TaxTMI Updates e-Newsletter
Jan 13,2015

Additions based on presumption versus evidentiary proof - burden on Revenue to establish unexplained cash loans and repayments - reliance on loose papers found from a third person and admissibility as evidence against the assessee - deletion of additions where only suspicion exists without corroboration - application of prior findings in the assessee's own earlier years

Additions based on presumption versus evidentiary proof - burden on Revenue to establish unexplained cash loans and repayments - reliance on loose papers found from a third person and admissibility as evidence against the assessee - deletion of additions where only suspicion exists without corroboration - application of prior findings in the assessee's own earlier years - Validity of additions made by the Assessing Officer and sustained by the CIT(A) for alleged unexplained repayment of cash loans and interest - HELD THAT: - The Tribunal's deletion of the additions was upheld. The Assessing Officer's conclusions rested on a series of uncorroborated presumptions: that notations on loose papers represented very large loan amounts (by altering zeros), that such notations related to loans taken by the assessee-company, that repayments occurred in the year under assessment, and that interest at an assumed rate had been paid. The loose papers were recovered from a third person (Shri Yogesh Gupta), contained only dates and amounts without narration or the assessee's name, and the person from whose premises they were seized did not state that they related to loans taken by the assessee; he had instead admitted unaccounted transactions and surrendered income which the Revenue accepted in earlier years. In these circumstances the burden lay on the Revenue to establish that the notings related to the assessee's borrowings and repayments; mere suspicion and successive inferences were insufficient. The Tribunal also correctly applied earlier decisions in the assessee's own case for prior years. As there was no corroborative material identifying the assessee as the recipient of the alleged cash loans or evidencing repayment and interest payments, the additions (including the interest addition sustained by the CIT(A)) could not be sustained. [Paras 6, 10, 11]

Additions and related interest inclusion and penalties based on the loose papers were deleted; the Tribunal's order in favour of the assessee is upheld.

Deletion of additions where only suspicion exists without corroboration - application of prior findings in the assessee's own earlier years - Whether notice should be issued on the application for condonation of delay in re-filing the Revenue's appeal - HELD THAT: - Although there was a substantial delay in re-filing, the Court examined the merits before deciding whether to issue notice. Having considered the Tribunal's factual findings and the absence of any new material placed before this Court to rebut those findings, the Court found no reason to grant the Revenue leave to proceed. The factual conclusions of the Tribunal were not shown to be perverse or unsupported by the record; consequently, issuing notice and entertaining the delayed appeal was not warranted. [Paras 2, 11]

Application for condonation of delay in re-filing the appeal refused; appeal dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal against the Tribunal's order for assessment year 2004-05, upholding deletion of additions and interest where the Assessing Officer's findings were based on unsupported presumptions and corroborative evidence was absent; the application for condonation of delay in re-filing the appeal was refused.

Taxation of winnings under Section 115BB - Set-off of business losses against gambling/betting income - Special-rate/standalone provision in Chapter XII prevailing over general provisions - Proviso to Section 58(4) - owner of race horses exception

Taxation of winnings under Section 115BB - Set-off of business losses against gambling/betting income - Whether business losses may be set off against winnings from betting for the purpose of taxation under Section 115BB - HELD THAT: - The Court held that Section 115BB is a special, standalone provision which prescribes the method of taxation of winnings from lotteries, races (including horse races, except where income arises from owning and maintaining race horses) and gambling at the special rate provided therein. The legislative scheme, as explained by the Board circulars, indicates that winnings of the type covered by Section 115BB are to be charged to tax at the flat rate specified and that losses from such sources are not to be set off against that income. Accordingly, when income falls within Section 115BB, the special charging provision governs the computation and the methodology of tax cannot be varied by applying general set-off provisions; the proviso to Section 58(4) (relating to owners of race horses) does not apply on the facts here, and the CBDT circular relied upon by the assessee cannot override the statutory mandate embodied in Section 115BB. For these reasons the tribunal's and Commissioner (Appeals)'s approach of allowing business losses to be set off against betting winnings and taxing only the net amount was rejected. [Paras 12, 13, 15]

Total winnings from betting are to be brought to tax at the special rate under Section 115BB and business losses cannot be set off against such winnings for the relevant assessment year.

Final Conclusion: Appeal allowed; the Tribunal's order is set aside and the winnings from betting for AY 1998-99 are to be taxed in full at the special rate under Section 115BB, without allowing set-off of business losses; no order as to costs.

Deduction under Section 32AB - business income - income from other sources - treatment of lease rent as commercial income - Board Circular No.461 interpretation of Section 32AB

Deduction under Section 32AB - business income - Board Circular No.461 interpretation of Section 32AB - Deduction under Section 32AB was allowable in respect of lease rent by treating the lease rent as business income for the purposes of computing eligible business profits. - HELD THAT: - The Tribunal and the Commissioner (Appeals) concluded that the assessee had exploited the factory premises as a commercial asset from the outset and had consistently treated lease rent as business income in earlier years. The Assessing Officer's narrow view that the assets must be used by the assessee itself for manufacturing was rejected. Reliance was placed on Board Circular No.461 and precedents holding that an 'eligible business' for Section 32AB is not confined to manufacturing and that income from exploitation of commercial assets (including lease) can form part of business income where accounts and activities are so interrelated. Applying these principles, the authorities held that the lease rent fell within the ambit of profits and gains of business and the deduction under Section 32AB was therefore allowable. The High Court found no error in the reasoning and agreed with the Tribunal's conclusion. [Paras 4, 5, 8]

Deduction under Section 32AB allowed on lease rent by treating it as business income; finding upheld.

Income from other sources - treatment of lease rent as commercial income - res judicata in income-tax proceedings - Addition made by the Assessing Officer treating lease rent as income from other sources was deleted. - HELD THAT: - The Tribunal observed that the unit set up by the assessee was never used by the assessee for manufacturing and that the assessee had chosen to exploit the asset commercially by leasing it out. The assessee had shown lease rent as business income in earlier years and the Assessing Officer's classification as income from other sources was not supported by the material. The Tribunal further noted that res judicata did not apply to income-tax proceedings in this context. The High Court agreed with the Tribunal's factual and legal conclusions and found no infirmity in deleting the addition. [Paras 6, 7, 8]

Addition treating lease rent as income from other sources deleted; Tribunal's order affirmed.

Final Conclusion: The appeal by the revenue is dismissed; both substantial questions of law are answered in favour of the assessee and against the revenue, upholding allowance of deduction under Section 32AB on lease rent and deletion of the addition treating lease rent as income from other sources.

Jurisdiction under Section 263 to revise an assessment as erroneous and prejudicial to the interest of revenue - distinction between an under assessment/under valuation and an order which is erroneous and prejudicial - CIT cannot substitute his opinion for the Assessing Officer's quasi judicial conclusion

Jurisdiction under Section 263 to revise an assessment as erroneous and prejudicial to the interest of revenue - distinction between an under assessment/under valuation and an order which is erroneous and prejudicial - Whether the Commissioner had jurisdiction under Section 263 to revise the assessment by substituting a higher quantified addition in place of the Assessing Officer's estimate - HELD THAT: - The Tribunal's finding that the Commissioner had no jurisdiction under Section 263 was upheld. Section 263 permits examination of an assessment to ascertain whether it is erroneous and prejudicial to revenue, but this power does not enable the CIT to re weigh evidence or substitute his own quantification where the Assessing Officer has conducted extensive inquiry and arrived at an estimate. The CIT's show cause and order rested on a computation in which finished goods were overstated by including unfinished goods and raw material, producing a higher aggregate figure. The record before the Tribunal (inventory, pre and post survey tallies and production/sales data) showed that the Assessing Officer had rejected books, applied a gross profit rate and made a substantial addition after examining production and stock details. The CIT's adjustment therefore amounted to determining a higher figure by re appraising factual material rather than correcting an assessment order that was both erroneous and prejudicial in law. At best the case was one of under assessment/under valuation that the Assessing Officer had already addressed; that does not convert it into a case warranting exercise of revisional jurisdiction under Section 263.

The Tribunal correctly held that the CIT lacked jurisdiction under Section 263 to substitute a higher quantified addition; the order under Section 263 was quashed.

CIT cannot substitute his opinion for the Assessing Officer's quasi judicial conclusion - Whether the Commissioner impermissibly substituted his own factual conclusion for the Assessing Officer's findings - HELD THAT: - The Court accepted the Tribunal's factual finding that the CIT's figure of finished blankets was incorrect because it aggregated finished goods, unfinished goods and raw material. The Assessing Officer had already made an addition after examining inventories and production/sales records; the CIT's exercise involved re examining and quantifying beyond correcting a demonstrable legal error. The principle applied is that revisional power under Section 263 does not permit the CIT to put words in the AO's mouth or to reopen factual quantification where the AO's conclusion is not shown to be legally erroneous and prejudicial.

The CIT impermissibly substituted his own factual quantification; the Tribunal rightly cancelled the revisional order.

Final Conclusion: The High Court affirms the Tribunal: the CIT had no jurisdiction under Section 263 to revise the assessment by substituting a higher addition based on an incorrect computation of finished stock; the revisional order is quashed and the appeal by the revenue is dismissed.

Integral part of a renewable energy device - power evacuation infrastructure - higher rate of depreciation for renewable energy devices - transmission and distribution network as plant and machinery

Integral part of a renewable energy device - power evacuation infrastructure - higher rate of depreciation for renewable energy devices - transmission and distribution network as plant and machinery - Whether the power evacuation infrastructure attached to a wind mill is integral to the renewable energy device and hence eligible for depreciation at the higher rate applicable to renewable energy devices. - HELD THAT: - The Court examined the Assessing Officer's conclusion that electricity lines and related evacuation infrastructure were not part of the wind mill and therefore liable to normal rates of depreciation, and contrasted that with the findings of the CIT(A) and the ITAT which held the infrastructure to be integral to the wind mill and eligible for higher depreciation. The ITAT's reasoning, followed by this Court, relied on earlier authorities (including an ITAT, Mumbai Bench decision and a High Court view approving that civil structures and electric fittings specially designed for a windmill are part of the common plant) which recognize that a wind mill cannot function without appropriate installation and electrification and that such specialised installations have no use other than for the functioning of the wind mill. The Court noted that the revenue had not appealed against the ITAT, Mumbai Bench decision relied upon. Having considered the material on record and the precedents, the Court concluded that treating the power evacuation infrastructure as not integral would be contrary to the physical and functional reality of wind mills; consequently the infrastructure is part of the renewable energy device and falls within the ambit of assets eligible for the higher rate of depreciation afforded to renewable energy devices.

The power evacuation infrastructure attached to the wind mill is integral to the renewable energy device and is eligible for depreciation at the higher rate applicable to renewable energy devices; the questions of law are answered against the revenue.

Final Conclusion: Questions of law answered in favour of the assessee; the power evacuation infrastructure forming part of the wind mill qualifies as part of the renewable energy device and is eligible for higher rate depreciation, and the revenue's appeals are dismissed.

Allowability of expenditure under Section 37(1) of the Income-tax Act - deductibility of hire charges for moulds supplied to contract manufacturers - relevance of excise valuation to income-tax deductibility - valuation of closing stock at cost or market price, lower of the two - application of the matching principle in closing stock valuation

Allowability of expenditure under Section 37(1) of the Income-tax Act - deductibility of hire charges for moulds supplied to contract manufacturers - relevance of excise valuation to income-tax deductibility - Hire charges paid by the assessee for moulds imported on hire and supplied free of cost to contract manufacturers are deductible as business expenditure under Section 37(1). - HELD THAT: - The Settlement Commission's findings on valuation for excise duty (Section 4, Central Excise Act, 1944) are not germane to whether an expenditure qualifies as a deduction under Section 37(1) of the Income-tax Act. The assessee imported moulds on hire from group companies, paid the hire charges, and provided the moulds to contract manufacturers free of cost; the contract manufacturers were paid for manufacture and inputs. The hire charges were incurred wholly and exclusively for business and are not rendered non-deductible merely because the cost of manufacture may include the mould-related expenditure for excise valuation; similarly, reliance on provisions such as Section 194C is misplaced where no amount was charged to the manufacturers. The Assessing Officer's addition disallowing the mould hire charges cannot be sustained. [Paras 5, 6, 7, 9, 10]

The addition disallowing hire charges for moulds is deleted; the expenditure is allowable under Section 37(1).

