TaxTMI Updates e-Newsletter
Jan 16,2018

Reopening of assessment - notice under Section 148 - limitation of four years - sanction under Section 151 (proviso) - reasons to believe - escaped assessment - writ jurisdiction to challenge reassessment

Notice under Section 148 - limitation of four years - sanction under Section 151 (proviso) - reasons to believe - escaped assessment - Validity of the notice under Section 148 issued after four years where the proviso to Section 151(1) sanction is not reflected - HELD THAT: - The Court examined the statutory scheme that bars issuance of a notice under Section 148 after four years unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer as required by the proviso to Section 151(1). The notice issued on 28.03.2017 relates to assessment year 2010-11, the assessment having been completed on 21.03.2013, and thus is beyond the four-year period. The reasons recorded by the Assessing Officer and the sanction endorsement were scrutinised; the reasons recorded do not show any compliance with the specific requirement of the proviso, and the endorsement granting sanction does not indicate the satisfaction required by the proviso for notices issued after four years. In the absence of the statutory pre-condition being fulfilled, the notice and proceedings initiated under Section 148 are vitiated. The Court therefore set aside the notice on this ground and did not proceed to decide the merits of the claimed escaped income. [Paras 14, 15, 16, 21, 24]

Notice under Section 148 quashed for failure to comply with the proviso to Section 151(1) where the notice was issued after the four-year period.

Writ jurisdiction to challenge reassessment - Calcutta Discount doctrine - reopening of assessment - Maintainability of a writ petition challenging issuance of notice under Section 148 where initiation is prima facie contrary to statutory provisions - HELD THAT: - The Court referred to authoritative precedents recognizing the writ court's power to restrain reassessment proceedings which are patently in contravention of the Income Tax Act. Noting the Constitutional Bench and subsequent Supreme Court decisions relied upon, the Court held that writ petitions are maintainable to test the legality of initiation of reassessment proceedings where a prima facie case of statutory non-compliance is made out. Applying this principle, the Court found the present petition justiciable because the notice was shown to be issued without the mandatory sanction prescribed by the proviso to Section 151(1). The Court accordingly entertained and decided the petition on that ground, leaving merits of assessment for the statutory forum. [Paras 22, 23, 24]

Writ petition maintainable and entertained to test the legality of the reassessment notice where prima facie statutory non-compliance is shown; petition allowed on that ground.

Final Conclusion: The notice under Section 148 issued for AY 2010-11 was quashed for non-compliance with the proviso to Section 151(1) when issued after the four-year period; the writ petition was held maintainable and allowed on that statutory ground, leaving all assessment merits to be adjudicated by the appropriate statutory authority.

Abrogation of acquisition order for non-payment of consideration - purchase under Section 269UD and deposit under sub-section (3) - entitlement to declaratory relief and possession in writ jurisdiction - effect of termination of development agreement and power of attorney on locus - effect of subsequent registered conveyance on prior equitable or contractual rights - suppression of material facts and its impact on relief under Article 226

Purchase under Section 269UD and deposit under sub-section (3) - abrogation of acquisition order for non-payment of consideration - Whether the order of purchase dated 24th February, 1994 made under Section 269UD stands abrogated for non-payment of the fixed consideration after dismissal of rival suit. - HELD THAT: - The Court noted that the order of purchase under Section 269UD was not challenged in this petition and that the rival suit filed by the original owner was dismissed on 19th September, 2005. However, the petitioner's claim that non-payment of the amount fixed under the purchase order after dismissal of the suit amounted to abrogation of the acquisition order was rejected. The Court found no basis to hold that the order under sub-section (1) of Section 269UD had been abrogated as a consequence of non-payment to the petitioner, particularly in the absence of a subsisting title or enforceable claim by the petitioner entitling him to the consideration determined by the Appropriate Authority. [Paras 6, 10]

The claim that the acquisition order stood abrogated for non-payment was negatived and no relief granted on that ground.

Effect of termination of development agreement and power of attorney on locus - effect of subsequent registered conveyance on prior equitable or contractual rights - Whether the petitioner had locus, title or any right to seek delivery of possession or declaration in respect of the subject property. - HELD THAT: - The Court accepted the material on record showing that the development agreement and power of attorney in favour of the petitioner were purportedly terminated by notice dated 12th January, 1992 and that the petitioner had paid only part of the agreed consideration. The Court further observed that the petitioner executed an agreement for sale in 2000 and gave a power of attorney to a transferee who executed a registered sale deed in 2008. In view of the termination of the original development agreement and the existence of a subsequent registered conveyance, the Court held that the petitioner had no subsisting title or proprietary interest enabling it to claim possession or seek declaratory relief in this writ petition. [Paras 7, 9, 10]

Petitioner held to have no locus, title or right to the property; petition not maintainable on this ground.

Suppression of material facts and its impact on relief under Article 226 - entitlement to declaratory relief and possession in writ jurisdiction - Whether the petitioner is entitled to relief under Article 226 in view of suppression of material facts and failure to enforce contractual rights by civil suit. - HELD THAT: - The Court found that the petitioner had indulged in suppression of material facts by not disclosing dealings executed after termination of the development agreement, including the 2000 agreement for sale and the subsequent power of attorney and registered conveyance. The Court also noted that after termination of the agreement the petitioner never sought enforcement by filing a civil suit. These factors, taken together with absence of a legal or equitable right, led the Court to conclude that the petitioner was not entitled to equitable relief in writ jurisdiction. The petition was therefore dismissed on grounds of lack of right and suppression of material facts. [Paras 9, 10, 11]

Relief under Article 226 denied; petition dismissed for lack of merit and suppression of facts.

Final Conclusion: The writ petition was dismissed; the rule discharged. The petitioner has no right, title or interest in the subject property and is not entitled to delivery of possession or declaration sought; no order as to costs.

Penalty under section 271(1)(c) - defective show cause notice under section 274 - concealment of particulars of income - furnishing of inaccurate particulars of income - rule of preferring view favourable to the assessee where conflicting High Court decisions exist - principles of natural justice in penalty proceedings

Penalty under section 271(1)(c) - defective show cause notice under section 274 - concealment of particulars of income - furnishing of inaccurate particulars of income - Validity of penalty imposed under section 271(1)(c) where the show cause notice under section 274 did not specify whether the charge was concealment of income or furnishing of inaccurate particulars. - HELD THAT: - The Tribunal found that the show cause notice issued under section 274 did not specify the charge against the assessee (whether for concealment of particulars of income or for furnishing inaccurate particulars) and that the printed proforma was not edited to indicate the specific charge. Noting conflicting High Court authorities on whether such a defect is fatal, the Tribunal observed that where two views exist the view favourable to the assessee must be followed. The Tribunal preferred the view of the Hon'ble Karnataka High Court in Manjunatha Cotton & Ginning Factory (and subsequent similar decisions) which held that a show cause notice failing to specify the charge invalidates the penalty proceedings. Applying that principle to the facts, and finding no clear specification of charge in the assessment or notice, the Tribunal concluded that the penalty could not be sustained and directed its cancellation. [Paras 10, 11]

Penalty imposed under section 271(1)(c) is unsustainable and is cancelled.

Final Conclusion: The appeals are allowed; the penalty levied under section 271(1)(c) for A.Y.2006-07 to 2008-09 is set aside because the show cause notice under section 274 did not specify the charge and therefore the penalty proceedings cannot be sustained.

Penalty u/s. 271(1)(c) for concealment or furnishing inaccurate particulars of income - non-striking-off of irrelevant limb in penalty notice under section 274 - non-application of mind in issuing penalty notice - principles of natural justice in quasi-criminal penalty proceedings

Penalty u/s. 271(1)(c) for concealment or furnishing inaccurate particulars of income - non-striking-off of irrelevant limb in penalty notice under section 274 - non-application of mind in issuing penalty notice - principles of natural justice in quasi-criminal penalty proceedings - Validity of penalty proceedings initiated under section 271(1)(c) where the notice under section 274 reproduced both limbs without striking off the irrelevant limb and the Assessing Officer recorded a satisfaction for one limb in the assessment order. - HELD THAT: - The Tribunal found that the notice issued under section 274 r.w.s. 271(1)(c) did not strike off the irrelevant limb and therefore did not convey a crystallised charge to the assessee. Following the reasoning in Dilip N. Shroff and the Coordinate Bench decisions (including Meherjee Cassinath Holdings and Dr. Sarita Milind Davare) and the Bombay High Court authority in Samson Perinchery, the non-striking-off of the irrelevant clause in a standard proforma notice evidences non-application of mind by the Assessing Officer. Quasi-criminal penalty proceedings under section 271(1)(c) must comply with principles of natural justice and the assessee must know which of the two distinct limbs-concealment or furnishing inaccurate particulars-is alleged. The fact that the assessment order later recorded initiation for furnishing inaccurate particulars does not cure the infirmity in the notice; the deficiency at the stage of issuance reflects the Assessing Officer's diffidence and prejudices the assessee's right to a fair opportunity to defend. Consequently, the penalty suffers from procedural vice and must be deleted. The Tribunal therefore deleted the penalty on this preliminary ground and did not decide the merits of other contentions. [Paras 5, 6, 7]

Penalty imposed under section 271(1)(c) is set aside as the notice under section 274 did not strike off the irrelevant limb, demonstrating non-application of mind and breach of natural justice.

Final Conclusion: The penalty levied under section 271(1)(c) is deleted; the assessee's appeal is allowed and the Revenue's appeal is dismissed for Assessment Year 2007-08.

Arm's length price - Transfer pricing - Most appropriate method - Transactional Net Margin Method (TNMM) - Comparability analysis and selection/exclusion of comparables - Rejection of transfer pricing documentation under section 92C(3)(c) - Berry Ratio / Operating Profit to Operating Cost (OP/OC) as Profit Level Indicator - Treatment of foreign exchange gain and loss - Rectification under section 154

Arm's length price - Transfer pricing - Most appropriate method - Transactional Net Margin Method (TNMM) - Comparability analysis and selection/exclusion of comparables - Berry Ratio / Operating Profit to Operating Cost (OP/OC) as Profit Level Indicator - Rejection of transfer pricing documentation under section 92C(3)(c) - Whether the transfer pricing adjustments made to marketing service fee and related incentives were justified and whether the international transactions were at arm's length - HELD THAT: - The Tribunal examined the TPO's selection of comparables, the methodology adopted (TNMM with OP/OC or Berry Ratio as the PLI), and the rejection of the assessee's TP documentation under section 92C(3)(c). Having considered the functional profiles, the Tribunal accepted the earlier Tribunal's detailed comparability analysis which found that several companies selected by the TPO were functionally dissimilar to the assessee and therefore not valid comparables. The Tribunal held that where the dissimilar comparables are excluded, the assessee's OP/OC falls within the safe zone and the international transactions stand established at arm's length. The Tribunal also noted that mere higher profitability of comparables is not a ground for rejection unless abnormal factors are shown to have affected their margins.

First ground of appeal allowed; transfer pricing adjustment set aside and transactions held to be at arm's length in favour of the assessee.

Treatment of foreign exchange gain and loss - Income chargeable and allowable expenditure under section 37 principles - Whether foreign exchange gain offered to tax could be treated without allowing corresponding foreign exchange loss disallowed earlier - HELD THAT: - The Tribunal followed its earlier decision for AY 2009 10 and authoritative precedent holding that loss on account of foreign exchange fluctuation arising on revenue account is allowable as business expenditure. The Tribunal rejected the inconsistent treatment of taxing gains while disallowing losses, holding that if gains from foreign exchange fluctuations are taxable, the corresponding losses must be allowable. Applying that reasoning, the Tribunal decided the ground in favour of the assessee.

Second effective ground of appeal allowed; foreign exchange loss treated as allowable and the assessee's contention accepted.

Rectification under section 154 - Recharacterisation of incentive receipt and disallowance of expenditure - Transfer pricing - reimbursement versus arm's length consideration - Whether the AO's rectification under section 154 to add back the incentive amount was justified in view of the DRP's findings and the nature of payment from the associated enterprise - HELD THAT: - The AO invoked section 154 to correct an alleged apparent mistake, adding back an amount on account of incentive. The Tribunal analysed the DRP's findings and the earlier Tribunal's reasoning that, although the question whether the amount received from the AE was at arm's length is separate, the expenditure on the incentive scheme was incurred by the assessee and not in doubt. The Tribunal held that the alternate contention of the assessee - that the expenditure was incurred and therefore deductible - was sustainable. Following the earlier Tribunal decision, the Tribunal held that the disallowance of the expenditure was not justified.

Rectification order not to operate to the detriment of the assessee on this point; appeal against the section 154 order allowed in part in favour of the assessee.

Final Conclusion: The Tribunal partly allowed the appeals: transfer pricing additions in respect of marketing services were set aside on comparability and ALP findings; foreign exchange loss was held allowable; and the rectification under section 154 adding the incentive amount was not sustained as against the assessee on the alternate view that the expenditure was incurred and allowable. Appeals disposed accordingly.

