TaxTMI Updates e-Newsletter
Jan 10,2019

Classification of goods by HSN/Customs Tariff nomenclature - Articles of plastic versus textile articles - Rule that specific tariff entry prevails over a general/residuary entry - Application of section and chapter notes (notably Section XI note 1(g), Chapter 39 note 2(p), Chapter 54 notes 1 and 1A) - Binding effect of High Court precedent on classification - Resort to Rules for interpretation of the First Schedule to the Customs Tariff Act

Classification of goods by HSN/Customs Tariff nomenclature - Articles of plastic versus textile articles - Application of section and chapter notes (notably Section XI note 1(g), Chapter 39 note 2(p), Chapter 54 notes 1 and 1A) - Binding effect of High Court precedent on classification - Classification of PP woven bags/sacks made from strips of width less than 5 mm and the applicable GST chapter heading. - HELD THAT: - The Authority examined whether PP bags woven from strips of width <5 mm fall under Chapter 63 (textile sacks and bags) or Chapter 39 (articles of plastic). The applicant relied on chapter notes and explanatory notes to contend the strips and resulting fabrics are textile materials (Chapter 54/63) and on an earlier AAR favourable to the applicant. The Authority applied the Rules for interpretation of the First Schedule to the Customs Tariff Act and observed that binding judicial precedent of the Madhya Pradesh High Court in M/s. Raj Packwell Ltd. holds that HDPE/PP strips and sacks woven therefrom are articles of plastic and classifiable under Chapter 39 (headings 3920/3923). The Authority noted that the West Bengal AAR relied upon by the applicant was set aside by the West Bengal Appellate Authority, and that the CEGAT judgment in Gujrat Raffia Industries also supports classification under Chapter 39. Having regard to the section and chapter notes, explanatory notes, and the binding High Court and tribunal authorities, the Authority concluded that the impugned PP woven bags/sacks are properly classifiable as articles of plastic under Chapter 39 rather than as textile sacks under Chapter 63, and will attract the rate applicable to Chapter 39 items at the time of supply. [Paras 6, 7]

PP woven bags/sacks made from strips of width less than 5 mm are classifiable under Chapter 39 of the GST Tariff as articles of plastic and shall attract the rate applicable to Chapter 39 at the time of supply.

Final Conclusion: The Advance Ruling Authority holds that the impugned PP woven bags/sacks manufactured from strips under 5 mm are articles of plastic classifiable under Chapter 39 of the GST tariff; the goods shall attract the GST rate applicable to Chapter 39 at the time of supply.

Government Entity - exemption for distribution, transmission and retail supply of electricity - NIL rate for composite supply where value of goods does not exceed 25% (Sr. No.3A) - supply-specific applicability of exemption (not supplier- or recipient-specific) - advance ruling inadmissible for insufficient / generic information

Government Entity - The applicant falls within the definition of a Government Entity as per the Notifications relied upon. - HELD THAT: - The Authority examined the applicant's ownership and control structure and the statutory definition in Notification No.32/2017. The applicant is a wholly owned subsidiary of a State Government entity and the Government of Madhya Pradesh exercises full control; accordingly the applicant meets the definition of a Government Entity under the notified scheme. [Paras 6]

Applicant is covered by the definition of Government Entity.

Exemption for distribution, transmission and retail supply of electricity - Activities of distribution, transmission and retail supply of electricity by the applicant are exempt under the notified entries. - HELD THAT: - On the material placed, the Authority observed that notifications exempting distribution, transmission and retail supply of electricity are already in force. The documents before the Authority did not cast doubt on the applicability of those exemptions to the applicant's distribution and transmission activities, and therefore those activities are not in dispute for the purposes of this ruling. [Paras 6]

Distribution, transmission and retail supply of electricity by the applicant are exempt under the relevant notifications.

NIL rate for composite supply where value of goods does not exceed 25% (Sr. No.3A) - supply-specific applicability of exemption (not supplier- or recipient-specific) - Applicability of Sr. No.3A (NIL rate for specified composite supplies) is dependent on the nature of the supply and cannot be affirmed merely by the identity of the supplier or recipient. - HELD THAT: - The Authority analysed Notification No.12/2017 and its amendment inserting Sr. No.3A and held that the benefit under Sr. No.3A applies to particular composite supplies meeting the prescribed value-composition condition and connected to functions entrusted to Panchayats. The exemption is therefore supply-specific and not automatically available to a supplier or recipient without examination of the precise nature and composition of the supply (goods v. services). [Paras 6]

Applicability of Sr. No.3A depends on the specific nature and composition of the supply and is not conferred by supplier/recipient status alone.

Advance ruling inadmissible for insufficient / generic information - No advance ruling could be given because the application was generic and lacked particulars of the specific supplies for which clarification was sought. - HELD THAT: - The Authority found that the question framed in the application was broadly generic and did not describe the particular services or the composition of supplies to Panchayats. Given that the applicability of the relevant entries is supply-specific, the absence of details precluded a definitive ruling. Consequently the Authority declined to grant a ruling on the merits. [Paras 6, 7]

In view of insufficient and generic information, no advance ruling is given on the application.

Final Conclusion: The Authority held that the applicant qualifies as a Government Entity and that distribution, transmission and retail supply of electricity are covered by existing exemptions; however, the NIL rate under Sr. No.3A is supply-specific and cannot be declared applicable without particulars of the supplies, and therefore, due to insufficient and generic information, no advance ruling is given.

Transmission or distribution of electricity by an electricity transmission or distribution utility - Value of supply includes interest or late fee or penalty for delayed payment - Delayed payment surcharge included in the value of the initial supply - Apportionment between exempt and taxable supplies

Delayed payment surcharge included in the value of the initial supply - Value of supply includes interest or late fee or penalty for delayed payment - Transmission or distribution of electricity by an electricity transmission or distribution utility - Whether delay payment charges recovered by the applicant constitute a separate taxable service or form part of the value of the main supply of electricity/transmission/distribution. - HELD THAT: - The Authority noted that distribution, transmission and retail supply of electricity by the applicant are covered by the exemption under Notification No.12/2017 and that electrical energy as goods is exempt under Notification No.2/2017. Circular No.34/8/2018 clarified that some services provided by DISCOMs are taxable. Section 15(2)(d) provides that interest, late fee or penalty for delayed payment is includible in the value of the supply to which it relates. The delayed payment surcharge is imposed as part of the tariff fixed by the regulatory authority and billed when payment is delayed; it is not an independent supply. Consequently, the surcharge must be included in the value of the initial supply to which it relates and does not have an independent status separate from that supply. [Paras 8, 9]

Delayed payment surcharge is not a separate service and shall be included in the value of the initial supply to which it relates.

Apportionment between exempt and taxable supplies - Transmission or distribution of electricity by an electricity transmission or distribution utility - Value of supply includes interest or late fee or penalty for delayed payment - If the delayed payment surcharge is includible in the value of the initial supply, how is its tax treatment determined and what rate applies to such charges? - HELD THAT: - The Authority observed that the applicant recovers delayed payment surcharge in relation to both exempt supplies (distribution/transmission/retail supply of electricity and electrical energy) and taxable services listed in Circular No.34/8/2018. Because the surcharge forms part of the value of the initial supply, its tax treatment follows that of the underlying supply: the portion attributable to exempt supplies is exempt; the portion attributable to taxable supplies is taxable. The taxable portion is chargeable at the rate applicable to the corresponding supply. [Paras 8, 9]

Portion of delayed payment surcharge attributable to exempt supplies is exempt; portion attributable to taxable supplies is taxable at the rate applicable to the corresponding supply.

Final Conclusion: The Advance Ruling holds that delayed payment surcharge/late payment surcharge is includible in the value of the initial supply and is not a separate service; it must be apportioned between exempt and taxable supplies - the part attributable to exempt supply is exempt and the part attributable to taxable supply is taxable at the rate applicable to that supply.

Input tax credit on migration - FORM GST TRAN-1 upload - IT grievance redressal mechanism for GST portal glitches - nodal officer facilitation - time-bar extension for technical glitches

FORM GST TRAN-1 upload - IT grievance redressal mechanism for GST portal glitches - nodal officer facilitation - input tax credit on migration - time-bar extension for technical glitches - Petitioner's claim for relief for inability to upload FORM GST TRAN-1 due to technical glitches and entitlement to avail input tax credit at migration. - HELD THAT: - The Court relied upon the Government of India circular (Ext.P4) establishing an IT grievance redressal mechanism and prescribing the role of nodal officers to address taxpayer grievances arising from GST portal glitches. Paragraph 5 of the circular contemplates that taxpayers may file applications to nodal officers demonstrating a bona fide attempt to comply where portal glitches prevented completion of statutory processes. The record showed that the petitioner, along with many others, was unable to upload FORM GST TRAN-1 due to such technical difficulties. Having regard to the circular and earlier similar orders, the Court directed that the petitioner shall apply to the sixth respondent (the Nodal Officer), who will examine the application, facilitate uploading of FORM GST TRAN-1 without reference to the statutory time-frame and, where uploading is not possible for reasons not attributable to the petitioner, enable the petitioner to take credit of the input tax available at the time of migration. The Court further fixed a procedural timeline: if the petitioner applies within two weeks of the judgment, the Nodal Officer shall take steps within one week thereafter to consider and act upon the application. [Paras 5, 6]

Petition allowed in part by directing the petitioner to apply to the Nodal Officer who shall facilitate uploading of FORM GST TRAN-1 (disregarding the time-limit) or, if uploading is impossible for reasons not attributable to the petitioner, enable the petitioner to avail the input tax credit; timeline fixed for application and action.

Final Conclusion: Writ petition disposed by directing the petitioner to apply to the designated Nodal Officer under the IT grievance redressal mechanism; the Nodal Officer shall, on receipt, facilitate uploading of FORM GST TRAN-1 without regard to the statutory time-bar or, if uploading cannot be effected for reasons beyond the petitioner, enable the petitioner to take the input tax credit, subject to the procedural timeline indicated by the Court.

Transitional credit - IT Grievance Redressal Mechanism - IT Redressal Committee - verification by the GSTN - speaking order - opportunity of hearing - right to lead evidence before authority - decision in terms of Clause 5.4 of Circular dated 3.4.2018

Transitional credit - IT Grievance Redressal Mechanism - IT Redressal Committee - verification by the GSTN - decision in terms of Clause 5.4 of Circular dated 3.4.2018 - speaking order - opportunity of hearing - right to lead evidence before authority - Representations by the petitioner alleging non-reflection of transitional credit and seeking transfer of eligible transitional credit were to be forwarded to and decided by the IT Redressal Committee after GSTN verification, with an opportunity to the petitioner to be heard and to lead evidence. - HELD THAT: - The writ petition sought mandamus to allow the claimed transitional credit or to decide the representations. The Court, without expressing any opinion on the merits, directed respondent No.6 to forward the petitioner's representations to the IT Redressal Committee after verification by the GSTN within fifteen days. Thereafter the Committee is required to decide the representations in accordance with law and in terms of Clause 5.4 of the Central Board of Indirect Taxes and Customs Circular dated 3.4.2018 by passing a speaking order. The Committee must afford the petitioner an opportunity of hearing and permit the petitioner to lead any evidence to substantiate its claim. A timetable was fixed for forwarding and for the Committee to decide the matter (decision to be rendered within four weeks from receipt of the representations). The Court expressly refrained from adjudicating the merits and limited its direction to administrative redress in accordance with the Circular and the Court's earlier order. [Paras 4]

Respondent No.6 to forward the representations to the IT Redressal Committee after GSTN verification within fifteen days; the Committee to decide the representations under Clause 5.4 of the Circular dated 3.4.2018 by a speaking order after affording hearing and permitting evidence within four weeks of receipt.

Final Conclusion: Writ petition disposed of by directing administrative redress: representations to be verified by GSTN, forwarded to the IT Redressal Committee and decided by it by a speaking order after hearing and allowing evidence; no adjudication on merits by this Court.

Admissibility of Government Circulars as Evidence - Requirement of Affidavit for Reliance on Administrative Circulars - Applicability of CBDT Circular to Section 56(2)(viia) - Assessment Order Placed on Record but Not Given Effect To - Continuation of Interim Order

Admissibility of Government Circulars as Evidence - Requirement of Affidavit for Reliance on Administrative Circulars - Applicability of CBDT Circular to Section 56(2)(viia) - Filing and reliance on CBDT circulars for the purpose of the petition - HELD THAT: - The Court required that the CBDT Circular No.10/2018 dated 31.12.2018 and Circular No.2/2019 dated 04.01.2019, which were referred to during arguments but not on record, must be filed on record supported by an affidavit stating the purpose for which they are relied upon. The Solicitor General was permitted to make submissions on the relevance of Circular No.10/2018 to the present proceedings. The petitioner was granted one week's time to file the affidavit and the circulars, and the respondents were permitted one week thereafter to file their response. These directions govern the admissibility and recordation of the administrative circulars for consideration by the Court.

Petitioner to file the circulars with an affidavit within one week; respondents to file response within one week thereafter.

Assessment Order Placed on Record but Not Given Effect To - Continuation of Interim Order - Treatment of the assessment order and interim relief status - HELD THAT: - The Court directed that the assessment order, which had been passed and served upon the petitioners along with the demand, be placed on record. It was noted that the assessment order has not been given effect to. The interim order previously passed on 04.12.2018 was directed to continue pending further hearing and list the matter on 29.01.2019.

Assessment order to be placed on record; interim order of 04.12.2018 to continue; matter listed on 29.01.2019.

Final Conclusion: The Court permitted filing of the referred CBDT circulars on affidavit with a short timetable for reply, recorded the assessment order on the file (noted as not given effect to), and directed continuation of the interim order until the next listing on 29.01.2019.

Prior satisfaction requirement for issuing proceedings under section 153C - first proviso to section 153C - date of receipt of seized books or documents - application of CBDT Circular No.24 of 2015 to proceedings under section 153C - validity of notices issued before recording independent satisfaction - effect of search carried out prior to amendment to section 153C

Prior satisfaction requirement for issuing proceedings under section 153C - validity of notices issued before recording independent satisfaction - application of CBDT Circular No.24 of 2015 to proceedings under section 153C - Interim stay of notices under section 153C qua Assessment Years 200910 to 201213 - HELD THAT: - The Court observed submissions that the Assessing Officer recorded satisfaction under section 153C after the assessment of the searched person and, in some respects, after issuance of notice to the petitioner; reliance was placed on the Supreme Court's requirement that a satisfaction note is a sine qua non and on CBDT Circular No.24 of 2015 applying those principles to section 153C. Having considered the contention that notices covering Assessment Years 200910 to 201213 indicated non-application of mind to the first proviso to section 153C and that satisfaction was recorded belatedly and by reproduction of the searched person's satisfaction, the Court granted ad interim relief by staying the impugned notices for the specified Assessment Years. The order is interlocutory and was confined to preservation of the petitioner's position for those years pending adjudication on merits.

Impugned notices under section 153C for Assessment Years 200910 to 201213 are stayed ad interim.

First proviso to section 153C - date of receipt of seized books or documents - effect of search carried out prior to amendment to section 153C - Permissible continuation of proceedings for remaining assessment years subject to prior court permission before final order - HELD THAT: - The Court permitted the Assessing Officer to proceed with notices issued for the remaining periods (outside the stayed years) but restrained the Assessing Officer from passing any final order without prior permission of the Court. This direction preserves the revenue's ability to continue assessment activity while ensuring that any final adjudication is subject to judicial oversight in light of the petitioner's challenge concerning applicability of the first proviso, timing of satisfaction, and the contention about search predating amendment to section 153C.

Proceedings for the other assessment periods may continue, but no final order shall be passed without the prior permission of this Court.

Final Conclusion: Notice issued under section 153C to the petitioner for Assessment Years 2009-10 to 2012-13 is stayed ad interim; proceedings for other years may continue subject to the Court's prior permission before any final order is passed.