Valuation of closing stock at cost or market price, lower of the two - application of the matching principle in closing stock valuation - Provision for obsolete and unsaleable stock in assessment year 2007-08, based on valuation of closing stock at lower of cost or market price, is acceptable and the addition is not warranted. - HELD THAT: - The assessee made a provision for obsolete and unsaleable finished goods and related items on the principle that closing stock must be valued at cost or market price, whichever is lower, a principle accepted by the Supreme Court in Chainrup Sampat Ram. The Assessing Officer did not examine the basis for the asserted lower market value and applied the matching principle without testing whether market price was in fact lower than cost. The Tribunal noted that the practice was consistently followed and that some obsolete items were subsequently sold with proceeds accounted for. In these circumstances, interference is not justified. [Paras 11]

The addition made by the Assessing Officer in respect of the provision for obsolete stock is not sustained.

Final Conclusion: Revenue's appeals for assessment years 2006-07, 2007-08 and 2008-09 are dismissed; the hire charges for moulds are allowed as business expenditure under Section 37(1) and the provision for obsolete stock in 2007-08 is upheld.

Interest from fixed deposits treated as business income - deduction under Section 80 HHC - ex parte adjudication and failure to place material on record - remand for fresh consideration where material document was not considered

Interest from fixed deposits treated as business income - deduction under Section 80 HHC - Whether the interest earned on the term deposit should be treated as business income for the purpose of computing deduction under Section 80 HHC - HELD THAT: - The assessee, a 100% export oriented unit, had placed a term deposit which the Assessing Officer treated as income from other sources and excluded for computation of deduction under Section 80 HHC. The CIT (Appeals) held that the deposit and the interest thereon were for purpose of business and directed treatment as business income. The Tribunal, however, passed an ex parte order rejecting that conclusion on the ground that there was no record to show the deposit was made to avail credit facilities. The High Court observed that condition No.6 of the bank's letter dated 2.8.89 expressly required a Term Deposit of Rs.15 lakhs to be given as collateral security for the term loan, which, if considered, materially bears on whether the deposit was made for business purpose. Because the assessee remained ex parte before the Tribunal and the Tribunal did not have the bank letter placed before it, the Tribunal erred in reaching a final conclusion without considering the primary document relied upon by the CIT (Appeals). The Court accordingly directed remand to the Tribunal to examine the bank's letter and decide on the merits whether the interest is business income eligible for deduction under Section 80 HHC.

Matter remitted to the Tribunal to reconsider and decide on merits in light of the bank's letter dated 2.8.89 whether the interest on the term deposit constitutes business income for Section 80 HHC purposes.

Ex parte adjudication and failure to place material on record - remand for fresh consideration where material document was not considered - Whether the Tribunal's ex parte conclusion should stand when a material document relied upon below was not considered - HELD THAT: - The Tribunal recorded an ex parte finding that there was no record showing the deposit was made to avail credit, but it did so without the benefit of the bank's letter which the CIT (Appeals) had considered. The High Court held that the absence of the material document before the Tribunal made its conclusion unsustainable and warranted remand. The Court directed that the Tribunal must consider the bank's letter dated 2.8.89 and decide the issue afresh on merits and in accordance with law.

Tribunal's order set aside to the extent it declined to consider the bank's letter; matter remitted for fresh consideration of that material and decision on merits.

Final Conclusion: Appeal allowed by way of remand; the Tribunal is directed to consider the bank's letter dated 2.8.89 and decide on merits whether the interest on the term deposit is business income for computing deduction under Section 80 HHC, with no order as to costs.

Recording of statement under Section 132(4) of the Income Tax Act - Presumption under Section 132(4A)(ii) that contents of seized documents are true - Validity of block assessment where seized documents are disbelieved - Duty to verify source of funds and to examine witnesses/authorized representatives - Addition in block assessment in absence of possession or recovery

Recording of statement under Section 132(4) of the Income Tax Act - Presumption under Section 132(4A)(ii) that contents of seized documents are true - Validity of block assessment where seized documents are disbelieved - Duty to verify source of funds and to examine witnesses/authorized representatives - Addition in block assessment in absence of possession or recovery - Whether the recording of statement and consequent block assessment adding the sum claimed to have been paid could stand when only two receipts were recovered, no cash or other incriminating material was found, the receipts were not treated as true by the Department and no verification from the company's authorised representative or other witnesses was made. - HELD THAT: - The Court held that Section 132 empowers search but, because it carries penal consequences, the steps must be followed meticulously. Where documents are found in a search, Sub section (4A)(ii) of Section 132 mandates that the contents of such documents be presumed true. If the authority conducting the search disbelieves the documents, the foundational basis for recording statements and for block assessment collapses. In the present case only two rough receipts evidencing payment and refund were recovered; no cash or other material was found and no person (including the payee or an authorised representative of the company said to be the source of funds) was examined to verify the transaction. The Assessing Officer and the Tribunal proceeded on the assumption that the assessee bore an obligation to explain the payment despite the fact that the amount neither remained in the assessee's possession nor was shown to be unreconciled in the books after proper verification. Given the Department's failure to accept or verify the receipts and its failure to cross examine or obtain statements from responsible persons to establish that the payment was not from the company as claimed, the proceedings lacked the necessary foundation and could not support the addition in the block assessment.

Appeal allowed; the addition of the sum to the appellant's income by way of block assessment set aside.

Final Conclusion: The High Court allowed the appeal, concluding that the block assessment addition based solely on two recovered receipts and unverified statements lacked foundational basis; consequently the addition of the disputed amount to the assessee's income was set aside and the appeal allowed.

Penalty under Section 271G - transfer pricing documentation - Section 92D and Rule 10D compliance - adjournment and extension of time for filing - onus of proof for imposition of penalty - adverse inference from silence of officer

Penalty under Section 271G - Section 92D and Rule 10D compliance - adjournment and extension of time for filing - onus of proof for imposition of penalty - adverse inference from silence of officer - Whether penalty under Section 271G was rightly imposed for alleged failure to furnish transfer pricing documentation within the stipulated time - HELD THAT: - The appellate fora found that the assessee filed the transfer pricing report and Form No.3CEB on 16th May, 2007, which was within the extended period of 60 days from service of the notice by the Transfer Pricing Officer (notice dated 19th March, 2007) after adjournments were sought and allowed. The Assessing Officer's penalty order recorded uncertainty and accepted that adjournments were granted, but drew an adverse inference from the Transfer Pricing Officer's silence as to whether Rule 10D documentation was filed within the stipulated time. The High Court held that penalty cannot be imposed where the Assessing Officer is not sure and certain that the statutory obligation was breached; ambiguity or mere surmise does not satisfy the requisite proof for imposing penalty. The Tribunal and Commissioner (Appeals) had recorded that statutory compliance under Section 92D(3)/Rule 10D was made within the extended period, and there was no adjustment to international transactions by the TPO, indicating the documentation supported the declared transactions. The Revenue's subsequent contention that the documents filed did not constitute Rule 10D documentation was not the stand taken before the Tribunal or by the Assessing Officer when imposing penalty, and therefore could not sustain the penalty now.

The penalty under Section 271G was unsustainable and rightly deleted by the Commissioner (Appeals) and affirmed by the Tribunal; the appeal is dismissed.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding deletion of the penalty under Section 271G on the ground that the transfer pricing documentation was filed within the extended 60 day period and that the Assessing Officer's uncertainty and adverse inference from silence did not justify imposition of penalty.

Reopening of assessment under Section 148 read with Section 147 - reasons to believe - prima facie opinion based on palpable or cogent material - non-application of mind in formation of belief - requirement of nexus between recorded reasons and escapement of income

Reopening of assessment under Section 148 read with Section 147 - reasons to believe - prima facie opinion based on palpable or cogent material - non-application of mind in formation of belief - requirement of nexus between recorded reasons and escapement of income - Validity of the reasons recorded by the Assessing Officer for issuance of notice under Section 148 and whether they furnish a legally sustainable 'reason to believe' that income had escaped assessment. - HELD THAT: - The Court examined the reasons recorded by the Assessing Officer and found them to be factually incorrect and founded on assumptions contrary to material already on record. The return and accompanying documents disclosed sale of a farmhouse within municipal limits, details of reinvestment claimed under the exemption provision, and correspondence furnished prior to the notice; despite this, the Assessing Officer treated the property as agricultural land without any supporting material. The court reiterated that a 'reason to believe' under the proviso to issue a notice beyond the assessment period requires a prima facie formation of belief grounded on palpable or cogent material, not mere suspicion or conjecture. While irrebuttable proof is not required at the inception of inquiry, the recorded reasons must be rational, coherent and must show a live nexus between the material relied upon and the conclusion of escapement of income. In the present case the reasons failed that limited threshold: they were ex facie incorrect, amounted to non-application of mind and did not disclose any germane basis connecting the asserted factual premise to the alleged escapement. The Assessing Officer's conclusion that exemption under Section 54 was wrongly claimed thus lacked the necessary foundation. The Tribunal correctly observed that no additions were ultimately made on that basis.

Recorded reasons did not constitute a valid 'reason to believe'; reopening under Section 148 was invalid for want of rational nexus and application of mind.

Final Conclusion: The Revenue's appeal fails. The notice under Section 148/147 was founded on reasons that were factually incorrect and devoid of the requisite prima facie material; the reassessment proceedings were therefore unsustainable and the appeal is dismissed.

Repairs and Insurance of machinery, plant and furniture - current repairs vs capital expenditure - replacement of parts of machinery as revenue expenditure - replacement of an independent machine as capital expenditure - increase in capacity as indicium of capital expenditure

Replacement of parts of machinery as revenue expenditure - current repairs vs capital expenditure - increase in capacity as indicium of capital expenditure - Whether the cost of replacing two Conors in an existing textile machine is deductible as current repairs under Section 31 or is to be treated as capital expenditure. - HELD THAT: - The Assessing Officer found that two parts (Conors) of an existing machine were replaced and recorded that such replacement did not result in any increase in the capacity of the machine. The Tribunal clarified that in an earlier assessment year the expenditure shown as capital related to acquisition of an altogether new machine to which Conors were referable, whereas in the year under consideration no new machinery was acquired. The court accepted the established principle that replacement of parts of an independent item of machinery, which does not bring into existence a new asset or increase the machine's capacity, constitutes current repairs eligible for deduction under Section 31. Mere differences in cost, description or improved efficiency of the replaced parts do not by themselves convert the expenditure into capital outlay. The decision in Commissioner of Income Tax v. Sri Mangayarkarasi Mills Pvt. Ltd. and the subsequent exposition in Sarvaraya Textiles Ltd. were noted to distinguish replacement of an independent machine (which may be capital) from replacement of parts of an existing machine (which is repair). Although the Tribunal's reasoning wandered slightly from precedents, its factual conclusion that no new machine was acquired and there was no increase in capacity was held to support allowing the expenditure as current repairs.

The replacement cost of the two Conors in the existing machine is revenue expenditure deductible under Section 31; the assessment authority's disallowance is set aside.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's order upholding deduction of the expenditure on replacement of two Conors as current repairs for assessment year 1995-96 is affirmed; no order as to costs.

Floor Space Index as a capital asset - attachment of FSI to property and not to business - conversion of a capital asset into stock-in-trade deemed transfer under section 2(47)(iv) - capital gains chargeability on conversion and valuation under section 45(2)

Floor Space Index as a capital asset - attachment of FSI to property and not to business - Floor Space Index (FSI) is a capital asset attached to the property and not part of the business - HELD THAT: - The Tribunal found, and this Court agrees, that the assessee acquired rights in FSI by virtue of the lease deed (clause No.8) and that such FSI-rights constitute an asset under the relevant legal definition. The Tribunal noted the factual finding that the assessee had introduced the FSI in its accounts as an asset and had credited capital reserve and debited an "FSI Right" account. Having examined the lease clause and the statutory concept of asset, the Tribunal concluded that the FSI right is an asset attached to the property rather than an incident of trading business; the High Court concurred with that conclusion and found no error in the Tribunal's approach or factual appreciation. [Paras 6, 7, 8]

Confirmed that Floor Space Index is a capital asset attached to the property and not the business

Conversion of a capital asset into stock-in-trade deemed transfer under section 2(47)(iv) - capital gains chargeability on conversion and valuation under section 45(2) - Conversion of the FSI-capital asset into stock-in-trade is a deemed transfer under section 2(47)(iv), and section 45(2) governs the year and valuation for capital gains - HELD THAT: - The Tribunal applied the combined operation of section 2(47)(iv) and section 45(2), observing that while the conversion or treatment of a capital asset as stock-in-trade is deemed a 'transfer', section 45(2) charges capital gains in the previous year in which the converted asset is actually sold or otherwise transferred to outside parties. Section 45(2) further prescribes that for computation of capital gains the fair market value on the date of conversion shall be deemed to be the full value of consideration. On that statutory construction and on the facts that only the portion actually sold would attract tax, the Tribunal held the assessee's claim to be correctly allowed; the High Court found no error in this legal conclusion or its application to the facts. [Paras 6, 7]

Held that deemed transfer on conversion is governed by section 45(2), and capital gains are chargeable in the year of actual sale with valuation as provided by section 45(2)

Final Conclusion: The appeal is dismissed. The substantial question is answered in favour of the assessee: Floor Space Index is a capital asset attached to the property, and conversion into stock-in-trade is a deemed transfer governed by section 45(2), with taxability arising on actual sale as held by the Tribunal and affirmed by this Court.

