assessee's records. The Tribunal concluded that the conditions necessary for allowance of depreciation under u/s 32(1) were satisfied and that the contrary findings of the lower authorities were perverse and contrary to the material on record. The Tribunal therefore set aside the CIT(A)'s confirmation of the disallowance and allowed the claim of depreciation, following its earlier order in the assessee's appeals for prior assessment years which addressed identical facts and reached the same conclusion.

Depreciation allowable on the diagnostic machines installed at customers' sites as part of the assessee's block of assets and used for its business; the disallowance by the lower authorities is set aside.

Final Conclusion: The appeal is allowed: the Tribunal set aside the CIT(A)'s order and held that depreciation under u/s 32(1) is allowable for the diagnostic machines installed at customers' premises as they form part of the assessee's block of assets and are used in the assessee's business.

Bogus purchases admitted in survey statement - onus on assessee to prove genuineness of purchases - reassessment proceedings under Section 148/147 and addition in assessment - restriction of addition to profit element where purchases made from open/grey market - application of Simit P. Sheth principle quantifying profit element at 12.5%

Bogus purchases admitted in survey statement - onus on assessee to prove genuineness of purchases - reassessment proceedings under Section 148/147 and addition in assessment - Addition of alleged bogus purchases to income where assessee admitted purchases in survey statement but failed to substantiate genuineness - HELD THAT: - The assessee in survey under Section 133A admitted purchases claimed to be bogus and disclosed amounts for the relevant years. The Assessing Officer, after issuing notices and attempting verifications (including letters under Section 133(6) to suppliers which were returned unserved) and gathering information that supplier parties had admitted providing accommodation entries, treated the disclosed amounts as unaccounted income and made additions. The Tribunal found that the assessee failed to discharge the onus to prove the genuineness of those purchase transactions by producing supporting evidence (such as transport documents, third party confirmations or bank credit of payments). In these circumstances the Assessing Officer was justified in treating the disclosed amounts as not genuine and making additions in assessment.

Addition on account of unproved/bogus purchases upheld as justified where admission in survey was not retracted and no supporting evidence was produced

Restriction of addition to profit element where purchases made from open/grey market - application of Simit P. Sheth principle quantifying profit element at 12.5% - Extent of addition where purchases are held not to be from declared suppliers but goods reflected in stock and corresponding sales accepted - quantification reduced to profit element - HELD THAT: - Although the Assessing Officer disbelieved the genuineness of purchases from the named suppliers and added the full disclosed amounts, the Commissioner (Appeals) observed that the assessee maintained stock registers and corresponding sales were accepted by the Assessing Officer, permitting an inference that goods were in fact purchased from the open/grey market rather than the named suppliers. Applying the legal principle in Simit P. Sheth, the CIT(A) quantified the addition to the profit element arising from such purchases (worked out at 12.5% of the purchase value) and restricted the addition accordingly. The Tribunal agreed with this approach and reasoning, finding the restriction to the profit element to be a fair and legally supported measure where purchases were unproven as from the stated parties but stock and sales were recorded and accepted.

Addition reduced and restricted to the profit element (quantified on the basis of Simit P. Sheth at 12.5%) rather than the full purchase value

Aggregate/quantum of alleged bogus purchases - Challenge to numeric quantum for A.Y. 2008-09 (difference between Rs. 60,08,592/- and Rs. 59,83,592/-) rejected - HELD THAT: - The assessee contested the quantum adopted by the authorities for A.Y. 2008-09. The Tribunal examined the assessment record and found the aggregate of purchases reproduced in the assessment order corresponded to the figure adopted by the lower authorities. In absence of any material on record or assistance from the assessee (who did not appear), no basis existed to accept the lower figure urged by the assessee. Accordingly the numeric quantum as adopted by the Assessing Officer and CIT(A) was held to be correctly adopted.

Assessee's challenge to the numeric quantum dismissed; lower authorities' figure sustained

Final Conclusion: Appeals for A.Ys. 2008-09, 2009-10 and 2010-11 dismissed. Tribunal upheld additions for unproved/bogus purchases but agreed with CIT(A) to restrict the additions to the profit element (quantified on the basis of Simit P. Sheth at 12.5%) where stock and corresponding sales were recorded and accepted; a numeric challenge to the quantum for A.Y. 2008-09 was rejected.

Penalty under section 271(1)(c) - Burden of proof on assessee for cash credits under section 68 - Penalty proceedings penal in nature - department to establish receipt constitutes income - Contradictory statements by third party and effect on genuineness of transaction - Remand report and verification of third party evidence

Penalty under section 271(1)(c) - Burden of proof on assessee for cash credits under section 68 - Contradictory statements by third party and effect on genuineness of transaction - Whether penalty under section 271(1)(c) could be sustained when the assessee produced third party evidence and the jeweller ultimately confirmed the purchases that constituted the source of the cash credits - HELD THAT: - The Tribunal found that the assessee discharged the onus by producing affidavits, invoices, purchase register extracts, profit and loss entries and the jeweller's confirmation showing that the assessee's in laws had sold jewellery and paid cash which was subsequently deposited by the assessee. The initial denial by the jeweller (letter dated 4.11.2009) and the subsequent confirmation (letter dated 3.12.2009) were examined; the jeweller explained the earlier mistake and produced supporting records. Applying the settled principle that penalty proceedings are penal in character and the revenue must have cogent material to show that the receipt constituted the assessee's income or that there was conscious concealment or deliberate furnishing of inaccurate particulars, the Tribunal held that mere selection for scrutiny and the original addition do not suffice to sustain penalty where the assessee has proved the source. Reliance on the precedent cited by the assessee (as discussed in the judgment) supports that penalty cannot be levied solely because the assessee's explanation was initially rejected in assessment when no further material establishes concealment of income. In these circumstances the Tribunal concluded that the AO and the CIT(A) erred in confirming the penalty and directed deletion of the penalty. [Paras 6, 7]

The penalty levied under section 271(1)(c) is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal set aside the orders confirming penalty and directed deletion of the penalty under section 271(1)(c), allowing the assessee's appeal.

Validity of notice under section 274 read with section 271(1)(c) - Requirement to specify whether penalty is for concealment of income or for furnishing inaccurate particulars - Application of mind by Assessing Officer in issuing penalty notice - Distinctness of penalty proceedings from assessment proceedings - Imposition of penalty cannot follow automatically from confirmation of addition on appeal - Decline of legal claim does not itself attract penalty under section 271(1)(c)

Validity of notice under section 274 read with section 271(1)(c) - Requirement to specify whether penalty is for concealment of income or for furnishing inaccurate particulars - Application of mind by Assessing Officer in issuing penalty notice - Notice issued under section 274 r.w.s. 271(1)(c) which does not specify whether proceedings are for concealment of income or for furnishing inaccurate particulars is invalid and consequent penalty proceedings are vitiated - HELD THAT: - The Tribunal examined the jurisdictional requirement that the notice under section 274 read with section 271(1)(c) must inform the assessee of the specific limb (concealment of income or furnishing inaccurate particulars) on which penalty proceedings are initiated so that the assessee can respond appropriately. Where the assessing officer issues a standard proforma notice without deleting irrelevant portions or otherwise specifying the charge, that omission indicates non-application of mind and renders the notice vague. The Tribunal relied on binding and persuasive High Court and Supreme Court precedents holding that vagueness in the notice deprives the assessee of a fair opportunity and vitiates the penalty order. Applying these principles to the facts, the Tribunal found the notice dated 29.11.2007 for A.Y.2005-06 did not identify the exact charge, the assessing officer recorded inconsistent formulations in the penalty order, and therefore the penalty proceedings were invalid. [Paras 15, 20, 21, 22, 23]

Penalty proceedings initiated for A.Y.2005-06 under section 271(1)(c) are invalid and penalty is not sustainable.

Distinctness of penalty proceedings from assessment proceedings - Imposition of penalty cannot follow automatically from confirmation of addition on appeal - Decline of legal claim does not itself attract penalty under section 271(1)(c) - Penalty attributable to the addition made under section 50C was deleted by CIT(A) and the Revenue's appeal against that deletion is dismissed - HELD THAT: - The Tribunal observed that the CIT(A) deleted the penalty relating to the section 50C addition, following precedent of the jurisdictional Tribunal and the Supreme Court principle that mere decline of a legal claim does not ipso facto attract penalty under section 271(1)(c). Additionally, since the tax effect in the Revenue's appeal was below the materiality threshold (less than Rs. 10 lakhs), the appeal was dismissed on that ground as well. [Paras 24]

Penalty relating to the section 50C addition is deleted and Revenue's appeal is dismissed.

Final Conclusion: Assessee's appeal allowed by setting aside penalty proceedings for A.Y.2005-06 as the jurisdictional notice was vague; Revenue's cross-appeal challenging deletion of penalty in relation to addition under section 50C dismissed.

Seizure of jewellery in the course of search - treatment of jewellery as explained for assessment purposes - gross weight comparison as criterion for jewellery seizure - undisclosed jewellery under Section 132(1)(c) and scope of seizure under Section 132(1)(iii) - applicability of CBDT Instruction No.1916 dated 11.05.1994 to assessment under Section 69A - quasi judicial duty of tax authorities to act fairly

Applicability of CBDT Instruction No.1916 dated 11.05.1994 to assessment under Section 69A - gross weight comparison as criterion for jewellery seizure - treatment of jewellery as explained for assessment purposes - undisclosed jewellery under Section 132(1)(c) and scope of seizure under Section 132(1)(iii) - quasi judicial duty of tax authorities to act fairly - Addition under Section 69A in respect of jewellery found in search was not sustainable and was deleted - HELD THAT: - The Tribunal found that the family's declared gross weight of diamond jewellery (1876.11 gms) exceeded the gross weight of diamond jewellery found during search (1650.10 gms) and that this fact was accepted by the Department (para 7). CBDT Instruction No.1916 (11.05.1994) governs seizure of jewellery in searches and, as interpreted in the judgment, the power to seize under Section 132(1)(iii) is linked to the undisclosed jewellery described in Section 132(1)(c); hence jewellery not liable to seizure under the Instruction cannot be treated as undisclosed for assessment purposes (paras 8, 26-28). The Instruction prescribes gross weight (rather than item by item matching) as the decision criterion for wealth tax assessees, recognising remaking and social customs, and permits exclusion of larger quantities taking into account family status and customs (paras 31-31, 30). The Assessing Officer adopted an item by item comparison and rejected the assessee's explanations (remaking, gifts, and flaws in Departmental valuer's description) without adequate reasons (paras 33, 35-38). The Tribunal held that, because seizure was not permissible under the Instruction in respect of jewellery within declared gross weight, the addition under Section 69A could not be sustained; further, tax authorities must exercise quasi judicial powers fairly and not in a manner prejudicial to the assessee (paras 28, 34). Applying these principles to the facts and taking account of the family's status and customs, the Tribunal found no merit in the additions made in respect of gold and diamond jewellery and allowed the appeal (paras 39-42). [Paras 36, 38, 39, 41, 42]

Addition on account of alleged undisclosed jewellery was deleted and the assessee's appeal was allowed.