Penalty under Section 271D for contravention of Section 269SS - Reasonable cause defence under Section 273B - Genuineness of transaction and bona fides - Onus of disproving reasonable cause lies on Assessing Officer

Penalty under Section 271D for contravention of Section 269SS - Genuineness of transaction and bona fides - Whether penalty under Section 271D could be levied for receipt of cash loan contrary to Section 269SS where the transaction was between the assessee and near relatives and there was no material to disbelieve the transaction. - HELD THAT: - The Court examined whether the Assessing Officer had material to show that the assessee's account of the transactions was false or lacked bona fides. Having found no material to disbelieve the assessee's case that the amounts were received to meet an earlier advance and were borrowed from maternal uncle and aunt, the Court held that the mere fact of cash receipt, standing alone, did not warrant imposition of penalty. The determinative consideration was the genuineness of the transaction; in the absence of any finding that the transactions were not bona fide, penalty under Section 271D was not justified. [Paras 3, 9, 13]

Penalty under Section 271D was not warranted and must be set aside where the cash receipt from relatives was bona fide and not disproved by the Assessing Officer.

Reasonable cause defence under Section 273B - Onus of disproving reasonable cause lies on Assessing Officer - Whether the assessee had shown reasonable cause under Section 273B for accepting cash and, if so, whether the burden shifted to the Assessing Officer to disprove that cause. - HELD THAT: - The Court noted that Section 273B provides that no penalty shall be imposed if the person proves reasonable cause for the failure. The assessee had given an explanation for accepting cash (advances and borrowings from near relatives to repay an advance for sale of land). Once a cause was shown, the burden shifted to the Assessing Officer to examine and establish that the cause lacked bona fides. No such negative finding was recorded by the authorities below or the Tribunal. Consistent with earlier decisions, the Court held that a bona fide explanation amounts to reasonable cause and disentitles the Revenue from levying penalty in these circumstances. [Paras 4, 5, 13]

The assessee established a reasonable cause under Section 273B and, in absence of any finding to the contrary by the Assessing Officer, penalty could not be imposed.

Final Conclusion: Appeal allowed. The levy of penalty under Section 271D was set aside on the ground that the cash receipts from near relatives were bona fide and the assessee had shown reasonable cause under Section 273B; the Tribunal's order is set aside and the substantial questions of law are answered in favour of the assessee. No costs.

Deductibility of write offs vis a vis provisions for bad and doubtful debts - Expenditure on compliments at shareholder meetings as business expenditure - Conversion of investment into stock in trade and timing of loss recognition - Applicability of the disallowance rule under section 14A to earlier assessment years - Disallowance of bad debts of non rural branches

Deductibility of write offs vis a vis provisions for bad and doubtful debts - Write offs claimed by the assessee cannot be allowed to the extent they are in substitution of amounts allowable as provision for bad and doubtful debts; Section 36(1)(vii) read with the proviso and Explanation confines deduction to amounts actually written off in excess of the deduction already allowed under the provision. - HELD THAT: - The Court followed the Supreme Court decision in Southern Technologies Ltd. which noticed the Explanation introduced with retrospective effect and overruled earlier precedent relied upon by the assessee. Applying that ratio, the claims for write off were held not allowable where they amounted to or substituted the provision allowable under the specific provision for bad and doubtful debts. This principle was applied to the assessment years in which such write offs were claimed, and the claims were disallowed accordingly.

Answered in favour of the Revenue and against the assessee for the assessment years where such write offs were claimed.

Expenditure on compliments at shareholder meetings as business expenditure - Cost of compliments supplied to shareholders attending the annual general meeting is expenditure incurred wholly and exclusively for the purpose of business and therefore deductible. - HELD THAT: - Following a Division Bench judgment of this Court, the Court accepted that providing compliments at the AGM encourages participation, transparency and democratic decision making, and on that basis treated the expenditure as a business expense. The Tribunal's contrary conclusion was set aside to the extent it denied deduction.

Answered in favour of the assessee and against the Revenue.

Conversion of investment into stock in trade and timing of loss recognition - Deductibility of write offs claimed in the year investment was held as investment - Where the assessee held a portfolio as investment in the subject assessment year, loss alleged subsequently after conversion into stock in trade in a later year could not be claimed as a write off in the earlier year. - HELD THAT: - The Tribunal's finding that in the assessment year under consideration the assets were held as investments and that the conversion into stock in trade occurred by board resolution in a subsequent financial year was upheld. Since the character of the asset in the relevant year was investment, the claimed write off for loss could not be allowed in that year.

Tribunal's findings upheld; claim for write off in that assessment year rejected.

Applicability of the disallowance rule under section 14A to earlier assessment years - The provision and the corresponding rule relating to disallowance under section 14A are not applicable to assessment years prior to the year from which the Supreme Court held they operate. - HELD THAT: - Relying on the Supreme Court decision in Essar Teleholdings Ltd., the Court held that the provision in question would apply only from assessment year 2007 08. Accordingly, the Tribunal's remand on this ground was not sustainable and the question was answered in favour of the assessee.

Answered in favour of the assessee and against the Revenue.

Disallowance of bad debts of non rural branches - Disallowance of bad debts claimed as written off in respect of non rural branches is not maintainable where controlling judicial precedent upholds the assessee's position. - HELD THAT: - The Assessing Officer disallowed the deduction relying on an ongoing appeal, but the first appellate authority and subsequently the Tribunal had considered the issue and the matter is covered by the Supreme Court judgment in Catholic Syrian Bank Ltd. The Court held that no substantial question of law survives and that the Revenue's appeal on this ground must be rejected, affirming the appellate authority's order.

Revenue's appeal rejected; issue favourable to the assessee.

Final Conclusion: Appeals relating to the disallowance of write offs under the provision for bad and doubtful debts were decided for the Revenue for the specified years; expenditure on compliments at the AGM was held deductible for the assessee; issues concerning classification of investment and timing of loss recognition were upheld for the Revenue in the relevant year; applicability of section 14A was denied for the assessment year in question and the disallowance of bad debts of non rural branches stood rejected in favour of the assessee. I.T.A. Nos.258, 261, 351, 664 & 1137 of 2009 rejected; I.T.A. No.1662 of 2009 allowed; I.T.A. No.267 of 2009 partly allowed.

Estimation of agricultural income - production of evidence after passing of assessment order - adjournment and non-appearance before Assessing Officer - relevance of RTC to assessment year

Estimation of agricultural income - production of evidence after passing of assessment order - adjournment and non-appearance before Assessing Officer - relevance of RTC to assessment year - Tribunal was justified in confirming the Assessing Officer's estimation in accepting only 25% of the agricultural income declared by the assessee. - HELD THAT: - The Court examined the documents which the assessee sought to rely on and found they were produced on 31.12.2007, after the Assessing Officer's order dated 28.12.2007. The record shows an adjournment sought to 24.12.2007, and that on that date the assessee neither appeared nor complied with the communication of 11.12.2007. Consequently, the Assessing Officer could not be faulted for non-consideration of material not placed before him prior to passing the order. Further, the RTC relied upon by the assessee related to the year 2007-2008 and was not relatable to the assessment year under consideration, so even reconsideration would not assist the assessee. Considering the conduct of the assessee and the futility of permitting further opportunity, remand was refused and the Tribunal's confirmation of the 25% acceptance of agricultural income was held to be justified. [Paras 7, 8, 9, 10, 11]

The substantial question is answered in favour of the revenue; the Tribunal was justified in confirming acceptance of only 25% of the declared agricultural income and the appeal is dismissed.

Final Conclusion: The High Court dismissed the appeal, upholding the Tribunal's confirmation of the Assessing Officer's estimation (25% acceptance) of the assessee's agricultural income; no additional opportunity or remand was granted.

Deduction for bad debts written off under Section 36(1)(vii) vis-a -vis provision under Section 36(1)(viia) - Depreciation/loss on revaluation of securities determined at market value or cost price, whichever is less - Identification of non rural branches by reference to revenue villages - Assessment of interest accrued on un matured securities as income for the year - Business expenditure under Section 37-gifts to shareholders at AGM - Non-applicability of Section 14A to assessment years prior to 2007-08 - Write off of current investments allowable as loss in year of write off - Prohibition on enhancement by appellate authority under proviso to Section 14A - Write off of amounts due as dividend on dishonour of cheque allowable under Section 36(1)

Deduction for bad debts written off under Section 36(1)(vii) vis-a -vis provision under Section 36(1)(viia) - Allowance of bad debts written off under clause (vii) of Section 36(1) must be restricted to the excess over any provision already allowed for non rural branches under clause (viia) but cannot be adjusted by reference to provisions allowed for rural branches. - HELD THAT: - Relying on the Supreme Court decision in Catholic Syrian Bank Ltd. (reported at [2012 (2) TMI 262 - SUPREME COURT]) the Court held that where provision for bad debts for non rural branches has already been allowed in earlier years under clause (viia), the deduction for actual bad debts written off under clause (vii) is confined to the excess over such provision. The Assessing Officer is to verify whether prior allowance for provision for non rural branches exists; only then can the write off be limited to the excess. Provision for rural branches under clause (viia) cannot be taken into account for this computation. [Paras 2]

Answered in favour of the assessee and against the Revenue.

Depreciation/loss on revaluation of securities determined at market value or cost price, whichever is less - Depreciation or loss on revaluation of securities is to be allowed on the basis of market value or cost price, whichever is less, as per Reserve Bank of India stipulation. - HELD THAT: - The Court followed its earlier decisions (C.I.T. v. Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA HIGH COURT] and C.I.T. v. Lord Krishna Bank Ltd. [2010 (10) TMI 860 - KERALA HIGH COURT]) to uphold the Tribunal's order permitting revaluation only at the lower of market value or cost. The reasoning affirms adherence to the RBI stipulation as the determinative standard for valuing securities for depreciation/revaluation purposes. [Paras 3]

Answered in favour of the assessee and against the Revenue.

Identification of non rural branches by reference to revenue villages - Non rural branches must be determined with reference to revenue villages and not solely by population statistics. - HELD THAT: - Following C.I.T. v. Lord Krishna Bank Ltd. [2010 (10) TMI 860 - KERALA HIGH COURT], the Court held that the correct criterion for identifying non rural branches is reference to revenue villages rather than merely population in municipal wards. The Court noted the anomaly of including municipal wards on population alone and therefore sided with the Revenue on this point, restoring the Assessing Officer's disallowance to the extent applicable. [Paras 4]

Answered in favour of the Revenue and against the assessee; disallowance restored to that extent.

Assessment of interest accrued on un matured securities as income for the year - Interest accrued on securities not yet matured is assessable as income of the year or not? - HELD THAT: - The Court applied its earlier decision in C.I.T. v. Federal Bank Ltd. [2008 (1) TMI 195 - KERALA HIGH COURT] to hold that accrued interest on un matured securities is to be assessed as income for the relevant year. The earlier related SLP was dismissed, supporting the applicability of that precedent. [Paras 6]

Answered in favour of the assessee and against the Revenue for the relevant appeals.

Business expenditure under Section 37- gifts to shareholders at AGM - Expenditure on gifts given to shareholders attending the annual general meeting is allowable as a business expenditure under Section 37. - HELD THAT: - A permissible allowance as business expenditure under Section 37. [Paras 7]

Answered in favour of the assessee and against the Revenue.

Non-applicability of Section 14A to assessment years prior to 2007-08 - Section 14A does not apply to assessment year 2004-05; Section 14A is applicable only from assessment year 2007-08 onwards. - HELD THAT: - Applying the Supreme Court's decision in C.I.T. v. ESSAR Teleholdings Pvt. Ltd. [2018 (2) TMI 115 - SUPREME COURT], the Court concluded that Section 14A cannot be invoked for AY 2004 05. Consequently, the Tribunal was correct in not applying Section 14A for that year. [Paras 8]

Answered in favour of the assessee and against the Revenue for AY 2004-05.

Write off of current investments allowable as loss in year of write off - Current investments written off are allowable as loss in the assessment year in which they are written off. - HELD THAT: - Following precedents including Nedungadi Bank Ltd. [2002 (11) TMI 29 - KERALA HIGH COURT] and United Commercial Bank v. C.I.T. [1999 (9) TMI 4 - SUPREME COURT], the Court upheld the view that write off of current investments may be claimed as a loss in the year of write off. The Tribunal's allowance in this regard was affirmed. [Paras 9]

Answered in favour of the assessee and against the Revenue.

Prohibition on enhancement by appellate authority under proviso to Section 14A - Non-applicability of Section 14A to assessment years prior to 2007-08 - Enhancement by the First Appellate Authority under Section 14A could not be sustained due to the proviso prohibiting enhancement and because Section 14A is inapplicable to the relevant assessment year. - HELD THAT: - The Court noted the specific prohibition in the proviso to Section 14A against enhancement by the appellate authority for the assessment year in question and applied the Supreme Court's ruling in ESSAR Teleholdings to conclude that Section 14A could not be applied for the assessment year where enhancement was attempted. Therefore the enhancement by the C.I.T.(Appeals) was not sustainable. [Paras 10]

Answered in favour of the assessee and against the Revenue; enhancement set aside.

Write off of amounts due as dividend on dishonour of cheque allowable under Section 36(1) - Write off of an amount due as dividend (previously returned as income on receipt of cheque) is allowable under Section 36(1) when the cheque is subsequently dishonoured and the amount is written off. - HELD THAT: - The Court upheld the Tribunal's allowance, observing that where dividend was returned as income in the year of receipt but the cheque was later dishonoured and the amount written off, the write off is evidenced in the books and is allowable. Any subsequent receipt would be taxable in the year of receipt; the write off in the year of dishonour is therefore permissible. [Paras 11]

Answered in favour of the assessee and against the Revenue.

Final Conclusion: Appeals I.T.A.Nos.597, 755, 769, 815, 817, 872 and 1287 of 2009 are partly allowed limited to the third question (identification of non rural branches); I.T.A.Nos.352/2009 and 38/2011 are rejected. No costs.

Valuation of trading assets on appreciation - Non-recognition of unrealised appreciation as income - RBI stipulation valuing securities at market price or cost price, whichever is lower

Valuation of trading assets on appreciation - Non-recognition of unrealised appreciation as income - RBI stipulation valuing securities at market price or cost price, whichever is lower - Whether unrealised appreciation in market value of securities held as trading assets must be credited to profit and loss account or whether valuation must follow the RBI prescription of market price or cost price, whichever is lower. - HELD THAT: - The Court applied its earlier decisions in CIT v. Nedungadi Bank Ltd. and CIT v. Lord Krishna Bank Ltd., adopting the Reserve Bank of India's directive that securities be valued at market price or cost price, whichever is lower. That stipulation, originally aimed at preventing banks from claiming inflated book profits on depreciation, operates equally where market value exceeds cost. Unrealised appreciation does not enure to the Bank as income; therefore the bank is not entitled to recognise such appreciation as profit. Consequently, the assessee-Bank's valuation at cost, in conformity with the RBI prescription, is to be accepted. [Paras 2]

Unrealised appreciation in trading securities is not to be recognised as income; valuation must be at market price or cost price, whichever is lower, and the Bank's valuation at cost is accepted.

Final Conclusion: Appeals dismissed; judgment for the assessee accepting valuation at cost in accordance with the RBI prescription; parties to bear their respective costs.