Impleadment of legal heirs - remand for fresh consideration after impleadment - nullity of adjudicatory order passed in respect of a deceased person - penalty under Section 271(1)(C) of the Income Tax Act - alternative remedy by statutory appeal before appellate authority

Impleadment of legal heirs - nullity of adjudicatory order passed in respect of a deceased person - remand for fresh consideration after impleadment - Ext.P3 order of the Appellate Tribunal rejecting the appeal for non-impleadment of the legal heirs was erroneous and vitiated the proceedings. - HELD THAT: - The Tribunal incorrectly found that the original appellant had died before filing the appeal and thereby refused to permit impleadment of the legal heirs; in truth the original appellant died during the pendency of the appeal. By failing to permit the petitioner (a legal heir) to be impleaded, the Tribunal effectively decided the appeal in respect of a dead person, rendering Ext.P3 a nullity. The High Court quashed Ext.P3 and directed the Tribunal to permit the petitioner to be impleaded as legal heir of the deceased appellant, to rehear the appeal afresh and pass orders after hearing the petitioner. The Tribunal is directed to complete consideration and pass orders within six months from receipt of the judgment.

Ext.P3 quashed; matter remanded to the Appellate Tribunal to permit impleadment of the petitioner as legal heir and to decide the appeal afresh within six months.

Penalty under Section 271(1)(C) of the Income Tax Act - alternative remedy by statutory appeal before appellate authority - Challenge to Ext.P6 penalty order under Section 271(1)(C) was not interfered with in writ jurisdiction and the petitioner must pursue the statutory appellate remedy. - HELD THAT: - The High Court found that the petitioner had been heard prior to passing Ext.P6. Since the order is one from which a statutory appeal lies, the proper course is to file an appeal under the Income Tax Act rather than seek interference under Article 226. The court declined to disturb Ext.P6 in the writ petition but granted the petitioner leave to file the statutory appeal within one month; the appellate authority is directed to decide that appeal on merits within six months of receipt, and may have the benefit of the Tribunal's decision on remand.

No interference with Ext.P6; petitioner permitted to file statutory appeal within one month and the appellate authority directed to decide it on merits within six months.

Final Conclusion: Ext.P3 is quashed and the appeal remanded to the Appellate Tribunal with directions to permit impleadment of the petitioner as legal heir and to decide the appeal afresh within six months; challenge to Ext.P6 is left to the statutory appellate remedy, with liberty to file an appeal within one month and for the appellate authority to decide it within six months.

Deduction under Section 80HHC for profit from export of goods - treatment of service charges in computing export profit - service charges as part of sale price, not brokerage or commission - precedential effect of Baby Marine Exports on interpretation of Section 80HHC

Deduction under Section 80HHC for profit from export of goods - treatment of service charges in computing export profit - service charges as part of sale price, not brokerage or commission - precedential effect of Baby Marine Exports on interpretation of Section 80HHC - Appellate Tribunal was right in allowing deduction under Section 80HHC by holding that service charges cannot be excluded while computing profit of business for the purpose of that deduction. - HELD THAT: - The Court accepted the view adopted by the CIT(A) and the Tribunal that service charges form part of the price for sale of merchandise and are not akin to brokerage, commission, interest or collection charges, and therefore are includible in computing profit derived from exports for the purpose of Section 80HHC. The authorities below relied on the decision in Baby Marine Exports, which the High Court found to be binding in light of its later confirmation by the Apex Court in CIT v. Baby Marine Exports. The judgment records that Section 80HHC(1) permits a deduction to the extent of profit derived from export of goods, and Section 80HHC(1A) deals with supporting manufacturers; applying those provisions, exclusion of service charges was not warranted. Having regard to the precedent and the statutory scheme, the Tribunal did not err in allowing the assessee's claim. [Paras 9, 10]

The Tribunal's order allowing the claim for deduction under Section 80HHC by treating service charges as part of export price is upheld; appeals dismissed.

Final Conclusion: Appeals dismissed. The question whether service charges may be excluded while computing profit for deduction under Section 80HHC is answered in favour of the assessee and against the Revenue.

Registration under Section 12AA - retrospective effect of registration - remand for fresh adjudication - quashing of appellate order founded on a set-aside order - stay on recovery pending fresh adjudication

Remand for fresh adjudication - registration under Section 12AA - retrospective effect of registration - 5th respondent to decide on the petitioner's application for effect of registration from the date of incorporation, on merits. - HELD THAT: - The Income Tax Appellate Tribunal had set aside Ext.P6 and directed the 5th respondent to decide the petitioner's application on merits. The High Court found that the question whether the registration granted by Ext.P3 should be given effect from 05.02.1992 (the date of incorporation) bears on the petitioner's entitlement to exemption for years prior to 2005-2006. In consequence, the Court directed that the 5th respondent must pass a fresh order pursuant to the Tribunal's directions, after affording the petitioner an opportunity of hearing, and do so within two months from receipt of the judgment.

The matter is remitted to the 5th respondent for fresh adjudication on merits and for determination of whether registration under Section 12AA should operate retrospectively from 05.02.1992; fresh order to be passed within two months after hearing the petitioner.

Quashing of appellate order founded on a set-aside order - remand for fresh adjudication - stay on recovery pending fresh adjudication - Ext.P2 order of the 3rd respondent is quashed and the appeal against Ext.P1 is to be reconsidered afresh after the 5th respondent's decision; no recovery steps meanwhile. - HELD THAT: - Ext.P2 relied on Ext.P6 of the 5th respondent to dismiss the petitioner's appeal against Ext.P1 (assessment for AY 2003-2004). Since the Tribunal had set aside Ext.P6, the High Court held that Ext.P2, being founded on an order already set aside, must be quashed. The Court directed the 3rd respondent to hear and decide the petitioner's appeal afresh, after considering the fresh order to be passed by the 5th respondent pursuant to the Tribunal's directions. Pending the final decision by the 3rd respondent, the Court prohibited pursuit of recovery steps for any differential tax amount.

Ext.P2 is quashed; the 3rd respondent must reconsider the appeal against Ext.P1 afresh after hearing the petitioner and taking into account the 5th respondent's consequential order; recovery proceedings stayed until final adjudication.

Final Conclusion: The Tribunal's order setting aside the 5th respondent's earlier order must be implemented: the 5th respondent is directed to decide the registration application on merits within two months, and the appellate order Ext.P2 is quashed so that the appeal against the AY 2003-2004 assessment is reheard afresh; recovery of any differential tax is restrained pending final orders.

Immediate suspension under Regulation 20(2) of CHALR, 2004 in cases where an enquiry is pending or contemplated - continuation of suspension under Regulation 20(3) of CHALR, 2004 - procedure for inquiry and show cause notice under Regulation 22(1)-(2) of CHALR, 2004 - legitimate expectation and right to carry on profession vis a vis prolonged suspension - interplay between emergency suspension and mandatory inquiry within prescribed time frame

Immediate suspension under Regulation 20(2) of CHALR, 2004 in cases where an enquiry is pending or contemplated - procedure for inquiry and show cause notice under Regulation 22(1)-(2) of CHALR, 2004 - continuation of suspension under Regulation 20(3) of CHALR, 2004 - Validity of the suspension and its continuance when no show cause notice under Regulation 22(1) was issued within the prescribed time and no inquiry was commenced. - HELD THAT: - The Court applied the established distinction between an investigatory process and the formal inquiry envisaged by Regulation 22. Regulation 20(2) permits immediate suspension only in emergent situations where an inquiry is pending or contemplated; thereafter the procedural safeguards of Regulation 22, beginning with the issue of a show cause notice under Regulation 22(1) and the inquiry under Regulation 22(2), must follow within the prescribed time frame. Where, as in this case, suspension was ordered and continued but no show cause notice or inquiry was initiated even after a prolonged period, the suspension could not be sustained. The Tribunal's earlier decisions in analogous matters, and the Madras High Court's affirmance, holding that prolonged suspension without initiating the Regulation 22 inquiry nullifies continuance of suspension, govern the present case. Respect for the right to carry on a profession and the requirement that exceptional emergency measures must be followed promptly by the statutorily mandated inquiry underpinned the conclusion that continuation of suspension was unjustified.

Impugned suspension and its continuance set aside; appeal allowed.

Final Conclusion: The suspension of the appellant's CHA licence and the order continuing that suspension were set aside for failure to initiate the inquiry and issue the show cause notice required by Regulation 22 within the prescribed/reasonable time; the appeal is allowed.

Confiscation of currency as sale proceeds of contraband - proof of cash credit and identification of creditor - precedential weight of ITAT findings - statement under Section 108 of the Customs Act, 1962

Confiscation of currency as sale proceeds of contraband - proof of cash credit and identification of creditor - statement under Section 108 of the Customs Act, 1962 - precedential weight of ITAT findings - Validity of confiscation of the seized Indian currency and penalty imposed on the appellant in light of the claim that the amount was a loan from S.S. Arumugam alias Rajarathinam - HELD THAT: - The Tribunal noted that at the time of seizure the appellant had stated the currency represented sale proceeds of contraband gold but subsequently, by representation dated 27.4.1985, asserted the amount was a loan from S.S. Arumugam. The question was considered by the Income Tax Appellate Tribunal for Assessment Year 1986-87, which after examining the material - including identification of the creditor, evidence of the creditor's capacity, and the Board's circular permitting sympathetic treatment of bona fide migrants from Sri Lanka - accepted that the amount was lent by Rajarathinam and deleted the addition. The ITAT also upheld the cancellation of the penalty in connected proceedings. Having perused those orders, the Tribunal held that the ITAT's findings establish that the seized currency was not sale proceeds of contraband and that the adjudicating authority's confiscation and penalty vis-a -vis the appellant could not be sustained. The Tribunal observed that the Revenue remains at liberty to verify authenticity of the ITAT orders, but on the material before the Tribunal the customs adjudication was set aside insofar as it related to the appellant. While the customs statements recorded under Section 108 were admissible, the subsequent corroborative material and the ITAT's determinations on cash credit and creditor's capacity were determinative in favour of the appellant. [Paras 5, 7]

Impugned adjudication order confiscating the currency and imposing penalty is set aside insofar as it relates to the appellant; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the seized Indian currency was established to be a loan from S.S. Arumugam (as accepted by the ITAT for AY 1986-87) and therefore the confiscation and penalty imposed by the adjudicating authority could not be sustained; the impugned order is set aside insofar as it relates to the appellant.

Classification of goods - interpretation of Chapter sub heading Note No.2 (Chapter 27) - claim of exemption under an exemption notification - pre deposit for stay of demand - levy of countervailing duty on imported goods - proof of origin under preferential notifications (SAARC/ASEAN)

Pre deposit for stay of demand - claim of exemption under an exemption notification - Application for waiver of pre deposit in stay petitions - HELD THAT: - The Tribunal found the classification and related substantive issues to be arguable and thus appropriate for full adjudication on merits, but held that appellants must be put to conditions by making partial pre deposits to secure the revenue while appeals are pending. Having considered submissions and deposits already made by one appellant, the Bench quantified specified pre deposit amounts for each appellant and directed compliance within eight weeks, with reporting and further listing for appropriate orders. Subject to such compliance, waiver of pre deposit of the balance amounts was allowed and recovery stayed till disposal of the appeals. The order records that the appeals raise contested questions requiring detailed consideration at final hearing, and therefore stay is granted only on the terms specified. [Paras 10, 11, 12, 13]

Pre deposit directed in specified sums for each appellant; on compliance within the time ordered, waiver of balance pre deposit allowed and recovery stayed until disposal of the appeals.