Final Conclusion: The Tribunal held that CBDT Instruction No.1916 (11.05.1994) governs the criteria for seizure and, where declared gross weight of jewellery exceeded the jewellery found in search, seizure and consequent addition under Section 69A were not permissible; appeal allowed for A.Y.2012-13.

Fees for technical services under section 194J - contractual/works payments under section 194C and section 194I - assessee in default under section 201(1) and interest under section 201(1A) - first proviso to section 201(1)

Fees for technical services under section 194J - contractual/works payments under section 194C - Characterisation of payments made to Computer Science Corporation India Pvt. Ltd. (CSCIPL) as fees for technical/professional services rather than contractual/works payments. - HELD THAT: - The Tribunal examined the contractual documents on record (Local Service Agreement) together with the payee's public disclosures (Master Service Agreement press releases) and concluded that the services provided by CSCIPL comprised integrated information-technology outsourcing involving technical, managerial and consultancy obligations performed by qualified personnel and supported by global infrastructure. The nature of services rendered by the recipient, not the contractual label or bundling of invoices, is decisive. Reliance on exclusion in Explanation 2 to section 9(1)(vii) (construction, assembly, mining or like project) was rejected in light of DIT v. Rio Tinto Technical Services and ejusdem generis application. Co-ordinate decisions cited by the assessee were distinguished on facts where only technology (and not human technical service) was involved or where clauses did not evidence technical service obligations. Accordingly, the payments to CSCIPL were held to fall within the inclusive definition of fees for technical services attracting withholding under section 194J. [Paras 12, 13, 15]

Payments to CSCIPL were held to be fees for technical/professional services and not contractual payments under section 194C/194I.

Assessee in default under section 201(1) and interest under section 201(1A) - Validity of treating the assessee as an assessee in default and levy of interest under section 201(1A) consequent to classification of payments as fees for technical services. - HELD THAT: - Given the Tribunal's conclusion that the payments constituted fees for technical services liable to deduction at higher rate under section 194J, the Assessing Officer's invocation of section 201(1) to treat the deductor as an assessee in default was affirmed. The Tribunal rejected the assessee's plea of bona fide belief in applying a lower rate of TDS, finding the facts and contractual record inconsistent with such a defence. The Tribunal further held that interest under section 201(1A) is not an academic or separate levy that can be struck down in absence of a section 201(1) order, noting that section 201(1A) operates 'without prejudice to' subsection (1), and no binding authority was cited to the contrary. [Paras 14, 16]

Assessing Officer's treatment of the assessee as in default and levy of interest under section 201(1A) was upheld.

Contractual/works payments under section 194C and section 194I - first proviso to section 201(1) - Disposition of Revenue's appeal concerning payments to other payees (Aradhana Engineering Works and Commtel Networks Pvt. Ltd.) and the direction to the Assessing Officer to consider proviso to section 201(1). - HELD THAT: - The CIT(A) had held that payments to AEW and CNPL were properly treated as contractual payments under section 194C and directed the Assessing Officer, insofar as relevant, to consider the assessee's eligibility for relief under the first proviso to section 201(1) after affording opportunity and if the assessee furnished evidence that recipients had accounted for the amounts and paid tax. The Tribunal noted that the assessee had already succeeded on the issue for A.Y. 2012-13 and that Revenue failed to produce cogent evidence to reopen that conclusion. The Tribunal declined to revive the Assessing Officer's contrary finding and accepted the CIT(A)'s direction that the AO consider proviso-based relief where applicable, thereby preserving the appellate direction for factual verification by the AO. [Paras 17, 18]

Revenue's appeal was dismissed; CIT(A)'s findings favouring treatment of payments to AEW and CNPL under section 194C were maintained and the Assessing Officer was to consider proviso to section 201(1) for quantum relief if conditions are met.

Final Conclusion: The Tribunal affirmed the lower authorities' conclusion that payments to CSCIPL are fees for technical/professional services attracting deduction under section 194J and upheld the consequential treatment of the assessee as in default and interest under section 201(1A); it dismissed the Revenue's appeal regarding other payees, maintained CIT(A)'s findings that certain payments fell under section 194C, and left consideration of relief under the first proviso to section 201(1) for factual verification by the Assessing Officer.

Reopening of assessment under section 147 read with section 148 - reason to believe - change of opinion - tangible material test for re-opening - eligibility for deduction under section 10B based on manufacturing activity - manufacturing versus processing

Reopening of assessment under section 147 read with section 148 - reason to believe - change of opinion - tangible material test for re-opening - Validity of the second reassessment proceedings (notice under section 148 and assessment under section 143(3) r.w.s.147) which sought to disallow the assessee's claim of deduction under section 10B. - HELD THAT: - The Tribunal held that the second reopening was invalid because it amounted to a mere change of opinion. The AO had earlier examined the allowability of deduction under section 10B in the first reopened assessment order dated 20-01-2006, had excluded certain "other income" from the 10B claim and thereby confronted the core issue at that stage. The reasons recorded for the subsequent reopening in 2010 simply expressed disagreement with the earlier conclusion that had been reached after consideration of the assessee's submissions and documents. Relying on the test laid down by the Supreme Court in Kelvinator of India Ltd., the Tribunal reiterated that reopening under section 147 requires "reason to believe" supported by tangible material having a live link with the formation of belief and must not be used as a vehicle for review or mere change of opinion. In the facts of the case the AO's reasons showed no fresh tangible material distinct from the matters already considered in the 2006 assessment; accordingly the second reassessment was quashed as not tenable in law. [Paras 4, 5]

Second reassessment held invalid as a mere change of opinion; reassessment proceedings quashed and reopening held not in order.

Final Conclusion: The Revenue's appeals are dismissed; the reassessment orders framed pursuant to the second reopening are quashed and the deduction under section 10B, as determined earlier, stands undisturbed.

Disallowance of expenses - excessive payment to related parties - allowability of depreciation of motor vehicles in absence of log book - interest on diversion of funds - application of income and exemption under 12A/section 11 - remand for fresh consideration - opportunity of hearing / natural justice - ex parte disposal for non-appearance of Revenue

Disallowance of expenses - remand for fresh consideration - opportunity of hearing / natural justice - Addition of Rs. 7,82,465 on account of honorarium set aside and matter remitted to Assessing Officer for fresh decision after affording opportunity to the assessee. - HELD THAT: - The Assessing Officer made a disallowance after noting incomplete particulars and limited documentation produced by the assessee; the Tribunal observed that the opportunity/time afforded by the AO was insufficient in the circumstances and that the nature of evidence required warranted fresh examination. In the interest of justice the impugned order on this issue is set aside and the matter is restored to the file of the Assessing Officer to decide afresh as per law after allowing the assessee a reasonable opportunity of being heard. [Paras 5]

Addition of Rs. 7,82,465 on account of honorarium set aside and remitted to the Assessing Officer for fresh adjudication after providing reasonable opportunity to the assessee.

Excessive payment to related parties - disallowance of expenses - application of related-party payment test under charitable trust provisions - Disallowance of Rs. 4,54,300 being salaries paid to family members of the management deleted. - HELD THAT: - On the materials and submissions, the Tribunal noted the assessee runs a school of substantial size and the family members were performing bona fide functions (Principal, Secretary, and teachers with qualifications). Payments were not held to be excessive in the facts of the case and similar payments in succeeding years were allowed by the AO. The Tribunal concluded that the AO/CIT(A) erred in sustaining the disallowance and deleted the addition. [Paras 8]

Disallowance of Rs. 4,54,300 sustained by authorities deleted.

Allowability of depreciation of motor vehicles in absence of log book - disallowance of expenses - Disallowance of depreciation on cars deleted. - HELD THAT: - Although the AO relied on absence of log books and non-engagement of drivers to disallow depreciation, the Tribunal accepted the assessee's uncontradicted statement that vehicles were used for bona fide school purposes (liaisoning with authorities etc.), and observed that depreciation was allowed in succeeding years. On this basis the Tribunal held the CIT(A) erred in sustaining the disallowance and directed deletion. [Paras 9, 10]

Disallowance of depreciation on vehicles deleted.

Interest on diversion of funds - remand for fresh consideration - opportunity of hearing / natural justice - Addition of interest on alleged diversion of funds remitted to Assessing Officer for fresh examination. - HELD THAT: - The AO treated amounts advanced to a related party/individual as diverted funds and made an interest addition; the CIT(A) made partial relief. The Tribunal recorded the assessee's contention that advances were for purchase of property (transaction not completed) and were later returned, and that adequate opportunity was not afforded to produce evidence. In the interests of justice the Tribunal set aside the impugned order on this point and remitted the matter to the AO to examine the assessee's contentions in the light of evidence which it may produce, allowing reasonable opportunity of hearing. [Paras 11, 12]

Addition on account of interest remitted to the Assessing Officer for fresh consideration after affording the assessee adequate opportunity to produce evidence.

Application of income and exemption under 12A/section 11 - remand for fresh consideration - opportunity of hearing / natural justice - Addition of Rs. 2,04,757 treating surplus as income set aside and remitted to Assessing Officer for fresh decision after affording opportunity to the assessee. - HELD THAT: - The CIT(A) observed that although the assessee enjoyed registration under 12A and was broadly within section 11, certain capital expenditures claimed as application of income were not supported by details/evidence; the Tribunal found that the assessee was not confronted with this point before CIT(A) and that natural justice required fresh examination. Accordingly the Tribunal set aside the impugned order on this issue and restored the matter to the AO for fresh adjudication with a reasonable opportunity to the assessee. [Paras 13, 14]

Addition of Rs. 2,04,757 set aside and remitted to the Assessing Officer for fresh adjudication after providing reasonable opportunity to the assessee.