Deduction under Section 80IB - eligible industrial undertaking - application of provisions of Section 80IA to Section 80IB - treatment of inter unit transfers/stock transfers as turnover of the eligible unit - market value adjustment for transfers between businesses

Treatment of inter unit transfers/stock transfers as turnover of the eligible unit - market value adjustment for transfers between businesses - deduction under Section 80IB - Whether turnover from retail outlets located other than the place of the eligible unit may be treated as turnover of the eligible undertaking for claiming deduction under Section 80IB. - HELD THAT: - The Tribunal examined production at the Salem unit, the stock transfers made to the assessee's retail business and actual sales realizations for the year, and found that sales routed through branches corresponded to goods manufactured by the Salem eligible unit. The Court noted that Section 80IB(13) makes sub sections of Section 80IA applicable to Section 80IB and that Section 80IA(8) contemplates computing consideration to correspond to market value where goods held for an eligible business are transferred to another business of the assessee, thereby recognising inter business transfers for calculating turnover of the eligible undertaking. Having verified the factual position, the Tribunal concluded that the allowance claimed by the assessee in respect of the Salem unit was proper. The High Court found no infirmity in the Tribunal's fact based conclusion and upheld the allowance.

Turnover from outlets located outside the place of the eligible unit can, on the facts shown, be treated as turnover of the eligible undertaking for the purpose of deduction under Section 80IB; the Tribunal's allowance is upheld.

Deduction under Section 80IB - eligible industrial undertaking - Whether the assessee is entitled to claim deduction under Section 80IB on a consolidated sales figure inclusive of another unit. - HELD THAT: - The Court observed that the Tribunal did not take the consolidated sales of Salem and Hyderabad units for computing the deduction but relied on the Salem unit figures. The question framed about entitlement to claim deduction on the consolidated sales figure was therefore not relevant in light of the factual basis adopted by the Tribunal. The High Court declined to disturb the Tribunal's approach which applied the Salem unit's accounts and allowed the claim.

Question of claiming deduction on a consolidated sales figure was held not relevant; the Tribunal's use of the Salem unit's figures is sustained.

Final Conclusion: The Tribunal's factual finding that the Salem unit's sales (including sales flowing through the assessee's retail outlets by way of stock transfers) qualified for deduction under Section 80IB was upheld; the Revenue's appeal is dismissed and the deduction allowed by the Tribunal is confirmed.

Addition to income on unaccounted payment - burden of proof on the assessee to explain source of payment - acceptability of explanation in assessment proceedings - perversity of findings - evidence required to discharge explanation: bank records and third party confirmation

Addition to income on unaccounted payment - burden of proof on the assessee to explain source of payment - acceptability of explanation in assessment proceedings - The correctness of the Tribunal's confirmation of the addition of Rs. 10,00,000/- and whether that finding was perverse for non-consideration of relevant facts. - HELD THAT: - The Court observed that during assessment an unexplained payment of Rs. 10,00,000/- to a third party for obtaining a Power of Attorney was noted and no contemporaneous explanation or source (bank details or third party confirmation) was produced before the Department. The assessee later placed on record a letter from the person executing the Power of Attorney stating that he had received the sum from another person, but no direct evidence was furnished to link the assessee to the source of funds. The Tribunal and lower authorities examined the material and the Tribunal deleted a separate addition of Rs. 5,91,650/- after accepting an explanation relating to drawings, but on the primary issue of the unexplained Rs. 10,00,000/- the Court found that the assessee had not discharged the burden of proof to render the explanation acceptable. In the absence of bank records or corroborative confirmation, the finding of the Tribunal confirming the addition was not shown to be perverse.

The Tribunal's confirmation of the addition of Rs. 10,00,000/- is upheld; the finding is not perverse.

Final Conclusion: The appeal is dismissed. The addition of Rs. 10,00,000/- to the assessee's income is sustained for AY 1999-2000 for want of satisfactory explanation; no costs.

Dividend within the meaning of Section 2(22)(e) - genuineness of agreement - refundable security deposit - beneficial receipt - appreciation of facts by the Tribunal

Dividend within the meaning of Section 2(22)(e) - genuineness of agreement - refundable security deposit - beneficial receipt - Whether the sum received by the assessee (transferred from his father) constitutes dividend income under Section 2(22)(e) of the Income Tax Act. - HELD THAT: - The Tribunal's finding that the transaction was supported by a genuine agreement dated 16-8-2004, under which leasehold rights were transferred to the company and a refundable deposit was paid to Sri K.P. Poddar, is not disputed by the Appellate Authority and is supported by the company accounts. The fact that mining activity occurred before the agreement was executed does not, without more, establish that the agreement was a sham. The refundable deposit was taxed in the hands of Sri K.P. Poddar and ledger entries show repayments to him; there is no material demonstrating that the amount paid to K.P. Poddar was in reality paid by the company for the benefit of the assessee. The Assessing Officer did not examine Sri K.P. Poddar, and the material on record supports the conclusion that the subsequent transfer from father to son was a personal transaction and not a distribution of company profits. The question therefore primarily involved appreciation of facts, and the Tribunal's factual conclusions are just and sustainable.

A sum of Rs. 17.50 crores received from MEL by Sri K.P. Poddar and thereafter transferred to the assessee cannot be treated as dividend under Section 2(22)(e).

Final Conclusion: The substantial question of law is answered in favour of the assessee and against the Revenue; the Tribunal's deletion of the addition is affirmed and the appeal is dismissed.

Deemed dividend under Section-2(22)(e) - inter-corporate deposit - business transaction vs sham/journal entries - nexus between seized documents and transaction - acceptance of transactions in assessments of related parties

Deemed dividend under Section-2(22)(e) - nexus between seized documents and transaction - acceptance of transactions in assessments of related parties - Whether the payments routed from M/s. MEL to M/s. SREL and thereafter to Smt. Vandana Poddar amounted to deemed dividend in the hands of the assessee under Section-2(22)(e). - HELD THAT: - The Court upheld the Tribunal's conclusion that Section-2(22)(e) was inapplicable. The seized 'settlement plan' indicating payments between the assessee and his wife did not establish a legal nexus sufficient to characterise the amounts paid by M/s. MEL to M/s. SREL and thence to Smt. Vandana Poddar as payments made by the company on behalf of the shareholder for his personal benefit. The transactions between M/s. MEL, M/s. SREL and Smt. Vandana Poddar were reflected in the books of accounts of the companies and supported by banking entries; interest receipts/payments had been assessed in the hands of M/s. MEL, M/s. SREL and Smt. Vandana Poddar by the same Assessing Officer without adverse observation. On these factual findings the Tribunal held, and this Court agreed, that the transfers constituted inter-corporate deposits and business transactions rather than payments attractable under Section-2(22)(e). Reliance on precedents that exclude ordinary course business transactions from the ambit of Section-2(22)(e) was endorsed. [Paras 20, 21, 22, 23, 24]

Tribunal's finding that the amounts were not deemed dividend under Section-2(22)(e) was upheld; Section-2(22)(e) does not apply.

Business transaction vs sham/journal entries - inter-corporate deposit - nexus between seized documents and transaction - Whether the series of transactions were commercial (inter-corporate deposits reflected in bank records) or merely journal entries entered to avoid tax. - HELD THAT: - The Court agreed with the Tribunal that the entries were not mere paper journal entries but were substantiated by bank transactions and accounting entries in the books of M/s. MEL and M/s. SREL. The same Assessing Officer had accepted corresponding entries and taxed interest in the assessments of M/s. MEL, M/s. SREL and Smt. Vandana Poddar. Given the interrelated assessments and the documentary and banking evidence, the Tribunal's conclusion that the transactions were bona fide commercial transactions and not a sham device for tax avoidance was found to be an appropriate factual finding not to be disturbed. [Paras 19, 20, 23, 24]

Tribunal's finding that the transactions were commercial inter-corporate deposits and not mere journal entries or a sham to avoid tax was upheld.

Final Conclusion: The appeal is dismissed. The Tribunal's factual findings that the transfers constituted inter-corporate business transactions supported by bank records and that Section-2(22)(e) is not attracted are affirmed; the additions made by the Assessing Officer and CIT(A) were set aside.

Classification of donations as anonymous under the provisions of section 115BBC - maintenance of donor particulars (names and addresses) as determinative for anonymous donation - invocation of section 68 against donations disclosed as income - treatment of depreciation not claimed as application of income

Classification of donations as anonymous under the provisions of section 115BBC - maintenance of donor particulars (names and addresses) as determinative for anonymous donation - invocation of section 68 against donations disclosed as income - Whether the donations received by the assessee could be treated as anonymous donations and added to income by invoking the deeming provisions applied through section 68 and section 115BBC. - HELD THAT: - The Tribunal held that section 68 was not attractable where the assessee had fully disclosed the donations as income and had also shown application of those funds for charitable purposes, particularly where the assessee is registered under section12A. The Tribunal relied on authority holding that non-filing of a complete list of donors or non-production of donors does not necessarily permit an inference of introduction of unaccounted money where donations are disclosed. Under sub section (3) of the provision dealing with anonymous donations, the statutory mischief targets donations for which no details of the donors are maintained; if names and addresses are maintained, the donations cannot be classified as anonymous merely because confirmations were not obtained or notices returned unserved. In the present case the assessee had furnished a list of donors and maintained donor particulars; the AO's addition was premised only on the non production of donors/absence of confirmation letters. Since the statutory requirement of maintaining donor particulars was satisfied, the provisions treating donations as anonymous could not be invoked and the addition could not be sustained. [Paras 5]

The addition treating the donations as anonymous and invoking section 68/section 115BBC is set aside and the AO is directed to delete the addition.

Treatment of depreciation not claimed as application of income - Whether depreciation which was not claimed as application of income could be added back to the income of the assessee. - HELD THAT: - The Tribunal accepted the assessee's submission that depreciation had not been claimed by the assessee as an application of income; accordingly there was no basis to add back depreciation to the income. The Tribunal therefore held the addition of depreciation to be incorrect and directed its deletion. [Paras 3, 5]

The addition on account of depreciation is deleted and the AO is directed to remove the same.

Final Conclusion: The appeal is allowed; the additions on account of anonymous donations and on account of depreciation are set aside and the AO is directed to delete both additions.

Deduction under section 80IA(4)(iv) - Initial assessment year for section 80IA - Application of section 80IA(5) - Ad-hoc additions based on conjecture - Burden of proof for additions to income

Deduction under section 80IA(4)(iv) - Initial assessment year for section 80IA - Application of section 80IA(5) - Claim for deduction under section 80IA(4)(iv) on windmill income denied by AO invoking section 80IA(5) despite assessee having opted an initial assessment year. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of the deduction. It followed coordinate-bench decisions holding that the phrase 'initial assessment year' in section 80IA(5) refers to the assessment year first opted for by the assessee under section 80IA(2) when claiming the deduction, and that the limiting effect of section 80IA(5) applies from that initial assessment year. The Tribunal also relied on CBDT Circular No.1/2016 (15.02.2016) which clarifies that the assessee may elect the initial assessment year for claiming ten consecutive years' deduction and that the term 'initial assessment year' means the year so opted. Applying these authorities to the facts, where the assessee had opted assessment year 2009-10 as the initial year and the present assessment year 2012-13 fell within the claimed period, the AO's invocation of section 80IA(5) to deny the deduction was held unwarranted and the deduction was directed to be allowed. [Paras 5, 6]

Deduction under section 80IA(4)(iv) allowed for the assessment year 2012-13 as the assessee had validly opted assessment year 2009-10 as the initial assessment year and section 80IA(5) applies from the chosen initial assessment year.

Ad-hoc additions based on conjecture - Burden of proof for additions to income - Addition of Rs. 2,00,000 made by AO on account of alleged scrap generated from repairs and maintenance, in absence of separate details or evidence. - HELD THAT: - The Tribunal concurred with the CIT(A)'s deletion of the addition. The AO's order contained only a speculative observation that scrap might have been generated from repairs without conducting specific enquiry into the nature of repairs, producing evidence of scrap generation or sale, or verifying records. Such an ad-hoc addition founded on suspicion and guesswork was held unsustainable under the statute; in the absence of verification or material evidence the addition could not be supported. [Paras 7, 8, 9]

The ad-hoc addition on account of scrap was deleted for want of any verification or evidence.

Final Conclusion: The Tribunal dismissed the Revenue's appeal; the CIT(A)'s order allowing the section 80IA(4)(iv) deduction (on the basis that the assessee had opted 2009-10 as the initial assessment year) and deleting the ad-hoc addition for scrap was upheld and the Revenue's grounds of appeal were rejected.

Addition as undisclosed payments towards credit cards - burden to substantiate inter-credit-card transfers - verification and re-examination on remand - short term capital gains - relevance of opening and closing balances of securities - treatment of broker ledger entries - whether amount is receipt or payment - interest under sections 234A and 234B

Addition as undisclosed payments towards credit cards - burden to substantiate inter-credit-card transfers - verification and re-examination on remand - Addition of Rs. 33,92,703/- treated as undisclosed payments towards various credit cards - HELD THAT: - The Tribunal found that the Assessing Officer had not verified the complete transaction cycle claimed by the assessee - namely withdrawals/loans from one credit card repaid into another - and that the appellate record showed incomplete and inconsistent disclosure by the assessee (including unexplained cash deposits and a large unexplained bank credit). Because the lower authorities did not examine and verify the inter-credit-card transfers and related bank transactions, the Tribunal set aside the issue for fresh adjudication by the Assessing Officer with a direction to the assessee to substantiate the inter-credit-card transactions and the cash/bank deposits and for the AO to verify the same. [Paras 7]

Issue set aside to the file of the Assessing Officer for fresh verification and adjudication.

Short term capital gains - relevance of opening and closing balances of securities - verification and re-examination on remand - Addition of Rs. 3,18,925/- as short term capital gain based on information received from broker - HELD THAT: - The Tribunal accepted that the Assessing Officer did not take into account opening and closing balances of securities and other account-specific entries; the assessee produced script-wise and broker-account details alleging overall trading losses. In view of these unexamined aspects and the assessee's claim of losses in various segments (trading, F&O, jobbing), the Tribunal directed that the assessee demonstrate the correct profit/loss positions to the AO and remanded the matter for fresh examination of the accounts and computation. [Paras 11]

Issue set aside to the file of the Assessing Officer for fresh verification and recomputation.

Treatment of broker ledger entries - whether amount is receipt or payment - verification and re-examination on remand - Addition of Rs. 2,58,472/- on account of alleged payments to M/s. Multiplex Capital Ltd. - HELD THAT: - The Tribunal observed a factual dispute as to whether the ledger entry represented payment by the assessee to the broker or credit to the assessee by the broker. Given that the related trading/profit issues were being remanded (see previous issue), and that the broker's ledger appeared to show the amount as credited to the assessee's account, the Tribunal directed fresh verification by the Assessing Officer to resolve the true nature of the ledger entry and attendant tax consequences. [Paras 15]

Issue set aside to the file of the Assessing Officer for fresh verification.

Interest under sections 234A and 234B - Charge of interest under sections 234A and 234B consequential to assessment adjustments - HELD THAT: - The Tribunal treated the interest demand as consequential to the substantive additions and, in light of its directions to remand the substantive issues to the Assessing Officer, declined to grant separate relief on the interest plea and dismissed the ground relating to interest as consequential. [Paras 16]

Ground relating to interest dismissed as consequential.

Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes by setting aside the substantive additions concerning credit-card payments, short-term capital gains, and broker-related entries to the file of the Assessing Officer for fresh verification and determination; the plea against interest under sections 234A and 234B was dismissed as consequential.