Classification of goods - interpretation of Chapter sub heading Note No.2 (Chapter 27) - levy of countervailing duty on imported goods - proof of origin under preferential notifications (SAARC/ASEAN) - Substantive classification of imported coal, applicability of exemption notification, and related CVD/preferential origin questions reserved for final adjudication - HELD THAT: - The Tribunal recorded that the core controversy-whether the imported coal falls within the tariff description of 'steam (non coking) coal' or is classifiable as bituminous coal under the Chapter sub heading note relied upon by Revenue-is a contentious and arguable question requiring deeper consideration. The Tribunal noted Revenue's reliance on load port test certificates and appellants' reliance on their invoices, past classifications and the object of the exemption notification, as well as contentions on CVD not being leviable and on preferential origin (SAARC/ASEAN). These substantive matters were not decided on the stay petitions and were left to be examined and decided at the final hearing of the appeals. [Paras 9, 10]

Classification, claim of exemption, liability to CVD and issues relating to preferential origin are left for detailed consideration and final disposal of the appeals.

Final Conclusion: The Tribunal allowed stay applications subject to specified conditional pre deposits by each appellant, reporting of compliance and consequent stay of recovery of the balance until final disposal; the substantive disputes on classification of coal, entitlement to exemption, liability to CVD and preferential origin remain undecided and are to be considered at the final hearing.

Challenge to assessment order in refund proceedings - availability of concessional duty under Notification No. 62/2007-Cus for iron ore fines - segregation of fines and lumps for concessional treatment - appealable order under Section 28 of the Customs Act, 1962 - requirement of prior protest or appeal under Section 17(5) for contesting assessment

Challenge to assessment order in refund proceedings - appealable order under Section 28 of the Customs Act, 1962 - requirement of prior protest or appeal under Section 17(5) for contesting assessment - Whether the appellant could maintain refund claims without first challenging the assessment order passed on the Shipping Bills. - HELD THAT: - The Tribunal held that the assessment order passed by the assessing authority on the Shipping Bills is an appealable order and cannot be challenged for the first time in refund proceedings. Relying on the principles in CCE, Kanpur v. Flock (India) Pvt Ltd and Priya Blue Industries Ltd, the court observed that payment made "in pursuance of an order of assessment" gives the right to claim refund but does not permit bypassing the statutory appellate remedy to attack the assessment. The appellant neither filed a protest under Section 17(5) nor appealed the assessment order; instead the assessment was sought to be questioned through the refund claim. The Tribunal found the precedent distinguishing Kothari Metals (where a protest under Section 17(5) had been lodged) inapplicable on facts, and therefore concluded that the refund claims could not be maintained without first assailing the assessment order through the prescribed remedy. [Paras 11, 12, 13]

Refund claims dismissed insofar as they seek to impugn the assessment order which was not challenged through the statutory appellate/protest remedy.

Availability of concessional duty under Notification No. 62/2007-Cus for iron ore fines - segregation of fines and lumps for concessional treatment - Whether the appellants were entitled to concessional duty under Notification No. 62/2007-Cus for the consignments declared as ROM (mixture of fines and lumps). - HELD THAT: - On merits the Tribunal noted that Notification No. 62/2007-Cus grants concessional duty specifically in respect of iron ore fines of specified Fe content. The appellants had declared the consignments in the Shipping Bills as ROM (mixture of fines and lumps) and paid duty at the tariff rate. The Board/Public Notice clarifies that where a consignment consists of fines and lumps, segregation is to be effected to determine quantity of fines; if segregation is not possible the entire consignment is to be treated as ores other than fines. Given the declaration as ROM and the absence of segregation or a prior adjustment of the assessment, the Tribunal held that the appellants were not entitled to the benefit of the Notification on the facts before it. [Paras 9, 10]

Concessional duty under Notification No. 62/2007-Cus not available to the appellants on the consignments declared and assessed as ROM.

Final Conclusion: Appeals dismissed: refund claims are not maintainable to challenge an unappealed assessment order, and on merits consignments declared as ROM are not entitled to the Notification No. 62/2007-Cus concessional treatment absent segregation or prior successful challenge to assessment.

Right of redemption under Section 13(8) of the Securitization Act - confirmation of sale by the secured creditor - transfer vests only on confirmation and issuance of sale certificate under Rule 9(6) - acceptance of bid by the authorized officer is not confirmation of sale - jurisdiction of the Debt Recovery Tribunal under Section 17 - literal construction of statutory language

Right of redemption under Section 13(8) of the Securitization Act - transfer vests only on confirmation and issuance of sale certificate under Rule 9(6) - literal construction of statutory language - Whether a borrower may redeem the immovable secured asset after an auction has taken place but before the sale is confirmed by the secured creditor under the Rules - HELD THAT: - The Court held that subsection (8) must be read to protect redemption both before the date fixed for 'sale' and before the date fixed for 'transfer'. The words 'sale or transfer' in subsection (8) are deliberate; redemption is available until transfer is effected. Transfer occurs only on confirmation of sale by the secured creditor and attendant formalities under Rule 9(6). Applying ordinary grammatical construction to the statutory language, the Court concluded that the borrower's right to redeem is not exhausted merely because an auction has been conducted or a bid accepted by the authorized officer; the right continues until the sale is confirmed by the secured creditor and the transfer effected. [Paras 14, 15, 16, 17, 27]

Borrower is entitled to redeem the secured asset after an auction but before confirmation of sale by the secured creditor; redemption continues until transfer on confirmation under Rule 9(6).

Acceptance of bid by the authorized officer is not confirmation of sale - confirmation of sale by the secured creditor - transfer vests only on confirmation and issuance of sale certificate under Rule 9(6) - Whether acceptance of the highest bid or receipt of bid amount by the authorized officer, in the absence of confirmation by the secured creditor, effects transfer of title in favour of the auction purchaser - HELD THAT: - The Court found that acceptance of bid by the authorized officer is a preliminary act and, where expressly made subject to bank confirmation, does not amount to transfer. Rule 9(2) contemplates sale subject to confirmation by the secured creditor and sub-rule (6) empowers issuance of sale certificate only upon such confirmation and compliance with payment terms. In the present case payments were accepted subject to the outcome of DRT proceedings and no written confirmation by the secured creditor nor sale certificate was issued; hence no transfer of title had taken place in law. [Paras 12, 20, 21, 22, 23]

Acceptance of bid or receipt of payment by the authorized officer, absent confirmation by the secured creditor and issuance of the sale certificate under Rule 9(6), does not effect transfer of title to the auction purchaser.

Jurisdiction of the Debt Recovery Tribunal under Section 17 - Whether the proceedings before the Debt Recovery Tribunal challenging the sale were within the Tribunal's jurisdiction - HELD THAT: - The Court observed that a borrower aggrieved by sale proceedings under the Securitization Act has the remedy under Section 17 before the DRT. In the facts, the borrower filed S.A. challenging the sale and the Tribunal issued directions permitting redemption within a time-frame; those directions were complied with. Given that the sale had not been confirmed by the secured creditor, the DRT was competent to entertain and dispose of the challenge. [Paras 4, 26]

Proceedings before the DRT under Section 17 were within its jurisdiction and the Tribunal was competent to grant the relief it did.

Final Conclusion: Appeal dismissed. The High Court held that under Section 13(8) of the Securitization Act a borrower may redeem the secured asset until the property is transferred by confirmation of sale by the secured creditor (and attendant issuance of sale certificate under Rule 9(6)); acceptance of a bid or payment by an authorized officer, without such confirmation, does not vest title in the auction purchaser, and the DRT proceedings were within jurisdiction.

Validity of Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - assistance to secured creditor in taking possession of secured assets - procedural and non-adjudicatory role of District Magistrate/Chief Metropolitan Magistrate under Section 14 - absence of statutory appeal against orders under Section 14 - remedy before Debts Recovery Tribunal under Section 17 - right to judicial review under Articles 226 and 227 of the Constitution - non-adjudicatory enforcement of security interest under Section 13(4)

Validity of Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - procedural and non-adjudicatory role of District Magistrate/Chief Metropolitan Magistrate under Section 14 - assistance to secured creditor in taking possession of secured assets - Section 14 of the Act is intra vires and valid. - HELD THAT: - The Court held that Section 14 is a procedural provision which obliges the District Magistrate or Chief Metropolitan Magistrate to assist a secured creditor in taking possession of secured assets and to forward assets and documents to the secured creditor; the authority exercises a ministerial, not adjudicatory, function, and may use necessary force for securing compliance. The substantive power to take possession is traceable to Section 13(4) (measures available to secured creditors) while Section 14 merely facilitates execution of those measures. As the Magistrate has no power to determine disputes between creditor and borrower, Section 14 does not usurp the statutory adjudicatory powers vested in the Debts Recovery Tribunal under Sections 17 and 18. The statutory scheme (including bar on civil courts under Section 34 and the complete code in Section 17) provides the remedial structure for grievances arising from measures under Section 13(4). [Paras 15, 20]

Section 14 is a valid, intra vires provision and the Magistrate/Chief Metropolitan Magistrate is bound to assist the secured creditor but is not empowered to adjudicate the legality of measures taken under Section 13(4).

Absence of statutory appeal against orders under Section 14 - remedy before Debts Recovery Tribunal under Section 17 - right of appeal as creature of statute - Non-provision of an appeal against orders under Section 14 does not render Section 14 unconstitutional. - HELD THAT: - The Court found that absence of an express statutory right of appeal against orders passed under Section 14 does not, by itself, make the provision arbitrary or violative of Articles 14 or 19. The legislature may omit an appellate remedy where the power conferred is executive/ministerial or when other corrective mechanisms exist. Here the Act furnishes a statutory remedy - Sections 17 and 18 before the Debts Recovery Tribunal and Appellate Tribunal - to challenge measures taken pursuant to Section 13(4). The Court relied on precedents holding that availability of appeal is one factor among many (including status of the authority, nature of power, objective tests, and availability of judicial review) to assess reasonableness; accordingly, the absence of appeal in Section 14 is not determinative of unconstitutionality. [Paras 15, 16, 20]

The absence of a statutory appeal against orders under Section 14 does not render Section 14 ultra vires the Constitution; remedies under Sections 17 and 18 and judicial review are adequate safeguards.

Right to judicial review under Articles 226 and 227 - limits of ouster clauses - Judicial review under Articles 226 and 227 is not ousted in respect of actions under Section 14 when the Magistrate exceeds or refuses to exercise jurisdiction. - HELD THAT: - Although Section 14(3) states that acts done under Section 14 shall not be called in question in any court or before any authority, the Court held that the constitutional power of judicial review remains available. The protection in Section 14(3) does not bar recourse to High Courts under Articles 226/227 where the Magistrate/Commissioner exceeds statutory power or refuses to exercise jurisdiction; such review is available only on conventional grounds of excess, abuse or failure to exercise jurisdiction. [Paras 15, 20]

Section 14 does not oust the High Court's power of judicial review under Articles 226 and 227 where the authority exceeds or refuses to exercise its jurisdiction.

Final Conclusion: Writ petition dismissed. Section 14 of the Act is upheld as intra vires; the Magistrate/Chief Metropolitan Magistrate must assist secured creditors in taking possession but may not adjudicate disputes reserved for the Debts Recovery Tribunal under Sections 17-18; absence of an express appeal against Section 14 orders does not render the provision unconstitutional, and constitutional judicial review remains available for excess or abuse of power.

Right of redemption under Section 13(8) of the SARFAESI Act - statutory requirement of 30 days individual notice under Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 - renotification/fresh proclamation requirement on adjournment (Rule 15 of Sch. II Part I of the Income-tax Rules, 1962 applied via Section 29 RDDB Act and Section 37 SARFAESI Act) - sale or transfer effected without compliance with Section 13(8) and Rules 8(6)/9(1) is vitiated - principle that mortgagor's redemption right survives until completion of sale by registered deed (analogy to Section 60 T.P. Act)

Right of redemption under Section 13(8) of the SARFAESI Act - statutory requirement of 30 days individual notice under Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 - Construction and effect of Section 13(8) of the SARFAESI Act read with Rules 8(6) and 9(1) of the Rules, 2002 on the borrower's right to redeem and the notice requirements for sale of immovable secured assets. - HELD THAT: - The Court held that Section 13(8) recognises a valuable right in the borrower to tender the dues, inclusive of costs, charges and expenses, at any time before the date fixed for sale or transfer, and that upon such tender no sale or further step for transfer may be taken. Rules 8(6) and 9(1) prescribe the procedural corollary: the borrower must be given a clear 30 days individual notice and a public newspaper notice before any sale. Reading Rule 8(6) and Rule 9(1) together, the Court construed the disjunctive 'or' in Rule 9(1) as requiring both publication and individual notice to the borrower so as to effectuate the protection under Section 13(8). The Court emphasised that these prescriptions serve the twin objectives of protecting the borrower's constitutional right to property and ensuring transparency so that the secured asset fetches a proper price. Non compliance with these mandates vitiates any sale or transfer effected in breach of them. [Paras 26, 28, 30, 31]

Section 13(8) affords the borrower a last moment right of redemption and Rules 8(6) and 9(1) require a fresh 30 days' individual notice plus public notice before sale; a sale effected without complying with these requirements is invalid.

