TaxTMI Updates e-Newsletter
Jan 18,2013

Treatment of interest income on margin money as business income - proportionate allocation of business profits under section 10A(4) - computation of profits eligible for deduction under section 10A - exclusion of insurance, telecommunication and internet charges from "export turnover" under section 10A

Treatment of interest income on margin money as business income - proportionate allocation of business profits under section 10A(4) - Interest earned on fixed deposits placed as margin money with banks is to be treated as business income and, if so, is liable to be considered in computing profits eligible for deduction under section 10A by applying the proportionate formula in sub-section (4). - HELD THAT: - The Tribunal held that interest on deposits constituting surplus funds set apart for business purposes (margin money for obtaining credit facilities) forms part of the profits of the business. Reliance was placed on the Jurisdictional High Court decision in CIT v. Indo Swiss Jewels Ltd. and the Tribunal's earlier decision in Jewelex International, which applied sub-section (4) of section 10A to include such interest in business profits and then allocate the deductible portion by applying the statutory export-to-total-turnover ratio. The Tribunal also noted consistency with Supreme Court jurisprudia on analogous proportional allocation under export related deductions and observed that contrary precedents cited by Revenue did not consider the relevant High Court decision. On these grounds the Commissioner (Appeals) finding treating the interest as business income for application of the section 10A formula was upheld and the Revenue's grounds challenging that treatment were dismissed. [Paras 6, 7, 12]

Interest income on margin money is business income and must be taken into account in computing profits eligible for section 10A relief by applying the proportionate formula in sub section (4).

Exclusion of insurance, telecommunication and internet charges from "export turnover" under section 10A - computation of profits eligible for deduction under section 10A - Expenditure for insurance, internet and telephone charges are to be excluded from export turnover (and accordingly reduced from total turnover as directed) for the purpose of computing the deduction under section 10A. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) direction that the specified expenditures should be reduced both from export turnover and from total turnover in applying the section 10A formula. This approach was held to be consistent with the Jurisdictional High Court's interpretation in Gem Plus Jewellery India Ltd., which recognises specific exclusions in the definition of "export turnover" and the need for consistent application of that definition when the export turnover forms both numerator and a part of the denominator in the statutory formula. Consequently the Revenue's ground challenging that direction was dismissed. [Paras 2, 13]

The Commissioner (Appeals) direction to exclude the said expenditures from export turnover and to correspondingly reduce total turnover for section 10A computation is upheld.

Final Conclusion: Revenue's appeal is dismissed; the Commissioner (Appeals) order upholding treatment of interest as business income for section 10A allocation and directing exclusion of specified charges from export (and total) turnover is affirmed.

Income escaping assessment - reason to believe - reopening of assessment beyond four years - failure to disclose fully and truly all material facts - Explanation 1 to Section 147 - obligation to furnish reasons and dispose objections by speaking order

Reopening of assessment beyond four years - failure to disclose fully and truly all material facts - Explanation 1 to Section 147 - Validity of the notice issued under Section 147/148 after expiry of four years - HELD THAT: - The Court held that the notice issued after the four year period could not be declared without jurisdiction on the material before it. Under the proviso to Section 147, action beyond four years is permissible if the Assessing Officer has reason to believe that income has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. Explanation 1 clarifies that mere production of books or evidence does not necessarily amount to such disclosure. At the initiation stage the Assessing Officer's satisfaction is subjective and need only be based on relevant material from which a reasonable person could form the belief that income had escaped assessment. On the facts, the Court refused to quash the notice at the writ stage and observed that it was not open to the High Court to veto further action pursuant to the notice.

Notice under Section 147/148 dated 09.12.2011 not held to be without jurisdiction and may be proceeded with by the assessing officer.

Obligation to furnish reasons and dispose objections by speaking order - reason to believe - Whether the Assessing Officer must furnish reasons and dispose objections by a speaking order before proceeding - HELD THAT: - The Court recalled the settled procedural requirement that where reasons for reopening are sought and provided, the assessee is entitled to file objections and the Assessing Officer must consider those objections and give reasons. Although the learned Single Judge had not directed a separate speaking order, the Division Bench exercised restraint and required that any objections filed by the assessee must be considered and decided with reasons by the assessing officer; it did not direct that a separate order be mandatorily issued in a particular form, but insisted on consideration and reasoned disposal in accordance with law.

Objections filed by the assessee must be considered and disposed of with reasons by the assessing officer before further action is taken.