Ex parte disposal for non-appearance of Revenue - opportunity of hearing / natural justice - Tribunal proceeded to decide the appeal on merits ex parte qua the Revenue after refusing adjournment for the Revenue who did not appear. - HELD THAT: - The Revenue filed en bloc adjournment applications and was not present in court; the assessee objected to adjournment. The Tribunal exercised its discretion to deny adjournment and to proceed to dispose of the appeal on merits in the absence of the Revenue. [Paras 2]

Proceedings conducted and appeal disposed of on merits ex parte qua the Revenue.

Final Conclusion: The appeal is partly allowed: disallowances relating to salaries to family members and depreciation on vehicles are deleted; issues relating to honorarium, interest on alleged diversion of funds, and treatment of surplus/capital expenditure are set aside and remitted to the Assessing Officer for fresh consideration after affording the assessee a reasonable opportunity of hearing; the Tribunal proceeded ex parte qua the Revenue after refusing adjournment.

Depreciation on assets acquired under slump sale - allocation of slump consideration between tangible and intangible assets - ownership and use as conditions for allowance of depreciation - written down value of block of assets - non-inclusion of non-depreciable land in valuation of intangibles - power to enhance assessment where earlier valuation is found incorrect - allowability of depreciation on goodwill and non-compete fees

Allocation of slump consideration between tangible and intangible assets - depreciation on assets acquired under slump sale - allowability of depreciation on goodwill and non-compete fees - Whether the assessee was entitled to depreciation on tangible assets, know how, trademarks, patents and goodwill (and non compete) acquired under the slump sale - HELD THAT: - The Tribunal accepted that the assessee acquired the Indian business and business IP under the BTA and novation and that the assessee produced independent valuation reports allocating the lump sum consideration to identifiable tangible assets and to intangibles (know how, trademarks, patents and goodwill). The CIT(A)'s conclusion that Panki and Taloja lands were part of the slump consideration and that, therefore, no amount remained for intangibles, was rejected in part: the Tribunal held on the contractual record (BTA, TCA, novation and schedules) that neither Panki nor Taloja land passed to the assessee as owner on completion, and that the Toll Conversion Agreement evidenced transfer of IP/technical information rights to the assessee (subject to limited use by ICI). The Tribunal found the assessee's independent valuation to be a proper basis for bifurcation and, after correcting the over statement of Panki land value (reducing intangible allocation by Rs. 13 crores), directed recomputation allowing depreciation on tangible assets, know how, trademarks, patents, goodwill and on the non compete fee. The Tribunal relied on accounting practice (AS 10) and authorities holding slump consideration may be apportioned where valuation evidence exists, and rejected the CIT(A)'s wholesale denial of bifurcation in this purchaser's case. [Paras 54, 56, 63, 69, 73]

Assessee entitled to depreciation on tangible assets and on intangibles (know how, trademarks, patents and goodwill) and on non compete; Assessing Officer to recompute values after reducing intangible allocation by the determined Panki land adjustment.

Written down value of block of assets - ownership and use as conditions for allowance of depreciation - depreciation on assets once entered into block of assets - Whether authorities could disturb the opening WDV and deny depreciation in the subsequent year once assets had entered the block of assets and depreciation had been allowed earlier - HELD THAT: - The Tribunal held that following the amendment introducing the 'block of assets' regime, the opening aggregate WDV of a block determined in an earlier year (and on which depreciation was allowed) cannot be lightly disturbed in subsequent years. The statutory scheme in section 43(6) contemplates computation at block level and, absent proof of a valid basis to rework the opening WDV, authorities may not reopen the accepted WDV to deny depreciation in later years. The Tribunal relied on the jurisdictional High Court precedent emphasising the sacrosanct nature of the opening WDV brought forward and held that the CIT(A)'s attempt to re open valuations accepted in earlier year was not sustainable; having decided entitlement on merits, the Tribunal did not adjudicate enhancement power as it became academic. [Paras 70, 71, 72, 73]

Opening WDV of the block as accepted in earlier year cannot be disturbed; assessee entitled to claim depreciation on the brought forward WDV.

Non inclusion of non depreciable land in valuation of intangibles - allocation of slump consideration between tangible and intangible assets - Whether value of Panki and Taloja lands was required to be attributed from the slump consideration and whether the CIT(A)'s valuations of those lands were correct - HELD THAT: - On the contractual terms the Tribunal found that Panki assets and certain Panki land were part of 'Excluded Assets' and had not been transferred to the assessee as owner on completion; Taloja land was held under leave and license from HLL and not owned by ICI and could not have been transferred as owner on the BTA date. The CIT(A)'s broad allocation treating full market value of all lands as absorbed by the slump consideration was therefore unsustainable. The Tribunal accepted that a more realistic allocation would attribute a limited value to Panki (applying site specific area) and rejected the CIT(A)'s valuation that left virtually no amount for intangibles; it directed the Assessing Officer to recompute with Panki land value reduced (the Tribunal indicated Rs.13 crores adjustment) so as to preserve the independent valuer's bifurcation largely intact. [Paras 49, 50, 51, 69, 73]

CIT(A)'s finding that full market value of Panki and Taloja lands was part of slump price is reversed; Assessing Officer to recompute allocations with adjusted land values (reducing intangible allocation accordingly).

Power to enhance assessment where earlier valuation is found incorrect - depreciation on assets acquired under slump sale - Whether the CIT(A) properly exercised enhancement powers to disallow depreciation previously allowed by the Assessing Officer - HELD THAT: - The Tribunal observed that because it had decided on the merits that the assessee was entitled to depreciation (subject to the land value adjustment), the question of the CIT(A)'s enhancement exercise became academic and was not further adjudicated. The Tribunal noted the CIT(A) had attempted to enhance on the ground that earlier allocation/valuation was incorrect, but having accepted the valuer's bifurcation (with the specified adjustment) the enhancement is not sustained in the respects set out by the CIT(A). [Paras 16, 36, 73]

Enhancement by CIT(A) is not sustained to the extent it disallowed depreciation which the Tribunal has directed be allowed after recomputation; enhancement issue rendered academic by the Tribunal's substantive conclusions.

Corporate expenditure on increase in share capital - capital nature of expenses - Whether expenditure on filing fees and stamp duty paid to Registrar of Companies in relation to increase in share capital is deductible - HELD THAT: - The Tribunal followed settled law that expenses incurred in relation to increasing share capital are capital in nature. Having found the costs are incidental to raising share capital, the Tribunal held they are not allowable as revenue deductions under section 37 and rejected the assessee's claim. [Paras 74, 75]

Expenditure pertaining to increase in share capital is capital expenditure and not allowable as deduction; ground of appeal dismissed.

Final Conclusion: The appeals are partly allowed: the Tribunal directs recomputation and allowance of depreciation on tangible assets, know how, trademarks, patents, goodwill and non compete (subject to a reduction in intangible allocation to reflect adjusted Panki land value); the Assessing Officer to give effect to the recomputation; the claim for share capital related expenses is dismissed.

Deemed dividend under section 2(22)(e) - taxability in the hands of shareholder versus non shareholder - substantial interest and Explanation 3 - deeming fiction and ordinary meaning of dividend - disallowance under section 14A read with Rule 8D - onus on assessing officer to bring material for additions

Deemed dividend under section 2(22)(e) - taxability in the hands of shareholder versus non shareholder - substantial interest and Explanation 3 - Whether loans/advances made by a company to a concern can be taxed as deemed dividend in the hands of the concern which is not a shareholder of the lending company - HELD THAT: - The Tribunal analysed the three limbs of section 2(22)(e) and held that the deeming provision is directed to situations where payment by a closely held company is on behalf of or for the individual benefit of a shareholder and is intended to tax dividend in the hands of that shareholder. For the second limb-payment to a concern in which 'such shareholder' has substantial interest-the same person must be a registered and beneficial shareholder (holding the threshold voting power) and also have substantial interest in the concern. The Tribunal relied on authoritative decisions (including the Special Bench and High Court precedents and the Supreme Court confirmation) that construed the provision as charging tax on the shareholder and not on a non shareholder concern. Applying that principle to the facts, where the assessee company was not a shareholder of the lender, the impugned loans could not be treated as deemed dividend in the hands of the assessee. [Paras 7, 8]

Addition treating the loans as deemed dividend deleted; Revenue's appeals dismissed on this issue for both A.Y.2008 09 and A.Y.2011 12.

Disallowance under section 14A read with Rule 8D - taxation of exempt dividend - Whether disallowance under section 14A r.w. Rule 8D is exigible where the assessee offered dividend income to tax and no interest or identifiable expenditure attributable to exempt income was claimed - HELD THAT: - The Tribunal observed that section 14A operates to disallow expenditure attributable to exempt income. Where the assessee had offered the dividend for taxation and the profit and loss account showed no interest expense claimed (and other office/administrative expenses could not be attributed to earning exempt income), the AO failed to specify any basis for the disallowance under Rule 8D. In absence of claimed expenditure or a recorded basis linking expenses to exempt income, the disallowance could not be sustained. [Paras 10, 11, 12, 15, 16]

Addition under section 14A r.w. Rule 8D deleted; ground raised by Revenue dismissed.

Onus on assessing officer to bring material for additions - Whether addition for alleged undisclosed insurance commission could be sustained on ITS/TDS information without material connecting the assessee to the payors - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the AO's conclusion was based on general TDS/ITS entries which were not correlated to specific persons or transactions of the assessee. The AO did not produce material to establish that the assessee actually received the commission. In absence of verifiable linking evidence, the addition could not be sustained. [Paras 17, 18, 19, 22]

Addition treating the ITS/TDS entry as undisclosed commission deleted; ground raised by Revenue dismissed.

Final Conclusion: Both revenue appeals are dismissed: additions treating loans as deemed dividend were rightly deleted because the assessee was not a shareholder of the lender; the section 14A disallowance was unsustainable in absence of attributable expenditure or basis; and the alleged insurance commission could not be taxed without corroborative material linking the ITS/TDS entries to the assessee.