Renotification/fresh proclamation requirement on adjournment (Rule 15 of Sch. II Part I of the Income-tax Rules, 1962 applied via Section 29 RDDB Act and Section 37 SARFAESI Act) - sale or transfer effected without compliance with Section 13(8) and Rules 8(6)/9(1) is vitiated - Whether a sale which was postponed and thereafter effected without issuing a fresh notice (after dismissal of the borrowers' S.A.) complied with the statutory scheme, and the consequence of non compliance. - HELD THAT: - The Court held that where a sale notified under Rules 8 and 9 does not take place as scheduled for reasons not solely attributable to the borrower (including adjournment), the earlier notice lapses and the secured creditor must follow the notice procedure afresh. Applying Section 37 of the SARFAESI Act and Section 29 of the RDDB Act, the Court read in Rule 15 of Sch. II Part I of the Income tax Rules to support the necessity of fresh proclamation where adjournment exceeds the permissible period. Therefore a sale effected on a subsequent date relying on the earlier, lapsed notice violates Section 13(8) and the Rules and is vitiated. [Paras 46, 48, 49, 51]

Where a notified sale did not take place as scheduled, the secured creditor must re notify in accordance with Rules 8(6) and 9(1)/(Rule 15 as applicable); failure to do so renders any later sale void.

Sale or transfer effected without compliance with Section 13(8) and Rules 8(6)/9(1) is vitiated - principle that mortgagor's redemption right survives until completion of sale by registered deed (analogy to Section 60 T.P. Act) - Validity of the sale effected on 28.12.2007 in favour of the purchaser and correctness of the High Court Division Bench's order dated 08.03.2010 setting aside that sale. - HELD THAT: - Applying the statutory construction of Section 13(8), Rules 8 and 9 and the principles drawn from Section 60 of the Transfer of Property Act as well as the Court's jurisprudence, the Bench found that the Bank effected and confirmed the sale without giving the borrowers the requisite opportunity to tender dues before the date fixed for sale. The sale procedure was therefore not in conformity with the SARFAESI Act and the Rules and was vitiated. The Division Bench's decision to set aside the sale (subject to the conditional mechanism it provided) was held to be justified on these grounds. [Paras 51, 52, 58]

The sale of 28.12.2007 and its confirmation were invalid for failure to comply with Section 13(8) and Rules 8/9; the High Court's judgment of 08.03.2010 setting aside that sale was upheld.

Finality of conditional directions and limits on subsequent extension by the same court - protection of purchaser's crystallised ownership where conditional cancellation lapses for non compliance - Validity of the Division Bench's subsequent orders (I.A. Nos. 437 and 507 of 2010) extending time and directing transfer in favour of a third party who deposited funds after the expiry of the time granted by the main judgment. - HELD THAT: - The Court observed that the main judgment dated 08.03.2010 contained a self executing condition: the sale would be set aside only if the borrowers complied within the two month period; failing which the sale would stand confirmed and the writ appeal be dismissed. That period expired and, by reason of non compliance, the sale in favour of the purchaser crystallised into ownership. The application for extension was filed well after expiry; the High Court had no justifiable basis to reopen the settled position on the slender grounds urged. The Court therefore set aside the subsequent interim orders which had permitted the 8th respondent's scheme of deposit and transfer. [Paras 52, 55, 58]

The Division Bench exceeded proper exercise of discretion in granting belated extensions and directing transfer to the 8th respondent; the orders dated 18.06.2010 and 08.07.2010 were set aside.

Remedies and equitable adjustment where an invalid sale fetched an inadequate price - Relief to be granted having upheld invalidity of the Bank's sale procedure while recognising purchaser's accrued rights after non compliance by borrowers. - HELD THAT: - Although the sale in favour of the purchaser had been confirmed by operation of the main judgment's condition, the Court recognised that the price realised through the defective procedure was not reflective of the property's true value. In equitable adjustment, the Court directed restitutionary and distributive measures: refund of deposits to the 8th respondent, application of amounts held with the Bank to statutory demands, and a requirement that the purchaser deposit the difference between the price he paid and the price subsequently obtained, with prescribed consequences for non payment. These directions aim to balance the purchaser's vested position with the borrowers' entitlement to a fair realisation of their property. [Paras 59, 60]

The Court framed equitable directions: refund to the 8th respondent, payment by the Bank to revenue authorities, and obligation on the appellant purchaser to deposit the balance sale consideration, failing which the earlier sale would be cancelled and the property re auctioned as directed.

Final Conclusion: The appeal against the Division Bench judgment dated 08.03.2010 is dismissed: the High Court was right in holding the sale of 28.12.2007 invalid for failure to comply with Section 13(8) and Rules 8/9 (requiring fresh 30 days' notice and renotification after adjournment). The interim orders of 18.06.2010 and 08.07.2010 (I.A. Nos.437 and 507 of 2010) are set aside. The Court directed refund of the 8th respondent's deposit, payment to the Tax Recovery Officer as applicable, and required the confirmed purchaser to deposit the balance sale consideration determined by the Court, with stipulated consequences if he fails to do so.

Definition of Storage and Warehousing Services under Section 65(102) of the Finance Act, 1994 - taxability of renting storage tanks - control and responsibility for goods as determinative test for storage services

Definition of Storage and Warehousing Services under Section 65(102) of the Finance Act, 1994 - control and responsibility for goods as determinative test for storage services - taxability of renting storage tanks - Whether the appellant's activity of providing and charging rent for storage tanks installed at customers' premises attracts service tax as Storage and Warehousing Services. - HELD THAT: - The Tribunal held that the determinative test for characterising an activity as Storage and Warehousing Services is whether the service-provider retains control or responsibility for the goods stored. The facts show that the gas stored in the tanks at the buyer's premises was transferred to the buyer and, thereafter, the appellant did not retain control over the goods, nor was it responsible for security of the goods. Although the appellant supplied and maintained the storage tanks, including wear and tear and insurance, the goods themselves remained with the buyer after transfer. On these findings, the activity of renting the storage tank did not amount to provision of storage and warehousing service as defined under the statute, and therefore was not taxable as such.

Impugned service-tax demands under the category of Storage and Warehousing Services set aside; appeals allowed.

Final Conclusion: The Tribunal concluded that renting and maintaining storage tanks installed at customers' premises, where the goods are transferred to the buyer and the appellant does not retain control or responsibility for the goods, does not constitute a taxable Storage and Warehousing Service; the impugned demands were set aside and the appeals allowed.

Export of services - business auxiliary service - reverse charge mechanism - user of service located outside India - Export of Service Rules, 2005 - Rule 3(1)(iii) - waiver of pre-deposit and stay of recovery

Business auxiliary service - export of services - Export of Service Rules, 2005 - Rule 3(1)(iii) - user of service located outside India - Whether the services rendered by the appellant qualify as export of services under the Export of Service Rules, 2005 and therefore fall outside the service tax demand raised on reverse charge basis. - HELD THAT: - The Tribunal found the material facts undisputed: the appellant procures sale orders in India for overseas group companies by conducting market surveys and receives commission in convertible foreign exchange. Applying Rule 3(1)(iii) of the Export of Service Rules, 2005, the Tribunal held that such services constitute business auxiliary service and, because the appellant procures orders for associates located outside India, the user of the service is located outside India. On that basis the Tribunal concluded that the conditions of the Export of Service Rules, 2005 were satisfied and the services qualify as export of services, removing the basis for the service tax demand under the reverse charge mechanism. [Paras 4]

The services rendered by the appellant are export of services under Rule 3(1)(iii) of the Export of Service Rules, 2005, with the user located outside India.

Waiver of pre-deposit and stay of recovery - Whether the appellant is entitled to waiver of the pre-deposit of the contested service tax, interest and penalties and a stay on recovery during the appeal. - HELD THAT: - Having held that the appellant's services qualify as export of services and the user is located outside India, the Tribunal concluded that the appellant had complied with the conditions of the Export of Service Rules, 2005. On that determinative finding the Tribunal exercised its power to waive the requirement of making any pre-deposit of service tax, interest and penalties and ordered stay of recovery for the duration of the appeal. [Paras 5]

Pre-deposit of the entire amount of service tax, interest and penalties is waived and recovery is stayed during the pendency of the appeal.

Final Conclusion: The Tribunal held that the appellant's procurement services are business auxiliary services exported under Rule 3(1)(iii) of the Export of Service Rules, 2005 (user located outside India), and accordingly waived the pre-deposit of the contested service tax, interest and penalties and stayed recovery pending the appeal.

Interest on delayed payment of service tax - penalty under Sections 77 & 78 of the Finance Act, 1994 - reverse charge mechanism - revenue neutrality

Interest on delayed payment of service tax - revenue neutrality - Section 75 of the Finance Act, 1994 - reverse charge mechanism - Whether interest is payable on service tax paid late for services received under reverse charge, despite revenue neutrality. - HELD THAT: - The Tribunal held that payment of tax must be made within the time prescribed and that revenue neutrality does not absolve the obligation to pay tax on time. The relevant period for calculating interest is the interval between the due date and the actual payment date; the Government is deemed to have lost interest for that period even though the assessee could claim Cenvat credit once duty was paid. Reliance on decisions addressing different factual matrices was distinguished. The Tribunal concluded that interest is therefore payable under Section 75 for the delay in payment for the months in question. [Paras 6]

Interest under Section 75 is payable for the delayed payment.

Penalty under Sections 77 & 78 of the Finance Act, 1994 - revenue neutrality - intention to evade - Whether penalties under Sections 77 and 78 should be imposed where service tax was not paid for two months due to oversight but tax was later paid and Cenvat credit claimed. - HELD THAT: - The Tribunal found that the appellants regularly paid service tax and that the failure to pay for the two months arose from oversight. There was no establishment of intention to evade payment of duty. In these circumstances, and having regard to precedents relied upon by the appellant, the Tribunal exercised its discretion to relieve the appellants from penalties, setting them aside. [Paras 7]

Penalties under Sections 77 and 78 are set aside for lack of intention to evade.

Final Conclusion: The appeal is disposed of by upholding the demand of interest for delayed payment of service tax for March 2008 and March 2009, while setting aside the penalties under Sections 77 and 78 of the Finance Act, 1994.

Overriding effect of the SEZ Act - refund under exemption/notification for services provided to SEZ - requirement of approval of list of services for refund - extension of time for filing refund claims under notification

Requirement of approval of list of services for refund - Notification No. 9/2009 does not mandate that the list of services must be approved prior to the provision of services for a refund claim to be maintainable. - HELD THAT: - The Tribunal examined the terms of notification No. 9/2009 and observed that the notification does not state that the list of services required in relation to authorised operations in the SEZ must be approved by the approval committee before the services are provided. The appellants had filed the refund claim after the list was approved, which the Tribunal found to be consonant with the requirements of the notification. Consequently, denial of refund on the sole ground that approval was not obtained prior to receipt of services was not upheld. [Paras 6]

The refund claim is not liable to be rejected on the ground that the list of services was not approved before the services were received.

Overriding effect of the SEZ Act - refund under exemption/notification for services provided to SEZ - The SEZ Act has overriding effect over other laws and therefore its provisions must be given effect to in relation to service tax treatment of services provided to SEZ units; consequently refund cannot be denied where SEZ Act provisions displace service tax liability. - HELD THAT: - The Tribunal relied on Section 50(1) of the SEZ Act as conferring overriding effect over provisions of any other law enacted by Parliament, and observed that where both the SEZ Act and the Service Tax Act apply, the SEZ Act's provisions must be given effect. The Tribunal distinguished the cited DHL Logistics decision as relating to a different exemption notification which did not provide for refund, and noted support in Intas Pharma Ltd. (Tri.-Ahd) holding that SEZ Act provisions have overriding effect. In the facts of the case, the Tribunal concluded that denial of refund would be inappropriate when, under the SEZ scheme, service tax is not payable on services provided to SEZ units. [Paras 6]

SEZ Act's overriding effect precludes denial of the refund claim where, under the SEZ provisions, service tax is not payable on services to SEZ units.