Deduction under Section 10A/10AA to be allowed at the unit level (gross total income of the undertaking) - Set off of losses of 10A/10AA unit against income of non 10A units - Allocation of head office and common expenses to 10AA (SEZ) unit - Revenue v capital characterisation of research and development expenditure (destructive testing) - Computer peripherals attract same depreciation rate as computers - Depreciation on capitalised software/ERP customisation

Deduction under Section 10A/10AA to be allowed at the unit level (gross total income of the undertaking) - Set off of losses of 10A/10AA unit against income of non 10A units - Allocation of head office and common expenses to 10AA (SEZ) unit - Whether losses and allocations relating to the MEPZ (10AA) unit could be set off/treated as done in computing unit level income and whether the additions for allocation of head office expenses, bank/loan processing charges and goods transferred to MEPZ unit were correctly deleted by the CIT(A). - HELD THAT: - The Tribunal followed the co ordinate Bench decision in the assessee's own case for the preceding year, which in turn applied the Supreme Court's reasoning in Yokogawa India Ltd. to hold that deductions under Section 10A/10AA operate at the stage of computing the gross total income of the eligible undertaking and not at the final stage of computation of the assessee's total income. Accordingly, the stage for applying set off and carry forward provisions is after unit level computation; the CIT(A)'s deletion of additions attributable to allocation of head office expenses, bank and loan processing charges and price differences on goods transferred to the 10AA unit was in line with that principle and did not suffer from illegality or perversity. The Tribunal therefore declined to interfere with the CIT(A)'s findings on these allocations, following the precedent and the explanatory guidance noted in the reproduced paragraphs of the earlier order. [Paras 7]

Grounds 1-4 of the revenue's appeal dismissed; additions relating to allocation to the MEPZ (10AA) unit upheld as deleted by the CIT(A).

Revenue v capital characterisation of research and development expenditure (destructive testing) - Whether the R&D expenditures disallowed by the Assessing Officer were capital in nature or revenue expenses and whether the CIT(A)'s deletion of the addition was sustainable. - HELD THAT: - The CIT(A) examined detailed breakup and invoices, treated items such as training charges and annual subscription for CAD validation as revenue, and noted that certain R&D inventory movements constituted destructive testing with no residual commercial inventory or creation of any new asset. The Tribunal found no infirmity in those factual findings, observed reliance on Empire Jute (SC) by the CIT(A), and, in the absence of any successful challenge by the Revenue to the factual and legal basis of the CIT(A)'s conclusions, declined to interfere. [Paras 7]

Ground 5 of the revenue's appeal dismissed; the R&D expenditure disallowance deleted by the CIT(A) is sustained.

Computer peripherals attract same depreciation rate as computers - Whether depreciation on computer peripherals should be allowed at 60% (same as computers) or restricted to 15% as assessed by the Assessing Officer. - HELD THAT: - The Tribunal applied settled law that computer peripherals cannot be treated in isolation from the computer system and therefore attract the same rate of depreciation as computers. The Tribunal also noted supportive authority of the High Court (BSES Yamuna Power Ltd.). On this basis, the Tribunal found no reason to interfere with the CIT(A)'s direction to allow depreciation at the higher rate. [Paras 7]

Ground 6 of the revenue's appeal dismissed; depreciation on computer peripherals to be allowed at the same rate as computers (60%).

Depreciation on capitalised software/ERP customisation - Whether depreciation should be allowed on ERP customization charges and software for tool management which were capitalised by the Assessing Officer and upheld by the CIT(A), and at what rate. - HELD THAT: - Although the Assessing Officer and CIT(A) treated the ERP customization and tool management software as capital expenditure, the Tribunal recognised that if such expenditure is capital in nature the inevitable corollary is entitlement to depreciation. Applying this principle, the Tribunal set aside the CIT(A)'s order to the extent of non allowance of depreciation and directed the Assessing Officer to allow depreciation at 60% on the ERP customization charges and on the tool management software. [Paras 9]

Assessee's cross objection grounds 1-3 allowed; AO directed to allow depreciation @60% on ERP customization charges and on software for tool management.

Final Conclusion: The department's appeal is dismissed in its entirety. The assessee's cross objection is allowed in part: the tribunal directs allowance of depreciation at 60% on the ERP customization charges and on the tool management software; other deletions and findings of the CIT(A) (relating to allocations to the MEPZ/10AA unit, R&D expenditure and depreciation on peripherals) are sustained.

Mandatory limitation period - procedure for suspending or revoking CHA licence - jurisdiction to issue show cause notice - non-obstante clause - writ jurisdiction to quash show cause notice issued without jurisdiction or in abuse of process

Mandatory limitation period - procedure for suspending or revoking CHA licence - jurisdiction to issue show cause notice - The ninety days limitation prescribed by Regulation 22(1) of the CHALR 2004 is mandatory and a show cause notice issued after that period is invalid. - HELD THAT: - Regulation 22(1) requires the Commissioner of Customs to issue a notice in writing to the Customs House Agent within ninety days from the date of receipt of the offence report, stating the grounds and requiring a statement of defence. Regulation 20(1) proceedings for revocation must follow the procedure in Regulation 22; Regulation 20(2) and (3) for immediate suspension are independent by virtue of the non-obstante clause. The Court followed the Division Bench decision in Santon Shipping Services (CMA.No.730 of 2016, dated 13.10.2017) which held the 90 day period under Regulation 22(1) to be mandatory and that a show cause notice issued beyond that period renders consequent proceedings unlawful. Applying that principle, the offence report in the present case was dated August 2010 while the impugned show cause notice was issued on 18.12.2012, well beyond ninety days; accordingly the show cause notice was issued without jurisdiction and the writ court could interfere under the principle that it may quash a show cause notice issued without jurisdiction or in abuse of process (with reference to UOI v. Vicco Laboratories). [Paras 8, 10, 11]

Impugned Show Cause Notice dated 18.12.2012 issued beyond the 90 day period under Regulation 22(1) is set aside and the writ petition is allowed.

Final Conclusion: The show cause notice issued on 18.12.2012 under Regulation 20(1)/22(1) of the CHALR 2004 is quashed for being issued beyond the mandatory ninety day period; the writ petition is allowed and the consequential proceedings stand set aside, with no costs.

Legality of investigation beyond time prescribed under Section 212(3) of the Companies Act - independence of SFIO's power of arrest under Section 212(8) from time limits for investigation - maintainability and territorial jurisdiction of habeas corpus/writ against remand orders from courts outside Delhi - retrospective application of Companies (Amendment) Act, 2015 to make fraud a cognizable offence - power of SFIO to submit interim reports during investigation

Legality of investigation beyond time prescribed under Section 212(3) of the Companies Act - Question whether investigation and consequent actions after expiry of the three month period specified in the Government order (read with Section 212(3)) are lawful - HELD THAT: - The Court did not decide the substantive question on the merits. Having considered rival contentions, including the petitioner's submission that any investigation after expiry of the three month period is without jurisdiction and the respondents' contention that the period is not sacrosanct, the Court found that the coordinate Bench judgment relied upon by the petitioner may not be dispositive because additional factual and legal issues arise in the present case. In view of these unresolved questions and the factual matrix, the Court issued notice and directed the respondents to file a detailed counter affidavit to enable a full adjudication of whether investigation and actions taken after the prescribed period were lawful. [Paras 8, 12, 13]

Notice issued; respondents directed to file detailed counter affidavit within three days and matter listed for further hearing.

Independence of SFIO's power of arrest under Section 212(8) from time limits for investigation - power of SFIO to submit interim reports during investigation - Whether the SFIO's power to arrest or take custody under Section 212(8) is independent of the time frame for submission of the investigation report under Section 212(3), and related question of interim reporting - HELD THAT: - The Court acknowledged the respondents' contention that Section 212(3) (time for submission of report) and Section 212(8) (power to arrest) operate in different fields and that the legislature used the word 'may' in Section 212(3), and that Section 212(11) permits interim reports. These contentions raise legal questions not resolved in the coordinate Bench decision and requiring fuller response and evidence. Consequently, the Court refrained from adjudicating the issue on merits and sought a detailed counter affidavit to address the legal interplay between the provisions and the factual basis for the arrest. [Paras 10, 12, 13]

Issue left open for adjudication after respondents file counter affidavit; notice issued.

Maintainability and territorial jurisdiction of habeas corpus/writ against remand orders from courts outside Delhi - Question of territorial jurisdiction of the Delhi High Court to entertain the petition challenging arrest and remand orders passed by courts in Gurugram and related maintainability issues - HELD THAT: - The Court noted contention of the respondents that the petitioner is in judicial custody at Gurugram and that other remedies are available, and observed that the coordinate Bench decision relied upon by the petitioner on territorial jurisdiction may not be dispositive for the present case. Given the factual distinctions and additional legal points raised, the Court declined to decide the jurisdictional/maintainability issue at this stage and directed the respondents to address these aspects in their counter affidavit. [Paras 8, 10, 12, 13]

Issue reserved for decision after issuance of notice and receipt of respondents' counter affidavit.

Retrospective application of Companies (Amendment) Act, 2015 to make fraud a cognizable offence - Whether the Companies (Amendment) Act, 2015, which made fraud under Section 447 cognizable, has retrospective effect for purposes of arrest and investigation in the present case - HELD THAT: - The Court observed that the question of retrospective operation of the amendment is an additional legal issue not addressed in the coordinate Bench decision and is relevant to the lawfulness of the arrest and investigation. The Court therefore required the respondents to deal with this contention in the counter affidavit so that the issue can be considered on merits. [Paras 12, 13]

Issue kept open for determination after counter affidavit and further hearing.

Final Conclusion: The Court declined to decide the substantive challenges at this stage, issued notice to respondents, directed filing of a detailed counter affidavit within three days with advance copy to the petitioner, permitted a rejoinder, and listed the matter for further hearing on 9 January 2019.

Oppression and mismanagement - transfer register and transmission of shares - conditional/voidable gift arising from requirement of RBI permission for transfer to foreign citizen - removal and appointment of directors in petitions alleging oppression and mismanagement - appointment of an independent director with casting vote for regulation of corporate affairs - investigation of company affairs by Central Government under Section 210 of the Companies Act, 2013 - remittance of matter to Tribunal for further directions and investigation (remand)

Conditional/voidable gift arising from requirement of RBI permission for transfer to foreign citizen - transfer register and transmission of shares - Title to the 40,77,600 equity shares of Late Kishanlal Jain and their entry in the Company's Register of Members - HELD THAT: - The Tribunal examined the competing unregistered gift deeds of 10.12.2002 and 16.10.2007 and related Board resolutions/endorsements. The 2002 document was shown to be conditional on RBI permission for transfer to a US citizen and functioned as a trust arrangement rather than an immediate transfer. Subsequent additions of US citizens as joint holders in 2003 were ineffective in law without RBI permission. By contrast, the 16.10.2007 gift deed, the contemporaneous Board resolution and the Share Transfer Form evidenced Late Kishanlal's contemporaneous act of adding Appellants 2 and 3 as joint holders and delivery/endorsement of the share certificates. The Tribunal found that the entries of 16.10.2007 reflected the donor's operative act and that the Respondents, who had custody of records, had not produced the transfer register to rebut that position. In consequence, the Tribunal directed that the Company take on record Appellants 2 and 3 as joint holders of the said shares since the death of Late Kishanlal Jain. [Paras 11, 13, 14, 15, 23]

The names of Appellants 2 and 3 shall be entered in the Transfer Register as joint holders of 40,77,600 equity shares of Late Kishanlal Jain since his death on 7th April, 2009.

Oppression and mismanagement - remittance of matter to Tribunal for further directions and investigation (remand) - Whether the Respondents have engaged in conduct amounting to oppression and mismanagement calling for remedial intervention - HELD THAT: - On review of the pleadings, annual reports, auditors' qualifications and related material, the Tribunal found that NCLT had not adequately considered the Appellants' complaints. The auditors' reports recorded significant write offs in relation to dealings with Diastar Inc. (a US concern managed by Respondent No.2), non provisioning of statutory liabilities and other indications of financial mismanagement. Given Respondent No.2's dual role in the Indian company and Diastar Inc., the writing off of large receivables without evident recovery efforts and without RBI approvals (where required) raised serious concerns of potential siphoning and adverse public interest consequences. The Tribunal held that these matters warranted investigation rather than summary dismissal and therefore concluded that there was material to sustain findings of oppression and mismanagement. [Paras 16, 17, 18, 22, 23]

Respondent Nos.2 and 3 are guilty of oppression and mismanagement; the matter is remitted to the NCLT, Mumbai Bench for further consideration and investigation.

Removal and appointment of directors in petitions alleging oppression and mismanagement - appointment of an independent director with casting vote for regulation of corporate affairs - Interim organisational reliefs: removal of certain office holders and appointment of directors to regulate the Company's affairs - HELD THAT: - Having found material on oppression and mismanagement, the Tribunal exercised its remedial powers to reconstitute management to protect shareholders and the Company. It removed Respondent No.2 from the post of Managing Director while permitting him to continue as a director, removed Respondent No.3 from directorship (including noting deficiencies such as lack of DIN), and appointed Appellant No.1 as a director (subject to ratification at the next AGM). Further, the Tribunal directed immediate appointment by the NCLT of an Independent Director to regulate conduct of affairs, take custody of official and statutory records, and participate in board decisions with a casting vote where differences arise, with a review of the independent director's continuation after two years. [Paras 21, 23]

Respondent No.2 stands removed as Managing Director but may remain as Director; Respondent No.3 is removed as Director; Appellant No.1 is appointed as Director (subject to AGM); NCLT to appoint an Independent Director with specified powers and casting vote.

Investigation of company affairs by Central Government under Section 210 of the Companies Act, 2013 - Referral for statutory investigation into the affairs of the Company - HELD THAT: - In view of the auditors' qualifications, the admitted write offs relating to Diastar Inc., non payment of statutory dues and other indicia of mismanagement and possible siphoning affecting public interest and revenue, the Tribunal directed that a copy of the judgment be forwarded to the Central Government through the Ministry of Corporate Affairs with a request to cause an investigation under Section 210 of the Companies Act, 2013. The Tribunal recorded that the Company, via the Independent Director, shall cooperate with any such investigation and that persons found responsible may be liable for appropriate action. [Paras 17, 22, 23]

Judgment to be forwarded to the Central Government requesting investigation under Section 210 of the Companies Act, 2013; the Company and Independent Director to cooperate.

Remittance of matter to Tribunal for further directions and investigation (remand) - Remand of the proceeding to the National Company Law Tribunal, Mumbai Bench for further adjudication and appropriate directions - HELD THAT: - The Appellate Tribunal found the NCLT's dismissal unsustainable in view of unaddressed material pointing to mismanagement and oppression. Accordingly, the appeal was allowed, the impugned order quashed and set aside, and the matter remitted to the NCLT, Mumbai for further consideration, investigation and appropriate orders, leaving open other reliefs such as winding up for determination by the Tribunal after investigation. [Paras 5, 22, 23]

The matter is remitted to NCLT, Mumbai Bench for further consideration and investigation; the impugned NCLT order is quashed and set aside.

Removal and appointment of directors in petitions alleging oppression and mismanagement - Costs awarded to successful Appellants - HELD THAT: - The Tribunal quantified and awarded costs in favour of the Appellants in recognition of successful prosecution of the appeal and the reliefs granted. [Paras 23]

Costs of the appeal quantified at an amount payable by Respondent Nos.2 and 3 jointly or severally to the Appellants.

Final Conclusion: The appeal is allowed; the NCLT order is set aside and the matter is remitted to the NCLT, Mumbai for further adjudication and investigation. The Tribunal found material of oppression and mismanagement, directed entry of Appellants 2 and 3 in the Transfer Register as joint holders of the specified shares, removed and appointed specified directors (including direction to appoint an Independent Director with specified powers), requested the Central Government to investigate under Section 210 of the Companies Act, 2013, and awarded costs to the Appellants.

Liquidation under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - failure to obtain a Resolution Plan within the statutory period - moratorium - appointment of Company Liquidator - vesting of management powers in the liquidator - disposal of assets as a going concern - prohibition on suits and legal proceedings during liquidation - liquidator's fees under IBBI regulations

Liquidation under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - failure to obtain a Resolution Plan within the statutory period - Order for liquidation of the Corporate Debtor following non-approval of any Resolution Plan within the maximum period permitted under the Code. - HELD THAT: - The Resolution Professional submitted that no Resolution Plan was approved by the Committee of Creditors within the maximum period permitted under Section 12 of the I&B Code and that no plan was received under Section 30(6). Having recorded the facts and the COC's commercial decision rejecting the offers, the Adjudicating Authority proceeded, in exercise of the powers under Clause (b) of sub section (1) of Section 33, to pass an order for liquidation of M/s. Ashok Magnetics Limited. The Authority expressly found that the recourse was liquidation as envisaged by the Code once the CIRP period expired without an approved plan. [Paras 6, 8]

Liquidation of the Corporate Debtor ordered and MA/163/2018 disposed of.