Judicial review of reopening at preliminary stage - Appropriate scope of writ intervention at the notice stage - HELD THAT: - The Court emphasised limited supervisory jurisdiction at the writ stage where proceedings are at the notice stage. It declined to exercise writ relief to quash the reopening notice when the assessee had not exhausted the statutory procedure of filing objections and obtaining reasons; instead, the Court allowed the statutory process to run, subject to the requirement that objections be considered and reasons given.

Writ relief refusing to permit reassessment was refused; statutory objection process must be followed and judicial intervention at the notice stage is inappropriate absent clear absence of jurisdiction.

Final Conclusion: Writ appeal dismissed. The reopening notice was not quashed for want of jurisdiction; the assessee may file objections and the assessing officer must consider and dispose of them with reasons before proceeding further, in accordance with law.

Section 50C - deeming provision - leasehold rights versus land and building - cost of acquisition / indexed cost - valuation date - MoU versus registration - obligation under Section 50C(2) to afford opportunity - treatment of building value in capital gains / block of assets - remand for fresh factual and valuation enquiry

Section 50C - leasehold rights versus land and building - deeming provision - remand for fresh factual and valuation enquiry - Whether the deeming provisions of Section 50C are attracted to the transfer in question or whether the transaction related only to leasehold rights not covered by Section 50C - HELD THAT: - The Tribunal noted that Coordinate Benches have held that Section 50C applies only to a capital asset being 'land or building or both' and not to mere rights in land or building. However, on the factual record before it the Tribunal found material indicating that the assessee had substantial proprietary and developmental rights (premium paid, lease deed terms, ULC exemption, MoU recitals, subdivision and MIDC consents, and valuation report treating the asset as plot of land). The Tribunal concluded that it could not finally determine whether the transfer was of leasehold rights only or of land and building without further factual enquiries and documents (ULC file, subsequent agreements, extent of development and transfers by the transferee). For these reasons the Tribunal set aside the orders under appeal and restored the matter to the Assessing Officer for fresh examination and determination of whether Section 50C is attracted, permitting the AO to determine in light of the further material whether the transfer was of land and/or building or merely leasehold/right transfers. [Paras 19]

Matter remitted to the Assessing Officer for fresh examination on whether Section 50C is attracted; no final adjudication on applicability.

Treatment of building value in capital gains / block of assets - Section 50 - section 43(6) - remand for fresh factual and valuation enquiry - Whether the value attributed to the building should be excluded/apportioned from the consideration and how the building's value should be treated in computation of capital gain and in the block of assets - HELD THAT: - The Tribunal found that the Assessing Officer had excluded the value of the building altogether without adequate examination. Given that deeds indicate transfer of building rights and that construction may have occurred after the MoU, the Tribunal held that the AO must examine the extent of property and building transferred, the correctness of the assessee's apportionment, and whether adjustments are required under the block provisions (Section 50 or Section 43(6)). The matter therefore was restored to the AO for fresh adjudication on valuation, apportionment and block treatment, with opportunity to both parties to place evidence. [Paras 20]

AO to re-examine valuation and apportionment of building value and its treatment in computation of capital gain / block of assets; issue remitted.

Obligation under Section 50C(2) to afford opportunity - Section 50C - Whether the Assessing Officer complied with the statutory requirement under Section 50C(2) to give the assessee an opportunity to make submissions before adopting stamp valuation authority value - HELD THAT: - The Tribunal observed that the Assessing Officer did not consider the objections and submissions of the assessee when invoking Section 50C, and did not follow the procedure envisaged by Section 50C(2) which requires giving the assessee an opportunity to make representations before adopting the stamp valuation authority value. For failing to comply with this statutory mandate the Tribunal set aside the orders and directed fresh proceedings by the AO in accordance with the statutory requirements. [Paras 21]

AO's adoption of Section 50C value set aside for non-compliance with Section 50C(2); AO to afford opportunity and re-adjudicate.

Cost of acquisition / indexed cost - remand for fresh factual and valuation enquiry - Whether the assessee is entitled to claim cost of acquisition (indexed) in respect of the leasehold/premium paid and whether AO should allow such claim despite it not being claimed in the original return - HELD THAT: - The Tribunal held that the assessee's failure to claim cost of acquisition in the return does not bar consideration of a bonafide claim supported by material. There is evidence that premium was paid and a valuation as on 01.04.1981 was placed before the AO. The Tribunal therefore restored this issue to the AO to examine the claim and allow cost of acquisition/indexation if supported by facts and law. [Paras 22]

Claim for cost of acquisition/indexation remitted to AO for examination and decision on merits.