Extension of time for filing refund claims under notification - Assistant Commissioner ought to have exercised the power under clause (2f) of para 2 of notification No. 9/2009 to consider extension of time for filing the refund claim in the totality of circumstances; the appellants' delay did not warrant rejection where refund was consequent to SEZ approvals and it was their first claim. - HELD THAT: - The Tribunal noted that the notification vests authority in the Assistant Commissioner to grant extension for filing refund claims. The appellants, registered in 2009, obtained various SEZ approvals and filed their first refund application beyond the six months period; they also needed time to ensure the service provider had not taken refund. The Assistant Commissioner was expected to examine the matter in a holistic manner while exercising the power under clause (2f). Given that subsequent refund claims by the appellants were being sanctioned and that no service tax was payable under the SEZ Act, the Tribunal found it would not meet the ends of justice to deny the refund. [Paras 6]

The delay in filing the refund claim should have been considered for extension by the Assistant Commissioner under the notification; the claim should not have been rejected solely on time-bar grounds in the circumstances.

Final Conclusion: The appeal is allowed; the refund claim cannot be rejected on the grounds that prior approval of the list of services was required before services were received, nor where the SEZ Act's overriding effect negates service tax liability, and the authority should have considered granting extension under the notification; consequential relief, if any, shall follow.

Business Auxiliary Service - service tax liability under Section 65(19) clause (4) of the Finance Act, 1994 - procurement of inputs/goods - principal-to-principal sale - expenses forming part of sale price - imported in own name and own account

Business Auxiliary Service - service tax liability under Section 65(19) clause (4) of the Finance Act, 1994 - procurement of inputs/goods - principal-to-principal sale - expenses forming part of sale price - Whether additional handling charges and facilitation charges are exigible to service tax as charges for procurement of inputs under Business Auxiliary Service. - HELD THAT: - The Tribunal found that the transactions were effected on a principal-to-principal basis: the appellant imported the goods in its own name and on its own account and thereafter sold them to the buyer. Accordingly, expenses incurred prior to transfer of ownership are components of the sale consideration and were borne by the appellant for its own purposes. Reliance was placed on the decision in CCE vs. Nahar Industrial Enterprises Ltd. to hold that where ownership remains with the seller, such charges do not constitute a taxable service of procurement of inputs for another party. Applying that principle, the additional handling and facilitation charges cannot be characterized as services rendered to the buyer and do not attract service tax under Clause (4) of Section 65(19). [Paras 6]

The charges held not exigible to service tax as Business Auxiliary Service; impugned order set aside and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the impugned additional handling and facilitation charges are part of the sale price of goods imported and sold on a principal-to-principal basis and therefore are not liable to service tax under the Business Auxiliary Service limb; the impugned order was set aside with consequential relief.

Classification of construction-related services as Commercial/Industrial Construction Service or Works Contract Service - Applicability of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 - Effect of introduction of Works Contract Service w.e.f. 1-6-2007 on ongoing contracts - Invocation of extended period of limitation for recovery - Simultaneous imposition of penalty under Section 76 and Section 78 of the Finance Act, 1994 - Interest as a civil liability consequential to confirmed demand

Classification of construction-related services as Commercial/Industrial Construction Service or Works Contract Service - Effect of introduction of Works Contract Service w.e.f. 1-6-2007 on ongoing contracts - Services provided by the appellants are taxable as Commercial/Industrial Construction Service for the period prior to 1-6-2007 and as Works Contract Service w.e.f. 1-6-2007. - HELD THAT: - The definition of Construction Services (pre-1-6-2007) did not exclude contracts styled as works contracts; any provider falling within that definition was liable to service tax for the earlier period. With effect from 1-6-2007 a distinct category 'Works Contract Service' was introduced, so classification for the subsequent period is guided by the nature of the contract. Precedents (including Alstom and Nagarjuna) support that taxable components of ongoing contracts were liable before 1-6-2007 under construction service and that after 1-6-2007 such ongoing contracts are to be classified as Works Contract Service where appropriate. The appellants' reliance on a decision disallowing taxation under a general heading where a specific heading exists was held inapplicable because both entries here attract tax and the service's nature did not change merely because a new category was introduced. The appellants' failure to produce contracts during investigation justified the department's classification using available means. Accordingly the demand was sustained on classification grounds: Commercial/Industrial Construction Service for the pre-1-6-2007 period and Works Contract Service thereafter. [Paras 7, 8]

Classification upheld: Commercial/Industrial Construction Service prior to 1-6-2007 and Works Contract Service w.e.f. 1-6-2007; demand on classification is sustainable.

Applicability of Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 - Requirement of prior option under Rule 3(3) for composition scheme - Appellants are entitled to avail the composition scheme for the portion of liability from 1-6-2007 onwards because they had not previously paid service tax and satisfied the pre-conditions of the scheme. - HELD THAT: - Rule 3(1) entitlement is subject to Rules 3(2), 3(2A), 3(3) and 3(4). The appellants had not taken cenvat credit or been registered and thus did not contravene Rules 3(2) and 3(2A); Rule 3(4) was not applicable for the demand period. Rule 3(3) requires exercise of option prior to payment of service tax in respect of the works contract; Board Circular No.128/10/2010 clarifies that if no service tax was paid before 1-6-2007 then such contracts may opt for the composition scheme thereafter. The appellants had not paid service tax earlier and were not registered, hence they meet the pre-requisites and the demand must be re-computed under the composition scheme rates for the relevant period. The adjudicating authority is directed to recompute the liability accordingly. [Paras 9]

Benefit of the composition scheme allowed for the period from 1-6-2007 onwards; demand to be re computed under the scheme and communicated to appellants.

Invocation of extended period of limitation for recovery - Extended period of limitation was correctly invoked and the demand is not time-barred. - HELD THAT: - The appellants concealed provision of services and failed to furnish documents despite repeated requests during investigation, indicating intent to evade payment. Accordingly the department legitimately invoked the extended period and none of the periods of demand exceed five years; the plea of time bar lacks merit. [Paras 11]

Invocation of extended period upheld; limitation plea rejected.

Simultaneous imposition of penalty under Section 76 and Section 78 of the Finance Act, 1994 - Penalty imposed under Section 76 is set aside where penalty under Section 78 has been imposed; penalties under Sections 77 and 78 are upheld. - HELD THAT: - Authority and precedent (First Flight Couriers) establish that where penalty under Section 78 for suppression of taxable value is imposed, imposition of penalty under Section 76 for failure to pay may not be justified because Section 78 is more comprehensive and provides for a higher amount. On the facts, penalty under Section 76 is unsustainable and is quashed. The appellants did not fulfill registration/formalities and penalty under Section 77 is justified; penalty under Section 78 is also held imposable in view of suppression noted earlier. [Paras 12, 13]

Penalty under Section 76 set aside; penalties under Sections 77 and 78 sustained.

Interest as a civil liability consequential to confirmed demand - Interest is payable as consequential liability on the confirmed demand. - HELD THAT: - Interest is a civil liability arising from retention/non-payment of public funds and is chargeable irrespective of whether non-payment was innocent or mala fide; interest follows the confirmed demand and is accordingly sustained as consequential to the demand. [Paras 10]

Interest component upheld as consequential to the demand.

Final Conclusion: Appeal partially allowed: classification of services upheld (Commercial/Industrial Construction Service prior to 1-6-2007; Works Contract Service w.e.f. 1-6-2007); appellants entitled to composition scheme for liability from 1-6-2007 (demand to be re-computed accordingly); invocation of extended limitation period, interest and penalties under Sections 77 and 78 upheld; penalty under Section 76 set aside; order modified and remitted for computation and communication of revised demand.

Definition of "cleaning activity" - cleaning of commercial or industrial buildings and premises - exclusion for non-commercial buildings - commerciality of electricity generation establishments - government ownership not a bar where services are commercial - negative list notification effective from 20-6-2012 not retrospective - classification of civil construction/repair as taxable "Commercial or Industrial Construction Service" when for commercial premises - penalty under Section 77 and Section 78 of the Finance Act, 1994

Definition of "cleaning activity" - cleaning of commercial or industrial buildings and premises - Whether routine cleaning of Technical and Non Technical buildings and routine cleaning of station/building at the Thermal Plant are taxable as "cleaning activity". - HELD THAT: - The definition of "cleaning activity" includes cleaning of commercial or industrial buildings and premises as well as factory, plant or machinery of such buildings; it is not confined to specialised cleaning and therefore covers routine cleaning performed in respect of commercial/industrial premises. The Thermal Plant is a commercial concern engaged in generation of electricity; buildings and premises used by it fall within the scope of "commercial or industrial buildings". The appellants' attempt to disaggregate items (canteens, toilets, sewerage etc.) and treat them as non taxable is impermissible; the services must be considered in light of the contract and their location within the commercial premises. Accordingly, routine cleaning of Technical and Non Technical buildings and routine cleaning of the station/building at the Thermal Plant are taxable as "cleaning activity" for the relevant period. [Paras 6, 7]

Routine cleaning of Technical & Non Technical buildings and of the station/building at the Thermal Plant is taxable as "cleaning activity".

Exclusion for non-commercial buildings - Whether routine cleaning and sweeping in Nuhon Colony falls within taxable "cleaning activity". - HELD THAT: - The contract for Nuhon Colony describes cleaning and sweeping of roads, paths, drains, approaches to residential and non residential buildings and carriage/disposal of garbage; these services did not involve cleaning of commercial or industrial buildings or plant/machinery. The statutory definition and Board instructions exclude cleaning in relation to non commercial buildings. Therefore the amount received for these services is not taxable and must be excluded from the taxable value. [Paras 7]

Routine cleaning and sweeping in Nuhon Colony is not taxable and its value is excluded from the demand.

Classification of civil construction/repair as taxable "Commercial or Industrial Construction Service" when for commercial premises - Whether repair of cabin for lift control panel and restoration of pathways along the railway track at the Thermal Plant are taxable. - HELD THAT: - The repair of cabin for lift control panel is civil construction work provided to a commercial concern and thus attracts service tax. The restoration of pathways along an internal railway track laid for the plant's commercial operations cannot be treated as services in respect of the railway (and so excluded); the track and pathways are part of the commercial premises used for business (cargo off loading). Consequently, these construction/repair works do not fall within the exclusion and are taxable. [Paras 7]

Repair of the lift control cabin and restoration of pathways along the internal railway track at the Thermal Plant are taxable.

Government ownership not a bar where services are commercial - Whether the Thermal Plant being government property exempts the services from service tax. - HELD THAT: - Exemptions for government bodies apply only when services/charges are statutory in nature or the constructions are for civic amenities; government ownership does not immunise services provided for commercial purposes. The Thermal Plant, though under government control, operates as a commercial concern engaged in generation of electricity; services provided to it are taxable if otherwise covered by law. Reliance on Nagarjuna Construction is inapplicable on facts. [Paras 6]

Government ownership of the Thermal Plant does not exempt taxable services provided to it when the services are commercial in nature.

Negative list notification effective from 20-6-2012 not retrospective - Whether Notification No. 25/2012 dated 20-6-2012 (negative list) applies to the demand period October 2011 to March 2012. - HELD THAT: - The notification relied upon by the appellants came into effect w.e.f. 20-6-2012, whereas the demand period is October 2011 to March 2012, i.e., prior to the notification. The notification is therefore not applicable to the period under adjudication and cannot be invoked to exclude services for that period. [Paras 7]

Notification No. 25/2012 dated 20-6-2012 does not apply to the demand period October 2011 to March 2012.

Recalculation of demand excluding non taxable colony cleaning - Quantum of service tax demand after excluding non taxable services. - HELD THAT: - Having held that Nuhon Colony cleaning is non taxable and other specified services are taxable, the demand is recalculated by excluding the value attributable to Nuhon Colony. The adjudicated figures are recomputed accordingly and the service tax demand is reduced to the amount indicated by the Commissioner (including applicable cesses). [Paras 8]

The service tax demand is reduced to the recomputed amount of Rs. 2,41,358 along with interest (as quantified by the authority).