Appointment of Company Liquidator - vesting of management powers in the liquidator - liquidator's fees under IBBI regulations - Appointment of the Resolution Professional as Company Liquidator and vesting of powers, duties and entitlements in the Liquidator during liquidation. - HELD THAT: - The Authority appointed the then Resolution Professional as Company Liquidator and directed issuance of the statutory public announcement. All powers of the board, KMPs and partners cease and vest in the Liquidator who is to exercise duties enumerated under the Code and Liquidation Regulations. The Liquidator is entitled to charge fees in the proportion and manner specified by the IBBI, to be paid from the liquidation estate proceeds. The Registry was directed to notify concerned authorities and offices for compliance. [Paras 8]

Mr. V. Nagarajan appointed Company Liquidator; management powers vested in him and entitlement to IBBI prescribed fees recognised; notification directions issued.

Moratorium - prohibition on suits and legal proceedings during liquidation - Cessation of the moratorium and constraints on instituting suits or proceedings following liquidation; exception for suits by the Liquidator and specified statutory exceptions. - HELD THAT: - The Order provides that the moratorium declared under Section 14 shall cease from the date of liquidation. Subject to Section 52 and notified transactions, no suit or legal proceeding shall be instituted by or against the Corporate Debtor; however, the Liquidator may institute suits on behalf of the Corporate Debtor with prior approval of the Adjudicating Authority. The Authority clarified that statutory exceptions notified by the Central Government in consultation with financial regulators are not affected. [Paras 8]

Moratorium ceases; general bar on suits against or by the Corporate Debtor during liquidation, with limited exceptions and leave for the Liquidator to sue with prior approval.

Disposal of assets as a going concern - continuation of operations during liquidation - Permission to the Liquidator to continue operations and to liquidate and dispose of assets of the Corporate Debtor on a going concern basis. - HELD THAT: - Noting the location and nature of the Corporate Debtor's factory and the commercial considerations advanced by the Resolution Professional, the Authority permitted the Liquidator to continue the business and to sell assets on a going concern basis where appropriate and tax efficient. This permission was granted to facilitate realization of value for the liquidation estate. [Paras 7, 9]

Liquidator permitted to continue operations and dispose of the corporate assets as a going concern.

Discharge of employees - Order deemed to be a notice of discharge to officers, employees and workmen of the Corporate Debtor, subject to continuation of business by the Liquidator. - HELD THAT: - The Authority declared that the liquidation order shall operate as a notice of discharge to the Corporate Debtor's officers, employees and workmen, except in the event the Liquidator continues the business during liquidation, in which case their engagement may be governed by the Liquidator's decision. [Paras 8]

Order deemed notice of discharge to employees, subject to continuation of business by the Liquidator.

Final Conclusion: The Tribunal ordered liquidation of M/s. Ashok Magnetics Limited after the CIRP concluded without an approved Resolution Plan, appointed the Resolution Professional as Company Liquidator with vesting of management powers and entitlement to IBBI prescribed fees, declared cessation of the moratorium subject to statutory exceptions and restrictions on suits, permitted continuation of operations and disposal of assets as a going concern, deemed employees discharged subject to continuation of business, and directed necessary communications for compliance.

Duties of resolution professional - duty to manage operations as a going concern and to protect and preserve value of corporate debtor's property - application to Adjudicating Authority under section 19(2) for non-cooperation - failure to conduct corporate insolvency resolution process - recusal from appointment as liquidator - professional misconduct of an insolvency professional - imposition of monetary penalty by Disciplinary Committee

Duties of resolution professional - duty to manage operations as a going concern and to protect and preserve value of corporate debtor's property - application to Adjudicating Authority under section 19(2) for non-cooperation - Whether Mr. Vasudeo Agarwal failed in his statutory duties as Resolution Professional by not taking over management, not seeking AA's direction under section 19(2) when faced with alleged non-cooperation, and thereby contravened provisions of the Code. - HELD THAT: - The Disciplinary Committee found that a resolution professional (RP) has the statutory duty to manage the corporate debtor as a going concern and to protect and preserve the value of its assets. The statute recognises that an RP may face non-cooperation and entitles the RP to apply to the Adjudicating Authority for directions under section 19(2). Mr. Agarwal neither took over management nor made an application for directions; he merely reported non-cooperation in a progress report towards the end of the CIRP. The DC rejected his explanation that he could not trace the corporate debtor, noting prior engagement of an IRP, two CoC meetings, attendance of a director who informed about a change of address, and that Mr. Agarwal did not visit the premises. On these facts the DC concluded that Mr. Agarwal failed in his statutory duties and contravened the provisions of the Code (sections 20 and 23 as identified by the DC). [Paras 4, 5]

Found guilty of failing in statutory duties as RP by not taking over management or applying to the AA for directions; contravention of the Code established.

Failure to conduct corporate insolvency resolution process - professional misconduct of an insolvency professional - Whether Mr. Agarwal failed to conduct the CIRP (including appointing valuers, preparing information memorandum, issuing invitation for expression of interest, inviting resolution plans) and whether such failure amounted to misconduct. - HELD THAT: - The DC held that an RP exercises the powers akin to the board of directors and is required to conduct the CIRP; while the role is challenging, an IP is expected to meet those challenges. The record showed that except for one CoC meeting and two progress reports Mr. Agarwal did not make serious efforts to perform necessary CIRP tasks such as appointing valuers, preparing information memorandum or issuing EOIs. The DC viewed this as a laid-back attitude and practical abandonment of the CIRP, amounting to contravention of the Code and professional failings. [Paras 4, 5]

Found that Mr. Agarwal failed to conduct the CIRP and that his conduct constituted professional misconduct/contravention.

Duties of resolution professional - recusal from appointment as liquidator - Whether Mr. Agarwal's request to be recused from appointment as Liquidator without cogent reasons amounted to misconduct. - HELD THAT: - Although Mr. Agarwal sought to be recused as Liquidator, he continued to discharge the responsibilities of the Liquidator until the Adjudicating Authority discharged him. The DC observed that while the statute does not envisage avoidance of responsibility, there is no prohibition on seeking recusal with the AA's approval. On the facts, the DC did not find fault with Mr. Agarwal for seeking recusal. [Paras 4]

Request for recusal did not attract adverse finding; no fault found in seeking recusal given continued discharge of duties until discharge by the AA.

Imposition of monetary penalty by Disciplinary Committee - professional misconduct of an insolvency professional - What penalty, if any, should be imposed for the contraventions found against Mr. Agarwal? - HELD THAT: - Balancing the seriousness of contraventions with mitigating facts, including the stage of the CIRP when Mr. Agarwal was appointed (about 140 days after commencement) and difficulties explained, the Disciplinary Committee opted for a lenient but substantive sanction. Exercising powers under the Code and relevant regulations, the DC imposed a monetary penalty equal to 100% of the total fee payable to Mr. Agarwal as IRP and RP in the CIRP and directed deposit of the penalty within 30 days, to be credited to the Consolidated Fund of India. [Paras 5, 6]

Monetary penalty equal to 100% of fees as IRP and RP imposed; directions issued for deposit and forwarding of order to relevant bodies.

Final Conclusion: The Disciplinary Committee found that Mr. Vasudeo Agarwal failed in key statutory duties as Resolution Professional and did not adequately conduct the CIRP, while his seeking of recusal as Liquidator did not attract adverse finding; a monetary penalty equal to 100% of the fees payable as IRP and RP was imposed with directions for deposit and administrative communication of the order.

Principles of natural justice in adjudication proceedings - opportunity to file reply under Section 33-A of the Central Excise Act, 1944 - maintainability of writ petition in presence of statutory appeal - statutory appeal to the Customs Excise and Service Tax Appellate Tribunal

Principles of natural justice in adjudication proceedings - opportunity to file reply under Section 33-A of the Central Excise Act, 1944 - Whether the Adjudicating Authority denied sufficient opportunity to the petitioner so as to render the adjudication vulnerable to writ challenge - HELD THAT: - The Court examined the show cause notice, the petitioner's failure to file any substantive reply and the record of personal hearing. It noted that the petitioner repeatedly sought extensions but, despite being granted time, did not submit a reply. The Court held that on the factual matrix the Adjudicating Authority had afforded opportunity and that Section 33-A does not mandate the further opportunity the petitioner sought. Consequently, the contention that principles of natural justice were violated was rejected and the adjudication was not found to be amenable to challenge under writ jurisdiction on that ground. [Paras 6, 7]

Claim of denial of sufficient opportunity and violation of natural justice rejected; adjudication not vulnerable to writ on that ground.

Maintainability of writ petition in presence of statutory appeal - statutory appeal to the Customs Excise and Service Tax Appellate Tribunal - Whether the petitioner may invoke writ jurisdiction instead of pursuing the statutory appeal and what relief, if any, should be afforded - HELD THAT: - The Court observed that an appeal against the impugned adjudication is maintainable before the Appellate Tribunal and that the impugned order itself refers to the statutory remedy. Without expressing any view on the merits, the Court declined to entertain the challenge to the order under writ jurisdiction and instead disposed the petition by granting liberty to the petitioner to file the statutory appeal. The Court permitted filing the appeal within four weeks and directed that any such appeal be considered on merits and in accordance with law, without regard to limitation. The petitioner was also permitted to raise all objections before the Tribunal. [Paras 4, 8]

Writ not entertained in lieu of statutory appeal; petitioner granted liberty to file statutory appeal within four weeks and the appeal to be adjudicated on merits without reference to limitation.

Final Conclusion: Writ petition dismissed on merits insofar as it alleged denial of opportunity; petitioner permitted to prefer statutory appeal before the Appellate Tribunal within four weeks, which shall be decided on its merits and in accordance with law without reference to limitation.

Maintenance or repair services - taxability of immovable property prior to 16.06.2005 - sub-contractor liability and main contractor discharge - inclusion of service tax in taxable turnover - erection and commissioning services and GTA services - penalty relief under Section 80 of the Finance Act, 1994

Maintenance or repair services - taxability of immovable property prior to 16.06.2005 - Whether demands for service tax on repair and maintenance of conveyor galleries and related works prior to 16.06.2005 are sustainable - HELD THAT: - The Court examined the statutory definition of "Maintenance or repair" before and after 15.06.2005 and held that repair and maintenance of immovable property became taxable only from 15.06.2005. The work orders and photographs indicate the appellant performed upkeep and maintenance of conveyor galleries and related refractory works that, on the material on record, constitute maintenance of immovable property. Applying the Tribunal's ratio in K.K. Spun Pipe and similar precedents, services relating to embedded or structural works prior to 16.06.2005 cannot be taxed as MMR services. Accordingly, demands for the period prior to 16.06.2005 are unsustainable. [Paras 6]

Demands for repair and maintenance relating to immovable property prior to 16.06.2005 quashed as unsustainable.

Sub-contractor liability and main contractor discharge - Whether service tax demand on works executed by the appellant as subcontractor stands when main contractors have discharged tax liability - HELD THAT: - The Tribunal noted the appellant's contention that main contractors discharged tax liability and observed that the ratio in Power Mech Projects Ltd., Dhaneshra Engineering Works and Lone Star Engineers would apply if the appellant produces evidence that the original contractors had discharged the tax. As the appellant failed to place complete evidence before the Tribunal, this part of the matter was not finally adjudicated on merits. The matter is remitted to the Adjudicating Authority to reconsider this issue in the light of evidence, following the cited precedents. [Paras 7]

Remitted to the Adjudicating Authority for fresh consideration on evidence whether main contractors discharged the service tax liability.

Inclusion of service tax in taxable turnover - Whether the Adjudicating Authority's computation erred by including service tax in taxable turnover - HELD THAT: - The Tribunal observed that the computation point raised by the appellant - inclusion of service tax in taxable turnover - requires reconsideration. It directed the Adjudicating Authority to examine this aspect when the remitted matter (relating to subcontractor/main contractor liability) is taken up, implying that the computation error was not finally decided but should be re-examined in the course of the remand. [Paras 8]

Computation issue remitted to the Adjudicating Authority for reconsideration as part of the remanded proceedings.

Erection and commissioning services and GTA services - penalty relief under Section 80 of the Finance Act, 1994 - Validity of demands and penalties in respect of short payment for erection & commissioning services and GTA services - HELD THAT: - The Tribunal recorded that the appellant admitted liability for short payment in relation to erection and commissioning services and GTA services and had not discharged tax earlier. The demands in respect of these services were therefore upheld. However, the Tribunal exercised its power to mitigate penalties and set aside penalties by invoking Section 80 of the Finance Act, 1994. [Paras 9]

Demands for erection & commissioning and GTA services upheld; penalties set aside under Section 80 of the Finance Act, 1994.

Limitation - Whether the demands are barred by limitation - HELD THAT: - The Tribunal did not decide the limitation question on the merits. It left the limitation issue open for the Adjudicating Authority to reconsider when addressing the matters remitted for fresh consideration. [Paras 10]

Limitation left open for reconsideration by the Adjudicating Authority in the remanded proceedings.

Final Conclusion: Appeal disposed: demands for repair and maintenance of immovable property prior to 16.06.2005 quashed; demands for erection & commissioning and GTA services upheld but penalties set aside under Section 80; issues relating to subcontractor liability, inclusion of service tax in taxable turnover and limitation remitted to the Adjudicating Authority for fresh consideration on evidence.

Classification of composite service by essential character - jurisdiction of centralized registration - works contract service vs erection, commissioning and installation service vs commercial or industrial construction service - remand for determination of predominant service - exclusion of transport terminals from commercial or industrial construction service - abatement under Notification No. 1/2006 ST - invocation of extended period of limitation - cum tax treatment

Jurisdiction of centralized registration - Hyderabad Commissionerate II had jurisdiction to issue demand despite services being provided at Kakinada. - HELD THAT: - The appellants had obtained centralized registration with Hyderabad Commissionerate II and maintained all records and accounts relating to the RIL project at their Hyderabad office. On these facts the Tribunal held that the Commissionerate could validly issue the demand even though the services were performed outside the territorial limits of the Commissionerate. [Paras 6]

Jurisdiction of Hyderabad Commissionerate II is sustained.

Classification of composite service by essential character - remand for determination of predominant service - The adjudicating authority must determine which taxable service (ECIS or CICS) imparts the essential character to the indivisible composite contract; the matter is remanded for fresh consideration on that limited question. - HELD THAT: - The Tribunal accepted that the contract is an indivisible composite contract involving construction, erection, commissioning and allied activities. Section 65A(2)(b) provides the test of essential character for classification of composite services. The Bench found insufficient material on record to decide which taxable category predominates and observed that quantification of predominance may require verifiable data such as man hours and cost apportionment. Accordingly, the Tribunal remanded the matter to the adjudicating authority to determine on evidence whether the essential character is that of Erection, Commissioning and Installation Service (ECIS) or Commercial or Industrial Construction Service (CICS). [Paras 7, 11, 12, 13, 15]

Remanded to the adjudicating authority to decide, on evidence, which taxable service imparts the essential character to the composite contract.

Works contract service vs pure service contract - Demand confirmed under Works Contract Service in appeal ST/30275/2016 is unsustainable and set aside. - HELD THAT: - The Tribunal found the contract to be a pure service contract on a cost plus basis that did not involve transfer of property in goods - a prerequisite for classifying a transaction as a Works Contract Service. On that basis the demand and penalties in the stated appeal were annulled. [Paras 14, 19]

Demand and penalties under the Works Contract Service head in appeal ST/30275/2016 are set aside.