Final Conclusion: Appeal allowed for statistical purposes; the Tribunal set aside the orders of the Assessing Officer and the CIT(A) and remitted the matter to the Assessing Officer for fresh adjudication on applicability of Section 50C, apportionment and valuation of building, compliance with Section 50C(2), and the assessee's claim for cost of acquisition/indexation, with opportunity to the parties to produce evidence and make submissions.

Mistake apparent from the record - rectification under section 254(2) - rectification versus review of Tribunal's order - error apparent on the face of the record - limits of Tribunal's power to recall or amend its order

Rectification under section 254(2) - mistake apparent from the record - rectification versus review of Tribunal's order - Scope of power under section 254(2) to rectify or recall a Tribunal order - HELD THAT: - The Tribunal reiterated that section 254(2) permits amendment only to correct a "mistake apparent from the record" and does not confer power to review or rehear an appeal. A rectifiable mistake must be patent, obvious and discoverable without elaborate argument or investigation; disputes on debatable points of law or fact, oversight of material, or errors requiring long-drawn argument are not "apparent" mistakes. Rectification cannot effect obliteration and substitution of the original order; recalling an order for fresh disposal amounts to review, which the Tribunal lacks power to undertake under the Act. The Tribunal relied on several authorities to underline that only glaring and self-evident errors fall within section 254(2), and that failure to notice an argument or to re-evaluate contested points is not a ground for rectification. [Paras 3, 4]

Section 254(2) is confined to rectification of patent errors apparent on the record and does not authorize recall of the Tribunal's order for reconsideration or review.

Mistake apparent from the record - limits of Tribunal's power to recall or amend its order - Whether the miscellaneous application identified any mistake apparent from the record justifying recall of the Tribunal's order - HELD THAT: - On application of the above legal test to the facts, the Tribunal found that the assessee failed to point out any patent or obvious error in the order dated 29.02.2012. The grounds urged (grounds Nos. 3, 4, 5 & 6) amounted to re-argument of issues already considered, and acceptance of the application would, in substance, convert a rectification petition into a review. Reliance on precedents showed that oversight or disputed questions of law/fact do not constitute an apparent mistake; accordingly, the misc. application did not disclose any ground for rectification. [Paras 1, 2, 4, 5]

The miscellaneous application failed to demonstrate any mistake apparent from the record and was dismissed.

Final Conclusion: The miscellaneous application seeking recall of the Tribunal's order was dismissed: section 254(2) permits only correction of patent errors apparent on the record and does not allow reopening or reviewing the Tribunal's earlier decision; the assessee did not point out any such apparent mistake.

Exercise of revisional jurisdiction under section 263 - change of opinion - allowability of depreciation - capital versus revenue expenditure - merger of assessment order with appellate proceedings

Exercise of revisional jurisdiction under section 263 - change of opinion - merger of assessment order with appellate proceedings - Whether the direction issued by the Commissioner under revisional jurisdiction to withdraw depreciation amounted to an improper change of opinion and was unsustainable where the assessment order had been merged with pending appellate proceedings. - HELD THAT: - The Tribunal found that the Assessing Officer had examined the claimed Research & Development expenditure, treated it as enduring in nature, and granted depreciation in the original assessment order. That assessment order had been appealed by the assessee and the matter was pending before the CIT(A), thereby merging the assessment order with the appellate proceedings. The Commissioner's direction under revisional jurisdiction to withdraw depreciation amounted to a change of opinion on facts already considered by the AO and merged in appeal. In those circumstances the Commissioner was not justified in issuing the direction under section 263. The Tribunal accordingly set aside the CIT's order without expressing any view on the substantive question whether the expenditure was capital or revenue or whether depreciation was ultimately allowable.

CIT's direction to withdraw depreciation set aside as an impermissible change of opinion where assessment order had been merged with appellate proceedings.

Capital versus revenue expenditure - allowability of depreciation - Whether the nature of the Research & Development expenditure (capital or revenue) and the consequent question of allowability of depreciation were finally determined by the Tribunal. - HELD THAT: - The Tribunal expressly refrained from deciding the substantive question of whether the R&D expenses were capital in nature or revenue in nature and whether depreciation was allowable. Having set aside the CIT's revisional direction, the Tribunal left the lower authorities free to consider and decide the nature of the expenses and the correctness of any depreciation claim in accordance with law and on the available records.

Substantive issues on nature of expenditure and entitlement to depreciation not decided and left to be adjudicated afresh by the authorities in accordance with law.