Penalty under Section 77 and Section 78 of the Finance Act, 1994 - Whether penalties under Section 77 and Section 78 are sustainable. - HELD THAT: - The appellants did not contest penalty under Section 77 and the adjudicating authority found deliberate suppression warranting penalty under Section 78. The Commissioner finds no dispute of these factual conclusions before him and upholds the penalties, reducing the Section 78 penalty proportionately to match the reduced demand. [Paras 9]

Penalty under Section 77 is upheld; penalty under Section 78 is upheld and reduced to an amount equivalent to the recomputed demand.

Final Conclusion: The appeal is partially allowed: cleaning services in Nuhon Colony are held non taxable and excluded; cleaning and construction/repair services provided to the Thermal Plant are taxable for October 2011-March 2012; the service tax demand is recomputed and reduced to Rs. 2,41,358 (with interest) and penalties under Sections 77 and 78 are upheld (Section 78 penalty reduced to correspond to the reduced demand). Stay application disposed of accordingly.

Applicability of Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Application of Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Tribunal's fact based adjudication - No substantial question of law

Applicability of Rule 9 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Application of Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Tribunal's fact based adjudication - Whether the Tribunal was correct in treating Rule 9 as not fully attracted and deciding the valuation on the basis of Rule 11 after examining the facts of the case. - HELD THAT: - The Tribunal did not hold that Rule 9 of the 2000 Rules is inapplicable as a matter of law; rather it found that both parts of Rule 9 were not fully attracted on the facts and therefore proceeded to consider and decide the matter under Rule 11. The Supreme Court recorded that the Tribunal reached its conclusion by applying the valuation rules to the facts of the cases before it, treating the matter as one of factual determination by the Tribunal. [Paras 2]

Tribunal's approach-treating Rule 9 as not fully attracted on the facts and applying Rule 11-was a fact based adjudication upheld by the Court.

No substantial question of law - Civil appeals dismissed - Whether the appeals raised any substantial question of law warranting interference by this Court. - HELD THAT: - The Court found that the Tribunal decided the matters on their own facts and that no substantial question of law arises from the Tribunal's fact based conclusions. Having so found, the Court declined to entertain the appeals. [Paras 3, 4]

No substantial question of law is involved; civil appeals dismissed with no order as to costs.

Final Conclusion: The Tribunal's factual determination that Rule 9 was not fully attracted and consequent decision under Rule 11 was left undisturbed; no substantial question of law arose and the civil appeals were dismissed with no order as to costs.

Related persons - transaction value and Rule 9 of Valuation Rules, 2000 - prima facie case for waiver of pre-deposit and grant of stay - control and supervision does not ipso facto establish relatedness - burden of proof for allegation of free supply of machinery

Related persons - transaction value and Rule 9 of Valuation Rules, 2000 - burden of proof for allegation of free supply of machinery - control and supervision does not ipso facto establish relatedness - Whether the Commissioner was justified in holding Philips and QSP to be related persons and in treating the transaction value as not the normal price so as to invoke Rule 9 for determination of assessable value - HELD THAT: - The Tribunal examined the agreement and the findings recorded by the Commissioner and concluded that the materials relied upon do not prima facie support the conclusion that Philips and QSP are related persons for valuation purposes. The Commissioner relied on alleged non-payment of hire charges for machinery supplied by Philips and on Philips' supervision and control over manufacture. The appellants produced sample debit entries showing deductions from amounts payable by Philips to establish payment of hire charges; the Commissioner, however, did not cite evidence that machinery was in fact supplied free of cost and merely relied on clause 8 of the agreement without proof that the triggering event occurred. As to supervision and control, the Tribunal held that where a principal supplies designs, know how and exercises supervision to ensure conformity with specifications it is not uncommon for the principal to supervise manufacture, and such supervision alone does not establish relatedness or negate a sale between independent principals. On the materials before it the Tribunal found the Commissioner's conclusions on relatedness and abnormality of price to be unsupported on a prima facie basis and therefore not sustainable for the purpose of invoking Rule 9 without further adjudication on evidence. [Paras 4, 5]

Commissioner's conclusion that Philips and QSP are related and that transaction value is not the normal price is not sustained on a prima facie basis.

Prima facie case for waiver of pre-deposit and grant of stay - Whether the appellants have made out a prima facie case entitling them to waiver of the pre-deposit and stay of recovery - HELD THAT: - Having found that the Commissioner's factual and evidentiary basis for treating the parties as related and for invoking Rule 9 was weak on a prima facie review, the Tribunal held that the appellants established a prima facie case in their favour. In light of that finding the Tribunal exercised its discretion to waive the requirement of pre-deposit and to stay recovery pending further adjudication, noting that the stay applications warranted complete waiver of pre-deposit given the inadequacy of the Commissioner's prima facie reasons. [Paras 5]

Requirement of pre-deposit waived and stay against recovery granted.

Final Conclusion: On a prima facie appraisal the Tribunal found the Commissioner's conclusions on relatedness and abnormality of price unsupported and, accordingly, waived the pre-deposit requirement and granted stay of recovery for the period covered by the show cause notices (February 2007 to February 2012).

Valuation between related persons - treatment of turnover discount and cash discount for valuation - cum-duty benefit - penalty for suppression and willful misstatement - remand for de novo adjudication with opportunity of hearing

Penalty for suppression and willful misstatement - valuation between related persons - Whether penalties imposed on the assessee and its principals for alleged suppression and incorrect valuation are sustainable - HELD THAT: - The Tribunal found the controversy to be essentially one of valuation and not of clandestine clearances or deliberate suppression. The appellants advanced a bona fide belief that they were not related to the buyer and there was nothing in the show cause notice to demonstrate wilful misstatement or suppression. The Tribunal relied on the prior inter partes CESTAT decision for a different period which had set aside similar penalties and concluded there was no reason to reach a different result in the present proceedings. Consequently, the Revenue's contention that penalties should be sustained for suppression and willful conduct was rejected. [Paras 5]

Revenue's appeals against the dropping of penalties are dismissed and the penalties are not sustained.

Treatment of turnover discount and cash discount for valuation - cum-duty benefit - remand for de novo adjudication with opportunity of hearing - Admissibility of turnover discounts and cash discounts and claim for cum-duty benefit in valuation of goods sold to the buyer, and whether these matters require fresh adjudication - HELD THAT: - The Tribunal recognised that turnover and cash discounts are often computed after sale (on turnover or payment promptness) and therefore their absence from invoices is not a valid reason to disallow them. The appellants contended that they had produced documentary evidence of such discounts which was not properly considered below. The Tribunal also noted that cum-duty benefit had been granted by the Commissioner in respect of a similar period and that the lower authorities had not dealt with this claim. Given these considerations, the Tribunal concluded that these matters were not finally adjudicated on merits and should be reconsidered. The case is remanded to the original adjudicating authority to examine afresh the documentary evidence regarding discounts, to consider the claim for cum-duty benefit in light of the earlier Commissioner's order, and to afford the appellants an opportunity of hearing before de novo adjudication. [Paras 3, 6]

The appellants' appeal is remanded for de novo adjudication on the admissibility of turnover and cash discounts and the claim for cum-duty benefit; the adjudicating authority must consider the documentary evidence and afford an opportunity of hearing.

Final Conclusion: Revenue's appeals challenging the dropping of penalties are dismissed. The appellants' appeals are allowed only to the extent of remanding valuation-related issues (turnover and cash discounts and cum-duty benefit) to the original adjudicating authority for fresh consideration after affording hearing; requirement of pre-deposit is waived and the impugned order is set aside for de novo adjudication in accordance with the directions given.

Registration of a person at a premises under Central Excise - entitlement of a bona fide transferee/lessee to obtain fresh registration despite non-deregistration by prior registrant - limits of refusal of registration where department's claim for dues subsists - distinction between cases of habitual misuse of premises and ordinary transfers/auctions

Registration of a person at a premises under Central Excise - entitlement of a bona fide transferee/lessee to obtain fresh registration despite non-deregistration by prior registrant - Whether the appellant was entitled to Central Excise registration of the premises despite the earlier registrant not having applied for deregistration - HELD THAT: - The Tribunal examined the statutory scheme and precedent authorities and accepted the proposition in Tata Metaliks Ltd. that Section 6, Rule 9 and the notification contemplate registration of the person carrying on business at a premises and do not create a power to refuse registration merely because a prior registrant has not applied for deregistration. The Court distinguished Manibhadra Processors on its peculiar facts (where the lessor habitually enabled successive lessees to misuse the factory by obtaining and surrendering registration while defaulting in dues), and accepted the Tribunal's view as reflected in PMS Exports that in ordinary cases of transfer or bona fide acquisition (including auction/transfer by financial institutions) refusal to grant registration on the ground that the previous registrant has not sought deregistration is without jurisdiction. The revenue's right to recover dues remains intact and is to be pursued under appropriate provisions, but that does not provide a statutory power to deny registration to a transferee or new occupier absent special circumstances of misuse. [Paras 6, 7, 8]

Registration could not be denied to the appellant on the specious plea that the previous registrant had not applied for deregistration; the impugned order was set aside and the appeal allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order which had denied Central Excise registration; the appellant is entitled to registration and the revenue's remedies for recovery of dues remain unaffected.

CENVAT credit admissibility on duty paid at debonding - use of intermediates and finished goods as inputs in subsequent manufacture - evidentiary standard for CENVAT credit - documentary proof versus purchase orders - reversal of CENVAT credit and its effect on admissibility - penalty for false declaration in CENVAT proceedings

CENVAT credit admissibility on duty paid at debonding - use of intermediates and finished goods as inputs in subsequent manufacture - Whether CENVAT credit of duties paid on intermediates and finished goods at the time of debonding of an EOU, which were thereafter used in manufacture of final products and cleared on payment of duty or exported, was admissible to the assessee. - HELD THAT: - The Tribunal found that the Commissioner denied credit without recording any positive findings negativing the appellants' primary contentions - namely, that duty was paid on stock at debonding, the goods were recorded and issued for further processing as per flow charts, the processed finished products were cleared to the domestic and export markets on payment of duty, and that detailed accounts and invoices were maintained. The adjudication lacked findings that the flow charts were false, that the goods were not manufactured, that clearances did not occur, or that sale documents were bogus. Under the CENVAT Credit regime the assessee must show duty was paid on the goods claimed as inputs, the inputs were received/accounted and used in manufacture, and finished products were cleared on payment of duty. On the material placed before the Tribunal the factual nexus required for credit was established and there was no contrary finding by the Commissioner. The Tribunal therefore concluded that the appellants were eligible for the CENVAT credit utilised by them.

CENVAT credit claimed on duties paid at debonding in respect of intermediates and finished goods used in manufacture and cleared on payment of duty/export was allowed.

Evidentiary standard for CENVAT credit - documentary proof versus purchase orders - reversal of CENVAT credit and its effect on admissibility - Whether absence of purchase orders, by itself, justified denial of CENVAT credit where other documentary evidence (flow charts, invoices, accounting records and clearances) was produced and no finding was recorded that such documents were false. - HELD THAT: - The Tribunal observed that purchase orders are not statutory requisites for claiming CENVAT credit and that the Commissioner had made no positive finding that the documents produced were fictitious. The adjudicating authority had erred in treating absence of purchase orders as fatal to the claim when other corroborative records and evidence of clearances on payment of duty/export were on record. The Tribunal also noted precedents and the principle that where credit, if any, has been reversed to the full extent, there may be no need for further adverse action; but in the present case the Revenue had not established any infirmity in the appellants' documentary proof.

Absence of purchase orders alone did not justify disallowance of CENVAT credit in the face of other credible documentary evidence and no adverse finding by the Commissioner.

Penalty for false declaration in CENVAT proceedings - Whether imposition of penalty for alleged false declaration was justified in the absence of any finding that the appellants' declarations or supporting documents were false or that the goods were not manufactured or cleared as claimed. - HELD THAT: - The Tribunal found the penalty to be harsh and unjustified because the adjudication proceeded without any affirmative findings that the appellants had made false declarations or that the documents were fabricated. Given that voluminous documents were produced, and the admitted mistake related to declaration at conversion which was followed by documentary evidence of processing and clearances, the Tribunal held there was no case for the Revenue to sustain penalty. The Tribunal therefore allowed the appeal, set aside the penalty, and granted consequential relief.

Penalty imposed for alleged false declaration was set aside as there were no findings supporting falsity of declarations or documents.