Exclusion of transport terminals from commercial or industrial construction service - If on remand the adjudicating authority concludes the contract is classifiable as CICS, the authority must then determine whether the Onshore Terminal qualifies as a 'transport terminal' and is therefore excluded from CICS. - HELD THAT: - The Tribunal directed that the exclusion of 'transport terminals' from CICS will become relevant only if the adjudicating authority finds that the essential character of the composite contract is CICS. In that event the adjudicating authority should consider whether the Onshore Terminal is a transport terminal, taking into account the ratio in Afcons and submissions of the parties. [Paras 15, 16]

Remanded: adjudicating authority to decide whether the Onshore Terminal is a 'transport terminal' if it concludes the contract is CICS.

Abatement under Notification No. 1/2006 ST - If the adjudicating authority holds the services taxable under CICS, the appellant may be entitled to abatement under Notification No. 1/2006 ST (33%) subject to departmental verification. - HELD THAT: - The Tribunal observed that, should the adjudicating authority determine the contract is taxable as CICS and not excluded as a transport terminal, the appellant's claim to pay tax on 33% of the value under Notification No. 1/2006 ST would be available, subject to verification of conditions (such as non availment of CENVAT). The Bench noted Revenue did not seriously dispute entitlement to the exemption if CICS is found to apply. [Paras 16]

If CICS is found to apply, abatement under Notification No. 1/2006 ST to be considered by the adjudicating authority.

Invocation of extended period of limitation - The question of invoking the extended period of limitation is left open for determination by the adjudicating authority on remand. - HELD THAT: - The Tribunal declined to decide the appellants' challenge to the invocation of the extended period because that issue becomes relevant only if on remand the adjudicating authority concludes that the services are taxable under CICS. The matter was accordingly left open for fresh adjudication. [Paras 17]

Extended period contention remitted to adjudicating authority for decision if taxability under CICS is affirmed.

Cum tax treatment - The applicability of cum tax treatment (whether amounts were inclusive of service tax) is to be examined by the adjudicating authority on remand if any demand is confirmed. - HELD THAT: - The Tribunal did not decide Revenue's appeal on cum tax; it instructed the adjudicating authority to examine cum tax benefit and related quantification if it confirms any demand on remand. [Paras 18]

Cum tax issue remanded for adjudication if demand is confirmed.

Final Conclusion: Appeals (except ST/30275/2016) are remanded to the adjudicating authority to determine, after giving parties opportunity and on evidentiary material, which taxable service imparts the essential character of the indivisible composite contract and, if CICS is held to apply, whether the Onshore Terminal is excluded as a transport terminal, applicability of Notification No.1/2006 ST, invocation of extended limitation and cum tax treatment; demand and penalties in appeal ST/30275/2016 (WCS head) are set aside.

Composite indivisible works contract - exigibility of service tax - abatement under notification 12/2003-ST - strict construction of exemption notification - Section 65(105)(zzzza) - principles of natural justice

Composite indivisible works contract - exigibility of service tax - Remand for determination whether the appellant's ship repair contracts were exigible to service tax prior to 01.06.2007 - HELD THAT: - The Tribunal observed that the contracts prima facie appear to be indivisible works contracts involving transfer of materials (replacement of steel sheets) together with services, and that exigibility was not examined by the adjudicating authority. Since the question whether such contracts attracted service tax prior to 01.06.2007 (in light of the Supreme Court's decision in Larsen & Toubro Ltd) was not considered below, the Tribunal held that the matter must be examined afresh by the original authority. The Tribunal therefore remanded the issue for denovo adjudication so that the original authority may determine, after following principles of natural justice, whether the services were exigible before 01.06.2007. [Paras 10]

Remanded to the original authority to decide whether the services were exigible prior to 01.06.2007.

Section 65(105)(zzzza) - exigibility of service tax - Remand for determination whether the appellant's services were exigible to service tax after 01.06.2007 under Section 65(105)(zzzza) - HELD THAT: - The Tribunal noted that the adjudicating authority did not examine whether the appellant's maintenance and repair services of ships fell within the scope of Section 65(105)(zzzza) post 01.06.2007. Because exigibility under that specific charging provision was not considered in the impugned orders, the Tribunal directed a fresh adjudication by the original authority to determine whether the appellant's services were chargeable to service tax after 01.06.2007, in accordance with law and after observing principles of natural justice. [Paras 10]

Remanded to the original authority to decide exigibility of the services post 01.06.2007 under Section 65(105)(zzzza).

Abatement under notification 12/2003-ST - strict construction of exemption notification - Remand for determination of the appellant's entitlement to abatement under notification 12/2003 ST if services are found exigible - HELD THAT: - The Tribunal agreed with the revenue that exemption notifications must be strictly construed and observed that the adjudicating authority denied abatement because the appellant produced records of purchases but not proof of sale or use of materials in the executed contracts. The appellant offered during the hearing to produce supporting evidence. Consequently, the Tribunal remanded the issue so the original authority may, after affording opportunity to the parties, examine the materials actually used/supplied and quantify any abatement under notification 12/2003 ST if the services are held exigible. [Paras 9, 10, 11]

Remanded to the original authority to determine entitlement to abatement under notification 12/2003 ST (and to compute the abatement) if the services are found exigible, after following principles of natural justice.

Final Conclusion: The appeals are allowed to the extent that the matters are remanded to the original adjudicating authority for fresh consideration, after affording opportunity to the parties, to determine (i) exigibility of service tax prior to 01.06.2007, (ii) exigibility post 01.06.2007 under Section 65(105)(zzzza), and (iii) entitlement to abatement under notification 12/2003 ST (with computation) if exigibility is established, the adjudicator to decide all points following principles of natural justice.

Liability to pay service tax on Business Auxiliary Service - service tax liability of a non-resident individual agent - commercial concern - proprietorship/individual not a commercial concern - extended period of limitation

Liability to pay service tax on Business Auxiliary Service - service tax liability of a non-resident individual agent - commercial concern - proprietorship/individual not a commercial concern - Whether an individual NRI providing commission agent services (proprietorship/individual) is liable to pay service tax under the category of Business Auxiliary Service. - HELD THAT: - The Tribunal held that, based on consistent precedent, services rendered by an individual or a proprietorship concern during the relevant period were not to be treated as services provided by a "commercial concern" for the purpose of taxing Business Auxiliary Services. The Tribunal relied on earlier decisions which construed the legislative intent and Board clarifications to the effect that proprietary/individual providers were not covered by the BAS levy in the period in question. Applying that legal position to the facts, the impugned demand against the appellant, an NRI individual/proprietor providing commission-agent services, could not be sustained. As the appeal was allowed on this ground, other contentions in the appeal were not considered.

Impugned order setting aside was allowed and the service-tax demand under Business Auxiliary Service against the appellant (individual/proprietor) was set aside.

Final Conclusion: Appeal allowed: service-tax demand under the Business Auxiliary Service category against the appellant, an NRI individual/proprietor providing commission-agent services, was set aside on the ground that an individual/proprietorship is not a "commercial concern" for BAS levy; other issues were not decided.

Support services of business or commerce - infrastructural support services - health care services - clinical establishment - negative list regime - distinction between profession and business

Support services of business or commerce - infrastructural support services - distinction between profession and business - Whether the portion of patient fees retained by the hospital constituted taxable consideration for providing business support/infrastructural support services to consulting doctors - HELD THAT: - On analysis of the contractual arrangements and revenue sharing model, the Tribunal held that the agreements reflect a joint, mutually beneficial commercial arrangement for provision of health care services rather than a contract by which the hospital separately provides infrastructural support services in relation to a doctor's business or commerce. The agreements specify appointment of consultants, duration of consultation, shared collections and shared obligations and do not manifestly identify or attribute consideration specifically for infrastructural support. Applying the legal distinction between a profession and business, the Tribunal observed that doctors render professional medical services and that treating the retained share as payment for support to a doctor's "business or commerce" is inconsistent with the nature of the arrangement. The Tribunal followed the reasoning in the cited precedent (M/s Sir Ganga Ram Hospital and others) and concluded that no taxable activity under the head of support services of business or commerce was discernible from the arrangements and the Revenue's inference to the contrary was not sustainable. [Paras 4, 5, 6, 7, 8]

The retained portion of patient fees was not taxable as consideration for business support/infrastructural support services; the finding of tax liability on that basis was rejected.

Health care services - clinical establishment - negative list regime - Whether the exemption for health care services rendered by clinical establishments under the negative list regime precludes treating any part of the consideration for such services as taxable business support services - HELD THAT: - The Tribunal examined Notification No. 25/2012 and the definitions of clinical establishment and health care services, and concluded that clinical establishments providing health care services are exempt under the negative list regime. The Revenue's attempt to single out and tax a portion of the consideration received for exempt health care services by characterising it as payment for business support services was held to defeat the exemption and to be neither factually supported by the contracts nor legally tenable. Since the services for which amounts were collected from patients were health care services provided by the clinical establishment (through engagement of consultant doctors), there was no legal justification to impose service tax on the establishment's retained share on the ground of providing infrastructural support to doctors. [Paras 9, 10, 11]

The exemption for health care services rendered by clinical establishments applies and the Revenue's claim to tax the hospital's retained share as business support service is untenable.

Final Conclusion: The Tribunal set aside the impugned appellate order and allowed the appeal, holding that the retained share of patient fees did not attract service tax as business support services and that the exemption for health care services rendered by clinical establishments under the negative list regime precluded the Revenue's claim.

Supply of tangible goods - effective control and possession - temporal operation of tax entry - non-retroactivity of taxation - lease arrangement distinguished from taxable supply

Supply of tangible goods - effective control and possession - temporal operation of tax entry - Whether periodic lease/rent receipts arising from wagons supplied to Indian Railways attract service tax as 'supply of tangible goods' for the period May 2008 to 31/03/2012. - HELD THAT: - The Tribunal held that the wagons were supplied to Indian Railways in 1996 pursuant to the contract and that the material event of supply therefore occurred prior to introduction of the tax entry w.e.f. 16/05/2008. Periodical payments under that earlier supply are not leviable to service tax because tax liability did not exist when the supply occurred. Independently, the Tribunal found that the contractual scheme conferred right of possession and effective control of the wagons on the Railways; where effective control and possession rest with the recipient, the transaction does not fall within the taxable entry for supply of tangible goods. The decision follows the Tribunal's earlier ruling in the appellant's own case and applies that precedent to the present facts, concluding that the tax entry has no application to the transaction on either temporal or control-possession grounds.

Impugned order confirming service tax demand set aside; appeal allowed.

Final Conclusion: The tribunal allowed the appeal, set aside the confirmed service tax demand for the period May 2008 to 31/03/2012, holding that the supply of wagons occurred in 1996 and that effective control and possession lay with Indian Railways, thus excluding the transaction from the taxable entry invoked.

Valuation of taxable service - gross amount charged in the normal course of business - non-monetary consideration - valuation under Section 67 of the Finance Act, 1994 - invocation of Rule 3 of the Service Tax Valuation Rules, 2006 - pre declared scholarship/discount as bona fide trade practice - application of prior tribunal decision as binding precedent - sustainability of penalties

Valuation of taxable service - gross amount charged in the normal course of business - non-monetary consideration - invocation of Rule 3 of the Service Tax Valuation Rules, 2006 - pre declared scholarship/discount as bona fide trade practice - Whether pre declared scholarship/fee concession granted to certain students constitutes non monetary consideration requiring valuation at the normal (full) fee under the valuation rules, or whether service tax is correctly payable on the actual concessional fee received. - HELD THAT: - The Tribunal held that where a coaching institute publishes in its prospectus a pre notified scholarship scheme that affords a percentage concession in course fees to categories of students meeting specified criteria, such concession represents a bona fide, universally available business practice and does not amount to non monetary consideration necessitating addition to the monetary consideration. The appellants did not dispute liability to pay service tax on the amounts actually received. In these facts there was no reason to invoke Rule 3 for treating the concessional portion as non monetary consideration and to value the service at the normal fee payable by other students. The decision was taken also in light of and consistent with the Tribunal's earlier Final Order No. 57680 57683/2017 dated 03.11.2017 in the appellant's own case, which rejected applying valuation rules to such pre declared scholarship schemes. [Paras 6]

Concessional fee under a pre declared scholarship scheme is not non monetary consideration; service tax is payable on the actual fee received and invocation of Rule 3 to value at normal full fee is unwarranted.

Application of prior tribunal decision as binding precedent - sustainability of penalties - Whether the impugned demands and penalties confirmed by the Commissioner are sustainable in view of the Tribunal's prior decision in the appellant's own case. - HELD THAT: - The Tribunal noted that the matter was no longer res integra and the Commissioner's invocation of valuation rules and imposition of penalties stood contrary to the Tribunal's earlier findings. Given the earlier decision in favour of the appellants on the valuation point, the demands and penalties confirmed by the Commissioner for the specified periods lacked merit. The Tribunal therefore set aside the orders in original, allowing the appeals and disallowing the penalties insofar as they rested on the same discredited valuation theory. [Paras 6, 7]

Impugned orders confirming demands and penalties are set aside as contrary to the Tribunal's earlier ruling; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for the periods 01/04/2013-31/03/2014 and 01/04/2014-31/03/2015, holding that pre declared scholarship/fee concessions are bona fide trade practice and do not constitute non monetary consideration requiring valuation at the normal fee; consequently the demands and penalties founded on that valuation theory were set aside.

Cenvat credit admissibility - requirement of invoices under Rule 9 of Cenvat Credit Rules, 2004 - admissibility of photocopies as secondary evidence - beneficial scheme for grant of credit and genuineness of transaction - remand for verification and re calculation

Cenvat credit admissibility - requirement of invoices under Rule 9 of Cenvat Credit Rules, 2004 - admissibility of photocopies as secondary evidence - beneficial scheme for grant of credit and genuineness of transaction - Whether cenvat credit can be allowed on the basis of photocopies of invoices where genuineness of the transaction and payment of duty are not disputed. - HELD THAT: - The Tribunal observed that there was no dispute as to receipt and use of duty paid inputs and no allegation that the invoices were bogus; the Department's sole objection was non production of original invoices. Rule 9 prescribes invoices as documents for availing credit but does not expressly mandate that such invoices must be in original form. Precedents referred to by the Tribunal support that technical insistence on originals should not defeat a bona fide claim where the transaction is genuine and duty has been paid. Further, the Indian Evidence Act permits tender of photocopies as secondary evidence. In these circumstances, refusal to consider photocopies solely on account of non production of originals was held to be insufficient and inequitable. However, since verification and recalculation based on the photocopies asserted to be available with the appellant were necessary, the matter required fresh adjudication. [Paras 6, 7, 8]

The matter is remanded to the Commissioner (Appeals) to consider the photocopies of invoices produced by the appellant within 15 days of notice, verify and re calculate entitlement to credit in the light of the foregoing, and adjudicate accordingly; appeal allowed by way of remand.

Final Conclusion: Appeal allowed by way of remand: Commissioner (Appeals) directed to consider photocopies of invoices produced by the appellant within 15 days, verify and re calculate the cenvat credit entitlement, and pass a fresh adjudication in accordance with the Tribunal's reasoning.

Limitation period and date of communication - condonation of delay - proof of service/communication - appeal under Section 35 of the Central Excise Act - date of communication relevant - remand for adjudication on merits

Limitation period and date of communication - proof of service/communication - appeal under Section 35 of the Central Excise Act - date of communication relevant - Whether the appeal to the Commissioner (Appeals) was time barred having regard to the date on which the Order in Original was communicated to the appellant. - HELD THAT: - The Tribunal found that reckoning of the 60 day limitation under Section 35 must commence from the date of communication of the Order in Original. The appellant filed an affidavit stating that the Order in Original was received only on 10.08.2015 and there is no proof of service or delivery by the Department; the Order in Original was dispatched to the assessee's old address. Mere dispatch by registered post without proof of effective communication was held insufficient to fix the date of communication. Singh Enterprises (relied on by Revenue) was held inapplicable on these facts because the Commissioner (Appeals) was required to examine whether the order had actually been communicated before concluding the appeal was barred by limitation. The Tribunal accepted that the 60 day period (and any condonable extension) must be reckoned from 10.08.2015 and therefore opined that the Commissioner (Appeals) erred in holding the appeal to be delayed by one year and twenty days. [Paras 4, 5, 6]

Delay in filing before the Commissioner (Appeals) was not established; limitation period begins from date of communication (10.08.2015) and the Tribunal condoned the delay.