Final Conclusion: The appeal is allowed: the CIT's order under revisional jurisdiction directing withdrawal of depreciation is set aside as a change of opinion where the assessment order was merged with appellate proceedings; the Tribunal does not express any view on whether the R&D expenditure is capital or revenue or on the allowability of depreciation, leaving those questions to be decided by the lower authorities as per law.

Transfer pricing - arm's length price - tested party - comparability and FAR analysis - idle capacity adjustment - remand for fresh consideration - interest income - business income v. other sources - computation of deduction under section 10A - export turnover and total turnover - capital expenditure v. revenue expenditure

Transfer pricing - arm's length price - tested party - comparability and FAR analysis - idle capacity adjustment - remand for fresh consideration - TP adjustment remitted to Assessing Officer/TPO for fresh consideration - HELD THAT: - The Tribunal found that the TPO's order fixing an arm's length margin at 11.96% was brief and unexplained and that the CIT(A) had in turn shifted the tested party to certain profit-making associated enterprises and arbitrarily fixed a 6% margin without adequate basis. The Tribunal observed that the TPO did not address the assessee's TNMM comparables or the assessee's contention on idle capacity; nor did the CIT(A) undertake a proper comparability/FAR analysis or explain rejection of loss-making AEs. Having found deficiencies in both the TPO and CIT(A) approaches, the Tribunal set aside their orders and restored the matter to the AO/TPO with directions to afford the assessee opportunity, to decide acceptance or rejection of the assessee's comparables with reasons, to undertake a proper FAR analysis, to consider the assessee's idle capacity claim and the apportionment data furnished regarding AEs, and to have regard to TP studies accepted in later years where relevant. [Paras 10, 11, 12, 13, 14]

Order of TPO/AO and CIT(A) set aside; matter restored to AO/TPO for fresh consideration and determination of arm's length margin after proper FAR and comparability analysis.

Interest income - business income v. other sources - capital expenditure v. revenue expenditure - Interest on term deposits and miscellaneous income treated as income from other sources and not as business income for section 10A computation - HELD THAT: - The Tribunal followed its prior coordinate-bench decision and Supreme Court authority that the phrase 'derived from' for special deductions contemplates only first-degree sources; interest on surplus funds placed in bank does not have a direct or immediate nexus with the eligible export business and therefore does not qualify as business income for the purpose of computing deduction under section 10A. On these factual and legal foundations, the CIT(A)'s view was upheld. [Paras 16, 17]

CIT(A)'s order upheld; assessee's ground rejected.

Computation of deduction under section 10A - export turnover and total turnover - parity between export turnover and total turnover - Communication line charges (expenses incurred in foreign exchange) are to be excluded from total turnover for computing deduction under section 10A - HELD THAT: - Relying on the Special Bench decision in Sak Soft Ltd. and the jurisdictional High Court authority, the Tribunal held that items excluded from the statutory definition of 'export turnover' (such as freight, telecom charges and expenses incurred in foreign exchange) must, on parity and contextual construction, also be excluded from 'total turnover' for applying the proportion under section 10A(4). The Tribunal directed that communication line charges attributable to exports be excluded from total turnover as well as export turnover while computing the deduction. [Paras 21, 23]

Ground allowed; AO directed to exclude communication line charges from total turnover for section 10A computation.

Capital expenditure v. revenue expenditure - Assessee did not press ground relating to treatment of software expenditure; ground treated as withdrawn - HELD THAT: - The learned counsel did not press the ground concerning classification of software expenditure as revenue rather than capital. Accordingly, the Tribunal recorded that the ground is not being pursued. [Paras 25]

Ground treated as withdrawn.

Final Conclusion: TP adjustment issue remitted to AO/TPO for fresh consideration after proper comparability/FAR analysis and opportunity to assessee; the CIT(A)'s view on interest being other income is upheld; communication line charges must be excluded from total turnover for section 10A computation; software-expenditure ground withdrawn. The appeals are accordingly disposed as recorded.