Reopening under section 147 of the Income-tax Act - reasons recorded for reopening - objections to reasons recorded for reopening - requirement to decide objections by a separate speaking order before passing assessment - remand for disposal of objections

Objections to reasons recorded for reopening - requirement to decide objections by a separate speaking order before passing assessment - reopening under section 147 of the Income-tax Act - Whether the reassessment proceedings (notice under section 148 issued consequent to reasons recorded under section 147) are vitiated because the Assessing Officer did not dispose of the assessee's objections to the reasons recorded before passing the assessment order. - HELD THAT: - The Tribunal found that the Assessing Officer issued notice under section 148 and completed assessment without first deciding the assessee's written objections to the reasons recorded for reopening. Reliance is placed on the requirement, as summarised in GKN Driveshafts (India) Ltd., that where objections to the reasons recorded for reopening are filed, the Assessing Officer must decide those objections by a separate, speaking order before proceeding to pass the reassessment. The CIT(A) did not address or rectify this failure. In view of this procedural defect, the reassessment was set aside and the matter remitted to the file of the Assessing Officer with directions to afford the assessee adequate opportunity, decide the objections in accordance with law by a speaking order, and only thereafter proceed, if justified, to pass the assessment order. The Tribunal observed that all legal pleas available to the assessee remain open in the fresh proceedings and that the assessee shall cooperate in those proceedings. [Paras 9, 10]

Assessment order set aside; matter restored to the Assessing Officer to first decide the assessee's objections by a separate speaking order after giving opportunity, and thereafter to pass the assessment order; appeal treated as allowed for statistical purposes.

Final Conclusion: The reassessment order is quashed for failure to decide the assessee's objections to the reasons recorded for reopening; the Tribunal restores the matter to the Assessing Officer to decide those objections in a speaking order after affording opportunity and thereafter to proceed in accordance with law; appeal treated as allowed for statistical purposes.

Applicability of proviso to section 12A(2) retrospectively - Registration under section 12AA and entitlement to exemption under sections 11 and 12 - Addition of unverifiable sundry creditors and admissibility of additional evidence under Rule 46A - Deemed interest on advances and requirement of actual accrual or receipt - Remand for verification of creditors

Addition of unverifiable sundry creditors and admissibility of additional evidence under Rule 46A - Remand for verification of creditors - Addition of Rs. 19,90,604 alleged as unverifiable sundry creditors and the question of admission of details/evidence relating thereto - HELD THAT: - The Tribunal found that the assessee had filed written submissions and details of sundry creditors before the AO on 03.02.2014 and that the AO's assessment order itself acknowledged consideration of the assessee's written submissions. The CIT(A) rejected the submissions at the threshold on the ground that they were 'improvements' made in rejoinder and refused to admit them without verifying the creditors. The Tribunal held that, since the AO had accepted that the written submissions were on record, the CIT(A) erred in treating those submissions as impermissible improvement and in refusing admission without any verification. The matter was therefore not decided on merits; instead, the Tribunal directed that the issue be remitted to the AO for fresh decision after making necessary verification of the sundry creditors and after affording the assessee adequate opportunity of hearing. [Paras 16, 17]

Remanded to the AO for fresh verification of the sundry creditors claimed by the assessee and for fresh decision in accordance with law.

Applicability of proviso to section 12A(2) retrospectively - Registration under section 12AA and entitlement to exemption under sections 11 and 12 - Whether the assessee is entitled to exemption of surplus (income over expenditure) for AY 2011-12 in view of subsequently granted registration under section 12AA and the proviso to section 12A(2) - HELD THAT: - The Tribunal concurred with the CIT(A) that the proviso to section 12A(2), introduced by the Finance (No.2) Act, 2014 and held retrospective by earlier authority relied upon, applies where registration is granted with retrospective effect and assessment proceedings were pending. The assessee's registration under section 12AA was granted with effect from 01.04.2013 on the same application earlier filed and the objects remained educational. Consequently, the Tribunal held that the AO ought to have allowed exemption under sections 11 and 12 and that the deletion of the addition of surplus by the CIT(A) was correct. The Department's contention that the proviso was inapplicable because the original application was earlier rejected was rejected on the facts that the same application was ultimately allowed and registration granted retrospectively. [Paras 23, 24, 25]

The deletion of the addition of surplus of income over expenditure is upheld and the assessee is entitled to exemption under sections 11 and 12 in view of retrospective applicability of the proviso to section 12A(2).

Deemed interest on advances and requirement of actual accrual or receipt - Sustainability of addition of deemed interest of Rs. 8,75,368 on advances in absence of evidence of actual interest income - HELD THAT: - The AO made an addition by computing notional interest on advances at 12% p.a. The CIT(A) deleted the addition on the basis that no material was brought on record to show that the assessee had actually earned interest on the advances and, relying on the principle in CIT v. Shoorji Vallabhdas, held that tax is leviable only on real income which has accrued or been received; hypothetical entries which did not materialize cannot be taxed. The Tribunal agreed that the AO had not produced evidence of accrual or receipt of interest and therefore confirmed deletion of the addition. [Paras 31, 32]

Addition on account of deemed interest is deleted for lack of evidence of actual accrual or receipt of interest.

Final Conclusion: The assessee's appeal is allowed for statistical purposes in part and remitted to the AO for verification of sundry creditors; the deletion of the addition of surplus on account of entitlement to exemption under sections 11 and 12 (in view of retrospective registration) and the deletion of the addition of deemed interest are upheld; the Department's appeal is dismissed.

Validity of notice under section 153C/153A - Seized documents belonging to searched person - Invocation of section 153C after conclusion of assessment under section 143(3) - Assessment framed in furtherance to invalid section 153C is void ab initio - Binding precedential effect of coordinate bench

Validity of notice under section 153C/153A - Seized documents belonging to searched person - Notice issued under section 153C read with section 153A was invalid because no seized material/documents belonging to the assessee were found. - HELD THAT: - The Tribunal examined the seized papers and the factual findings recorded by the ld CIT(A) that the documents relied upon by the AO did not belong to the assessee, and that the assessment accepting sale consideration had been framed under section 143(3) prior to search. The coordinate bench's detailed decision in the related family-member case was followed as a binding precedent. Applying the principles in the cited authorities and the factual finding that no incriminating material belonging to the assessee was seized, the Tribunal held that the statutory pre-condition for invoking section 153C was not satisfied and therefore the notice under section 153C/153A was invalid. [Paras 8, 10]

Notice under section 153C/153A held invalid and not sustainable.

Invocation of section 153C after conclusion of assessment under section 143(3) - Assessment framed in furtherance to invalid section 153C is void ab initio - Assessment framed pursuant to the invalid section 153C proceedings is void ab initio and the addition of undisclosed capital gain was to be deleted. - HELD THAT: - Because the initiation of proceedings under section 153C was held invalid (no seized material belonging to the assessee and prior completion of assessment under section 143(3) accepting the transaction), the Tribunal concluded that any assessment and consequential addition made in furtherance of such invalid initiation lacked jurisdiction. Following the coordinate bench's reasoning and the ld CIT(A)'s findings (not rebutted by Revenue), the Tribunal quashed the assessment framed under section 153C as void ab initio and confirmed deletion of the addition contested by Revenue. [Paras 8, 10]

Assessment under section 153C quashed as void ab initio and the addition deleted.

Final Conclusion: The appeals filed by the Revenue are dismissed and the cross-objection of the assessee is allowed; the notice under section 153C/153A was invalid, the assessment framed thereon is quashed as void ab initio, and the addition of undisclosed capital gain (deleted by the CIT(A)) is confirmed.

Liability to pay demurrage charges where goods are detained by Customs - consignee/importer liable for demurrage notwithstanding delay attributable to Customs authorities - custodian's right to recover demurrage from consignee - sub-judice adjudication of show cause notice before Customs authorities

Liability to pay demurrage charges where goods are detained by Customs - consignee/importer liable for demurrage notwithstanding delay attributable to Customs authorities - custodian's right to recover demurrage from consignee - Petitioner Company's liability to pay demurrage charges for consignments detained at the Inland Container Depot until release. - HELD THAT: - The Court held that established Supreme Court precedents govern the question and are determinative. Reliance was placed on Trustees of the Port of Madras v. K.P.V. Sheikh Mohd. Rowther & Co. Pvt. Ltd. and International Airports Authority of India v. M/s. Grand Slam International, which recognize that a statutory custodian or port/airport authority which has custody of imported goods is entitled to charge demurrage and recover it from the consignee/importer even for periods during which clearance was prevented by action or fault of Customs or other authorities. Applying those authorities to the facts-where the consignments were detained by Customs and released only after provisional payments, bonds and guarantees were furnished-the Court concluded that the respondents were justified in claiming demurrage from the petitioner and that the petitioner is liable to pay demurrage until release of the goods from the ICD. [Paras 8, 9, 10, 11]

Petitioner Company is liable to pay the demurrage charges until the consignments were released from the ICD; the writ petition is dismissed.

Sub-judice adjudication of show cause notice before Customs authorities - Treatment of the pending show cause notice issued by Customs in relation to alleged undervaluation and mis-declaration. - HELD THAT: - The Court declined to adjudicate the merits of the show cause notice, noting that the matter is sub-judice before the customs authorities for adjudication. The Court observed that it will not express any view on the show cause notice which is pending and being adjudicated by the appropriate authority. [Paras 7]

Show cause notice is left for adjudication by the customs authorities and was not decided by the Court in this petition.

Final Conclusion: Applying binding Supreme Court authority, the High Court held that the petitioner must pay demurrage charged by the ICD for the detained consignments until release; the writ petition is dismissed, while the show cause proceedings before the Customs remain pending for adjudication.

Waiver of demurrage and detention charges - release of imported goods on NOC - compliance with departmental endorsement - effect of departmental show cause communication

Waiver of demurrage and detention charges - compliance with departmental endorsement - Demurrage/detention charges of the container are to be waived from 23-5-2017 until the date of release in view of the departmental endorsement directing waiver. - HELD THAT: - The Preventive Officer of Chennai Customs had endorsed in a letter that the goods may be released and detention charges for the container for the period 25-3-2017 to 7-7-2017 should be waived (para 2). The departmental correspondence produced in court shows that the Department had effectively directed waiver by way of its communication and has followed up by seeking an explanation from the sixth respondent as to why charges were still being demanded despite the earlier office letter (para 4). The sixth respondent's claim that no proper order was served on them was rejected as immaterial in light of the departmental communication which operates as a directive to waive the charges (para 4). In consequence, until the cargo is released, demurrage/detention charges must be waived from 23-5-2017 onwards (para 5). [Paras 2, 4, 5]

Respondents 5 and 6 are directed to waive the demurrage/detention charges of the container from 23-5-2017 until the date of its release.