Make available - fees for technical services (FTS) - tax deduction at source (TDS) - grossing up - interest under section 234B - penalty under section 271(1)(c) - premature initiation

Make available - fees for technical services (FTS) - Whether the administrative support services rendered by the assessee to its Indian affiliate satisfy the 'make available' criterion and thus constitute Fees for Technical Services chargeable in India - HELD THAT: - The Tribunal examined the nature of the administrative support services (marketing and advertising support; MIS and accounting support; treasury function support; information technology support) and the limited evidence produced (eight emails and bills). The Tribunal found that the material on record was scanty and did not permit a conclusive determination whether the services were of such a nature that the recipient was enabled to perform them independently (i.e., services were 'made available'). Although the DRP's observation that prolonged provision of such services may render the recipient capable of performing them was accepted as relevant, the Tribunal held that resolution requires a full factual scrutiny of the nature, manner and continuity of services, and correspondence and conduct of the parties. For these reasons the Tribunal set aside the issue to the file of the Assessing Officer for fresh adjudication and directed the assessee to furnish complete evidence and be afforded opportunity of hearing. [Paras 7]

Issue remanded to the Assessing Officer for fresh adjudication with direction to the assessee to produce complete evidence on nature and manner of services and to be heard.

Tax deduction at source (TDS) - grossing up - Whether the assessee is entitled to treat the fee as paid 'gross of tax' and hence the payer's TDS amount should be grossed up in computing taxable income - HELD THAT: - The Tribunal observed that the grossing-up issue is directly linked to the primary question whether the payments constitute FTS. Having set aside the FTS determination to the Assessing Officer for fresh consideration, the Tribunal also set aside the grossing-up issue to the Assessing Officer for adjudication in the same proceeding. [Paras 9]

Ground relating to grossing up is set aside to the Assessing Officer for decision along with the remanded 'make available'/FTS issue.

Interest under section 234B - tax deduction at source (TDS) - Whether interest under section 234B is chargeable on the assessee's income in the event the consideration is held taxable in India - HELD THAT: - Relying on the precedent of the Hon'ble Delhi High Court, the Tribunal held that where the entire tax on the relevant income of a non-resident is required to be and has been subjected to deduction at source by the payer, there is no liability on the non-resident to pay advance tax and consequently interest under section 234B cannot be charged. Applying that principle, the Tribunal allowed the assessee's challenge to the levy of interest under section 234B. [Paras 12]

Interest under section 234B is not chargeable and ground No. 3 is allowed in favour of the assessee.

Penalty under section 271(1)(c) - premature initiation - Maintainability of initiation of penalty proceedings under section 271(1)(c) in the facts of the case - HELD THAT: - The Tribunal found the initiation of penalty proceedings to be premature and accordingly dismissed the assessee's challenge in part by declining to sustain premature penalty proceedings. [Paras 13]

Penalty initiation under section 271(1)(c) is dismissed as premature.

Final Conclusion: The appeal is partly allowed: the question whether the administrative support services constitute FTS (the 'make available' issue) and the related grossing-up/TDS issue are remanded to the Assessing Officer for fresh adjudication with directions to the assessee to place complete evidence and be heard; interest under section 234B is disallowed in favour of the assessee; initiation of penalty proceedings under section 271(1)(c) is dismissed as premature.

Interest under section 234B (advance tax shortfall and period of levy) - Applicability of section 234B(3) on reassessment under section 147 - Effect of appellate orders and adjustment of interest under section 234B(4) - Obligation to increase or reduce interest on variation of assessed income while giving effect to appellate/rectification/revisionary orders

Interest under section 234B (advance tax shortfall and period of levy) - Applicability of section 234B(3) on reassessment under section 147 - Effect of appellate orders and adjustment of interest under section 234B(4) - Whether interest under section 234B should be computed up to the date of reassessment u/s 147 or be limited to the date of the original regular assessment u/s 143(3), having regard to subsequent appellate adjustments. - HELD THAT: - The Tribunal found that the assessment figure originally recorded u/s 143(3) (22.03.1996) was subsequently substituted by a lower figure on giving effect to the CIT(A)'s order (25.09.1996), and that the reassessment completed u/s 147 on 20.03.2000 resulted in an assessed income higher than the substituted figure. Consequently, the reassessment under section 147 produced an increase in assessed income vis-a -vis the figure subsisting immediately prior to reassessment, attracting the specific mechanism in section 234B(3) which contemplates computation of interest up to the date of reassessment/re-computation. The Tribunal distinguished cases where section 234B(4) applies (adjustments while giving effect to appellate, rectification or revisionary orders) and held that where reassessment under section 147 results in an increase in income relative to the interim assessed figure, section 234B(3) is the relevant provision for fixing the terminus of interest liability. The Tribunal noted conflicting authorities and factual permutations but accepted that, on the facts of this case, the increase consequent to reassessment brings section 234B(3) into play. [Paras 6]

Held that reassessment under section 147 resulted in an increase in assessed income (after substitution by the appellate-effect figure), thereby invoking section 234B(3) rather than relegating the matter to section 234B(4).

Recalculation of interest by Assessing Officer - Opportunity of hearing and application of relevant precedents - Whether the Assessing Officer's computation of interest under section 234B in the giving effect order was correct and what direction should be given for adjudication of interest liability. - HELD THAT: - The Tribunal observed that the manner and periods adopted by the Assessing Officer for computing interest in the impugned order dated 12.10.2010 were not transparently recorded and the computation therefore required to be done afresh. In the interest of justice and equity the Tribunal remitted the matter to the Assessing Officer to recompute interest under section 234B, directing that the AO afford a reasonable opportunity of hearing to the assessee and take into account the Tribunal's dictum in MBG Commodities (P.) Ltd. v. DCIT while recalculating interest. [Paras 6]

Matter remitted to the Assessing Officer for fresh calculation of interest under section 234B, with opportunity to the assessee and with directions to consider the relevant Tribunal precedent; appeal restored to files of the AO.

Final Conclusion: The Tribunal held that on the facts there was an increase in assessed income by reason of the reassessment under section 147 (thus attracting section 234B(3) for fixing the terminus of interest) but directed the Assessing Officer to recompute interest afresh, after affording the assessee a hearing and having regard to the cited Tribunal precedent; appeal restored to the AO for calculation.

Agency of State Government - principal-agent relationship - trade or business test - income of the State under Article 289 - incidental to ordinary functions of government - rule of consistency

Agency of State Government - principal-agent relationship - trade or business test - income of the State under Article 289 - incidental to ordinary functions of government - rule of consistency - Whether the assessee (CIDCO) is an agent of the State Government of Maharashtra and, consequently, whether the income assessed as business income in the hands of the assessee for AY 2007-08 does not belong to the assessee but to the State and is not taxable as the assessee's business income. - HELD THAT: - The Tribunal, following the Coordinate Bench decision in the assessee's own case for AY 2006-07, held that the assessee functions as an agent/arm of the State Government. The Coordinate Bench analysis applied the constitutional framework of Article 289 read with the statutory scheme under the MR&TP Act and relevant resolutions which expressly designated the corporation to act as an "agent" and to function under control and supervision of the State. The Tribunal accepted that where activities are not commercial or undertaken with a profit motive but performed on behalf of the State (with funds and projects routed and handed back to the State on completion), the income is the income of the State and not the corporation. The Tribunal also relied on consistent past treatment by the department and applied the rule of consistency to reject the Assessing Officer's treating the receipts as the assessee's business income. Having found no change in material facts, the Tribunal affirmed the CIT(A)'s deletion of the business income assessed by the AO. [Paras 5, 6, 7]

Appeal dismissed; the assessee is an agent of the State Government and the income assessed as business income for AY 2007-08 does not belong to the assessee and is deleted.

Final Conclusion: Revenue's appeal is dismissed; the assessment treating the receipts as the assessee's business income for AY 2007-08 is reversed on the ground that the assessee acted as agent of the State Government and the income belongs to the State.

Treatment of interest as business income versus income from other sources - interest on income tax refund and consequential double taxation - allocation of expenses to tax exempt income and applicability of section 14A principles - characterisation of income earned from temporary deployment of borrowed funds - deductibility of interest and netting off of interest receipts and payments

Interest on income tax refund and consequential double taxation - whether interest received on income tax refunds (relating to earlier assessment years) is taxable in the year under appeal - HELD THAT: - The Tribunal examined the claim that interest of Rs. 20,11,502 received on refunds for earlier assessment years should not be taxed in the year under appeal because the refunds were subsequently withdrawn on completion/reopening of assessments. It found that part of the interest (Rs. 12,55,571) which arose on processing under section 143(1) was subsequently withdrawn and accordingly reduced the addition, sustaining only the balance. The additional ground was admitted as a legal point and decided on the documentary record. [Paras 6, 7]

Addition reduced; only Rs. 7,55,931 held taxable for the year and the ground is partly allowed.

Treatment of interest as business income versus income from other sources - characterisation of income earned from temporary deployment of borrowed funds - whether various interest receipts (interest from subsidiary companies, inter corporate deposits and discounting charges on trade bills) should be treated as business income of the shipping business or as income from other sources - HELD THAT: - The Tribunal reviewed documentary evidence showing that the assessee had borrowed funds from a financial institution for ship acquisitions but, pending utilisation, temporarily deployed those borrowed funds by advancing amounts to subsidiary companies and by bill discounting, thereby earning interest. Citing commercial expediency and the fact that recipient subsidiaries were engaged in the same line of business, the Tribunal treated the interest so earned as income arising from the business activity (interest on unutilised borrowed funds employed temporarily for business purpose). Applying that analysis, Rs. 3,41,10,001 out of the total Rs. 3,64,92,593 was directed to be treated as business income; the remaining items (staff loan interest, interest on securities, miscellaneous earnings, rent and the portion of income tax refund sustained) remain taxable as income from other sources. [Paras 8, 9]

Directs the Assessing Officer to treat Rs. 3,41,10,001 as income from business; rest to be taxed under other sources.

Allocation of expenses to tax exempt income and applicability of section 14A principles - whether interest and other expenses should be apportioned and disallowed against tax exempt dividend and tax free bond income - HELD THAT: - The AO had estimated and apportioned Rs. 12,073,623 of interest and other expenses to exempt income. The Tribunal noted the assessee's substantial own funds relative to the investments in tax free securities and observed that the AO's disallowance was made on an arbitrary estimate. Relying on the principle that investments in tax free securities were, on the material, made out of own funds, the Tribunal held that no such disallowance could be sustained and deleted the allocation. [Paras 10]

Disallowance deleted; additional ground no.2 allowed.

Characterisation of losses of barge division vis a vis shipping business - whether loss of the barge division is deductible from profits of shipping business for computing deduction under section 33AC - HELD THAT: - The Tribunal noted the assessee's concession that this issue is covered against the assessee by a prior Tribunal decision (DCIT vs. Orion Agencies Ltd.) and, on that basis, dismissed the ground. [Paras 12]

Ground dismissed.

Deductibility of interest and netting off of interest receipts and payments - whether, alternatively, interest paid should be allowed by netting off against interest received under the head 'Income from other sources' (claim under section 57(iii)) - HELD THAT: - The Tribunal considered this alternate plea rendered infructuous because it had already directed that the relevant interest receipts be treated as business income; consequently, the question of section 57(iii) deduction against other source interest need not be determined. [Paras 13]

Alternate ground stands dismissed as infructuous.

Effect of appellate order on assessment (give effect to CIT(A) order) - whether the Assessing Officer should give effect to the CIT(A)'s order dated 8.3.2013 - HELD THAT: - The Tribunal directed the Assessing Officer to give effect to the appellate order of the CIT(A) as required, noting that consequential compliance was necessary. [Paras 14]

Directed AO to give effect to the CIT(A) order; ground statistically allowed.

Final Conclusion: The appeal is partly allowed: the addition for interest on earlier income tax refunds is reduced; substantial interest receipts arising from temporary deployment of funds borrowed for ship acquisition are recharacterised as business income and directed to be treated accordingly; the AO's arbitrary allocation of expenses to tax exempt income is deleted; the barge loss ground is dismissed; alternate netting claim is rendered infructuous; and the AO is directed to give effect to the CIT(A) order.