Recognition of interest on non-performing assets (NPA) - accrual vis-a -vis cash basis - de-recognition of interest on NPAs pursuant to RBI prudential norms - mandatory effect of Reserve Bank of India directions overriding other laws - application of Accounting Standards (income recognition) to companies - accrual system of accounting under Section 145 and its application to NPAs - tax treatment of provisions for doubtful debts made under RBI Prudential Norms

Recognition of interest on non-performing assets (NPA) - accrual vis-a -vis cash basis - de-recognition of interest on NPAs pursuant to RBI prudential norms - application of Accounting Standards (income recognition) to companies - accrual system of accounting under Section 145 and its application to NPAs - Whether de-recognised interest on accrual basis in respect of NPAs is taxable or may be excluded from income until actually received in view of RBI directions and applicable accounting standards. - HELD THAT: - The Tribunal found that the assessee is a licensed NBFC obliged to follow mandatory Prudential Norms and directions issued by the Reserve Bank of India, including rules for identification of NPAs and de-recognition of interest thereon. Those directions, having statutory backing under Section 45-S of the RBI Act, operate to prevent recognition of income on NPAs merely on accrual and require recognition only on actual receipt. Accounting Standards applicable to companies reinforce that income on assets which have ceased to yield income should be stopped. Prior judicial authorities and a CBDT circular were held to support the proposition that interest on NPAs is to be taxed only when actually received and not merely on accrual even where the assessee otherwise follows the mercantile system of accounting. On these grounds the Tribunal upheld the order of the CIT(A) deleting the additions made by the Assessing Officer in respect of interest de-recognised on NPAs. [Paras 13, 14, 15, 16, 17]

Deletion of additions made by the Assessing Officer in respect of de-recognised interest on NPAs upheld; such interest is to be recognised only on actual receipt.

Tax treatment of provisions for doubtful debts made under RBI Prudential Norms - provisions debited to profit and loss account by NBFCs - income or deductible expense - Whether provisions for doubtful debts (made under RBI Prudential Norms by the NBFC) are deductible as expense or must be treated as income for tax purposes. - HELD THAT: - The Tribunal observed that the question stands concluded by the Hon'ble Supreme Court in Southern Technologies Ltd. v. Jt. CIT, which holds that provisions for NPAs debited to the Profit & Loss Account by an NBFC under RBI Prudential Norms can be treated as income and are not deductible as an expense under the provisions relied upon by the assessee. No contrary binding decision was placed before the Tribunal. Applying that authoritative ruling, the Tribunal set aside the CIT(A)'s order in this respect and revived the Assessing Officer's treatment. [Paras 18, 19]

Order of the CIT(A) deleting the addition for provision for doubtful debts is set aside and the Assessing Officer's treatment is restored.

Final Conclusion: The appeals by the department contesting deletion of de-recognised interest on NPAs are dismissed (CIT(A)'s deletions upheld), whereas the department's appeal concerning provision for doubtful debts succeeds (CIT(A)'s deletion set aside and AO's order revived); accordingly ITA Nos.100/Del/2010, 102/Del/2010, 2308/Del/2011 & 5642/Del/2011 are dismissed, ITA No.101/Del/2010 is allowed and ITA No.103/Del/2010 is partly allowed.

Deductibility under section 43B of the Income-tax Act - employees' contribution to Provident Fund treated like employer's contribution - payment "accrued but not due" and exigibility for s.43B - capital expenditure on scientific research and deduction under section 35 - treatment of expenditure on computer software as intangible asset and rate of depreciation - allowability of expenditures "wholly and exclusively" for business - set-off of member's share of loss from an AOP and taxability under relevant provisions - eligibility for deduction under section 80-IA(4) - developer versus works contractor - apportionment of interest against exempt/dividend income and deduction under section 80M - computation of book profits for minimum alternate tax under section 115JB and consistency principle - disallowance under section 14A and its treatment for book-profit computation - relief for doubly taxed foreign income under section 91 - application of lower average tax rate to the income actually doubly taxed - levy and applicability of interest under section 234D where refund adjustment/order preceded assessment completion

Deductibility under section 43B of the Income-tax Act - employees' contribution to Provident Fund treated like employer's contribution - Deletion of addition under section 43B in respect of employees' contribution to Provident Fund paid after salary deduction but before due date of filing return - HELD THAT: - Tribunal followed coordinate-bench and higher-court jurisprudence holding that employees' contribution withheld by employer merges with employer's funds and, if deposited before the due date for filing the return, is allowable for deduction despite delay in deposit; facts show payment was made within the relevant due date and within the financial year, hence disallowance u/s 43B deleted.

Addition of Rs. 43,915 made under section 43B in respect of employees' PF contribution is deleted.

Deductibility under section 43B of the Income-tax Act - payment "accrued but not due" and exigibility for s.43B - Disallowances under section 43B in respect of octroi charges and interest accrued but not due to UTI - HELD THAT: - On octroi, assessee produced invoices/receipts showing octroi was paid by adjustment against advances to octroi agent; therefore municipal dues were discharged and s.43B disallowance not justified. As to interest on credit from UTI, contractual terms showed interest for the relevant period had not become payable (not due) by the due date of filing the return; where interest was not yet due under the agreement s.43B is not attracted. Tribunal followed precedents applying the same principle.