Release of imported goods on NOC - compliance with departmental endorsement - The container must be released forthwith in compliance with the departmental direction, within three days of service of this order. - HELD THAT: - Although an office endorsement and subsequent departmental communications had directed waiver and release, respondents 5 and 6 had not released the cargo (para 2). The Court observed that the petitioner filed the writ petition after the departmental endorsement and after respondents sought time to obtain instructions; having found that the Department had in effect ordered waiver and communicated with the respondents, the Court directed immediate compliance by releasing the container (para 5). The release is to be effected within three days from receipt of the order (para 5). [Paras 2, 5]

Container to be released by respondents within three days from receipt of a copy of this order.

Final Conclusion: Writ petition disposed of by directing respondents 5 and 6 to waive demurrage/detention charges from 23-5-2017 until release and to release the container within three days of receipt of this order; no costs.

Retrospective operation - Rule 16A of the Customs & Central Excise Duty Drawback Rules, 1995 - recovery of duty drawback - Section 75 of the Customs Act, 1962 - show cause notice

Rule 16A of the Customs & Central Excise Duty Drawback Rules, 1995 - retrospective operation - recovery of duty drawback - show cause notice - Validity of the show cause notice issued under Rule 16A/Section 16A in respect of exports made between March, 1995 and May, 1995 and whether recovery under Section 16A was permissible - HELD THAT: - The Court considered whether the statutory provision invoked to recover duty drawback could be applied to exports made prior to the rule's commencement. Relying on the Supreme Court decision in Surinder Singh, which treated Rule 16A as clarificatory of existing law and having retrospective effect vis-a -vis the excise component (and observed that Section 75 of the Customs Act operates to treat non-realisation of export proceeds as if no drawback had been allowed), the Court held that the basic contention raised by the petitioners had to be accepted. Given that the exports in question took place between March, 1995 and May, 1995 and the impugned show cause notice was issued under Section/Rule 16A, the Court concluded that recovery under Section 16A was not permissible in the present proceedings and that it would not proceed beyond quashing the notice itself. [Paras 9, 10, 11]

The show cause notice dated 26-11-1997 issued under Section/Rule 16A is quashed and set aside.

Final Conclusion: Writ petition allowed; the show cause notice issued under Section/Rule 16A (dated 26-11-1997) is quashed and set aside in light of the Supreme Court's reasoning in Surinder Singh; Court limited its order to quashing the notice and did not decide other contentions raised by the respondents.

Definition of as including prohibitions under any law for the time being in force - confiscation of prohibited goods under Section 111(d) of the Customs Act - penalty for prohibited imports under Section 112 of the Customs Act - requirement of NOC from Food Safety and Standards Authority of India for imported food items - re-export of goods subject to redemption fine after acceptance of regulatory refusal

Definition of as including prohibitions under any law for the time being in force - confiscation of prohibited goods under Section 111(d) of the Customs Act - Whether the imported consignment, in view of FSSAI's refusal to grant NOC and the appellant's subsequent conduct, was to be treated as 'prohibited goods' within the meaning of the Customs Act and liable to consequences thereunder. - HELD THAT: - The Court accepted that under the Act the expression 'prohibited goods' includes goods the import of which is subject to any prohibition imposed by any law for the time being in force. The FSSAI's letter declined NOC on account of non-compliant labelling and thereby refused clearance. The appellant, instead of challenging that refusal, sought permission to re-export and expressly stated that no penalty should be imposed because it considered the consignment not prohibited. That position was inconsistent: acceptance of FSSAI's refusal and seeking re-export amounted to treating the goods as falling within the definition of prohibited goods and exposed to the statutory consequences of confiscation/penalty. Given the appellant's acquiescence and the grant of permission to re-export upon payment of a redemption fine, the Court held that the question of declaring the goods not to be 'prohibited goods' did not arise and was rendered academic. [Paras 7, 10, 11, 13]

The goods were to be treated as 'prohibited goods' in the factual matrix of this case by virtue of FSSAI's refusal and the appellant's acquiescence; the contention that they were not prohibited is academic.

Requirement of NOC from Food Safety and Standards Authority of India for imported food items - re-export of goods subject to redemption fine after acceptance of regulatory refusal - Whether the appellant could rely on the Division Bench decision in Danisco (India) Pvt. Ltd. to challenge the consequences of FSSAI's refusal to grant NOC under the Customs Act. - HELD THAT: - The Court observed that the cited Division Bench decision addressed provisions of the Food Safety and Standards Act, 2006 and did not consider the provisions of the Customs Act relating to prohibited goods, confiscation and penalty. Therefore that decision did not address whether non-compliance with FSSAI regulations would render goods 'prohibited goods' under the Customs Act. Moreover, in the present case the appellant had accepted FSSAI's decision and re-exported the consignment after payment of a redemption fine, rendering the reliance on Danisco immaterial to the outcome. [Paras 12, 13]

Reliance on Danisco (India) Pvt. Ltd. was misplaced and did not affect the outcome where the appellant had accepted FSSAI's refusal and re-exported the goods on payment of fine.

Final Conclusion: The appeal and the pending application are dismissed; because the appellant accepted the FSSAI refusal and obtained permission to re-export after payment of the redemption fine, the challenge to classification of the goods as 'prohibited' under the Customs Act was rendered academic.

Oppression and mismanagement jurisdiction under sections 397 & 398 - residuary equitable powers under section 402 - effect of resignation and re-appointment of directors - validity of filings before Registrar of Companies (Form No.32) - voidness of unauthorized alienation of company property - maintainability of company petition based on shareholding

Maintainability of company petition based on shareholding - Petition under sections 397/398 is maintainable on the basis of the petitioner's shareholding as established by share transfer documents. - HELD THAT: - The Tribunal examined the share transfer forms and associated filings and found that the share transfers to the petitioner were duly executed and recorded. The contention that transfer forms were blank signed and misused was rejected as a post hoc, mala fide averment. On the admitted and proved transfers, the petitioner holds the requisite shareholding to maintain the petition under sections 397/398, and therefore the petition is properly maintainable. [Paras 22]

Petition held maintainable on the basis of the petitioner's proved shareholding.

Effect of resignation and re-appointment of directors - appointment of additional directors under articles and section 260/161 - Respondent Nos. 2 to 4 ceased to be directors with effect from 09.04.2004 and Respondent No.5 ceased to be director with effect from 18.12.2004; contentions of re-appointment were rejected for want of proof. - HELD THAT: - Resignation letters and consequent Form 32 filings were examined and found to show that Respondent Nos.2-5 had resigned on the dates relied upon by the petitioner. The respondents alleging re-appointment failed to produce records required under the articles and statutory provisions to substantiate re-induction as additional directors. The Tribunal therefore rejected the contrary contentions and held the resignations effective as pleaded. [Paras 18, 19, 21]

Resignations of Respondent Nos.2-5 upheld; alleged re-appointments not established.

Validity of filings before Registrar of Companies (Form No.32) - effects of filing by person not a director - Form No.32 filed on 09.02.2005 purporting to record induction of certain respondents is invalid and the Registrar was directed not to take cognizance of it. - HELD THAT: - Given the Tribunal's finding that Respondent No.5 had ceased to be a director on 18.12.2004, he lacked authority to file or authenticate Form No.32 on 09.02.2005. The complaint lodged by the company with the ROC and the absence of substantiating documents from respondents reinforced the conclusion that the later filing was not entitled to legal recognition. Consequently the impugned filing was declared not to be recognized and ROC was directed to effect necessary corrections. [Paras 24, 25]

Form No.32 dated 09.02.2005 declared invalid as not to be recognised by the Registrar of Companies.

Voidness of unauthorized alienation of company property - nobody can convey a better title than one has - Impugned registered and unregistered sale/gift deeds executed by respondents in respect of company properties are illegal, void ab initio, and are set aside. - HELD THAT: - The Tribunal found that the properties were company assets and that the respondents who executed or procured the impugned instruments lacked authority to alienate those assets after their resignations. The unregistered instrument was held to have no effect under the Transfer of Property Act in the circumstances alleged, and registered transfers executed without company authority were declared void. The beneficiaries of those transactions having been impleaded and heard, the Tribunal exercised its broad remedial powers to set aside the impugned instruments. [Paras 23, 25, 35]

All impugned sale and gift documents declared illegal and void ab initio and set aside.

Residuary equitable powers under section 402 - relief and directions to Registrar of Companies - Appropriate reliefs were fashioned under sections 397/398 read with section 402 and corresponding provisions of the 2013 Act; ROC directed to correct records and CA No.94 of 2017 dismissed. - HELD THAT: - Having found oppression and mismanagement and unauthorized alienations, the Tribunal invoked its wide discretionary and equitable powers to order corrective reliefs necessary to protect the company and minority shareholders. The Tribunal directed the Registrar of Companies to effect changes in board records and not to recognise the impugned Form 32, and dismissed the interim application CA No.94/2017 as devoid of merits. The directions were framed as necessary incidental measures to give effect to the substantive findings. [Paras 30, 34, 36]

Reliefs granted including direction to ROC to correct records; CA No.94 of 2017 dismissed.

Final Conclusion: The Tribunal held that the petition is maintainable; declared Respondent Nos.2-4 ceased as directors from 09.04.2004 and Respondent No.5 from 18.12.2004; set aside as void ab initio the impugned registered and unregistered sale/gift instruments executed without company authority; directed the Registrar of Companies to expunge/not recognise the Form No.32 filed on 09.02.2005 and to update board records; and dismissed CA No.94 of 2017. No order as to costs.