Disallowance under section 40(a)(i) - obligation to deduct tax at source under section 195 - application of double taxation avoidance agreements to determine taxability of cross border professional fees - requirement of 'make available' for fees for technical services under tax treaties - absence of permanent establishment and taxability of independent personal services/business profits - retrospective amendment affecting recipient's tax liability but not retroactive payer's TDS obligation - principle of mutuality

Disallowance under section 40(a)(i) - obligation to deduct tax at source under section 195 - application of double taxation avoidance agreements to determine taxability of cross border professional fees - requirement of 'make available' for fees for technical services under tax treaties - absence of permanent establishment and taxability of independent personal services/business profits - retrospective amendment affecting recipient's tax liability but not retroactive payer's TDS obligation - Whether disallowance of payments to specified non resident service providers under section 40(a)(i) was justified - HELD THAT: - The Tribunal held that the assessing officer's disallowance under section 40(a)(i) could not be sustained for payments to the non resident recipients, since the payments were not shown to be chargeable to tax in India. The Tribunal relied on its earlier decisions in the assessee's own cases to conclude that (i) the services did not constitute 'make available' technical services under relevant DTAAs, (ii) recipients did not have permanent establishments in India so as to render the amounts taxable as business profits, and (iii) many of the payments fell within the scope of independent personal services/business profits under the applicable treaties and hence were not chargeable to tax in India so as to attract a payer's duty under section 195. The Tribunal also noted that a subsequent retrospective amendment affecting taxability in the hands of recipients cannot retrospectively impose upon the payer an obligation to deduct tax at source on the date of payment; therefore the payer cannot be treated as in default for not deducting TDS when, at the relevant time, the sums were not chargeable to tax. Applying these principles, the Tribunal affirmed the CIT(A)'s deletion of the disallowance in respect of the payments in issue, insofar as they were covered by the cited precedents. However, the Tribunal observed that the DTAA position with respect to the payment to KPMG Australia had not been examined by the CIT(A) or considered in the earlier orders and accordingly remitted that specific payment for fresh examination by the CIT(A) with reference to the applicable DTAA. [Paras 10, 14]

Disallowance under section 40(a)(i) deleted in respect of the payments covered by earlier ITAT decisions; payment to KPMG Australia remitted to the CIT(A) for examination under the applicable DTAA.

Principle of mutuality - disallowance under section 40(a)(i) - Whether receipts of KPMGI Co operative, Switzerland, fall within the principle of mutuality and therefore are not income chargeable to tax so as to require TDS deduction - HELD THAT: - The Tribunal followed its earlier, detailed analysis in the assessee's own precedent and agreed with the CIT(A) that the facts showed identity between contributors and participators and absence of any element of profit to contributors from the fund. Relying on established authority applying the principle of mutuality, the Tribunal found that the association's receipts fell within the four corners of mutuality and were not income chargeable to tax in the hands of the association. Consequently, there was no obligation on the payer to withhold tax and the disallowance under section 40(a)(i) was not warranted. [Paras 12, 13]

Order of the CIT(A) upholding that the receipts of KPMGI Co operative, Switzerland are governed by the principle of mutuality and not chargeable to tax, and deletion of the disallowance under section 40(a)(i) is affirmed.

Final Conclusion: Following earlier Tribunal precedents in the assessee's own cases, the appeals by Revenue were dismissed except that the matter of the payment to KPMG Australia was remitted to the CIT(A) for consideration under the applicable DTAA; the CIT(A)'s deletion of disallowances under section 40(a)(i) and the finding of mutuality in respect of KPMGI Co operative, Switzerland, were upheld.

Application of Section 68 as unexplained cash credit - accommodation entries and benami concerns - burden of proof on assessee to prove identity, creditworthiness and genuineness - test of human probabilities in evaluating surrounding circumstances - binding effect and scope of Lovely Exports precedent

Application of Section 68 as unexplained cash credit - accommodation entries and benami concerns - burden of proof on assessee to prove identity, creditworthiness and genuineness - Addition of share application money of Rs. 45,00,000 treated as unexplained cash credit was sustainable. - HELD THAT: - The Tribunal examined material showing that the share application money originated from nine entities operated by Shri Praveen Kumar Jain, whose modus operandi of providing accommodation entries was established by seized documents, statements and corroborative findings from related search and survey operations. The assessee produced only xerox copies, omitted ledger confirmations signed by principal officers, and did not produce evidence of existence or accessibility of the alleged investors or offer to produce their officers for verification. The Tribunal applied the test of surrounding circumstances and human probabilities to conclude that the transactions were sham and that the assessee failed to discharge the evidentiary burden to explain the nature and source of the credit. In those circumstances the amount was correctly treated as a cash credit, unexplained under the law, and assessable as income. [Paras 13, 14, 16]

Addition on account of share application money upheld in favour of Revenue and restored.

Binding effect and scope of Lovely Exports precedent - test of human probabilities in evaluating surrounding circumstances - Reliance by the Commissioner (Appeals) on Lovely Exports to delete the addition was misplaced and set aside. - HELD THAT: - The Tribunal held that the factual matrix in Lovely Exports was materially different because in the present case there was clear and specific establishment that the share applicants were non existent or dummy entities operated to provide accommodation entries. Where surrounding circumstances, seized material and admissions establish that the investors were sham, mere production of names, addresses and PAN on xeroxed documents is insufficient. Consequently the narrow rule applied in Lovely Exports could not be invoked to negate the detailed factual findings of bogus share application entries in this case. [Paras 15]

Order of CIT(A) deleting the addition by relying on Lovely Exports set aside.

Final Conclusion: The Tribunal allowed the Revenue's appeal, restored the addition of Rs. 45,00,000 as unexplained cash credit on account of bogus share application money received from entities operated by Shri Praveen Kumar Jain, and set aside the CIT(A)'s deletion based on Lovely Exports.

Exemption under sections 11 and 12 - non-cooperation in assessment proceedings - requirement of a speaking and reasoned order - remand for fresh consideration - opportunity of being heard - ex parte disposal - appeal allowed for statistical purposes

Exemption under sections 11 and 12 - non-cooperation in assessment proceedings - requirement of a speaking and reasoned order - opportunity of being heard - remand for fresh consideration - Order of ld. CIT(A) allowing exemption was remitted for reconsideration and a speaking, reasoned order addressing the Assessing Officer's observations was directed to be passed after affording the assessee an opportunity of being heard. - HELD THAT: - The Tribunal found on the record that the Assessing Officer had recorded multiple instances of the assessee's non-cooperation and had specifically sought particulars regarding the nature of services and professional receipts shown at the relevant figure, which were not furnished. The ld. CIT(A) allowed exemption relying on precedents but did not address the specific observations and factual findings made by the Assessing Officer; the appellate order was therefore cryptic and non speaking. In view of these defects, the Tribunal considered it appropriate to remit the matter to the ld. CIT(A) with a direction to examine and meet the Assessing Officer's observations, apply relevant law to the material facts, and pass a reasoned order after giving the assessee proper and sufficient opportunity to be heard. [Paras 3, 4]

Matter remitted to ld. CIT(A) for fresh adjudication by a speaking and reasoned order after addressing the AO's observations and affording the assessee an opportunity of hearing.

Ex parte disposal - appeal allowed for statistical purposes - Proceedings were conducted ex parte qua the assessee and the Revenue's appeal was disposed of for statistical purposes. - HELD THAT: - The assessee failed to appear despite service of notice; the Bench proceeded in the absence of the assessee and directed the ld. DR to argue the appeal. Having remitted the substantive issue to ld. CIT(A) for fresh consideration, the Tribunal recorded its conclusion that the appeal is allowed for statistical purposes. [Paras 2, 5]

Appeal disposed of ex parte qua the assessee and allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the question of exemption under sections 11 and 12 to the ld. CIT(A) for fresh, speaking and reasoned disposal after considering the Assessing Officer's observations and after providing the assessee an opportunity of hearing; the appeal is disposed of ex parte and allowed for statistical purposes.

Corporate guarantee as international transaction - arm's length price of guarantee fee - benchmarking of guarantee fee - disallowance of interest under section 36(1)(iii) - commercial expediency and presumption of use of own funds - remand for verification of unmatched entries in Form 26AS - verification of TDS credit claim - prematurity of penalty initiation under section 271(1)(c)

Corporate guarantee as international transaction - arm's length price of guarantee fee - benchmarking of guarantee fee - Appropriate arm's length rate for corporate guarantee (CG) fee payable/benchmarkable in respect of guarantees given to associated enterprise. - HELD THAT: - The Tribunal examined the nature of the corporate guarantee, the benefit conferred on the associated enterprise and precedents including earlier Tribunal decisions and Bombay High Court authorities. Having considered the TPO's yield-method benchmarking and the DRP's adoption of a 1.75% rate, the Tribunal followed its earlier decision for the assessee and the cited High Court decisions to restrict the arm's length guarantee fee to 0.50% of the gross amount of corporate guarantee. The Tribunal observed that the guarantee remained in force and the assessee was contingently liable for the gross amount; consequently the adjustment is to be computed on the full guarantee amount. The appellate ground raised by the Assessing Officer (seeking reduction from 2.75% to 1.75%) was also decided accordingly in favour of the assessee. [Paras 2, 8]

CG fee restricted to 0.50% on the gross corporate guarantee; appeal of the AO on this issue dismissed.

Disallowance of interest under section 36(1)(iii) - commercial expediency and presumption of use of own funds - Validity of disallowance of interest under section 36(1)(iii) on account of interest-free loans advanced to group concerns. - HELD THAT: - On facts identical to the earlier year considered by the Tribunal, the assessee demonstrated sufficiency of own funds (shareholders' funds, reserves and surplus exceeding the advances) and that the advances were made in the course of the same line of business as measures of commercial expediency; a significant portion of advances was subsequently converted into equity. Applying settled principles and relevant precedents, the Tribunal concluded that the advances were to be presumed to be out of owned funds and that the loans served commercial/business purposes, thereby justifying deletion of the disallowance under section 36(1)(iii). The Tribunal therefore allowed the assessee's ground on merits. [Paras 3]

Disallowance of interest under section 36(1)(iii) deleted; second ground allowed in favour of the assessee.

Remand for verification of unmatched entries in Form 26AS - Treatment of amounts remaining unmatched in Form 26AS. - HELD THAT: - The Tribunal found that the issue regarding amounts unmatched in Form 26AS required further factual verification. It directed the Assessing Officer to afford the assessee a reasonable opportunity of hearing and to decide the matter afresh after verifying the entries and claims made by the assessee. [Paras 4]

Matter remanded to the Assessing Officer for fresh adjudication after verification and hearing.

Verification of TDS credit claim - Claim for credit of tax deducted at source (TDS). - HELD THAT: - The Tribunal noted the assessee's contention that the AO had not granted full TDS credit claimed. It directed the Assessing Officer to verify the assessee's claim and to grant credit as appropriate after verification. [Paras 5]

TDS credit issue restored to the file of the Assessing Officer for fresh verification and adjudication.

Prematurity of penalty initiation under section 271(1)(c) - Maintainability of penalty proceedings initiated under section 271(1)(c). - HELD THAT: - The Tribunal held that initiation of penalty proceedings was premature at the stage of the contested assessment and related issues, and therefore should not be adjudicated at this juncture. [Paras 7]

Penalty proceedings under section 271(1)(c) dismissed as premature.

Final Conclusion: The assessee's appeal is partly allowed: the corporate guarantee fee is restricted to 0.50% on the gross guarantee and the disallowance under section 36(1)(iii) is deleted; matters relating to unmatched Form 26AS and TDS credit are remitted to the Assessing Officer for fresh verification; penalty proceedings under section 271(1)(c) are dismissed as premature; the Revenue's appeal on the guarantee-rate issue is dismissed.

Reopening of assessment - reason to believe - accommodation entries - unexplained cash credits - treatment of bogus/share-manipulation transactions as colourable device - right to cross-examination and principles of natural justice in income-tax proceedings

Reopening of assessment - reason to believe - Validity of the reassessment notice issued under section 148 read with section 147 for AY 2008-09 - HELD THAT: - The Tribunal upheld the finding that the Assessing Officer had material on record to form a prima facie reason to believe that income chargeable to tax had escaped assessment, including information and admissions arising from investigations into entities controlled by Shri Mukesh Choksi which had provided accommodation entries. Relying on the settled test that sufficiency of reasons is not to be gone into at the stage of reopening but existence of a reason to believe is material, the Tribunal found a live nexus between the material and the belief of escapement and concurred with the Commissioner (Appeals) that the prerequisites for valid exercise of power under sections 147/148 were satisfied. The appellant's generalized objection to reopening and absence of specific grounds were noted but not found to vitiate the notice. [Paras 11, 12]

Notice under section 148/147 for AY 2008-09 is valid and reopening is upheld.

Accommodation entries - unexplained cash credits - treatment of bogus/share-manipulation transactions as colourable device - right to cross-examination and principles of natural justice in income-tax proceedings - Whether alleged share transactions were genuine or were accommodation/bogus transactions and whether the profit is exigible as unexplained cash credit under sections 68/69 - HELD THAT: - On the merits the Tribunal accepted the factual findings that the shares of Cable Corporation of India and the broker M/s Alliance Intermediates & Network Pvt. Ltd. were part of a scheme controlled by Shri Mukesh Choksi for providing accommodation entries, that transactions were not through demat accounts and that enquiries corroborated the fraudulent modus operandi. The assessee's explanations were limited to asserting genuineness and correcting figures, without rebutting the investigative findings. The Tribunal also held that absence of an opportunity to cross-examine Mukesh Choksi was not determinative where there existed substantial corroborative material and surrounding circumstances; income-tax proceedings are quasi-judicial and may proceed on available material and preponderance of probabilities. Applying these principles, the Tribunal concurred with the view that the profits constituted unexplained cash credits / receipts from undisclosed source and were assessable under sections 68/69; the Commissioner (Appeals) had restricted the addition consistent with the assessee's own admitted figures. [Paras 7, 11, 13, 14, 15]

The transactions were held to be accommodation/bogus and the profit was assessable as unexplained cash credit under sections 68/69; the appellate authorities' confirmation of the addition is sustained.