Disallowances in respect of octroi and interest accrued but not due are deleted / allowed in favour of the assessee.

Capital expenditure on scientific research and deduction under section 35 - Deduction under section 35 allowed in respect of capital expenditure on in-house scientific research awaiting capitalization - HELD THAT: - Expenditure was capital in nature and incurred on an approved R&D centre; the fact that the asset awaited capitalization at year end does not disentitle deduction where the expenditure was genuinely incurred for scientific research and was subsequently accepted in a later year; lower authorities' denial merely because capitalization was not completed was held unjustified.

Disallowance under section 35 is set aside and the claim is allowed.

Treatment of expenditure on computer software as intangible asset and rate of depreciation - Software development expenditure treated as capital (intangible) and depreciation to be allowed at 60% - HELD THAT: - Expenses related to specially and exclusively designed software (E-Construct suite) gave enduring benefit and constituted an intangible asset; following the Special Bench decision in Datacraft India Ltd., depreciation at 60% (as part of computer-related assets) was directed to be allowed rather than 25%.

Software expenditure to be capitalized and depreciation allowed at 60% for the year under consideration.

Allowability of expenditures "wholly and exclusively" for business - General/site expenditures (local ceremonies, donations, funeral expenses) incurred at Bhutan site are allowable as business expenses - HELD THAT: - Expenditure incurred to create a conducive socio-economic environment and to maintain employee/community relations was held to satisfy commercial expediency; applying Supreme Court authorities, these amounts were regarded as incurred wholly and exclusively for business and therefore allowable.

Disallowance of general expenses at Bhutan is set aside and amounts are allowed.

Apportionment of interest against exempt/dividend income and deduction under section 80M - Pro rata interest apportioned to dividend income cannot be disallowed without nexus; deduction under section 80M allowed for dividend from domestic companies but denied for dividend from mutual funds where provenance not established - HELD THAT: - Assessing Officer's notional apportionment of interest to investment without establishing nexus between borrowings and specific investments is unsustainable; where no nexus is shown and investments were existing carry-forwards, notional apportionment cannot be made. Consequently, deduction under s.80M allowed as to dividend from domestic companies; deduction in respect of dividend from mutual funds not allowed as assessee failed to prove domestic-source requirement.

Apportionment of interest disallowed; deduction under section 80M allowed to extent of dividend from domestic companies (Rs. 25,19,530) and deduction relating to mutual fund dividend is disallowed.

Set-off of member's share of loss from an AOP and taxability under relevant provisions - Share of loss from Association of Persons (AOP) not allowable to be set off against the assessee's other income where AOP's income is not included in the member's total income - HELD THAT: - Tribunal followed jurisdictional High Court authority holding that where AOP income is assessed at maximum marginal rate by reason of AOP status and not included in member's income, member cannot set off his share of AOP loss against his other income; moreover, losses available to AOP for carry forward under Chapter VI are not allowable in hands of member.

Claim for set-off of share of loss from AOP is rejected; disallowance upheld.

Eligibility for deduction under section 80-IA(4) - developer versus works contractor - Claim for deduction under section 80IA(4) rejected on finding that assessee acted as works contractor and not as enterprise developing/operating/maintaining infrastructure facility - HELD THAT: - Statutory explanation (as substituted retrospectively) excludes works contracts awarded by government/statutory bodies from s.80IA benefit. Whether an undertaking is a developer or a works contractor is a question of fact determined from contract terms; CIT(A) examined contracts and concluded assessee's role was that of contractor and not investor/developer. Assessee produced no contracts to controvert. Tribunal found no ground to interfere.

Deduction under section 80IA(4) is disallowed; orders of lower authorities upheld.

Disallowance under section 14A and its treatment for book-profit computation - computation of book profits for minimum alternate tax under section 115JB and consistency principle - Matters under section 14A remitted to Assessing Officer for fresh adjudication; where expenditure disallowed under section 14A attains finality it must be added back in computation of book profits under section 115JB - HELD THAT: - In view of binding High Court authority (Godrej & Boyce), the Tribunal set aside the s.14A quantification to the AO for fresh decision (AYs where issue arose). For book-profit computation under s.115JB, the Tribunal held that disallowance under s.14A (once final) falls within clause (f) of Explanation I to s.115JB and must be added back; however, quantum to be recomputed after AO's fresh adjudication on s.14A.