Default under Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - suspension of Board of Directors under Section 17 of the Insolvency and Bankruptcy Code, 2016 - service of notice and compliance with procedural requirements

Default under Insolvency and Bankruptcy Code, 2016 - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - service of notice and compliance with procedural requirements - Default by the Corporate Debtor was established and the petition under the IBC, 2016 was admitted; an Interim Resolution Professional was appointed. - HELD THAT: - The Tribunal found on the material on record that a loan of Rs. 50 lakhs was advanced to the Corporate Debtor pursuant to the parties' contract and that the Corporate Debtor issued a post-dated cheque which was later dishonoured for insufficiency of funds. The Financial Creditor served the statutory notice and produced documentary evidence including board resolutions authorising the filing, bank statements, the cheque/covering correspondence, the demand notice and proof of service. The proposed IRP had given consent and produced a valid registration certificate with the IBBI. On this basis the Tribunal concluded that default, as contemplated under the IBC, 2016, was established and admitted the application. Consequentially the Tribunal appointed the named Interim Resolution Professional to act in accordance with the IBC and attendant rules. [Paras 3, 4, 5, 6]

Petition admitted; Mr. Umesh Garg appointed as Interim Resolution Professional.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium under Section 14 of the IBC, 2016 was declared from the date of the order until completion of the CIRP. - HELD THAT: - Having admitted the petition and appointed the IRP, the Tribunal declared the moratorium prohibiting institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of its assets, enforcement of security interests and recovery of property in possession of the Corporate Debtor, subject to the provisos of Section 14. The Tribunal also observed that supply of essential goods or services shall not be terminated, suspended or interrupted during the moratorium period. [Paras 6]

Moratorium declared with effect from the date of the order until completion of the CIRP.

Suspension of Board of Directors under Section 17 of the Insolvency and Bankruptcy Code, 2016 - service of notice and compliance with procedural requirements - The Board of Directors of the Corporate Debtor was suspended and the Registry was directed to communicate the order to the parties. - HELD THAT: - Pursuant to admission of the CIRP, the Tribunal directed that the Board of Directors stand suspended as envisaged by Section 17 of the IBC, 2016. The Registry was further directed, in terms of Section 7(7)(a) as cited in the order, to communicate the order to both the Financial Creditor and the Corporate Debtor at the earliest. The Tribunal's directions followed from its finding that procedural requisites for initiation (including service on the Corporate Debtor and IRP's registration and consent) were satisfied. [Paras 6]

Board of Directors suspended; Registry directed to communicate the order to the parties.

Final Conclusion: The application under the Insolvency and Bankruptcy Code, 2016 was admitted on the ground of established default; Mr. Umesh Garg was appointed as Interim Resolution Professional, moratorium was declared, the Board of Directors was suspended and the Registry was directed to communicate the order to the parties.

Export of services - Business Auxiliary Services - reimbursement forming part of taxable consideration - use of service - place of use for export of services - maintenance and repair of software - taxability from 09.07.2004 - reverse charge on foreign currency expenditure - remand for fresh adjudication

Export of services - Business Auxiliary Services - use of service - place of use for export of services - Whether Marketing Support Services (MSS) provided to Microsoft Singapore qualify as export of service and are not liable to service tax. - HELD THAT: - The Tribunal followed its earlier Division Bench / Larger Bench decision in the appellant's own case and held that the Business Auxiliary Services rendered by the appellant to its Singapore parent satisfy the conditions of the Export of Service Rules, 2005. The Tribunal accepted the majority view that the services were provided to the foreign recipient (Microsoft Singapore) and were delivered/used outside India for the purposes of the Export of Service Rules; therefore such services are not chargeable to service tax. The adjudicating authority's contrary conclusion that physical performance in India precludes export status was rejected by applying the Tribunal precedent which treated marketing services rendered in India for a foreign principal as export of services when the recipient is located abroad and pays in convertible foreign exchange. [Paras 13, 14]

Demand in respect of MSS for the periods in dispute set aside as the services qualify as export of services and are not liable to service tax.

Reimbursement forming part of taxable consideration - export of services - Business Auxiliary Services - Whether reimbursements received in relation to Marketing Support Services (MSS) form part of taxable value or are covered as export turnover. - HELD THAT: - The Tribunal noted that the reimbursements relate to MSS and form part of the cost/consideration (cost-plus markup) received by the appellant for marketing activities. Having held that MSS are exports under the Export of Service Rules, the reimbursement component which forms part of the consideration for those exported services also falls within export turnover and is not liable to service tax. The Tribunal observed that the Commissioner had already dropped demands for later periods where reimbursements were included in MSS value, and applied the export finding to the disputed earlier periods. [Paras 15, 16]

Demand in respect of reimbursements related to MSS is set aside as not liable to service tax being part of export turnover.

Maintenance and repair of software - taxability from 09.07.2004 - Product Support Services - Whether reimbursement received in relation to Product Support Services (PSS) for the period 09.07.2004 to 31.03.2005 is taxable. - HELD THAT: - The Tribunal accepted that Product Support Services (maintenance/repair of software) for the period prior to 07.10.2005 had been held non-taxable by the Division Bench in the appellant's own case. The adjudicating authority's reliance on the Board circular fixing effective date of taxability was not determinative in view of the Tribunal's earlier order; accordingly the demand relating to PSS for the specified period was set aside. [Paras 17]

Demand in respect of PSS reimbursements for 09.07.2004 to 31.03.2005 set aside.

Reverse charge on foreign currency expenditure - remand for fresh adjudication - Whether certain foreign currency expenditure incurred by the appellant from April 2006 till March 2009 is taxable under the Act. - HELD THAT: - The Tribunal observed that the Commissioner confirmed demand for foreign currency expenditure for 17.04.2006 to 31.03.2009 but the adjudicating order contains no findings on the particulars and classification of the expenditures for the impugned period. Although the appellant had furnished explanations and particulars for subsequent years which were accepted, the adjudicating authority had not examined or recorded findings on the evidence for the disputed period. In consequence, the Tribunal remanded the matter to the adjudicating authority to permit the appellant to produce supporting evidence and to decide the demand afresh with specific findings; the question of limitation was left open for determination by the adjudicating authority. [Paras 18, 22]

Demand in respect of foreign currency expenditure for 17.04.2006 to 31.03.2009 is remanded for fresh adjudication; limitation issue kept open.

Final Conclusion: The appeals are allowed in part: demands in respect of Marketing Support Services and related reimbursements, and the Product Support Services demand for the specified earlier period, are set aside on the ground that they qualify as export of services or are non taxable; the demand relating to foreign currency expenditure for 17.04.2006 to 31.03.2009 is remanded to the adjudicating authority for fresh consideration after hearing the appellant, with the limitation question left open. Appeals disposed accordingly.

Renting of immovable property - security deposit not forming part of gross value - taxability of open-plot rentals from 01/07/2010 - parking fees not covered by renting of immovable property entry - waiver of penalty where there was genuine confusion over levy

Security deposit not forming part of gross value - Security deposits received from tenants are not part of the gross value of rent and are not exigible to service tax. - HELD THAT: - The Tribunal accepted the appellant's submission that deposits received from tenants are returnable and have the character of security deposits rather than rental receipts; consequently such deposits do not constitute gross value for the purposes of taxing renting of immovable property and are not leviable to service tax. [Paras 6]

Deposits from tenants are not taxable as rent and are excluded from the service tax levy.

Taxability of open-plot rentals from 01/07/2010 - Rentals from open plots (open space) became exigible to service tax only from 01/07/2010 and not before. - HELD THAT: - The Tribunal noted that the statutory insertion (sub-clause (v) of Section 65(105)(zzzz)) brought open-plot rentals within the taxable entry with effect from 01/07/2010; since the adjudication period includes years prior to that date, rentals for periods before 01/07/2010 are not taxable, whereas rentals for the period from 01/07/2010 onwards are exigible and the appellant has discharged liability for the post-01/07/2010 period with interest. [Paras 2, 7]

Open-plot rental is taxable only from 01/07/2010; no levy prior to that date; levy for the post-01/07/2010 period is sustained (and paid).

Parking fees not covered by renting of immovable property entry - Parking fees received from agriculturists do not fall within the taxable entry for renting of immovable property and are not taxable. - HELD THAT: - The Tribunal accepted the appellant's contention that parking fees charged to agriculturists are not within the coverage of the entry for renting of immovable property under Section 65(105)(zzzz); the adjudicating authority erred in levying tax on such receipts, and those receipts are therefore not exigible to service tax. [Paras 3, 8]

Parking fees from agriculturists are not taxable under the renting of immovable property entry.

Confirmation of tax on other rent receipts - Service tax demand on rent receipts other than deposits, open-plot rentals (as time-limited above), and parking fees is confirmed. - HELD THAT: - The appellant did not dispute the levy of service tax on the remaining receipts from renting of immovable property; accordingly, the Tribunal upheld the adjudication insofar as it relates to those undisputed rental receipts and confirmed the tax demand on that account. [Paras 4, 9]

Tax demand on the balance rent receipts is confirmed.

Waiver of penalty where there was genuine confusion over levy - Penalty for service tax on renting of immovable property is not to be imposed in view of prevailing confusion among taxpayers regarding the levy. - HELD THAT: - Recognising that the question of levy on renting of immovable property had traversed various fora and caused confusion among taxpayers, the Tribunal exercised its discretion to disallow imposition of penalty on the appellant for service tax paid (with interest) on renting of immovable property. [Paras 10, 11]

No penalty shall be imposed on the appellant in respect of the renting of immovable property levy.

Final Conclusion: The appeal is partly allowed: deposits from tenants and parking fees from agriculturists are not taxable; open-plot rentals are taxable only from 01/07/2010 (with post-01/07/2010 liability already discharged); tax on other rent receipts is confirmed; and penalty is waived in view of the confusion over the levy.

Refund of tax paid under mistake - admissibility of refund v. question of levy - scope and ambit of exemption notifications - precedential effect of pending Supreme Court decisions - remand for fresh consideration in light of higher court rulings

Refund of tax paid under mistake - admissibility of refund v. question of levy - Whether the claims for refund of service tax already paid by the bank should be adjudicated or remanded for fresh consideration in light of pending higher court rulings on leviability and applicability of exemptions. - HELD THAT: - The Tribunal observed that the appellate authority had confined itself to examining admissibility of refund without a full consideration of the law on levy of service tax. The Tribunal noted that the question of leviability in analogous cases was sub judice before the Supreme Court (Canera Bank and ICICI Bank), and that it would be premature for the Tribunal to depart from or to act inconsistently with outcomes that may be rendered by the Apex Court. Although a Larger Bench of the Tribunal had taken a view on the scope of the relevant notification, the Tribunal held that that decision cannot be allowed to override or pre-empt the pending Supreme Court adjudications. For these reasons the Tribunal directed that the matters be sent back to the adjudicating authority to decide the refund claims after taking into account the outcome of the higher court proceedings and following due process of law. [Paras 5, 6, 7, 8]

Both appeals are remanded to the adjudicating authority for fresh adjudication of the refund claims in light of the outcome of the pending Supreme Court decisions; cross-objection disposed of.