Final Conclusion: The appeal is dismissed: the reassessment for AY 2008-09 was validly initiated and the addition treating the contested share transactions as accommodation entries and assessing the resultant profit as unexplained cash credit under sections 68/69 is upheld.

Revisionary jurisdiction under Section 263 - Explanation 2(a) to Section 263 - Obligation to withhold tax under Section 195 - Deduction at source on commission under Section 194H - Disallowance under Section 40(a)(ia) - Plausible view / acceptance by the Assessing Officer

Obligation to withhold tax under Section 195 - Revisionary jurisdiction under Section 263 - Explanation 2(a) to Section 263 - Plausible view / acceptance by the Assessing Officer - Whether the Principal Commissioner was justified in revising the assessment under Section 263 on the ground that the Assessing Officer failed to verify liability to deduct tax at source under Section 195 in respect of foreign commission. - HELD THAT: - The Tribunal held that the Assessing Officer had raised specific queries during assessment and the assessee furnished details and supporting documents showing the payments were to foreign commission agents for services rendered abroad. The assessee further clarified in response to a subsequent notice under Section 133(6) that, in view of Section 9, no income was deemed to accrue in India and hence no obligation to withhold under Section 195 arose. The Tribunal found that these inquiries and verifications were on record and that the AO after deliberation accepted the assessee's position. Explanation 2(a) to Section 263 confers power to the revisional authority only where the AO has not made inquiries or verifications which should have been made; the CIT must also demonstrate how the AO's view is erroneous. The Principal CIT did not point out why the AO's acceptance was wrong or what further verifications would have led to a contrary conclusion; insistence on absence of Form 15CA/Section 195 certificate was rendered redundant where no statutory obligation to withhold subsisted. Consequently, the exercise of jurisdiction under Section 263 was held unsustainable in respect of the foreign commission. [Paras 8, 9]

Order of the Principal CIT revising the assessment on the foreign commission ground is set aside and the AO's order is restored.

Deduction at source on commission under Section 194H - Disallowance under Section 40(a)(ia) - Revisionary jurisdiction under Section 263 - Plausible view / acceptance by the Assessing Officer - Whether the Principal Commissioner was justified in revising the assessment under Section 263 by treating payment to Shri Pratap Singh as commission attracting Section 194H and disallowance under Section 40(a)(ia), instead of salary. - HELD THAT: - The Tribunal found that the assessee consistently maintained in assessment proceedings and in reply to the Section 133(6) notice that the amount paid to Shri Pratap Singh constituted supervision charges forming part of salary. The Assessing Officer, after considering the material and explanations, accepted this view. The Principal CIT did not identify what additional inquiries the AO should have made nor demonstrate that the AO's conclusion was erroneous; his mere assertion that the payment was commission lacked supporting examination of records. Where a plausible view has been taken by the AO on available material, the revisional jurisdiction under Section 263 cannot be invoked without showing the AO's decision to be erroneous. Accordingly the Tribunal held that the CIT's revision on this count could not be sustained. [Paras 8, 9]

Order of the Principal CIT revising the assessment on the local commission/salary characterisation is set aside and the AO's order is restored.

Final Conclusion: The Tribunal allowed the appeal, set aside the order of the Principal Commissioner under Section 263 dated 21.03.2017, and restored the assessment order passed under Section 143(3) dated 29.01.2015.

Right to be searched before a Gazetted Officer or Magistrate under Section 50 of the NDPS Act - Mandatory compliance of procedural safeguards to prevent planting or foisting of contraband - Procedure for screening/X-ray and magistrate's supervisory role under Section 103 of the Customs Act - Voluntariness and evidentiary value of statements recorded under Section 67 of the NDPS Act

Right to be searched before a Gazetted Officer or Magistrate under Section 50 of the NDPS Act - Mandatory compliance of procedural safeguards to prevent planting or foisting of contraband - Alleged recovery from the persons: compliance with statutory safeguards in Section 50 of the NDPS Act - HELD THAT: - The Court examined whether the notices served satisfied the mandatory requirement of apprising the suspects of their right to be searched before a Gazetted Officer or Magistrate. Relying on the object and strict compliance doctrine in the cited Supreme Court precedent, the Court found the notices were only framed as an enquiry and failed to convey the legal right in terms the respondents could understand; the interpreter himself admitted he did not convey the meaning of key terms. The failure defeated the very purpose of Section 50 and rendered the personal search procedure infirm, so that the alleged recovery from the persons could not be relied upon against them. [Paras 16, 18, 19, 20, 25]

Non-compliance with Section 50 rendered the alleged recovery from the persons inadmissible and unreliable for proving unlawful possession.

Procedure for screening/X-ray and magistrate's supervisory role under Section 103 of the Customs Act - Mandatory compliance of procedural safeguards to prevent planting or foisting of contraband - Alleged recovery from the persons: compliance with the procedure under Section 103 of the Customs Act for body screening/X-ray and subsequent medical action - HELD THAT: - Section 103 mandates production before a magistrate, radiological examination, and, if satisfied, magistrate's directions for bringing out secreted goods with appropriate supervisory measures and custody orders. Although the respondents were produced before the magistrate and an order to permit medical examination was obtained, the prosecution failed to prove any magistrate's order under subsections (6) and (7) authorising continued custody and medically supervised extraction. Material relied upon (an application and a purported subsequent order) was not proved from court records. The investigating agency therefore did not comply with the procedural requirements of Section 103 for the period of hospitalisation and recoveries. [Paras 21, 22, 23, 24, 25]

Failure to obtain and prove the magistrate's requisite directions under Section 103 rendered the subsequent medical recoveries procedurally infirm and inadmissible against the respondents.

Voluntariness and evidentiary value of statements recorded under Section 67 of the NDPS Act - Mandatory compliance of procedural safeguards to prevent planting or foisting of contraband - Admissibility and voluntariness of the respondents' statements under Section 67 of the NDPS Act - HELD THAT: - The statements under Section 67 were recorded while the respondents remained in custody after the recoveries. The investigating officer admitted interrogating the respondents through an interpreter and failing to inform them of their right to remain silent. In light of the principles in D.K. Basu and subsequent decisions, a custodial interrogation without informing the right to silence undermines the voluntariness of such statements. Given that the statements were recorded post-recovery in custody and without informing the suspects of their rights, the Court held they could not be regarded as voluntary or be relied upon without independent corroboration. [Paras 26]

Statements under Section 67 were not shown to be voluntary and could not be relied upon as evidence against the respondents.

Final Conclusion: The Court held that recoveries and confessional statements were vitiated by non-compliance with the safeguards of Section 50 of the NDPS Act and Section 103 of the Customs Act, and that the Section 67 statements were not voluntary; accordingly the leave petition is dismissed and the acquittal upheld.

Distinction between interest chargeable under the Act and interest payable under a bond - prospective operation of Section 28AB of the Customs Act, 1962 - power of the Settlement Commission to waive interest - contractual character of bonds executed pursuant to exemption notifications

Prospective operation of Section 28AB of the Customs Act, 1962 - distinction between interest chargeable under the Act and interest payable under a bond - Whether the Settlement Commission erred in holding the petitioner liable to pay simple interest at 15% in respect of imports made in February 1994, prior to insertion of Section 28AB. - HELD THAT: - The Court examined the petitioner's contention that Section 28AB was inserted only on 20.08.1996 and therefore interest could not be levied for imports made in February 1994. The Court considered the decision relied upon by the petitioner and observed that the Division Bench decision in Akbar Knitting Co. did not address the exact factual matrix of this petition and therefore did not support the petitioner. The Court relied on the reasoning in Commissioner of Customs (Port) v. Settlement Commission and the subsequent approval by the Supreme Court in Rexnord Electronics and Controls Ltd., which recognize that interest stipulated in a bond executed pursuant to exemption notifications retains its contractual character and is not interest "chargeable under the Act." Applying these authorities, the Court found no error in the Settlement Commission's approach and its conclusion that the petitioner remained liable for interest at the rate applied.

The Settlement Commission did not err in holding the petitioner liable to pay simple interest at 15% for the relevant import transaction.

Power of the Settlement Commission to waive interest - contractual character of bonds executed pursuant to exemption notifications - Whether the Settlement Commission could equate or waive interest payable under a contractual bond with interest chargeable under the Customs Act. - HELD THAT: - The Court noted that the Settlement Commission's power to waive interest relates to interest chargeable under the Act and that where interest liability arises from a contractual bond (including rates fixed by exemption notifications), that liability retains its contractual character. The Calcutta High Court's reasoning-that the Commission cannot, unlike a civil court, unilaterally waive contractual interest without both parties' consent-was accepted, as was the Supreme Court's confirmation that interest under such bonds is not interest under the Act. Having applied these principles, the Court upheld the view that the Commission was correct in treating the bond-based interest distinctly and in reaching its decision.

The Settlement Commission was not empowered to treat or waive contractual bond interest as interest chargeable under the Act and accordingly its approach was correct.

Final Conclusion: Writ petition dismissed; the order of the Settlement Commission upholding liability to pay simple interest at 15% is affirmed.

Fixation of upset price and earnest money deposit - sale by Official Liquidator of company in liquidation - advertisement for sale of company assets - permitted expenditure from company funds for advertising - ratification of actions of the Official Liquidator - deployment and payment for security to safeguard assets

Fixation of upset price and earnest money deposit - sale by Official Liquidator of company in liquidation - Fixation of upset price and EMD for specified lots as recommended by the sale committee - HELD THAT: - The Court considered the supplementary valuation report dated September 2017 placed before the sale committee and the recommendation of the sale committee following earlier unsuccessful sale attempts and a site-survey by the valuer. Having perused the valuation and the sale committee minutes, the Court accepted the committee's recommendation and directed that the upset price and EMD for the lots shall be fixed as recommended by the sale committee. [Paras 7]

Upset price and EMD fixed as recommended by the sale committee.

Advertisement for sale of company assets - sale by Official Liquidator of company in liquidation - Approval of the schedule for sale and direction to issue advertisements in specified newspapers - HELD THAT: - The Court examined the proposed sale programme and the sale committee's recommendation to invite offers by advertisement. As the sale committee's proposal was supported by the supplementary valuation and the sale schedule proposed by the Official Liquidator's counsel, the Court directed the Official Liquidator to advertise the sale in the specified Gujarati and English daily newspapers and adopted the sale schedule as stated in the report. [Paras 7]

Sale schedule approved and advertisement in the specified newspapers directed.

Permitted expenditure from company funds for advertising - ratification of actions of the Official Liquidator - Permission to make payment to the advertising agency from the company's funds on receipt of bill - HELD THAT: - Having authorised issuance of the advertisement, the Court also permitted the Official Liquidator to make payment to the concerned advertising agency from funds available in the company's account upon receipt of the bill, thereby allowing necessary expenditure to be met from the company's liquid assets for the sale process. [Paras 7]

Official Liquidator permitted to pay advertising expenses from the company's funds on production of bill.

Deployment and payment for security to safeguard assets - ratification of actions of the Official Liquidator - Ratification of deployment of six security guards and permission to make monthly payments to the security agency - HELD THAT: - The Court noted the sale committee's decision to deploy security guards to safeguard the company's assets and the Official Liquidator's prior action in engaging the security agency. Considering the minutes of the sale committee and the need to protect the property pending sale, the Court ratified the deployment of six security guards and authorised monthly payment to the security agency from funds available in the company's account. [Paras 7]

Deployment of six security guards ratified and monthly payments to the security agency permitted from company funds.

Final Conclusion: The Court accepted the sale committee's recommendations: upset price and EMD fixed as recommended; the sale schedule adopted and advertisement directed; payment to the advertising agency and monthly security payments authorised from the company's funds; the report is disposed of accordingly.

Classification of taxable service - scope of show cause notice - support services for business or commerce - business auxiliary services - appellate jurisdiction

Classification of taxable service - scope of show cause notice - appellate jurisdiction - Whether the Commissioner (Appeals) lawfully reclassified the appellant's services as business auxiliary services when the show cause notice alleged levy only under support services for business or commerce. - HELD THAT: - The Tribunal held that the Commissioner (Appeals) exceeded the scope of the show cause notice by treating the services as business auxiliary services when the allegation in the notice was limited to support services for business or commerce. Citing the principle in the appellant's earlier reported decision, the Tribunal reiterated that an appellate authority exercising appellate jurisdiction must confine its classification finding to the grounds alleged in the show cause notice and cannot introduce a new classification not pleaded in the notice. Because the Commissioner (Appeals) reached a classification beyond what was alleged, the impugned order could not be sustained. [Paras 3, 4]

The impugned order is set aside and the appeals are allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that the Commissioner (Appeals) went beyond the scope of the show cause notice by reclassifying the services; the impugned order was set aside and consequential relief granted.