Issues under section 14A remitted to Assessing Officer for fresh determination; any final disallowance under s.14A to be added back for s.115JB computation and computation remitted accordingly.

Relief for doubly taxed foreign income under section 91 - application of lower average tax rate to the income actually doubly taxed - Relief under section 91 to be computed by applying the lower average rate of tax (Bhutan) to the profit from Bhutan operations actually doubly taxed and not to the Assessing Officer's restricted base - HELD THAT: - Section 91 entitles deduction calculated on the doubly taxed income at the lower of Indian or foreign average tax rates. AO computed relief by applying Bhutan average rate to total business income rather than to the income from Bhutan operations included in Indian total; Tribunal found this contrary to s.91 and directed AO to compute relief @ 8.53% on the Bhutan operation profit (subject to overall cap of tax paid/ payable in either country) and to give adjustment accordingly.

Matter remitted to Assessing Officer for recomputation of relief under section 91 applying the lower foreign average tax rate to the income from Bhutan operations actually doubly taxed.

Levy and applicability of interest under section 234D where refund adjustment/order preceded assessment completion - Applicability of section 234D to assessment completed after applicable retrospective amendment and verification whether refund was actually received before levying interest remitted to Assessing Officer - HELD THAT: - Amendment to s.234D made provisions applicable retrospectively to assessments completed after specified date; Tribunal held s.234D provisions apply to the assessee's assessment completed after that date, but directed AO to verify whether the refund quantified earlier under section 143(1) was actually received by the assessee - if refund was not received, interest under s.234D may not be chargeable; verification and fresh decision left to AO.

Issue remitted to Assessing Officer for verification of refund receipt and fresh decision on interest under section 234D.

Admission of fresh claim before appellate authorities without revised return - Claim for exempt income (dividend) made first time during assessment proceedings remitted to Assessing Officer for adjudication despite no revised return having been filed - HELD THAT: - While AO had declined to admit a fresh claim in absence of a revised return, Tribunal noted appellate forum and AO have jurisdictional discretion; in interest of justice the matter was remitted to AO to decide claim on merits after verification of facts.

Issue remitted to Assessing Officer to decide the fresh claim for exempt income after verifying facts; remand ordered.

Writing off of old debit balances and requirements of section 36(2) - Disallowance of old debit balances written off upheld where assessee failed to produce details showing prior inclusion in income as required under section 36(2) - HELD THAT: - Bad-debt type write-offs require satisfaction of conditions in s.36(2) including evidence of prior inclusion; assessee did not furnish requisite details, hence AO and CIT(A) disallowance sustained.

Disallowance of old debit balances written off is upheld.

Final Conclusion: The Tribunal partly allowed the appeals: additions under section 43B in respect of employees' PF contribution, octroi and interest 'not due' were deleted; deduction under section 35 for R&D capital expenditure was allowed; software expenditure capitalised and depreciation at 60% directed; Bhutan site general expenses allowed; apportionment of interest against dividend income disallowed and section 80M relief partly allowed (mutual fund dividend disallowed); share of AOP loss and claims under section 80IA(4) were rejected; issues under section 14A, computation under section 115JB, relief under section 91 and interest under section 234D and a fresh claim for exempt income were remitted to the Assessing Officer for fresh computation/verification as directed.

Reopening of assessment - section 147 proviso - failure to disclose fully and truly all material facts - change of opinion - primary facts and material facts

Reopening of assessment - section 147 proviso - failure to disclose fully and truly all material facts - change of opinion - primary facts and material facts - Validity of reopening assessment after four years where Assessing Officer did not record failure by the assessee to disclose fully and truly all material facts - HELD THAT: - The proviso to section 147 bars action to reopen an assessment after four years unless income escaped assessment by reason of the assessee's failure to make a return or to disclose fully and truly all material facts. The Court held that the reasons recorded for reopening did not attribute any failure on the part of the assessee to disclose material facts; they only asserted that the deduction under section 80-IB(10) had been wrongly claimed. The assessment order dated 5.12.2007 shows that the Assessing Officer was aware of and considered the claim for deduction and allowed deduction in respect of tenements after applying his mind, treating profit on sale of shops separately. Once primary facts (the housing project, existence of shops and profits) were disclosed, it was for the Assessing Officer to draw legal conclusions; a subsequent difference of view or an attempt to review those conclusions is a change of opinion and not a ground for reopening. Reliance on authorities establishing that 'material facts' mean primary facts and that reopening cannot be for mere change of opinion supports that the First proviso to section 147 was not satisfied. Consequently, assumption of jurisdiction to reopen was beyond power. [Paras 5, 7, 10]

Reopening of assessment after four years was impermissible as the proviso to section 147 was not satisfied; notice dated 18.03.2011 under section 148 is quashed.