Final Conclusion: The Tribunal did not decide the substantive question of levy or entitlement to refund on merits; instead both matters are remanded to the adjudicating authority to be re-examined and disposed of in accordance with the outcome of the pending Supreme Court decisions and following due process.

Captive consumption exemption under Notification No.67/95-CE - revenue neutrality of duty paid and Cenvat credit - Applicability of Rule 4(5)(b) of Cenvat Credit Rules, 2004 - clearance of goods to job workers without payment of duty - seizure and redemption fine on dies cleared to job workers - penalty for non-payment of duty on clearance to job workers - requirement of return of dies by job workers

Captive consumption exemption under Notification No.67/95-CE - Availability of benefit of Notification No.67/95-CE in respect of dies manufactured and sent to job workers - HELD THAT: - The Tribunal recorded that the dies were manufactured by the appellant and sent to job workers for further manufacture. The notification grants benefit where goods are captively consumed within the factory of production. The judgment states that it is an admitted fact that the dies were not used captively in the factory and, on that basis, reaches the conclusion concerning the notification's applicability as recorded in the order. [Paras 6]

The benefit of Notification No.67/95-CE is held to be available to the appellant as stated in the order.

Revenue neutrality of duty paid and Cenvat credit - Applicability of Rule 4(5)(b) of Cenvat Credit Rules, 2004 - clearance of goods to job workers without payment of duty - Whether the clearances of dies to job workers without payment of duty give rise to a sustainable demand when the situation is revenue neutral and Rule 4(5)(b) is applicable - HELD THAT: - The Tribunal examined earlier decisions of the Tribunal and High Court holding that where duty, if paid, would be immediately available as Cenvat credit or refundable, the overall position is revenue neutral and demands framed merely increase scriptorial work without benefiting revenue. Applying that principle, the Bench held that had duty been paid on the dies the appellant would have been entitled to Cenvat credit; consequently the situation is revenue neutral. In that factual and legal context the Tribunal found Rule 4(5)(b) of the Cenvat Credit Rules, 2004 applicable so that clearing the dies to job workers does not require reversal or return of credit and does not sustain the confirmed demand. [Paras 7, 8, 9, 10]

The confirmed duty demand is not sustainable on the ground of revenue neutrality and applicability of Rule 4(5)(b); the demand is set aside.

Seizure and redemption fine on dies cleared to job workers - penalty for non-payment of duty on clearance to job workers - requirement of return of dies by job workers - Legality of seizure, redemption fine and penalty imposed in respect of dies sent to job workers - HELD THAT: - Relying on the finding that the situation is revenue neutral and that Rule 4(5)(b) permits clearance to job workers without obligation to have the dies returned, the Tribunal held that seizure of the dies was not legally correct and that consequential imposition of redemption fine and penalty could not be sustained. [Paras 10, 11]

Seizure of dies and the redemption fine are set aside; the appeal is allowed with consequential relief (including against penalty) as recorded in the order.

Final Conclusion: The impugned order confirming duty, interest, penalty and redemption fine in respect of dies cleared to job workers during 2002 to March, 2007 is set aside on the basis that the case is revenue neutral and Rule 4(5)(b) of the Cenvat Credit Rules, 2004 applies; consequently the appeal is allowed with consequential relief.

Principles of natural justice - opportunity of hearing - corroborative evidence for clandestine removal and duty evasion - liability for personal penalty under Rule 209A of the Central Excise Rules - penalties under Section 11AC and Rule 9(2) and Rule 173Q for systematic suppression and clandestine removal - prohibition on enhancement of penalty in remand proceedings without new evidence

Principles of natural justice - opportunity of hearing - Whether adjudication rendered ex parte violated principles of natural justice where noticee failed to file reply despite repeated opportunities including directions on remand to file reply within two months. - HELD THAT: - The Tribunal found that the show cause notice was issued on 04.04.2000, the original OIO was passed and remanded with a specific direction to the party to file reply in two months and for the Commissioner to decide thereafter. The appellants did not file any reply in the remand proceedings despite repeated reminders and opportunities and did not attend personal hearings. The adjudicating authority recorded the opportunities afforded in its order. Reliance on earlier Tribunal precedents establishes that where ample opportunity was afforded but reply was not filed or hearings avoided, principles of natural justice are not violated. Accordingly, non-filing of reply on account of pending application before the Settlement Commission did not render the adjudication a nullity. [Paras 7]

No violation of principles of natural justice; adjudication was not rendered invalid by the appellants' non-participation.

Corroborative evidence for clandestine removal and duty evasion - Whether the Department adduced sufficient corroborative evidence to sustain the demand for clandestine removals, evasion of duty and disallowance of Cenvat credit. - HELD THAT: - The Tribunal accepted the Commissioner's findings that a series of incriminating documents recovered during searches, statements of management executives and the MD, bank and octroi records, truck registers, weighment slips and private depot records together provided corroboration for clandestine removals and illegal utilization of PLA credit. Entries recovered were confronted and admissions recorded, none of which were retracted. Specific truck movement registers were upheld by admission of the security-in-charge and matched octroi records; weighment slips and other private records were found authentic. On these materials the Tribunal held that the demand and denial of Cenvat credit were duly established and sustained the adjudicating authority's computation and conclusions. [Paras 8, 9, 10, 11]

Sufficient corroborative evidence exists to uphold the demand, interest and denial of Cenvat credit.

Penalties under Section 11AC and Rule 9(2) and Rule 173Q for systematic suppression and clandestine removal - Whether penalties under Section 11AC and Rules 9(2) and 173Q were correctly imposed in view of systematic, repeated and planned clandestine removals and fraudulent credit utilization. - HELD THAT: - The Tribunal found the facts showed repeated, systematic and planned suppression of production, clandestine removals and misuse of PLA credit. It noted CBEC clarification that Section 11AC applies where show cause notices were issued on or after enactment of the Finance Bill 1996 and, since the show cause notice was dated 04.04.2000, Section 11AC was applicable. In view of the established pattern of fraud and deliberate violations over time, imposition of penalties under Section 11AC and the cited Rules was held to be proper. [Paras 11]

Penalties under Section 11AC and Rules 9(2) and 173Q are correctly imposed.

Liability for personal penalty under Rule 209A of the Central Excise Rules - Whether personal penalties under Rule 209A could be imposed on the Managing Director, General Manager (Finance) and AGM (Cost & Accounts) in the facts of the case. - HELD THAT: - The Tribunal reviewed statements, admissions and the role of each officer. The Managing Director acknowledged knowledge of fraudulent PLA credit and had seen and signed statements; the GM (Finance) admitted preparing parallel invoices and supervising excise matters; the AGM admitted directing taking credit on TR-6 without deposit and overseeing day-to-day excise matters. The Tribunal distinguished precedents relied upon by appellants where connection or knowledge was absent, and held that on the present facts each of these individuals had active, pervasive participation or knowledge amounting to dealing with contraband/excisable goods and abetment of clandestine removals. Reliance was placed on relevant Tribunal authorities upholding Rule 209A penalties where managerial participation and knowledge were established. Accordingly, penalties on these officers were sustained except as to quantum in remand-related enhancement. [Paras 12, 13, 14, 15, 18]

Personal penalties under Rule 209A on the Managing Director, GM (Finance) and AGM are justified and upheld on the merits (subject to reduction for enhancement in remand where applicable).

Prohibition on enhancement of penalty in remand proceedings without new evidence - Whether enhancement of personal penalties in the remand adjudication was permissible where no new facts or evidence were placed on record and no reasons were given. - HELD THAT: - The Tribunal observed that in remand proceedings the penalty quantum cannot be increased in the absence of new evidence or changed circumstances. It found that penalties imposed on Sh. N.M. Gupta and Sh. V.K. Sachdeva were enhanced by the adjudicating authority without any fresh material or explanation. In view of settled law that remand cannot be used to increase penalties when facts remain unchanged, and since the impugned order did not furnish reasons to justify the enhancement, the Tribunal reduced the penalty for the AGM to the earlier quantum and similarly reduced the GM's penalty to the prior level. [Paras 19]

Enhancement of penalties in remand was not justified; penalties on Sh. N.M. Gupta and Sh. V.K. Sachdeva reduced to earlier amounts.

Final Conclusion: The Tribunal dismissed the appeals of the company and the Managing Director, upheld the demand, interest, denial of Cenvat credit and penalties under Section 11AC/Rules 9(2)/173Q; personal penalties under Rule 209A on the Managing Director, GM (Finance) and AGM are upheld on the merits, but penalty amounts enhanced in remand for the GM and AGM have been reduced to their earlier levels; appeals disposed accordingly.

Exemption notification - conditional exemption - option to avail or opt out - CENVAT credit - revenue neutral principle - strict compliance with conditions of notification

Exemption notification - conditional exemption - CENVAT credit - revenue neutral principle - strict compliance with conditions of notification - Applicability of Notification No.8/03-CE to the appellant for the period in question in light of (a) rescission of Notification No.9/03-CE, and (b) the fact that Cenvat credit had been availed and utilized - HELD THAT: - The Members are divided on whether, having paid duty at concessional rate under a rescinded Notification No.9/03-CE and having availed and utilized Cenvat credit, the appellant could be extended the benefit of Notification No.8/03-CE (which is subject to a condition of not availing credit) because the net effect was revenue neutral. The Member (Judicial) concluded that there is no evidence that the appellant had opted out of Notification No.8/03-CE and that the credit availed was either utilized for payment of concessional duty or reversed, producing a revenue neutral position; accordingly the conditions of Notification No.8/03-CE were effectively satisfied and the demand should not have been confirmed. The Member (Technical) concluded that condition 2(iii) of Notification No.8/03-CE (no availing of Cenvat credit) was not fulfilled as the appellant admittedly availed and utilized credit, and therefore the exemption could not be allowed; hence the demand and interest were properly upheld. Because the Members have expressed contrary conclusions on this determinative legal question, the point requires reference to a third Member for final adjudication. [Paras 11, 17, 23]

Contrary views recorded; question referred to third Member for resolution.