Exemption for activities in relation to education under Notification No.14/2004 - interpretation of "in relation to" - Business Auxiliary Service - principal to principal relationship

Exemption for activities in relation to education under Notification No.14/2004 - interpretation of "in relation to" - Business Auxiliary Service - Whether the services rendered by the assessee to Chhattisgarh Madhyamik Shiksha Mandal are exempt as activities "in relation to" education and therefore not exigible to service tax under Notification No.14/2004. - HELD THAT: - The Tribunal examined Notification No.14/2004 which exempts activities in relation to education and applied the Supreme Court's authoritative construction of the phrase "in relation to" in Doypack Systems (Pvt.) Ltd. v. Union of India, where the expression was held to be broad and comprehensive, capable of including direct and indirect associations with the subject matter. On perusal of the agreement between the Board and the appellant, the Tribunal found that the appellant's work - encompassing pre-exam, examination-result preparation and post-exam support linked to board examinations - falls within services rendered "in relation to" education. The department's classification of the same under Business Auxiliary Service was rejected because the contractual and factual matrix demonstrates the services are integrally connected with the educational function exempted by the Notification. Accordingly, there was no justification to sustain the impugned order. [Paras 5, 6]

The services rendered by the assessee are exempt as activities in relation to education under Notification No.14/2004 and the impugned order is set aside.

Final Conclusion: The appeal is allowed; the order-in-original is set aside and the services provided by the appellant to the Chhattisgarh Madhyamik Shiksha Mandal for the period 2006-07 to 2011-12 are held exempt under Notification No.14/2004 as activities in relation to education.

Taxability of renting buses - business auxiliary services - rent-a-cab service w.e.f. 1.6.2007 - clarificatory circular of CBEC as determinative guidance

Taxability of renting buses - business auxiliary services - clarificatory circular of CBEC as determinative guidance - Amounts received for hiring out buses to APSRTC during 2005-06 and 2006-07 (prior to 01.06.2007) are not taxable as business auxiliary services or any other service - HELD THAT: - The Tribunal accepted the Board's clarificatory Circular No. 137/155/2007 CX.4 dated 02.08.2007 which states that w.e.f. 01.06.2007 the scope of 'cab' was expanded and renting of buses would be taxable as 'rent-a-cab service', but that for the earlier period (prior to 01.06.2007) mere renting of buses was not taxable under business auxiliary services or any other taxable service then in existence. Applying this clarification to the facts, the Tribunal found that the lower authorities erred in holding the receipts taxable under business auxiliary services and set aside the impugned order. [Paras 2, 3]

Impugned order set aside; appeal allowed and amounts for the specified periods held not taxable.

Final Conclusion: The appeal succeeds: receipts from hiring buses to APSRTC for 2005-06 and 2006-07 (prior to 01.06.2007) are not leviable to service tax as business auxiliary services or any other taxable service, and the contested orders are set aside.

Maintainability of appeal - Appeal to Tribunal under VCES, 2013 - Absence of statutory appellate remedy - Voluntary Compliance Encouragement Scheme (VCES) 2013 - Action for false declarations under Section 111 of the VCES, 2013

Maintainability of appeal - Appeal to Tribunal under VCES, 2013 - Absence of statutory appellate remedy - Appeal to the Tribunal against rejection of a VCES, 2013 declaration is not maintainable in absence of a statutory appellate remedy under the scheme. - HELD THAT: - The scheme as enacted by the Finance Act, 2013 does not provide any appellate remedy against the adjudicating authority's rejection of a VCES, 2013 declaration. In consequence, there is no jurisdictional basis for entertaining an appeal before the Tribunal. The appeal was therefore not maintainable and had to be dismissed for that reason.

Appeal dismissed for want of maintainability.

Action for false declarations under Section 111 of the VCES, 2013 - Administrative examination of false declarations under Section 111 of the VCES, 2013 was directed to be undertaken by the Chief Commissioner. - HELD THAT: - In addition to dismissing the appeal for lack of an appellate remedy, the Tribunal requested that the Chief Commissioner examine cases involving false declarations under Section 111 of the VCES, 2013 and take appropriate action. This is a procedural request addressed to the departmental head to consider enforcement or other administrative measures in respect of false declarations.

Chief Commissioner requested to examine cases of false declarations under Section 111 of the VCES, 2013 for appropriate action.

Final Conclusion: The appeal against rejection of the VCES, 2013 declaration is dismissed as not maintainable because the scheme contains no appellate remedy; the Chief Commissioner is requested to examine cases of false declarations under Section 111 of the VCES, 2013 and take appropriate action.

Refund claim under Rule 4(A) Service Tax Rules, 1994 - computer generated invoice / advice requiring no signature - evidence of payment as sufficient for refund - validity of unsigned bank document as proof of tax discharge

Computer generated invoice / advice requiring no signature - validity of unsigned bank document as proof of tax discharge - evidence of payment as sufficient for refund - refund claim under Rule 4(A) Service Tax Rules, 1994 - Whether computer-generated bank invoices/advice, unsigned but stating that no signature is required, constitute valid documentary evidence of payment for processing and sanctioning a service tax refund claim. - HELD THAT: - The Tribunal accepted the First Appellate Authority's finding that the documents produced by the respondent were computer-generated advices from the service provider bank which expressly stated that no signature was required. There was no dispute that the service provider had paid the service tax and that the respondent had discharged the tax liability to the service provider. In these circumstances the Tribunal held that such computer-generated bank advices constitute satisfactory evidence of payment for the purpose of processing and sanctioning a refund under the applicable refund rule. The Tribunal found the First Appellate Authority's reasoning to be in consonance with law and declined to overturn it. [Paras 4, 5]

The Revenue's appeals are rejected and the impugned orders allowing the refund claims are upheld.

Final Conclusion: The Tribunal upheld the First Appellate Authority's conclusion that unsigned computer-generated bank advices stating no signature is required are valid evidence of payment and sufficient to allow the service tax refund; accordingly the Revenue's appeals were dismissed.

Option to avail exemption - election irrevocable for financial year - small scale service provider exemption - exemption under Notification No. 4/2007-ST - payment of service tax option

Option to avail exemption - election irrevocable for financial year - exemption under Notification No. 4/2007-ST - Whether the appellant could withdraw an earlier election to pay service tax and, mid-financial year, opt for the exemption under the notification - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s construction of the notification as clear and unambiguous that a provider who elects not to avail the exemption and to pay service tax in a financial year cannot withdraw that option during the remaining part of the same financial year. Applying that mandate to the facts, the appellant had elected to pay service tax for April 2007 to June 2007 and therefore could not, for the same financial year, switch to claim exemption for July 2007 to March 2008. The appellate authority's conclusion that the option, once exercised for the financial year, is binding for the remainder of that year was held to be correct and no error was found in denying the mid-year claim of exemption. [Paras 3, 4]

Appellant's mid-year withdrawal of the election to pay service tax and claim exemption was not permissible; the impugned order denying exemption is upheld and the appeal is dismissed.

Final Conclusion: The appeal is dismissed: the notification prohibits withdrawal of the option to pay service tax once exercised in a financial year, and the appellant who paid service tax earlier in the year could not claim the exemption for the remaining months of that financial year.

Cenvat credit on outward transportation - place of removal - FOR (Freight on Road) sales - assessable value inclusive of freight - risk in transit borne by manufacturer

Cenvat credit on outward transportation - place of removal - FOR (Freight on Road) sales - assessable value inclusive of freight - risk in transit borne by manufacturer - Legitimacy of availment of Cenvat credit on Service Tax paid on freight for outward transportation where sales were on FOR basis and freight formed part of assessable value. - HELD THAT: - The Tribunal, after considering the assessee's specific pleadings and documentary evidence that sales were on FOR basis, that freight charges were included in the assessable value and excise duty was paid on that basis, and that transit risk remained with the manufacturer until delivery at the customer's premises, applied its earlier inter partes decision and the High Court precedents to conclude that the place of removal in such transactions is the customer's premises and not the factory gate. On that basis the Service Tax paid on freight for FOR sales is properly available as Cenvat credit. The Tribunal followed its prior reasoning in Ultratech Cement Ltd. v. CCE&ST, Rohtak and related authorities, held the factual matrix established the FOR nature of sales, and set aside the impugned order which had denied credit. [Paras 4, 5]

Impugned order set aside and the appeal allowed; Cenvat credit on Service Tax paid on freight for the FOR sales for the period in dispute granted.

Final Conclusion: The Tribunal allowed the appeal, holding that where sales are on FOR basis with freight included in the composite value and the risk during transit is borne by the manufacturer until delivery at the customer's premises, the place of removal is the customer's premises and Cenvat credit on Service Tax paid on freight is legitimately available for the period June, 2008 to September, 2015.

Principle of natural justice - ex parte hearing - service of notice after change of address - reliance on precedent without independent reasoning - remand for fresh consideration

Principle of natural justice - ex parte hearing - service of notice after change of address - remand for fresh consideration - Whether the ex parte order dated 28/2/2010 violated the principle of natural justice because the notice of hearing was not served on the appellant at its changed/merged address, warranting remand to the Tribunal. - HELD THAT: - The High Court found that the Tribunal passed its order without recording any facts or reasons and had relied solely on a Supreme Court judgment. The record showed that the appellant's address had changed (the unit merged and new address was on the cause title) and that the notice for final hearing had not been served on the appellant at the new address. In these circumstances the appellant was prevented from being heard before the Tribunal. The Court held that on this ground the matter could not be allowed to stand and required the issue to be remitted to the Tribunal for fresh consideration, without expressing any opinion on the substantive merits of entitlement to SSI exemption. [Paras 6, 7, 8]

Second issue decided in favour of the assessee; the matter is remitted to the Tribunal for fresh consideration on that issue.

Final Conclusion: The appeal is disposed of by remitting the matter to the Tribunal for fresh consideration on the question of whether the ex parte order violated the principle of natural justice owing to non service of notice at the appellant's changed address; no opinion expressed on the substantive entitlement to SSI exemption.

Interest payable under Rule 96ZO(3) of the Central Excise Rules, 1944 - effect of declaration of unconstitutionality on past demands - right to know particulars of tax/interest computation - automatic operation of interest consequent to adjudication

Interest payable under Rule 96ZO(3) of the Central Excise Rules, 1944 - effect of declaration of unconstitutionality on past demands - Liability of the petitioner to pay interest claimed pursuant to the Order in Original despite the rule being struck down by the Supreme Court. - HELD THAT: - The Court noted that Rule 96ZO(3) had been held unconstitutional by the Supreme Court and that the Supreme Court's decision contained no saving clause for past cases. On that basis the Court held that the petitioner cannot avoid liability to pay interest which was demanded pursuant to the earlier adjudication; the constitutional invalidation of the rule did not absolve the petitioner of the interest liability in the absence of a saving provision in the declaratory judgment. [Paras 2, 3]

The petitioner's substantive liability to pay the interest claimed under the earlier order is not avoided by the striking down of Rule 96ZO(3).

Right to know particulars of tax/interest computation - automatic operation of interest consequent to adjudication - Adequacy of the impugned demand notice and the petitioner's entitlement to details of computation of the interest demanded. - HELD THAT: - The Court rejected the petitioner's contention that no notice had been issued prior to the demand, observing that payment of interest flowed automatically from the Order in Original. However, the Court accepted the petitioner's submission that there was a substantial discrepancy between the Department's quantified demand and the petitioner's calculation and that the petitioner was entitled to know how the claimed amount was computed. Consequently the Court directed the first respondent to issue a fresh demand which sets out the breakup and particulars of the interest computation before proceeding with recovery in accordance with law. [Paras 3, 5]

The demand must be reissued with full breakup details of the interest computation; thereafter recovery may proceed in accordance with law.

Final Conclusion: Writ petition disposed by directing the authority to issue a fresh demand setting out breakup particulars of the interest computation and thereafter to proceed with recovery in accordance with law; petitioner's broader challenge to liability was rejected in view of the absence of a saving clause in the Supreme Court's decision.

Denial of Modvat credit - penalty under Rule 571(4) of the Central Excise Rules - cum-duty price valuation - remand for re-determination of assessable value

Denial of Modvat credit - penalty under Rule 571(4) of the Central Excise Rules - Validity of imposing a partial penalty where the Tribunal set aside the denial of Modvat credit. - HELD THAT: - The Tribunal allowed the petitioner's appeal insofar as the denial of Modvat credit was concerned and set aside that finding. The High Court held that where the principal finding denying Modvat credit is set aside, the corresponding penalty relating to that finding could not properly be retained only in part. The Court found that the Tribunal's grant of only partial relief from penalty was not tenable and interfered with the impugned order accordingly. [Paras 3, 5]

Order directing levy of penalty of Rs. 35,000 under Rule 571(4) is set aside and the writ petition is allowed.