Condonation of delay - proof of service/communication - remand for adjudication on merits - Whether the appeal should be remanded to the Commissioner (Appeals) for decision on merits after condoning the delay. - HELD THAT: - The Tribunal exercised its power to condone delay having accepted the appellant's affidavit of non receipt and noting absence of proof of service by Revenue. Since the Commissioner (Appeals) dismissed the appeal solely on limitation without adjudicating the substantive merits, the Tribunal held that the appropriate course was to condone the delay and remit the matter to the Commissioner (Appeals) for adjudication on merits. The Tribunal relied on precedent permitting condonation where non receipt is established by affidavit and not rebutted by proof of dispatch. [Paras 7, 8]

Delay condoned and the matter remitted to the Commissioner (Appeals) for decision on merits.

Final Conclusion: The Tribunal condoned the delay in filing the appeal (finding the Order in Original communicated to the appellant on 10.08.2015) and allowed the appeal by way of remand to the Commissioner (Appeals) for adjudication on merits.

Short payment of service tax - excess cenvat credit - software error in filing returns - production and examination of documentary proof - voluntary deposit of disputed tax

Short payment of service tax - excess cenvat credit - software error in filing returns - production and examination of documentary proof - voluntary deposit of disputed tax - Sustainability of the demand confirmed for alleged short payment of service tax and alleged excess cenvat credit for the period July, 2012 to March, 2014. - HELD THAT: - The Tribunal found that the dispute required examination and correlation of the ST-3 returns and supporting documents to determine whether there was any short payment of service tax and whether excess cenvat credit had been availed during the impugned period. The appellant produced half-yearly ST-3 returns and a calculation chart which showed identical opening balances between successive half-yearly returns, a fact indicative of the software failing to pick up opening balances rather than deliberate evasion. A Chartered Accountant's certificate corroborated that glitches in the appellant's return-preparation software caused input credits not to be shown as utilized, producing anomalous large credit balances. The appellant also made a suo motu deposit of the identified short payment during 2013, which the lower authorities did not confront in their order. Having examined the record, the Tribunal concluded that the adjudicating authority erred in confirming the demand merely for want of documents and by ignoring the documentary evidence already placed on record, and that there was no material to establish intentional evasion by the appellant.

The order confirming the demand is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the order confirming the demand for the period July, 2012 to March, 2014, and granted consequential benefits if any.

Dismissal for want of prosecution - power of Tribunal to decide appeals on merits - restoration of appeal - recall/rehearing of ex parte orders - Section 35C of the Central Excise Act - Rule empowering dismissal ultra vires - substantial question of law

Dismissal for want of prosecution - power of Tribunal to decide appeals on merits - Balaji Steel precedent effect - The Tribunal's dismissal of the appeal for want of prosecution is unsustainable and the appeal ought to be decided on merits. - HELD THAT: - Relying on the principles laid down by the Supreme Court in Balaji Steel Re-Rolling Mills and the consistent view in decisions referenced by this Court, the Tribunal has no power to short-circuit an appeal by dismissing it for non-appearance. The scheme of the Central Excise Act contemplates that appeals be disposed of by confirming, modifying or annulling the impugned order or by remanding the matter; it does not confer a power to dismiss for default of appearance. Where an appeal is decided ex parte, established principles permit recall and rehearing if sufficient cause is shown. The Tribunal's impugned order dismissing the appeal for want of prosecution, without adjudication on merits and without considering grounds for restoration, is therefore contrary to law. [Paras 3, 5, 6, 7]

Impugned dismissal for non-prosecution set aside; the principle that appeals must be decided on merits is affirmed.

Restoration of appeal - remand for fresh consideration - notice to Official Liquidator - The application for restoration was wrongly dismissed and the appeal is to be restored and remitted to the Tribunal for fresh adjudication on merits. - HELD THAT: - Having found the initial dismissal to be without jurisdiction and contrary to law, the Court directed restoration of the appeal and remand for fresh consideration. The Court noted circumstances (including prior hearings and the company's liquidation) which required notice to be served on the Official Liquidator and afforded an opportunity to appear. The matter is remitted so the Tribunal can decide the appeal on merits in accordance with law and after giving appropriate notice and opportunity to the parties. [Paras 5, 6, 7, 8]

The restoration application is allowed; the appeals are restored to the Tribunal and remitted for adjudication on merits with directions to serve notice (including on the Official Liquidator where appropriate).

Section 35C of the Central Excise Act - absence of power to dismiss for default - Section 35C does not empower the Tribunal to dismiss appeals for default or want of prosecution; dismissal on that ground is contrary to the statutory scheme. - HELD THAT: - The Court examined the statutory scheme under Section 35C and relevant precedent and held that the provision, when read with the Act, contemplates disposal of appeals on merits. Any rule or provision (or part thereof) permitting dismissal for non-appearance that conflicts with Section 35C is ultra vires and cannot be sustained. Consequently, the Tribunal should not have dismissed the appeal for non-prosecution and ought to have proceeded to decide the appeal on merits or adjudicate ex parte subject to recall where sufficient cause is shown. [Paras 3, 6]

The Tribunal has no power under the statutory scheme to dismiss appeals for want of prosecution; such dismissal is set aside.

Final Conclusion: The Civil Miscellaneous Appeal is allowed; the Tribunal's dismissal for non-prosecution and refusal to restore are set aside. The appeals are restored and remitted to the Tribunal for fresh adjudication on merits in accordance with law, with directions to serve appropriate notice (including on the Official Liquidator where relevant) and to afford the assessee opportunity to appear.

Area-based excise exemption - cut-off date for commencement of commercial production - installation of plant and machinery after cut-off date - intermediate-stage machinery versus final-product capacity - strict and literal interpretation of exemption notification - Board clarification on new products and post cut-off additions

Installation of plant and machinery after cut-off date - intermediate-stage machinery versus final-product capacity - area-based excise exemption - entitlement to refund/re-credit under Notification No. 39/2001-CE in respect of goods manufactured using machinery installed after the cut-off date where such machinery was used only for intermediate stages - HELD THAT: - The Tribunal found that the unit had satisfied the notification conditions: civil construction and initial installation completed and commercial production commenced prior to 31.12.2005 with original investment exceeding the threshold. Machinery added after 31.12.2005 related to intermediate processes (spinning, weaving, processing) and no additions were made to cutting machines which determine final-product (made-ups) capacity. Because the installed intermediate-stage machines did not increase the rated capacity of the cutting machines that control final output, the capacity of the final products (bed sheets and terry towels) remained unchanged. The notification contains no restriction forbidding post cut-off additions of machinery at intermediate stages and no value or quantity cap on final clearances during the exemption period. Applying the notification literally and in light of Board clarifications, the Tribunal held that goods manufactured and cleared of the declared final products are eligible for re-credit even though some intermediate-stage machinery was installed after the cut-off date. [Paras 12, 13, 20]

Claim for re-credit/refund for goods of the declared final products manufactured using intermediate-stage machinery installed after 31.12.2005 is allowed.

Cut-off date for commencement of commercial production - strict and literal interpretation of exemption notification - Board clarification on new products and post cut-off additions - whether expansion of the unit after the cut-off date disentitles the appellant from exemption under Notification No. 39/2001-CE - HELD THAT: - The Tribunal examined the object and wording of the notification and relevant Board clarifications. It observed that the notification requires completion of civil work and installation of plant and machinery and commencement of commercial production before the cut-off date; it does not prohibit additions or modifications thereafter. Board circulars distinguish between (a) introduction of a new product after the cut-off date by installing fresh plant and (b) post cut-off additions where the same declared products continue to be manufactured. The Tribunal held that absent introduction of a new product and where final-product capacity remains the same, post cut-off additions at intermediate stages do not disentitle the unit from the exemption. Earlier authorities relied upon by Revenue were factually distinguishable where additions enhanced final-product capacity or introduced new products. [Paras 13, 15]

Expansion or additions to plant and machinery after 31.12.2005 do not, by themselves, bar entitlement to exemption under Notification No. 39/2001-CE where they do not increase the capacity of the declared final products and no new product is introduced.

Limitation for recovery - extended period of limitation - larger period of limitation for recovery was not adjudicated - HELD THAT: - The Tribunal expressly decided the appeal on merits in favour of the appellant and therefore declined to address the contention on invocation of extended limitation. No determination was made on whether extended limitation would be invokable or whether procedural preconditions for recovery under the notification were met or breached. [Paras 19]

Issue of invocation of larger period of limitation is not decided and remains unaddressed.

Final Conclusion: The appeal is allowed on merits: the appellant is entitled to re-credit/refund under Notification No. 39/2001-CE for the declared final products manufactured and cleared during February 2006 to September 2007 despite installation of intermediate-stage machinery after 31.12.2005 (so long as final-product capacity was not increased and no new product was introduced); the question of extended limitation was left undetermined.

Valuation of job-work goods - transaction value under Section 4 - permissible deduction under Section 4 - admissibility of Cenvat credit on inputs used in job work - remand for re-quantification of duty - penalty excluded for absence of mala fide

Valuation of job-work goods - transaction value under Section 4 - Assessable value of goods manufactured on job work should be computed by reference to the sale price charged to independent buyers where such transaction value is available. - HELD THAT: - The Tribunal applied its Larger Bench precedent in M/s Ispat Industries Ltd., holding that when the transaction value under Section 4 (i.e. sale price to independent customers) is available for identical goods manufactured on job work, that value governs assessable value and there is no need to resort to alternative valuation under the Valuation Rules. The adjudicating authority's adoption of cost of raw material plus job charges (Ujagar Prints principle) for valuation was held to be incorrect in the facts of this case where independent sale prices existed.

Valuation based on cost plus job charges set aside; assessable value to be recomputed using sale price to independent buyers.

Permissible deduction under Section 4 - Deductions allowable under Section 4, such as transportation, are permissible when transaction value is applied. - HELD THAT: - Because the assessable value is determined by transaction value under Section 4, the appellant is entitled to statutory deductions available under that provision. The Tribunal specifically recognised entitlement to deduction for transportation in computing the taxable value.

Allow deduction for transportation while recomputing assessable value.

Admissibility of Cenvat credit on inputs used in job work - Cenvat credit on inputs (tin plates) is admissible to the appellant even though purchase invoices are in the name of another unit and not the appellant. - HELD THAT: - The Tribunal noted that it was admitted that the inputs shown in the invoices were actually used by the appellant in manufacture of job-worked goods and that the department itself relied on those invoices to compute raw material cost. Where raw materials in the invoices were used by the appellant in production, mere absence of the appellant's name on the invoice does not disentitle it to credit, particularly in the job-work context where inputs may be invoiced in the principal's name.

Cenvat credit on tin plates accepted and must be allowed in recomputation.

Remand for re-quantification of duty - penalty excluded for absence of mala fide - Demand to be re-quantified by adjudicating authority in light of the correct valuation and admissible credits; penalties set aside as mala fide intention was not attributable to the appellants. - HELD THAT: - Given the Tribunal's conclusions on valuation, deductions and admissible cenvat credit, the matter requires re-quantification of duty by the adjudicating authority applying transaction value and allowable deductions and credit. Considering the nature of the issues (interpretation of SSI exemption notification and valuation provisions) and the facts, the Tribunal found no basis to attribute mala fide intention to the appellants and therefore set aside the penalties imposed by the adjudicating authority.

Matter remanded for re-quantification of duty; penalties imposed by the adjudicating authority are set aside.

Final Conclusion: Appeals partly allowed: valuation of job-worked tin containers to be recomputed on the basis of sale price to independent buyers with permissible deductions and Cenvat credit allowed; demand re-quantified by adjudicating authority; penalties set aside; matter remanded for compliance with these directions.

Adjustment of refund in terms of Section 11 of the Central Excise Act, 1944 - Pre-deposit return after successful appeal/remand - Interest on delayed refund - Three-month period before entitlement to interest

Adjustment of refund in terms of Section 11 of the Central Excise Act, 1944 - Pre-deposit return after successful appeal/remand - Adjustment of the sanctioned refund amount towards pending arrears - HELD THAT: - The Tribunal found that the orders which gave rise to the purported arrears had been set aside on appeal and, therefore, there were no subsisting dues payable by the appellant to the Revenue. The lower authorities erred in appropriating the sanctioned refund amount of Rs. 35,52,510/- towards those arrears. Reliance is placed on the principle that amounts paid as pre-deposit or found to be refundable following a successful appeal cannot be appropriated against Revenue dues unless the statutory provisions permitting appropriation are properly invoked and followed. Having regard to the Tribunal's earlier order setting aside the demand, the adjustment was held incorrect and the amount must be refunded forthwith. [Paras 8]

The adjustment of Rs. 35,52,510/- towards arrears was incorrect and must be refunded to the appellant forthwith.

Interest on delayed refund - Three-month period before entitlement to interest - Whether interest is payable on the delayed refund and, if so, from which date - HELD THAT: - The Tribunal held that entitlement to interest on a refundable amount arises only after the statutory/administrative three-month period following disposal of the appeal in the appellant's favour. Although an earlier Bench had passed an order in favour of the appellant in December 2009, the matter was ultimately disposed by the Tribunal on 14.07.2016 when the appeal was allowed with consequential reliefs. The Tribunal therefore treated 14.07.2016 as the operative disposal date for computing the three-month period; if the pre-deposit (or other refundable amount) was not returned within three months from that date, interest liability would arise from the expiry of that three-month period in accordance with the Board circulars and established practice. [Paras 9]

Interest, if payable, is to be computed from the expiry of three months after 14.07.2016 (the date on which the appeal was finally disposed) where the refundable amount was not returned within that three-month period.

Final Conclusion: The appeal succeeds to the extent that the lower authorities erred in adjusting the sanctioned refund of Rs. 35,52,510/- against alleged arrears and must refund that amount forthwith; any interest on delayed refund is payable only if the refundable amount was not returned within three months from 14.07.2016, in which event interest shall run from the expiry of that three-month period.

Clandestine removal - third party documentary evidence and corroboration - presumption of use of unaccounted inputs in manufacture - confiscation and redemption fine - penalty under Rule 26 of the Central Excise Rules, 2002 - burden of proof and requirement of tangible evidence (tests for clandestine clearance)

Third party documentary evidence and corroboration - clandestine removal - burden of proof and requirement of tangible evidence (tests for clandestine clearance) - Validity of demand of Rs. 3,39,36,175/- based on alleged clandestine receipt of 9,240.395 MT MS ingots from M/s Pankaj Ispat Ltd. and inferred clandestine manufacture/clearance of finished goods. - HELD THAT: - The Tribunal held that the demand was founded primarily on private records recovered from a third party (M/s Pankaj Ispat Ltd.) and on statements which were not tested by cross examination. No corresponding records were found in the appellant's factory to link the alleged supplies to actual manufacture or clearance of finished goods. The Bench applied the tests for proving clandestine removal (requirement of tangible evidence such as actual instances of unaccounted finished goods, discovery outside the factory, buyers' statements, transportation proof, electricity usage, receipt of sale proceeds, and direct links between recovered documents and factory activity) and found these parameters unmet. Third party records were treated as a starting point only and insufficient without independent corroboration. Accordingly, the assumed clandestine removals based on mathematical/input output inference were held to be not sustainable. [Paras 30]

Demand of Rs. 3,39,36,175/- set aside.