Final Conclusion: The appeal was allowed: CENVAT credit on duties paid at debonding in respect of intermediates and finished goods used in subsequent manufacture and cleared on payment of duty/export was held admissible; absence of purchase orders alone did not justify rejection of the claim; and the penalty for alleged false declaration was quashed. Consequential relief, if any, was granted to the appellant.

Inclusion of third-party handling charges in assessable value - Liability to penalty under Section 11AC for alleged under-valuation - Burden of proof that expenses were not borne by the assessee - Precedential effect of Larger Bench decision in Supreme Petrochem Ltd. on valuation

Inclusion of third-party handling charges in assessable value - Burden of proof that expenses were not borne by the assessee - Precedential effect of Larger Bench decision in Supreme Petrochem Ltd. on valuation - Whether handling charges paid by the buyer to a third party form part of the assessable value of slag sold on 'as is where is' basis for the period December, 2002 to February, 2003. - HELD THAT: - The Tribunal applied the Larger Bench ratio in Commr. of Central Excise, Mumbai III v. Supreme Petrochem Ltd., holding that for the post-1.7.2000 period handling charges may be included in assessable value unless the assessee proves the burden was not borne by it. On the material, the handling/ lifting charges were paid by the buyer (M/s ACC Ltd.) directly to the transporter and were not borne by the appellant. The demand was issued for the normal limitation period and there is no material that the appellant bore those expenses. In view of the Larger Bench decision and the contractual allocation of transport/handling to the buyer, the appellant was not required to include those handling charges in the assessable value and accordingly not liable to duty on that account. [Paras 5]

Handling charges paid by the buyer to a third party were not part of the assessee's assessable value for the period in question; duty was not exigible on those charges.

Liability to penalty under Section 11AC for alleged under-valuation - Whether penalty under Section 11AC is imposable where duty demand relates to inclusion of handling charges which were not borne by the assessee and the demand was within normal limitation. - HELD THAT: - The Tribunal found no materials to demonstrate suppression, mis-declaration or deliberate evasion by the appellant. The demand related to an issue which, at the relevant time, was not finally settled and was subsequently addressed by the Larger Bench in favour of the position that the appellant need not bear those charges. Since duty was not exigible on the handling charges and there is absence of culpable conduct or prima facie mens rea, the ingredients necessary to impose penalty under Section 11AC are not made out. Consequential reliefs flowing from setting aside the penalty would follow as per law. [Paras 5]

Penalty under Section 11AC set aside as not imposable in the facts and circumstances.

Final Conclusion: Appeal allowed: imposition of penalty set aside; appellant not liable to duty on handling charges paid by the buyer for the period December, 2002 to February, 2003 in view of the Larger Bench ratio; consequential reliefs to follow as per law.

Cenvat credit on input services - utilisation of service tax credit for payment of excise duty - SSI exemption and its effect on availability of credit - nexus between input services and manufacture of final product - credit on capital goods - penalty under Rule 15(1) of the Cenvat Credit Rules, 2002 - limitation and bonafide interpretation defence

Cenvat credit on input services - utilisation of service tax credit for payment of excise duty - SSI exemption and its effect on availability of credit - Service tax credit availed while the appellant was within SSI exemption cannot be utilized for payment of excise duty after crossing the exemption limit. - HELD THAT: - The appellants had claimed Cenvat credit on service tax paid when they were operating under SSI exemption and not liable to pay excise duty on their final product. The Tribunal held that such credit was availed as input credit for the output services then being provided and was therefore available only against service tax on those output services. The subsequent crossing of the exemption threshold and transfer of any remaining service-tax Cenvat balance into excise input credit for payment of excise duty is not permissible because the credit was earned during a period when the final product did not attract excise duty. The reasoning follows the principle that credit earned in an exempted period for services availed in relation to exempted activities cannot be re-purposed to discharge excise liability on goods manufactured after the exemption ceases, absent a direct nexus showing the inputs or input services were used, directly or indirectly, in relation to the manufacture of the current final products.

Appeal allowed on this point: service-tax credit availed during SSI exemption is not available for payment of excise duty after exemption ceases.

Nexus between input services and manufacture of final product - credit on capital goods - penalty under Rule 15(1) of the Cenvat Credit Rules, 2002 - limitation and bonafide interpretation defence - Whether parts of the carried-forward credit relating to capital goods and the question of imposition of penalty and limitation require fresh adjudication. - HELD THAT: - The Tribunal observed that the opening balance in ER-1 included credit attributable to capital goods and input services used when the appellants provided output services, and that the adjudicating authority had proceeded on findings of lack of nexus and imposed penalty under Rule 15(1). However, the Court found that the matter requires fresh consideration: capital goods credit may become allowable once the exemption limit is exhausted depending on use and nexus; the adjudicating authority must verify the factual nexus between the inputs/input services and the manufacture of the present final products. The Tribunal therefore set aside the impugned order and remanded the matter to the adjudicating authority to decide these issues afresh, explicitly directing consideration of the appellants' limitation plea and their submission that the issue involved a bonafide interpretation of law which would negate imposition of penalty.

Impugned order set aside and the questions regarding credit on capital goods, penalty under Rule 15(1), and limitation remitted to the adjudicating authority for fresh decision.

Final Conclusion: The appeal is allowed by way of remand: the Tribunal holds that service-tax Cenvat credit earned while under SSI exemption cannot be used to pay excise duty after exemption ceases, and sets aside the impugned order while remanding the remaining issues-credit on capital goods, penalty and limitation-for fresh adjudication in light of the observations made.

Classification of rubberised coir mattresses as coir products - relevance of Coir Board opinion and CBEC circular in tariff classification - eligibility for exemption and concessional duty under applicable notifications - applicability of reduced ad valorem duty rates from 01.03.2011 and 17.03.2012 - condition of non-availability of Cenvat credit and its bearing on duty obligation - penalty for short levy

Classification of rubberised coir mattresses as coir products - relevance of Coir Board opinion and CBEC circular in tariff classification - R.C. Mattresses manufactured by the appellants are coir products for the purpose of excise classification and exemption. - HELD THAT: - The Tribunal accepted that the Coir Board's opinion and the CBEC circular treating rubberised coir mattresses as coir products are relevant and persuasive for tariff classification. Reliance on dictionary meanings by the adjudicating authority was held to be insufficient in the face of the Coir Board's specific view and consistent judicial precedents recognizing R.C. mattresses as products of the coir industry. Consequently, the adjudicating authority's finding that the goods were not coir products was displaced.

R.C. Mattresses are treatable as coir products.

Eligibility for exemption and concessional duty under applicable notifications - applicability of reduced ad valorem duty rates from 01.03.2011 and 17.03.2012 - condition of non-availability of Cenvat credit and its bearing on duty obligation - Excise demand up to 28.02.2011 is not sustainable; for subsequent periods duty is to be determined at the concessional ad valorem rates (1% and 2%) subject to the Cenvat credit condition. - HELD THAT: - The Tribunal found that exemption Notification No.6/2006 applied to coir products and was effective until 28.02.2011, so the demand for the period up to that date could not be sustained. For the period 01.03.2011 to 16.03.2012 the effective rate applicable to coir products was 1% ad valorem and from 17.03.2012 it was 2% ad valorem, subject to the legislative/notification condition that no Cenvat credit had been availed. The appellants stated they had discharged the duty for the later period; accordingly the demand is to be recomputed/confirmed at the stated concessional rates for the respective subperiods.

Demand set aside for period up to 28.02.2011; demand recomputed/confirmed @1% ad val. for 01.03.2011-16.03.2012 and @2% ad val. from 17.03.2012 to May 2012, subject to the Cenvat credit condition.

Penalty for short levy - Imposition of penalty in respect of the disputed duty is not justified and is set aside. - HELD THAT: - Having held that the goods are coir products and that exemption/concessional rates applied (and that the appellants have discharged duty for the later period), the Tribunal found no justification for imposing penalty. The circumstances do not support the continuation of penalty proceedings.

Penalty imposed by the adjudicating authority is set aside.

Final Conclusion: Appeals allowed: demand set aside for April 2008 to 28.02.2011; demand sustained only as recomputed @1% ad val. for 01.03.2011-16.03.2012 and @2% ad val. from 17.03.2012 to May 2012 (subject to the Cenvat credit condition); penalty quashed.

Compounding of tax - formula for computation under compounding - finality of figures conferred by returns/accounts as basis for compounding - rectification power and statutory limitation - non-obstante clause and alternative assessment scheme

Compounding of tax - formula for computation under compounding - finality of figures conferred by returns/accounts as basis for compounding - non-obstante clause and alternative assessment scheme - Assessments concluded under the compounding scheme can they be re-opened on the basis of revised assessments for earlier years - HELD THAT: - The court held that Section 7 contemplated payment of tax at compounded rates by application of a formula which required adoption of the higher of two computed figures - 140% of purchase value or 115% of the highest turnover tax as conceded in returns/accounts or actually paid in the previous consecutive three years. The statutory scheme thus depended on data available at the date of computation derived from returns/accounts or tax actually paid, and did not make reference to tax as assessed by subsequent assessment orders. Given the alternative, non-obstante character of the compounding scheme and its object of dispensing with regular assessment rigours, the department cannot re-open concluded compounding proceedings merely because an earlier year's assessed tax was subsequently revised. Re-opening is not permissible except to the limited extent of correcting apparent computational mistakes in the compounding proceedings in accordance with the statute. Applying these principles, the court found that revised orders re-determining compounding liabilities based on subsequent revision of the earlier year's assessment were unsustainable and liable to be quashed. [Paras 10, 11, 12, 13, 14]

Re-opening compounding assessments on the sole basis of revised assessments for earlier years is impermissible; the challenged revised orders and consequential appellate orders and demand notices for the relevant assessment years are quashed and the writ petitions are allowed.

Rectification power and statutory limitation - compulsory inclusion of opening stock in purchase turnover (contention) - Whether rectification of a compounding order to include opening stock in purchase turnover could be validly exercised beyond the three year period prescribed by Section 43 - HELD THAT: - While the court acknowledged authority holding that the value of opening stock ought to be included in computing purchase turnover of the first year of compounding (and that such a computational omission may be amenable to rectification), it emphasised that the statutory rectification power must be exercised within the three year period specified by Section 43. In the case before it, the order permitting compounding was dated 28.11.2006 whereas the rectification order was dated 29.07.2010 - beyond the three year limitation. As limitation is jurisdictional, the rectification order and the consequent orders and demand notices were invalid. [Paras 15]

Rectification exercised after the three year period prescribed by Section 43 is beyond jurisdiction and such rectification orders and consequent demand notices are quashed.

Final Conclusion: Writ petitions allowed; revised compounding orders, appellate orders and resulting demand notices impugned in respect of the stated assessment years quashed; no order as to costs.

Transfer of property in goods - deemed sale under the Works Contracts Act - property passing in chemical or other non-physical form - theory of accretion - dominant intention test post-46th Amendment - marketability test not determinative under the Works Contracts Act

Transfer of property in goods - deemed sale under the Works Contracts Act - property passing in chemical or other non-physical form - theory of accretion - Transfer of property in ink and lacquer to the customer occurred in the process of plate-making on job-work basis and therefore amounts to a deemed sale under the Works Contracts Act. - HELD THAT: - The court applied the principle laid down in Matushree Textile Limited that under the Works Contracts Act a 'sale' includes a deemed transfer of property in goods used in execution of a works contract if the property passes either in its original form or in some other form, including chemical change. The Tribunal's conclusion based on the plates retaining the same thickness and reusability was rejected as an incorrect test for transfer of property. Earlier Division Bench authority to the contrary was held to be without precedential value in light of binding larger-bench and Supreme Court decisions. Reliance on decisions concerned with service-dominant contracts or different constitutional sub-clauses was rejected: the dominant-intention test is not determinative for the clause dealing with transfer of property in goods after the 46th Amendment, and tests such as marketability under the Sale of Goods Act are not imported into the Works Contracts Act. Applying these principles, the court held that lacquer and ink used in plate-making pass their property to the plates (by accretion or transfer in other form) in the execution of the contract and therefore constitute a deemed sale taxable under the Works Contracts Act.

There was a transfer of property in ink and lacquer in the plate-making job-work and consequently a deemed sale under the Works Contracts Act is attracted.

Final Conclusion: The reference is answered in favour of the Revenue: the Tribunal was not justified in holding there was no transfer of property in ink and lacquer; the court holds such transfer occurred and the deemed-sale provisions of the Works Contracts Act apply. No order as to costs.