Cum-duty price valuation - remand for re-determination of assessable value - Whether the assessable value should be re-determined on a cum-duty price basis and whether the matter requires remand for that purpose. - HELD THAT: - The petitioner had raised, in the memorandum of appeal and in the supporting affidavit, that the value should be taken as the cum-duty price in accordance with settled Supreme Court authority; the Tribunal did not decide this contention. The High Court observed that there was no specific denial of this contention in the counter-affidavit and that the question of valuation on a cum-duty basis is a settled legal issue which requires fresh determination. In consequence, the Court remanded the matter to the third respondent to arrive at the correct value taking into account the cum-duty price. [Paras 4, 5]

Matter remitted to the third respondent for re-determination of assessable value on the basis that cum-duty price ought to be considered.

Final Conclusion: Writ petition allowed: the penalty of Rs. 35,000 imposed under Rule 571(4) is set aside and the matter is remanded to the third respondent for fresh determination of the assessable value taking cum-duty price into account; no costs.

Limitation prescribed under Section 11A - demand of interest - warehouse removals/warehousing procedure - application of Rule 8(3) of Central Excise Rules, 2002 - condonation of duty for storage losses

Limitation prescribed under Section 11A - demand of interest - Limitation under Section 11A applies to demand of interest levied under Central Excise Rules in respect of warehoused removals. - HELD THAT: - The Tribunal examined whether the demand of interest raised by show cause notice dated 21.6.2007 in respect of clearances during April 2001 to December 2003 was time-barred. Reliance was placed on precedent holding that the period of limitation applicable to the principal duty claim also applies to claims for interest thereon, including decisions of the Tribunal and higher Courts (TVS Whirlpool Ltd. affirmed by the Apex Court and decisions of High Courts). The Bench observed that unless the statutory conditions for invoking an extended period of limitation (misstatement, fraud, concealment etc.) are pleaded and established, the normal limitation under Section 11A governs demands for duty and interest. In the present case no material or allegation was shown to invoke the extended period; accordingly the demand dated 21.6.2007 fell beyond the normal limitation period and was barred. [Paras 4]

Demand of interest in the show cause notice dated 21.6.2007 is barred by limitation and the appeal is allowed on that ground.

Final Conclusion: The appeal is allowed: the demand of interest in respect of warehoused clearances for the period April 2001 to December 2003 is time barred under Section 11A and cannot be sustained.

Assessable value in job work - inclusion of value of raw material and costs necessarily attributable to bringing goods to job worker - value versus cost distinction for assessable value - inclusion of supplier's expenses (inward transport, insurance, overheads) in assessable value - Rule 6 of the Valuation Rules, 2000 - scope of value to be included at job-worker's end - limitation and bona fide belief defence in valuation disputes

Assessable value in job work - inclusion of value of raw material and costs necessarily attributable to bringing goods to job worker - value versus cost distinction for assessable value - inclusion of supplier's expenses (inward transport, insurance, overheads) in assessable value - Whether expenses incurred by the supplier on free-supplied raw material (such as inward transport, insurance and overheads) are includible in the assessable value of goods manufactured on job work basis. - HELD THAT: - The Tribunal held that for determining assessable value at the hands of a job worker what is relevant is the value and not 'cost' in the narrow sense of cost of manufacture. Reliance on the Larger Bench decision in Eicher Motors Ltd. and the clarification in Ujagar Prints establishes that the assessable value of processed goods comprises the value of the raw material in the hands of the processor plus the value of job work and manufacturing profit and expenses. That formulation necessarily contemplates inclusion of expenses incurred for bringing the raw material to the job worker (such as inward transport and insurance) in the assessable value. Earlier decisions to similar effect were noted. In the facts before the Tribunal the inclusion of supplier-incurred expenses in assessable value was therefore upheld. [Paras 4]

Expenses incurred by the supplier to bring free-supplied raw material to the job worker (including inward transport, insurance and related overheads) are includible in the assessable value of the goods manufactured on job work.

Limitation and bona fide belief defence in valuation disputes - Whether the appellants' plea of bona fide belief (based on earlier CBEC circulars and practice) entitled them to relief on limitation grounds in the valuation dispute. - HELD THAT: - The Tribunal observed that valuation in such situations had long been disputed but was ultimately clarified by the Apex Court in Ujagar Prints, which settled the legal position that expenses attributable to bringing goods to the job worker form part of assessable value. Given that legal position as settled by the Apex Court, the appellants' claim of bona fide belief based on earlier clarifications could not be sustained and did not afford a limitation defence. [Paras 5]

The plea of bona fide belief does not absolve the appellants; the limitation ground is rejected.

Final Conclusion: The appeal is dismissed; the tax demand (including inclusion of supplier-incurred expenses in assessable value) and penalty were confirmed and the limitation/bona fide belief defence was rejected.

Refund of interest paid on provisional assessment - chargeability of interest where differential duty paid before finalization of provisional assessment - applicability of Section 11B to refund of interest demanded under Section 11AB - payment under protest - limitation for refund claims computed from date of final assessment - unjust enrichment in refund of interest

Refund of interest paid on provisional assessment - chargeability of interest where differential duty paid before finalization of provisional assessment - applicability of Section 11B to refund of interest demanded under Section 11AB - payment under protest - Interest paid by the appellant in respect of duty paid prior to finalisation of provisional assessment is not chargeable and is refundable; such refund is within the scope of Section 11B where interest was demanded under Section 11AB; the payment was made under protest. - HELD THAT: - The Tribunal accepted the established ratio that interest is chargeable only where the differential duty is paid after finalization of a provisional assessment and not where duty is paid prior to finalisation. Applying that principle to the facts, the interest paid by the appellant in respect of duty paid before the assessment was finalised is not payable and therefore refundable. The Tribunal further held that because the interest was demanded under Section 11AB it cannot be excluded from the operation of Section 11B, and thus the statutory refund mechanism applies. The appellant had informed the department that payment was made under protest and also paid pursuant to departmental direction; on these facts the payment qualifies as made "Under Protest", reinforcing entitlement to refund of an amount not legally payable. [Paras 4]

Amount of interest paid is not chargeable, is refundable, and the refund falls within Section 11B; payment was made under protest.

Limitation for refund claims computed from date of final assessment - The limitation period for the refund claim runs from the date of finalisation of the provisional assessment; the appellant's refund claim filed within six months of finalisation is not time-barred. - HELD THAT: - There was no basis to file a refund claim prior to finalisation of the provisional assessment because the final determination of duty had not yet arisen; once the provisional assessment was finalised on 28.12.2006 the refund claim arose and the claim filed on 20.04.2007 was within six months of that date, hence within the statutory limitation for refund. [Paras 5]

Refund claim is not time-barred as it was filed within six months of finalisation of assessment.

Unjust enrichment in refund of interest - The doctrine of unjust enrichment does not bar the refund of interest paid, as the interest was not part of the price of the goods and there is no evidence that the appellants passed on its incidence. - HELD THAT: - Because the appellants voluntarily paid the interest and the interest did not form part of the price charged for goods, there is no showing that the incidence of the interest was passed on to customers. In these circumstances a claim for refund is not defeated by unjust enrichment principles. [Paras 6]

Unjust enrichment does not preclude the refund of the interest paid.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the interest paid by the appellant in respect of duty paid prior to finalization of provisional assessment is refundable, the claim not being time-barred and not barred by unjust enrichment.

Valuation for assessable value - bought-out parts and accessories - inclusion of amounts collected as tax but not paid as additional consideration - extended period of limitation and penalty under Rule 173Q

Valuation for assessable value - bought-out parts and accessories - Whether duty is leviable on bought-out parts and accessories supplied independently as replacement spares - HELD THAT: - The Tribunal found that the appellants included the value of bought-out parts and accessories in the assessable value when cleared along with the main machine but did not pay duty when such items were supplied independently as replacement spares. The impugned order did not deal with the distinct fact that these items are bought-out and supplied as such. Since no manufacture occurs in respect of bought-out items supplied independently, no duty liability arises on those supplies. Consequently the demand made on this count was set aside. [Paras 5]

Demand set aside insofar as it related to bought-out parts and accessories supplied independently as replacement spares.

Inclusion of amounts collected as tax but not paid as additional consideration - Whether amounts collected as sales tax but not paid to the government are includible in the assessable value - HELD THAT: - The Tribunal held that amounts collected from buyers as sales tax but not paid to the government are includible in the assessable value. The appellant relied on authorities concerning freight collected in excess of actual cost where the excess profit margin was held not includible. Those decisions were distinguished: freight cases involved a distinct service-margin principle, whereas deduction for sales tax is available only on actual payment; any amount collected in excess of the actual sales tax paid must therefore be treated as additional consideration and included in assessable value. On this basis the demand on this count was upheld. [Paras 6]

Demand upheld for inclusion in assessable value of sales tax amounts collected but not paid to the government.

Extended period of limitation and penalty under Rule 173Q - Whether invocation of the extended period and imposition of penalty under Rule 173Q was justified - HELD THAT: - The Tribunal noted that although the assessee's unit was audited and RT-12 returns and invoices were produced, those documents did not contain any declaration that the amounts collected as sales tax had been paid to the government exchequer. In the absence of such proof, invocation of the extended period of limitation was held to be justified. Consequently penalty under Rule 173Q could be imposed, but the Tribunal exercised its discretion to reduce the quantum of penalty. [Paras 7]

Invocation of extended period and penalty under Rule 173Q upheld; penalty reduced by the Tribunal.

Final Conclusion: Appeal partly allowed: demand set aside in respect of bought-out parts and accessories supplied independently; demand upheld for inclusion of sales-tax-collected-but-not-paid in assessable value; invocation of extended period and penalty under Rule 173Q sustained but penalty reduced.

Exemption notification - Generic medicines - Interpretation of tariff description

Exemption notification - Natural Micronised Progesterone - Excipients in medicaments - Eligibility of the respondent's product marketed as 'Sugest' for exemption under Notification No. 4/2006-CE, with reference to the entry covering Natural Micronised Progesterone. - HELD THAT: - The Tribunal held that the exemption entry covered drugs and medicines, and that a medicine manufactured out of the basic drug would ordinarily contain other ingredients in the nature of excipients. Mere addition of such excipients did not alter the character of the basic drug so as to take the product outside the exemption entry. On examining the product packing, the Tribunal found that the product sold was Natural Micronised Progesterone and, notwithstanding the presence of other excipients, it remained covered by the relevant entry in List 3 of Notification No. 21/2002-Cus read with Notification No. 4/2006-CE. The Tribunal also agreed with the Commissioner (Appeals) that the notification should not be construed narrowly so as to defeat the purpose of exemption for the generic medicine. [Paras 4, 5, 6]

The product was held eligible for the exemption, and the Revenue's appeal was dismissed.

Final Conclusion: The Tribunal upheld the order of the Commissioner (Appeals) and held that the respondent's medicament remained Natural Micronised Progesterone for the purpose of the exemption entry notwithstanding the presence of excipients. The Revenue's appeal was dismissed.

Show Cause Notice hit by limitation - Issue previously adjudicated / same cause of action - Investigation-based adjudication - Reliance on earlier order / ratio of Bombay High Court in Cona Industries

Show Cause Notice hit by limitation - Issue previously adjudicated / same cause of action - Investigation-based adjudication - Impugned Show Cause Notice dated 31.08.2009 is time barred and liable to be set aside. - HELD THAT: - The Tribunal found that an earlier Show Cause Notice dated 31.03.2005 arose from the same visit, investigation and intelligence and had been adjudicated (with the confiscation set aside by the Tribunal). The later Show Cause Notice of 31.08.2009 repeats the same preamble and seeks to raise the same demand arising out of that investigation. Applying the ratio of the Bombay High Court in Cona Industries, where a subsequent notice founded on the same allegations and documents was held to be barred, the impugned notice is patently hit by limitation. Given that the appeals are disposed of solely on this ground, the Tribunal did not record any findings on the other contentions raised by the parties. [Paras 7, 8]

Impugned order set aside and appeals allowed on the ground of limitation.

Final Conclusion: The appeals are allowed and the impugned order is set aside on the sole ground that the later Show Cause Notice is time barred in view of the earlier adjudication and the controlling ratio of the Bombay High Court in Cona Industries; other contentions were not decided.

Clandestine manufacture and clearance - demand of excise duty on shortage of inputs - reliance on private production register vis-a -vis RG-1 statutory register - requirement of corroborative evidence to establish clandestine clearances - confiscation of goods and necessity of intention to clandestinely remove - penalty under Section 11AC - penalty under Rule 26 of the Central Excise Rules, 2002

Demand of excise duty on shortage of inputs - requirement of corroborative evidence to establish manufacturing of input - Demand of excise duty on shortage of Calcium Carbonate (an input) held unsustainable - HELD THAT: - The Show Cause Notice sought duty on shortage of Calcium Carbonate which was an input purchased from manufacturers on payment of duty. There was no evidence that the appellant manufactured the raw material in its factory or that the Revenue sought reversal of cenvat credit in respect thereof. In absence of any material to show manufacture by the appellant, demand of excise duty on the missing input cannot be sustained. [Paras 7]

Demand of excise duty on shortage of Calcium Carbonate set aside.