Presumption of use of unaccounted inputs in manufacture - burden of proof - Demand of Rs. 25,71,244/- attributable to quantities shown in 'IN slips' recovered from the appellant's premises and admitted non accountal by the appellant. - HELD THAT: - Direct admissions by the appellant's director regarding receipt of the unaccounted raw materials against the 'IN slips' placed the onus on the appellant to prove non use of those inputs in manufacture. The adjudicating authority did not accept contentions challenging signature authenticity or documentary explanations for certain suppliers when the appellant failed to produce statutory accountal entries or other corroborative records. Where non accountal was admitted and not specifically controverted, the Tribunal upheld the presumption that such inputs were used in clandestine manufacture and upheld demand, interest and penalty under Section 11AC. [Paras 30]

Demand of Rs. 25,71,244/- upheld along with interest and penalty under Section 11AC.

Shortages and excesses reconciliation - confiscation and redemption fine - Demand of Rs. 14,24,796/- arising from shortages of inputs (CI moulds and MS ingots), excess finished stock, confiscation of 191.752 MT of MS channels/angles, and imposition of redemption fine. - HELD THAT: - The appellant's explanation that shortage of CI moulds and minor shortage of MS ingots were reconciled by conversion and weighment error was rejected in absence of proper statutory records evidencing such accounting. The Tribunal observed that the appellant was under statutory obligation to maintain and produce records; mere mathematical possibility without entries and in the backdrop of findings of clandestine activity could not be accepted. Consequently, the demand for shortages, confiscation of excess finished goods, associated interest, penalty and the redemption fine were upheld. [Paras 30]

Demand of Rs. 14,24,796/-, confiscation and redemption fine upheld.

Penalty under Rule 26 of the Central Excise Rules, 2002 - liability of directors - Imposition and quantum of penalties on directors (Shri Bajrang Jain, Shri Shankar Jain, Shri Kailash Agrawal) under Rule 26 arising from clandestine purchases, manufacture and clearance. - HELD THAT: - The Tribunal found the three directors responsible for respective functions (procurement, production, marketing) and therefore liable under Rule 26. Taking into account the overall findings and reduced demands, the Tribunal exercised discretion to reduce the penalty imposed on each director to a fixed reduced amount as a mitigating measure. [Paras 31]

Directors held liable under Rule 26; penalty on each reduced to Rs. 5,00,000/-. (Total penalty against appellant partly upheld and partly set aside as recorded.)

Third party documentary evidence and corroboration - clandestine removal - Demand of Rs. 1,76,125/- (and consequential interest and penalty) confirmed against M/s Rooplaxmi Industries India Pvt. Ltd. based solely on 'IN slips' and third party admissions. - HELD THAT: - The Tribunal examined the material relied upon against Rooplaxmi Industries and found no corroborative evidence at the supplier's end: no confession by Rooplaxmi's director or employees, no transport documents, no cash receipts or transporter statements. Applying the principle that clandestine removal requires clinching evidence and not mere third party records or untested admissions, the Tribunal set aside the demand, interest and penalty confirmed against Rooplaxmi Industries. [Paras 32]

Demand of Rs. 1,76,125/- and consequent interest and penalty set aside for M/s Rooplaxmi Industries India Pvt. Ltd.

Final Conclusion: The Tribunal set aside the principal demand of Rs. 3,39,36,175/- based on uncorroborated third party records but upheld the demand of Rs. 25,71,244/- arising from 'IN slips' admitted as unaccounted by the appellant, and upheld demands, confiscation and redemption fine relating to shortages/excesses; penalties under Rule 26 were sustained but mitigated to Rs. 5,00,000/- each for the three directors. The demand, interest and penalty confirmed against M/s Rooplaxmi Industries India Pvt. Ltd. were set aside.

Cenvat Credit on inputs used in fabrication of capital goods - Definition of capital goods under Rule 2(k) of CCR - Prospective operation of amendment to explanation 2 of Rule 2(k) of CCR - Rule-making power under Section 37 of the Central Excise Act - Eligibility of credit for structural/supporting items embedded to earth - Penalty set aside where credit is held allowable

Cenvat Credit on inputs used in fabrication of capital goods - Definition of capital goods under Rule 2(k) of CCR - Eligibility of credit for structural/supporting items embedded to earth - Allowability of Cenvat credit on specified iron and steel items used in fabrication/erection of plant and machinery - HELD THAT: - The Tribunal examined whether the assessee was entitled to Cenvat credit of the listed items used in fabrication and erection of plant/machinery (bulk loading machine, pre-heater passenger lift, cement storage silo, clinker chute, belt conveyor, stacker and reclaimer units, walkways and platforms). Relying on higher court rulings which held that the amendment to explanation 2 of Rule 2(k) of the CCR was prospective and that structural items (angles, joists, beams, bars, plates, channels etc.) used in fabrication are to be treated as inputs for capital goods, the Tribunal concluded that such items qualify for credit. The Tribunal also noted earlier decisions, including Madras High Court authority in the assessee's own case, recognising entitlement to credit for supporting structures and structural items necessary for fabrication of plant and machinery. Applying these principles to the material before it, the Tribunal held the disputed credit of Rs. 2,09,573/- allowable. [Paras 7, 8]

Cenvat credit of Rs. 2,09,573/- allowed.

Penalty set aside where credit is held allowable - Validity of penalty and consequential relief following allowance of credit - HELD THAT: - Given the Tribunal's finding that the disputed Cenvat credit is allowable, the penalty imposed in respect of the disallowance was set aside. The Tribunal directed consequential benefits to the appellant. [Paras 8]

Penalty stands set aside; appellant entitled to consequential benefit.

Final Conclusion: Appeal allowed: disputed Cenvat credit of Rs. 2,09,573/- held allowable for the period January to December, 2011; penalty quashed and consequential relief directed.

Inclusion of government investment subsidy (VAT 37B) in assessable value for excise duty - transaction value deduction for sales tax/VAT - actual payment of VAT for deduction from transaction value - treatment of VAT 37B challans as legal payment of tax under state investment promotion scheme

Inclusion of government investment subsidy (VAT 37B) in assessable value for excise duty - actual payment of VAT for deduction from transaction value - treatment of VAT 37B challans as legal payment of tax under state investment promotion scheme - VAT amounts discharged by utilization of VAT 37B subsidy challans are not required to be included in the assessable value of goods for excise duty. - HELD THAT: - The Tribunal applied the transaction-value concept and considered whether VAT discharged through Rajasthan Government subsidy challans (Form 37B) amounts to VAT actually paid so as to be deductible from transaction value. While the Apex Court in Super Synotex was held to require actual payment of sales tax/VAT after 01/07/2000 for deduction, the Tribunal distinguished that decision in light of state incentive schemes where subsidy remittance is treated as a legal discharge of VAT liability. The Rajasthan Investment Promotion Scheme provides that VAT initially deposited is partially disbursed back in Form 37B challans which are usable to discharge VAT in subsequent periods and are regarded under the scheme as legal payments of tax. Following the precedential reasoning in Welspun Corporation Ltd., the Tribunal held that such subsidy challans are equivalent to cash for the specific purpose of discharging VAT and therefore cannot be treated as retention of VAT collected or as an addition to assessable value. Consequently, inclusion of amounts paid by utilising VAT 37B challans in the assessable value under the Central Excise valuation provisions was held to be unjustified.

Impugned orders set aside; appeal allowed and subsidy amounts given in VAT 37B challans not included in assessable value.

Final Conclusion: The Tribunal allowed the appeal, holding that VAT discharged by utilisation of Form 37B subsidy challans under the Rajasthan Investment Promotion Scheme constitutes legal payment of VAT and therefore such subsidy amounts are not includible in the assessable value for excise duty; the impugned orders were set aside with consequential relief, if any.

Eligibility for CENVAT credit on inputs used for effluent/hazardous waste treatment - treatment of effluents as part and parcel of manufacture - indirect use 'in relation to' manufacture - statutory environmental compliance as prerequisite to manufacture - processes integrally connected with production bringing inputs within 'in the manufacture of goods'

Eligibility for CENVAT credit on inputs used for effluent/hazardous waste treatment - treatment of effluents as part and parcel of manufacture - statutory environmental compliance as prerequisite to manufacture - Whether cement used for stabilisation/treatment of hazardous waste (Jarofix) qualifies as an input for CENVAT credit under Rule 2(k) of the Cenvat Credit Rules, 2004 - HELD THAT: - The Tribunal held that although the cement was applied after the manufacturing process, its use was mandated by the Ministry of Environment and Forests as a precondition for the plant's operations; consequently the manufacture of the final products could not take place unless the plant remained operational. Applying the established principle that processes which are integrally connected with production (including effluent treatment) form part of the manufacturing process, the Tribunal relied on precedents treating effluent-treatment inputs as inputs for excise/CENVAT purposes. On that basis cement used to stabilise hazardous waste at a secured landfill was held to be used, albeit indirectly, in relation to the manufacture of lead and zinc concentrates and therefore eligible for CENVAT credit under Rule 2(k).

CENVAT credit on cement used for treatment/stabilisation of hazardous waste was held to be admissible and need not be reversed.

Final Conclusion: The Department's appeal is dismissed; the respondent's entitlement to CENVAT credit for the period January 2013 to September 2013 is upheld.

Gypsum in all its forms - chemical composition test - common parlance test - form as visible shape or configuration - expanded meaning of a taxing entry

Gypsum in all its forms - chemical composition test - form as visible shape or configuration - common parlance test - expanded meaning of a taxing entry - Whether 'gypsum board' is covered by Entry 56 of Schedule IV of the RVAT expressed as 'gypsum in all its forms' and thus taxable at the rate applicable to that Entry. - HELD THAT: - The Court held that the legislature's amendment expanding the entry from 'gypsum' to 'gypsum in all its forms' must be given effect and would include gypsum board. The decision rests on the combined application of the chemical composition test and the common parlance test: gypsum board's primary raw material remains gypsum (calcium sulphate dihydrate), and the processes involved (crushing, calcining to stucco, rehydration, admixture with additives and encasement between paper sheets) do not effect a change in the substantive character of gypsum that would exclude it. The Court observed that the expression 'in all its forms' contemplates different manifestations or configurations of the same commodity - the word 'form' denotes visible shape or configuration - and must be construed purposively to effect the expansion intended by the legislature. Reliance on precedents where processed products were held to remain within the parent entry (including instances where inter-molecular/configurational changes or mechanical processing occurred) supported the conclusion. The subsequent legislative creation of a separate entry for 'gypsum board' in a later amendment (2014) was noted as confirming that, for the assessment years in question, gypsum board was not intended to be excluded from the expanded Entry 56. [Paras 13, 14, 17, 21, 22]

Gypsum board is included within the Entry 56 description 'gypsum in all its forms' in Schedule IV of the RVAT for the assessment years in question and is taxable accordingly; appeals dismissed.

Final Conclusion: The appeals are dismissed. For the assessment years 2006-07 and 2007-08, 'gypsum board' falls within the expanded Entry 56 ('gypsum in all its forms') of Schedule IV of the RVAT and is taxable at the rate applicable to that Entry; parties to bear their own costs.

Input Tax Credit reversal as per annual scrutiny cross verification report - Input Tax Credit reversal on exempted sales - opportunity of personal hearing before assessment -

Input Tax Credit reversal as per annual scrutiny cross verification report - opportunity of personal hearing before assessment - Assessment in respect of ITC reversal as per annual scrutiny cross verification report was set aside and remitted for fresh consideration after affording opportunity of hearing to the petitioner. - HELD THAT: - The Court found that although the petitioner had filed detailed replies to the notice of proposal, the Assessing Officer's assessment order did not record independent reasoning rejecting those objections and merely stated that copies of purchase invoices were not filed. The order was also passed by a new Assessing Officer without giving the petitioner an opportunity for personal hearing before that Officer. In view of the absence of considered findings on the objections and the lack of fresh hearing by the Officer who passed the impugned order, the matter requires fresh adjudication. The assessment is therefore set aside insofar as this issue and remitted to the Assessing Officer to redo the assessment after giving the petitioner a hearing within the time directed by the Court. [Paras 8, 9, 10]

Assessment order set aside in respect of ITC reversal as per annual scrutiny cross verification report and remitted for fresh consideration after giving opportunity of hearing to the petitioner.

Input Tax Credit reversal on exempted sales - opportunity of personal hearing before assessment - Assessment in respect of ITC reversal on exempted sales was set aside and remitted for fresh consideration after affording opportunity of hearing to the petitioner. - HELD THAT: - The Court noted that the petitioner had furnished detailed responses to the notice of proposal but the Assessing Officer did not address those objections with independent reasoning in the assessment order, instead rejecting them on the ground of non-filing of purchase invoices. Given the petitioner's contention that they possess purchase invoices and that discrepancies arose from end dealers not reporting full sales, the absence of adjudicative reasoning and the fact that the impugned order was passed by a different Officer without hearing warrant fresh consideration. The matter is remitted to the Assessing Officer to re-examine the ITC reversal on exempted sales and pass a reasoned order after hearing the petitioner within the period fixed by the Court. [Paras 8, 9, 10]

Assessment order set aside in respect of ITC reversal on exempted sales and remitted for fresh consideration after giving opportunity of hearing to the petitioner.

Final Conclusion: Writ petitions allowed insofar as they challenge the two disputed ITC reversal issues; impugned assessment orders are set aside on those points and remitted to the Assessing Officer for fresh adjudication after giving the petitioner a personal hearing, to be completed within six weeks from receipt of this order; no costs.

Ex parte assessment - remand for fresh consideration - right to be heard - quashing of assessment order - pre-deposit direction - costs as condition of participation - direct service

Ex parte assessment - quashing of assessment order - right to be heard - remand for fresh consideration - Validity of the assessment order passed ex parte and whether it should be quashed and remitted for fresh consideration - HELD THAT: - The Court found that the assessment proceedings were conducted ex parte because notices issued by the assessing authority were not served on the petitioner (closure of business being the stated reason). Given that the impugned assessment order resulted in a large demand of tax, interest and penalty, and that there were arguable points against the adjudication, the High Court held that the assessment could not stand without fresh consideration. The Court observed that even where a party has not participated, the authority must decide on the basis of materials on record and by applying correct legal principles; where that has not occurred and significant rights are affected, relief by quashing and remand is appropriate. Consequently the assessment order dated 30.03.2017 was quashed and the matter was restored to the file of the Assessing Officer for fresh adjudication after affording the petitioner an opportunity of hearing. [Paras 8, 9]

Impugned assessment order quashed and set aside; matter remitted to the Assessing Officer to pass fresh orders after hearing the petitioner.

Pre-deposit direction - costs as condition of participation - direct service - Procedural directions incidental to the remand, including requirement to appear, payment of costs, and service - HELD THAT: - In exercise of its remedial powers the Court set procedural terms to facilitate fresh adjudication. The petitioner was directed to appear personally or through an authorised representative before the Assessing Officer on 17th December, 2018 for the first hearing (no formal notice to be issued for that date). The Court imposed a condition that the petitioner shall pay costs of Rs. 50,000 to the respondents in view of past non-appearance despite service of notices. The Court also permitted direct service. The order did not separately adjudicate on the earlier pre-deposit directions of the appellate authorities, but by quashing the assessment and remitting the matter it effectively required the Assessing Officer to re-examine the issues afresh in accordance with law. [Paras 2, 9, 10]

Petitioner to appear before the Assessing Officer on the specified date; payment of costs imposed; direct service permitted; appellate pre-deposit directions to be rendered academic by fresh adjudication at the Assessing Officer's end.

Final Conclusion: Writ petition allowed to the extent that the assessment order dated 30.03.2017 is quashed and set aside; matter remitted to the Assessing Officer for fresh disposal after hearing the petitioner, who must appear on the specified date and pay the ordered costs; direct service permitted.