Exemption notification - conditional exemption - CENVAT credit - Legitimacy of penalty imposed on the appellant for alleged incorrect duty payment - HELD THAT: - Both Members accepted that the facts indicated a bona fide mistake attributable to the appellant's continued practice of availing concessional rate under the earlier notification. The Member (Technical) expressly held that penalty would not be justified in a case of bona fide mistake and set aside the penalty. The Member (Judicial) also recorded that confirmation of penalty was not warranted. On this point the Tribunal is unanimous. [Paras 11, 21]

Penalty set aside.

Final Conclusion: A difference of opinion has arisen on the core question whether Notification No.8/03-CE applies (given availing/utilisation of Cenvat credit and alleged revenue neutrality); that issue is therefore referred to a Third Member for decision. The penalty imposed has been set aside.

Cenvat credit on rent-a-cab service - exclusion of rent-a-cab from input service under Rule 2(l)(B) of the Cenvat Credit Rules, 2004 - classification of service by service provider binding on recipient - definition of "Cab" under Section 65(91) of the Finance Act, 1994

Cenvat credit on rent-a-cab service - exclusion of rent-a-cab from input service under Rule 2(l)(B) of the Cenvat Credit Rules, 2004 - Entitlement to Cenvat credit in respect of rent-a-cab service for the period July, 2013 to July, 2014 - HELD THAT: - The Tribunal noted that by Notification No. 3/11 CE(N.T.) dated 1-3-2011 (w.e.f. 1-4-2011) the definition of input service under Rule 2(l) was amended so that rent-a-cab service falling under the relevant clause was excluded from input service. Applying that amendment to the period in dispute (July 2013 to July 2014), the Tribunal held that rent-a-cab services are not eligible for Cenvat credit on or after 1-4-2011. The Tribunal relied on earlier reasoning in Orient Paper Mills (as recorded in the order) to reinforce the exclusion and found no infirmity in the adjudicating authority's denial of credit.

Cenvat credit for rent-a-cab service for July, 2013 to July, 2014 is not admissible; appeal dismissed.

Classification of service by service provider binding on recipient - definition of "Cab" under Section 65(91) of the Finance Act, 1994 - Whether the appellant could avoid the exclusion by contending that the hired 24-seater vehicle did not qualify as a "Cab" and therefore the service was not rent-a-cab - HELD THAT: - The Tribunal rejected the appellant's contention that a 24-seater vehicle fell outside the definition of "Cab" under Section 65(91) so as to avoid characterization as rent-a-cab service. The Tribunal observed that the service provider had classified the service as rent-a-cab and discharged service tax under that head; the recipient (appellant) could not challenge that classification to claim Cenvat credit. Accordingly, the factual-legal contention regarding vehicle classification did not assist the appellant.

Submission that the hired 24-seater was not a "Cab" and hence not a rent-a-cab service was held untenable; appellant cannot challenge provider's classification to claim credit.

Final Conclusion: For the period July, 2013 to July, 2014 the Tribunal affirmed denial of Cenvat credit on rent-a-cab services: the statutory amendment excluding rent-a-cab from input service applied and the appellant could not evade that exclusion by disputing the service provider's classification.

Assessment value excluding separately negotiated freight/transportation charges - Section 4(1)(a) read with Rule 5 of Central Excise Valuation Rules, 2000 - Invoices under Rule 11 of Central Excise Rules, 2001 and relevance of separate disclosure of freight - Identifiability of freight as non-excisable component

Assessment value excluding separately negotiated freight/transportation charges - Invoices under Rule 11 of Central Excise Rules, 2001 and relevance of separate disclosure of freight - Section 4(1)(a) read with Rule 5 of Central Excise Valuation Rules, 2000 - Whether freight/transportation charges separately collected and shown in the commercial invoice, though not shown separately in the excise invoice, are includible in the assessable value of excisable goods. - HELD THAT: - The Tribunal found that the lower authority confirmed duty solely because transportation charges were not shown separately in the excise invoice issued under Rule 11 of the Central Excise Rules, 2001. The court held that the purpose of showing freight separately in the excise invoice is to evidence the actual amount of freight, but that freight as such is not includible in assessable value. Whether freight is disclosed in the excise invoice or by a separate commercial/transportation invoice, in both situations the amount remains identifiable as transportation and therefore is not a component of assessable value under the valuation provisions cited. Reliance placed on earlier decisions was accepted to support that omission of separate disclosure in the excise invoice alone cannot convert freight into an excisable component. For these reasons the order confirming demand on that ground was set aside and the appeal allowed.

Demand of duty confirmed only because freight was not shown separately in the excise invoice cannot be sustained; freight separately negotiated and identifiable is not includible in the assessable value and the appeal is allowed.

Final Conclusion: The Tribunal set aside the demand confirmed by the lower authority for not showing freight separately in the excise invoice and allowed the appeal, holding that separately negotiated and identifiable freight/transportation charges are not includible in the assessable value of the goods.

Denial of reasonable opportunity - service of show cause notice and orders - assessment and penalty under the VAT regime - quashing and remand for fresh hearing - exercise of discretionary relief despite procedural lapse

Service of show cause notice and orders - denial of reasonable opportunity - exercise of discretionary relief despite procedural lapse - Whether the assessment and penalty orders could be set aside and relief granted where the show cause notice and orders were served but the petitioner misplaced the orders and failed to file objections or appeals. - HELD THAT: - The Court recorded that the show cause notice in Form VAT 305A was served on the petitioner and that the assessment and penalty orders were also served. On that factual basis the case did not strictly amount to a denial of reasonable opportunity. Nonetheless, the Court noted that the petitioner had cooperated during audit, which the Court treated as an mitigating circumstance. Exercising its discretion in the circumstances, the Court allowed relief despite the procedural lapse and set aside the impugned orders to afford the petitioner an opportunity to be heard. The decision does not determine the merits of the assessment or penalty but is grounded in equitable discretion to permit fresh adjudication where cooperation by the assessee provided a basis for reopening the matter. [Paras 3, 5, 6]

Impugned assessment and penalty orders set aside and petitioner granted an opportunity to file objections.

Quashing and remand for fresh hearing - assessment and penalty under the VAT regime - The procedure to be followed on remand after setting aside the assessment and penalty orders. - HELD THAT: - The Court directed that the petitioner shall file objections to the show cause notice by a specified date and ordered the Assessing Officer to fix a date for personal hearing within a fixed timeline. The Court made clear that the petitioner must appear on the date fixed or risk forfeiting the opportunity; thereafter the Assessing Officer is to pass fresh orders on merits and in accordance with law. The Court did not adjudicate the correctness of the assessment or penalty but remitted the matter for fresh consideration following compliance with the directed procedural steps. [Paras 6]

Matter remitted for fresh hearing: petitioner to file objections and appear for personal hearing; Assessing Officer to hear and pass fresh orders on merits.

Final Conclusion: Writ petitions allowed; impugned assessment and penalty orders set aside and remitted for fresh consideration-petitioner given one opportunity to file objections and obtain personal hearing; Assessing Officer to pass fresh orders thereafter.

Condonation of delay - reopening of assessment not pressed - deduction of debts in relation to taxable assets - proportionate allocation of debt - net wealth definition under section 2(m) of the Wealth Tax Act - remand for verification of utilisation of borrowed funds

Condonation of delay - Application for condonation of 25 days' delay in filing the appeals before the Tribunal - HELD THAT: - The assessee filed a petition explaining that a single common order by the Commissioner (Appeals) for two assessment years led to a bona fide impression that a single appeal would suffice; separate appeals were filed after receiving advice causing the short delay. The affidavit was examined and the Revenue did not press a serious objection. The Tribunal found that the delay was neither wilful nor wanton and that the assessee was prevented by sufficient cause. [Paras 2]

Delay of 25 days in filing the appeals is condoned and the appeals are admitted for hearing.

Reopening of assessment not pressed - Ground challenging reopening of the wealth tax assessments - HELD THAT: - Although pleaded in the grounds of appeal, the counsel for the assessee expressly declined to press the ground relating to reopening of assessment during the hearing. The Tribunal accordingly treated that ground as not pressed. [Paras 4]

Ground on reopening of assessment dismissed as not pressed.

Deduction of debts in relation to taxable assets - proportionate allocation of debt - net wealth definition under section 2(m) of the Wealth Tax Act - remand for verification of utilisation of borrowed funds - Validity of disallowance of deduction claimed for debts as incurred in relation to assets included in gross wealth - HELD THAT: - The Wealth Tax Act permits deduction only for debts owed on the valuation date that were incurred in relation to the assets included in gross wealth. The assessee had claimed a proportionate deduction by applying an overall debt-to-funds ratio, asserting that it is in the leasing/hire-purchase business and that vehicles (taxable assets) formed part of charged assets. The Tribunal observed that a proportionate basis may be adopted where it is impossible to ascertain debt attributable to each asset, but here the assessee declared own and leased vehicles and no other mixed assets that would necessitate proportionate allocation. The assessee failed to produce cogent evidence that borrowed funds were actually utilized to acquire the leased vehicles. In view of the factual lacunae, the Tribunal declined to uphold the deduction on the record before it but directed the Assessing Officer to verify complete details of acquisition and utilisation of borrowed funds and to decide the matter afresh after affording the assessee an opportunity of being heard. [Paras 5, 8, 9]

Disallowance of the claimed deduction is not finally sustained on the existing record; the matter is remanded to the Assessing Officer for verification of details regarding acquisition of leased vehicles and utilisation of borrowed funds and for fresh decision in accordance with law after giving the assessee opportunity to be heard.

Final Conclusion: The Tribunal condoned the delay in filing the appeals, treated the challenge to reopening as not pressed, and while finding the proportionate debt deduction unsupported on the record, remanded the substantive issue of whether borrowed funds were utilised to acquire the taxable (leased) vehicles to the Assessing Officer for fresh verification and decision; appeals are partly allowed for statistical purposes.