Clandestine manufacture and clearance - reliance on private production register vis-a -vis RG-1 statutory register - requirement of corroborative evidence to establish clandestine clearances - Demand of duty for alleged clandestine manufacture and clearance during August & September 2009 based on mismatch between private production register and RG-1 held not proved - HELD THAT: - The allegation rested solely on discrepancies between the private production (profit) register and the statutory RG-1. Records show mismatches in other months where RG-1 even recorded higher production, but Revenue only proceeded for August and September and did not produce corroborative evidence such as purchases of unaccounted raw material, abnormal electricity consumption, identification of recipients, or cash-trace linking receipts to clandestine sales. Reliance solely on register mismatch, without further corroboration, is insufficient to prove clandestine manufacture/clearances; the tribunal followed the ratio of relevant High Court and tribunal precedents to that effect. [Paras 7]

Demand of excise duty for alleged clandestine manufacture/clearances for August & September 2009 set aside.

Clandestine manufacture and clearance - reliance on transporter consignment notes - Demand based on two consignment notes for clandestine removal upheld - HELD THAT: - The Revenue produced the transporter manager's statement and the two consignment notes which identified the appellant as consignor; these materials established removal of goods without documents. The tribunal found this evidence sufficient to sustain the demand in respect of those consignments and therefore upheld the duty demand based on them together with interest. [Paras 7]

Demand based on two consignment notes upheld; duty and interest to be recovered and equivalent penalty imposed on that amount.

Confiscation of goods and necessity of intention to clandestinely remove - Confiscation of excess finished goods found at premises set aside - HELD THAT: - Confiscation was not sustainble in absence of any evidence indicating an intention by the appellant to remove the goods clandestinely. Mere non-entry of finished goods in statutory records was not held sufficient to uphold confiscation where intention to clandestine removal was not established. [Paras 7]

Confiscation of excess finished goods set aside; redemption fine not payable.

Penalty under Section 11AC - penalty under Rule 26 of the Central Excise Rules, 2002 - Penalties: penalty equivalent to the upheld demand to be sustained under Section 11AC; other penalties including penalty on director under Rule 26 set aside - HELD THAT: - Having sustained the demand arising from the two consignment notes, the tribunal upheld the imposition of an equivalent penalty under Section 11AC in respect of that demand. All other penalties imposed on the appellant were set aside because the underlying demands were not proved. The penalty on Sh. K.D. Agarwal under Rule 26 was specifically set aside for lack of material establishing his liability. [Paras 7]

Penalty equal to the sustained demand upheld under Section 11AC; other penalties and the penalty on K.D. Agarwal under Rule 26 set aside.

Final Conclusion: Appeals disposed: demands and penalties based on register mismatches and shortage of raw material largely set aside for lack of corroborative evidence; demand and equivalent penalty sustained only insofar as supported by two consignment notes and transporter evidence; confiscation and other penalties, including that on the director under Rule 26, set aside.

Cenvat credit on construction materials - Definition of inputs for Cenvat credit - Effect of change in law w.e.f. 07.07.2009 on credit admissibility - Remand for fresh adjudication - Penalty for erroneous availment of Cenvat credit

Cenvat credit on construction materials - Definition of inputs for Cenvat credit - Effect of change in law w.e.f. 07.07.2009 on credit admissibility - Remand for fresh adjudication - Remand of appeals for reconsideration on admissibility of Cenvat credit for cement and steel items used in erection/construction of the plant/support structures for the period prior to 07.07.2009. - HELD THAT: - The Tribunal noted that the period in question is prior to 07.07.2009 when the restriction regarding use of cement and steel as inputs was introduced for a short duration. In view of earlier proceedings in the appellant's own case where similar appeals were remanded for reconsideration after application of relevant authorities, the Tribunal found it appropriate to remit the present appeals to the adjudicating authority for fresh consideration. The adjudicating authority is directed to afford the appellants an opportunity of hearing, to consider the applicability of the case laws placed before the Tribunal (including the list of decisions specified in the order) and any other authorities produced by the appellants, and to pass an appropriate reasoned order on admissibility of credit on cement and steel used for construction/erection of plant and related structures. [Paras 5]

Appeals remanded to the adjudicating authority for reconsideration and fresh decision after hearing the appellants and considering the cited authorities.

Penalty for erroneous availment of Cenvat credit - Validity of imposition of penalty for taking Cenvat credit on cement and steel during the relevant period. - HELD THAT: - The Tribunal observed that the question whether credit on cement and steel was admissible during the relevant period was contentious, with judicial authorities having taken divergent views and the definition of inputs having undergone change w.e.f. 07.07.2009. Having regard to the existence of conflicting decisions and the disputed nature of the legal position during the period in issue, the Tribunal concluded that the imposition of penalty was unwarranted and unjustified. Accordingly, the penalty imposed by the adjudicating authority was set aside. [Paras 5]

Penalty imposed is set aside.

Remand for fresh adjudication - Miscellaneous applications by the Revenue for change of cause-title. - HELD THAT: - The Tribunal dealt with the Revenue's miscellaneous applications and allowed the applications for change of cause-title, recording the allowance in the operative part of the order. [Paras 6]

Miscellaneous applications for change of cause-title are allowed.

Final Conclusion: The appeals are partly remanded to the adjudicating authority for fresh adjudication on admissibility of Cenvat credit on cement and steel used in construction/erection of the plant (period prior to 07.07.2009), the penalty imposed is set aside, and the Revenue's miscellaneous applications for change of cause-title are allowed.

Reliance on panchnama without cross-examination - cross-examination of panch witnesses - principles of natural justice - reconsideration and remittal for fresh adjudication

Reliance on panchnama without cross-examination - cross-examination of panch witnesses - principles of natural justice - Whether the adjudicating authority could rely upon the panchnama to sustain demand without producing panch witnesses for cross-examination and whether the matter required reconsideration in the light of failure to permit such cross-examination. - HELD THAT: - The Tribunal found that the Revenue's case and the demand of duty and penalties were founded on the panchnama drawn at the factory premises recording shortages of finished goods and inputs. The assessee had specifically sought cross-examination of the panch witnesses to challenge the correctness of the stock-taking. The adjudicating authority recorded that notices sent to the panch witnesses were returned and yet there is nothing on record to show that the authority summoned or otherwise made efforts to produce the panch witnesses for cross-examination before relying on the panchnama. In these circumstances the Tribunal held that, where reliance is placed on a panchnama, it is the duty of the adjudicating authority to enable cross-examination of the panchas if requested, so as to afford an adequate opportunity to test the veracity of the document and to satisfy the mandates of natural justice. Following the precedents of the Punjab & Haryana High Court cited in the judgment, the Tribunal concluded that the impugned order could not stand without giving the assessee the opportunity to cross-examine the panch witnesses and that the matter must be reconsidered afresh after permitting such cross-examination. [Paras 9, 10, 11]

Impugned order set aside and the matters remitted to the adjudicating authority to make available the panch witnesses for cross-examination and to decide the issue afresh in accordance with the principles of natural justice.

Final Conclusion: The Tribunal set aside the appellate order and remitted the matters to the adjudicating authority for fresh adjudication after permitting cross-examination of the panch witnesses and observing the principles of natural justice.

SSI exemption - brand name provision - benefit of exemption where goods are not traded - job work manufacture - Notification No.8/2003 CE - Circular No.71/71/94 CX

SSI exemption - brand name provision - benefit of exemption where goods are not traded - Notification No.8/2003 CE - Circular No.71/71/94 CX - Appellant's entitlement to exemption under Notification No.8/2003 CE for job-work manufacture of table diaries bearing LIC logo. - HELD THAT: - The Tribunal examined whether the presence of the LIC logo on diaries manufactured on job-work basis by the appellant attracts the mischief of the brand name provision so as to deny the SSI exemption under Notification No.8/2003 CE. The appellant's case, supported by its letter, was that the printed diaries bearing the LIC logo were distributed by LIC as complimentary gifts and were not traded in the market. The Tribunal relied on the departmental clarification in Circular No.71/71/94 CX, which explains that the brand-name mischief requires (i) a connection between the branded goods and a person using the brand name, and (ii) that such connection be in the course of trade; if there is no trade in such goods the brand-name provision does not apply. The Circular's illustration of branded castings supplied to a specific user for further manufacture was held to be analogous: where branded goods supplied to a principal-user are not traded, putting the brand name does not strip the supplier of exemption. Applying this principle and on the admitted fact that LIC did not trade the diaries, the Tribunal held that the brand-name provision is not attracted and the appellant is entitled to the benefit of the exemption.

Appeal allowed; exemption under Notification No.8/2003 CE granted and impugned order set aside with consequential benefits in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, holding that where goods bearing another's brand are manufactured on job-work for that principal and are not traded by the principal, the brand name provision does not deny the SSI exemption under Notification No.8/2003 CE; the impugned order was set aside and consequential relief was directed.

Eligibility for SSI Exemption - valuation of clearances versus trading activity - reliance on Chartered Accountant certificate for reconciliation - confirmation of duty demand - remand for fresh adjudication following principles of natural justice

Reliance on Chartered Accountant certificate for reconciliation - valuation of clearances versus trading activity - confirmation of duty demand - Validity of the First Appellate Authority's decision to drop part of the duty demand (Rs. 32,76,128/-) after accepting the Chartered Accountant's reconciliation and other records. - HELD THAT: - The Tribunal examined the First Appellate Authority's detailed findings, noting that paragraphs 11.2 to 11.7 of the impugned order record consideration of the Chartered Accountant certificate, statements, and ledger accounts produced by the assessee. The Tribunal held that the First Appellate Authority correctly accepted the reconciliation evidence and the statutory auditor's role of the Chartered Accountant in relation to the trading activity, and therefore rightly set aside the demand to the extent of Rs. 32,76,128/-. The Revenue's contention that the FAA misappreciated the records was rejected on the basis that the FAA had, on sound reasoning, considered the certificate and supporting material. [Paras 6]

Revenue's appeal against the deletion of the demand of Rs. 32,76,128/- is devoid of merits and is rejected.

Eligibility for SSI Exemption - confirmation of duty demand - remand for fresh adjudication following principles of natural justice - Whether the confirmed duty demand (Rs. 13,70,651/-) should be re-examined in the light of the assessee's claim to SSI Exemption for the period in question. - HELD THAT: - The Tribunal noted that the value of clearances on which duty was confirmed amounted to Rs. 75,17,137/- for 2004-2005 to 2006-2007 and that SSI Exemption during the relevant period applied to assessees whose turnover was below the prescribed threshold. As the point of SSI eligibility had not been raised before the lower authorities, the Tribunal considered it necessary that the adjudicating authority test the confirmed demand against the assessee's plea of SSI entitlement. Consequently, the matter was remitted to the adjudicating authority for fresh consideration, directing that the authority follow the principles of natural justice and afford the assessee an opportunity to produce any documents relied upon. [Paras 7]

The confirmed duty demand is remitted to the adjudicating authority for fresh adjudication on SSI eligibility, with liberty to the assessee to produce documents and after observing principles of natural justice.

Final Conclusion: The Revenue appeal is dismissed and the First Appellate Authority's deletion of part of the demand is upheld; the assessee's appeal is disposed of by remitting the question of SSI entitlement in respect of clearances for 2004-2005 to 2006-2007 to the adjudicating authority for fresh consideration in accordance with natural justice.

Transfer of right to use goods - composite contract - dominant nature test - deemed sale - non-severability of composite contracts (outside Article 366(29-A) exceptions)

Transfer of right to use goods - composite contract - dominant nature test - deemed sale - The contract between the petitioners and ONGC is a pure contract for services and does not involve a transfer of the right to use workover rigs constituting a deemed sale liable to value added tax. - HELD THAT: - The court examined the contractual clauses (including duties/authority of ONGC's site representative, remuneration and day-rate structure, contractor's responsibility for operation, maintenance, insurance and control of rigs, non substitution clause, and clause allowing limited use by ONGC only in exceptional circumstances) and applied the principles in Bharat Sanchar Nigam Ltd. and related authorities. While goods were available and identifiable, the attributes required for a transfer of the right to use-notably that the transferee obtain legal right to use to the exclusion of the transferor-were not satisfied. The contractor retained possession, control and responsibility for the rigs; remuneration was fixed as day rates inclusive of service tax with no bifurcation for hire of rigs; and the contract contemplated performance of services using the contractor's equipment rather than delivery of possession to ONGC. The opening recital stating "charter hiring" was held not to override the substantive provisions. Accordingly, the transaction is in substance a service contract on which service tax was rightly paid, and it does not attract VAT as a deemed sale. [Paras 31, 36, 37, 43, 44]

Contract is a pure service contract; there is no transfer of right to use the workover rigs and hence no deemed sale liable to VAT.

Non-severability of composite contracts (outside Article 366(29-A) exceptions) - deemed sale - Even if the contract were treated as composite, it is not severable into separate values for service and transfer of right to use, and therefore the State cannot tax a separable sale element. - HELD THAT: - Applying the ratio of Bharat Sanchar Nigam Ltd. and the line of authority construing Article 366(29-A), the court observed that only specified composite transactions (works contracts, hire purchase, catering) are constitutionally deemed divisible. The contract's payment structure (day rates inclusive of service tax) contains no bifurcation of charges for hire/use of rigs and services; consequently the parties did not intend separable values. Since the contract is not severable and no separate value for transfer of right to use is ascertainable, the State cannot isolate and tax a sale element by treating the composite transaction as divisible. [Paras 30, 31, 34, 45]

Composite contract, if any, is not severable; sale element cannot be isolated for VAT.

Remand for computation - The Tribunal's remand to compute VAT liability is rendered untenable because the contract is not severable and no bifurcated computation can be made pursuant to the Tribunal's directions. - HELD THAT: - The Tribunal had remanded the matter to the first appellate authority to compute tax, interest and penalty after treating the contract as composite. Given the court's findings that the contract is a pure service contract and, alternatively, not severable (no separate values are specified), there is no basis on which the first appellate authority can perform the computation directed by the Tribunal. [Paras 45]

Remand for computation cannot be implemented as the contract is not severable and no VAT liability arises.

Final Conclusion: The writ petition is allowed: the Tribunal and subordinate orders are quashed and set aside as the contract is a contract for services (no transfer of right to use goods) and, in any event, is not severable for VAT; therefore no value added tax liability arises; rule made absolute with no order as to costs.

Review Petition - Condonation of Delay - Prayer for Oral Hearing - No Case for Review

Review Petition - No Case for Review - Maintenance of the review petitions filed against the judgment dated 04.10.2017 - HELD THAT: - The Court examined the review petitions and the grounds advanced in support thereof and concluded that the material before it did not disclose any valid ground warranting review of the earlier order dated 04.10.2017. Having perused the petitions and their supporting grounds, the Court found no error, omission or other circumstance that would justify reopening or reviewing its prior decision.

Review petitions dismissed.

Condonation of Delay - Application for condonation of delay in filing the review petitions - HELD THAT: - The Court considered the application for condonation of delay and, on the material before it, exercised its discretion to condone the delay. The order records that delay is condoned without further elaboration.

Delay in filing condoned.

Prayer for Oral Hearing - Request for oral hearing in the review proceedings - HELD THAT: - A prayer for oral hearing was made but the Court declined that request. The Court rejected the prayer for oral hearing and proceeded to decide the review petitions on the papers.

Prayer for oral hearing rejected.

Final Conclusion: The review petitions against the judgment dated 04.10.2017 are dismissed; delay in filing the petitions is condoned and the request for oral hearing is refused.

Additional sales tax liability of agent - statutory duty to clarify under Section 28-A(2) of the TNGST Act - interpretation and application of Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970 - application of decision of Tamil Nadu Taxation Special Tribunal in Siemens Ltd. - remand for fresh assessment after affording opportunity of hearing

Statutory duty to clarify under Section 28-A(2) of the TNGST Act - administrative decision v. judicial direction to consider representation - Validity of the Commissioner's one line refusal to grant clarification and whether that order complied with the earlier direction of the Court. - HELD THAT: - The Court found that the impugned order did not address the points raised by the petitioner nor give reasons for refusing the requested clarification despite the earlier direction to consider the representation. In view of the statutory duty to clarify procedural points and the prior order directing consideration, the Commissioner's brief order was set aside and the matter required fresh consideration in accordance with law. [Paras 6]

Impugned clarification order set aside for failure to address petitioner's submissions and to give reasons; matter remitted for reconsideration.

Interpretation and application of Section 2(1)(aa) of the Tamil Nadu Additional Sales Tax Act, 1970 - application of decision of Tamil Nadu Taxation Special Tribunal in Siemens Ltd. - Whether the Tribunal's decision in Siemens Ltd. (striking down aspects of Section 2(1)(aa) where principal is outside the State) applies to the petitioner, whose principal is situated outside Tamil Nadu and has no branch in the State. - HELD THAT: - On the facts, the petitioner is a direct agent of a principal located outside Tamil Nadu and has no local branch; the Court held that the reasoning in Siemens Ltd. regarding deletion of the state location words in Section 2(1)(aa) is squarely applicable. The Court relied on the Tribunal's conclusion that the provision, as then framed, could not be sustained insofar as it discriminated against agents of non resident principals and therefore is relevant to the present assessment. [Paras 7, 8]

Siemens Ltd. decision applies to the petitioner's factual position and is to be given effect in the reassessment.

Remand for fresh assessment after affording opportunity of hearing - assessment to be redone in accordance with law - Relief to be granted and further course of action following setting aside of the impugned order. - HELD THAT: - Having set aside the Commissioner's order and found the Siemens Ltd. decision applicable, the Court remitted the matter to the Assessing Officer for redo of the assessment in accordance with law. The Assessing Officer is directed to afford the petitioner an opportunity of hearing and to pass a fresh assessment order consonant with the applicable legal position. [Paras 9]

Writ petition allowed; impugned order set aside; matter remanded to the Assessing Officer to redo the assessment after hearing the petitioner.

Final Conclusion: The Commissioner's one line refusal was set aside for want of reasons and failure to consider the petitioner's submissions; the Tribunal decision in Siemens Ltd. was held applicable to the petitioner's case, and the assessment was directed to be redone by the Assessing Officer after affording an opportunity of hearing.

Principle of audi alteram partem - suppression of inter-state sales - assessment under the Central Sales Tax regime - penalty for concealment / failure to account - concurrent findings of fact - perversity standard for interference under Article 226

Principle of audi alteram partem - suppression of inter-state sales - assessment under the Central Sales Tax regime - concurrent findings of fact - Whether the assessing authority was justified in holding that the dealer effected and suppressed inter-state sales and disallowing the claimed exemptions. - HELD THAT: - The Court accepted the concurrent factual findings of the First Appellate Authority and the Tribunal that the assessing authority had relied primarily on the purchaser's statement and movement of lorries without affording the dealer an opportunity to cross-examine the purchaser or giving adequate reasons for rejecting the dealer's documentary evidence. The appellate authority summoned the purchaser for cross-examination (summons returned unserved) and both appellate bodies examined invoices, lorry receipts, ledger extracts and other documents produced by the dealer. In the absence of clinching evidence and because the purchaser's statement was not tested by cross-examination, the conclusion that the dealer effected interstate sales and suppressed turnover was not warranted. The Court applied the established principle that concurrent findings of fact will not be interfered with unless perverse, and held that the conclusions reached by the appellate authorities were supported by evidence on record and therefore not vitiated by perversity. [Paras 19, 20, 21, 22, 30]

The assessing authority's finding of suppression of inter-state sales was set aside; the First Appellate Authority's and Tribunal's concurrent conclusions that the disputed turnover could not be assessed as interstate sales were upheld.

Penalty for concealment / failure to account - principle of audi alteram partem - perversity standard for interference under Article 226 - Whether the penalty imposed ought to be restored despite the appellate and Tribunal findings in favour of the dealer. - HELD THAT: - The Court noted that penalty and its applicability were considered by the Appellate Assistant Commissioner and the Tribunal in the context of the substantive finding that there was no proven suppression. Because the assessing authority denied the dealer the opportunity to cross-examine the purchaser and failed to appropriately consider the dealer's documentary proofs, the appellate authorities declined to sustain the penalty. Applying the standard that concurrent factual findings should not be disturbed unless perverse, and finding no perversity in the appellate and Tribunal conclusions, the High Court declined to interfere with the non-imposition/restoration of penalty. [Paras 6, 17, 19, 20, 30]

The order refusing to sustain/restore the penalty was upheld; no interference with the appellate and Tribunal decisions on penalty.

Final Conclusion: Tax Case Revision Petitions dismissed; concurrent findings of the First Appellate Authority and the Sales Tax Appellate Tribunal that the disputed turnover could not be assessed as interstate sales and that penalty was not warranted are maintained, there being no perversity in those findings.

Penalty under Section 54(1)(5)(ii) for deliberate non-obtaining of tax invoice - obligation under Section 22(7) to furnish registration and Tin Number - requirement of deliberate intent and undue gain for imposition of penalty - judicial discretion in imposing statutory penalty where breach is technical or bona fide - principle in Hindustan Steel regarding imposition of penalty only for deliberate, contumacious or dishonest conduct

Penalty under Section 54(1)(5)(ii) for deliberate non-obtaining of tax invoice - obligation under Section 22(7) to furnish registration and Tin Number - requirement of deliberate intent and undue gain for imposition of penalty - Whether penalty under Section 54(1)(5)(ii) can be sustained when a registered purchasing dealer received a sale invoice instead of a tax invoice but did not obtain any undue benefit and there was no deliberate omission to furnish registration/Tin details to the seller. - HELD THAT: - Section 22(7) imposes on a purchasing dealer the duty to furnish registration and Tin Number to the selling dealer; section 54(1)(5)(ii) contemplates penalising a registered purchasing dealer who has "deliberately not obtained" a tax invoice. The expression "deliberately" denotes intentional or purposeful omission, and the statutory scheme implies such deliberate non-compliance must be accompanied by intent to secure undue advantage. Authorities exercising the power to impose penalty must examine facts and circumstances and should not impose penalty as a routine measure where the breach is venial, technical or arises from bona fide error. The Court applied the principle in M/s Hindustan Steel Ltd. that penalty in quasi criminal statutory proceedings ordinarily requires conduct that is deliberate, contumacious or dishonest and that discretion to impose penalty must be exercised judicially. On the material before it the Tribunal found that the assessee had not taken any benefit from the issuance of a sale invoice instead of a tax invoice and that there was no deliberate omission to furnish registration/Tin details; accordingly the impugned penalty could not be sustained. [Paras 5, 6, 7]

Penalty imposed under Section 54(1)(5)(ii) set aside because no deliberate omission or undue benefit was established.

Final Conclusion: The revision is allowed; the penalty imposed under Section 54(1)(5)(ii) is not sustainable in the absence of deliberate non compliance or gain, and is therefore set aside.

Jurisdiction to assist secured creditor under Section 14 of the SARFAESI Act, 2002 - security interest - equitable mortgage by deposit of title deeds - transfer of property and life interest - writ of prohibition - limits and requisites

Jurisdiction to assist secured creditor under Section 14 of the SARFAESI Act, 2002 - writ of prohibition - limits and requisites - Validity of issuance of enquiry notice by the District Collector-cum-District Magistrate under Section 14 of the SARFAESI Act, 2002 and maintainability of a writ of prohibition restraining him from proceeding - HELD THAT: - The Court held that the statutory scheme of Section 14 casts a duty on the District Magistrate/District Collector to consider applications by authorised officers and, after satisfying the affidavit, to pass orders to assist the secured creditor. The District Collector had issued notice and complied with the requirements of natural justice. Precedents establish that a writ of prohibition lies only where there is a total absence of jurisdiction, excess of jurisdiction, breach of natural justice, or the law itself is ultra vires. No such defect was shown: the Collector was empowered to act, had been directed by a Division Bench to decide the application, and had issued notices for hearing. Interference by way of prohibition was therefore not warranted. [Paras 21, 22, 26, 27]

Writ of prohibition restraining the District Collector from proceeding under Section 14 is not maintainable and is refused.

Equitable mortgage by deposit of title deeds - security interest - transfer of property and life interest - Whether the petitioner's life interest under the Will precluded creation of a security interest and prevented bank action under the SARFAESI Act - HELD THAT: - The Court examined the deposit memorandum executed by the petitioner and co-executants for deposit of title deeds to secure the borrower's debt and noted that the bank was aware of the Will and related documents. Under the SARFAESI Act definitions, a 'security interest' includes mortgages and equitable mortgages created by deposit of title deeds. The Court found that execution of the memorandum effected creation of a security interest by way of equitable mortgage, and the petitioner could not contend that absence of an absolute transfer under Section 6, Transfer of Property Act, precluded the bank from invoking SARFAESI remedies. Accordingly, the contention that no security existed for the purposes of Section 14 was rejected. [Paras 19, 20, 25, 27]

The memorandum of deposit of title deeds created a security interest; the petitioner's life interest did not preclude invocation of SARFAESI remedies.

Final Conclusion: The writ petition seeking prohibition of the District Collector from proceeding under Section 14 of the SARFAESI Act, 2002 was dismissed: the Collector had jurisdiction and complied with natural justice, and the deposit of title deeds constituted an equitable mortgage creating a security interest permitting the bank to invoke SARFAESI proceedings.