Final Conclusion: The assumption of jurisdiction to reopen the assessment for Assessment Year 2005-2006 was illegal for non-compliance with the proviso to section 147 and the notice under section 148 dated 18.03.2011 is set aside.

Re-opening of assessment and 'reason to believe' under section 147/148 of the Income tax Act - Doctrine of 'reason to believe' for reassessment as construed in Rajesh Jhaveri - Communication of reasons and consequences of non-objection - GKN Driveshafts principle - Taxability of long term capital gains and sham partnership doctrine - Mandatory charging of interest under sections 234B and 234C

Re-opening of assessment and 'reason to believe' under section 147/148 of the Income tax Act - Doctrine of 'reason to believe' for reassessment as construed in Rajesh Jhaveri - Communication of reasons and consequences of non-objection - GKN Driveshafts principle - Validity of reopening assessment under section 147/148 in respect of alleged undisclosed long term capital gains. - HELD THAT: - The return had been processed under section 143(1) and the Assessing Officer received specific and credible information from a counterpart that on identical facts the assessee's spouse's assessment had resulted in taxation of consideration as long term capital gains. The AO recorded reasons and issued notice under section 148. The Tribunal applied the Rajesh Jhaveri construction of 'reason to believe', observing that the AO need not have ascertained the matter with final legal evidence but must have cause or justification to suppose income escaped assessment. The assessee had been served notices under sections 143(2) and 142(1), furnished the details and, although she sought the reasons recorded, did not file a substantive objection to the reopening. In these circumstances the Tribunal held that GKN Driveshafts did not assist the assessee because no objection on the sufficiency of reasons was pressed before the AO, and the AO and CIT(A) were justified in holding that the statutory requirement for reopening was satisfied. [Paras 9]

Reopening of the assessment by issuance of notice under section 148/assumption of jurisdiction under section 147 upheld and ground dismissed.

Taxability of long term capital gains and sham partnership doctrine - Correctness of bringing the proceeds to tax as long term capital gains in the hands of the assessee. - HELD THAT: - The facts recorded at the assessment and by the CIT(A) showed that the alleged partnership and the claimed earlier capital contribution lacked genuineness: no original deed was produced, no bank account or returns of the firm were filed, registration coincided with the sale transaction, and the notional historical valuation was unsupported. The CIT(A) found the formation and reconstitution of the partnership to be a device to avoid tax and relied on authority treating sham schemes as ineffective to avert capital gains. The Tribunal noted that an identical contention was considered against the assessee's husband by the same Bench and that those findings apply equally. On the material before it, the Tribunal sustained the assessment of the receipt as long term capital gains after indexation. [Paras 9]

Assessment treating the proceeds as long term capital gains in the hands of the assessee confirmed.

Final Conclusion: The Tribunal dismissed the appeal: the reassessment under sections 147/148 was validly initiated on 'reason to believe' and the authorities were justified in taxing the receipt as long term capital gains; the assessee's challenge to charging of interest under sections 234B/234C was held not maintainable as interest is mandatory.

Income from house property - Profits and gains of business or profession - substance over form - Sultan Bros. test for inseparability of lettings - intention of the parties - letting out of furnished premises

Income from house property - Profits and gains of business or profession - Sultan Bros. test for inseparability of lettings - substance over form - intention of the parties - Lease/licence fee received for letting out the hotel (together with furniture, furnishings and equipment) is assessable as income from house property and not as business income - HELD THAT: - The Tribunal examined the Agreement of Licence (dated 11-12-2000) under which the assessee admitted receiving a fixed licence fee and conceded that the licensee accounted for daily collections and running expenses. Although styled a licence, the agreement in substance let out the hotel building along with furniture, furnishings and equipment for a long term (seven years with possible extension) at fixed annual amounts. Applying the principle that substance prevails over form, the Tribunal held that the arrangement was effectively a letting of the property together with movable fittings. The three-part test laid down by the five-judge Bench in Sultan Bros. was applied: (a) the parties intended the building and furniture to be enjoyed together, (b) the letting was practically one letting, and (c) one would not have been let alone without the other - each question answered affirmatively on the facts. The Tribunal distinguished authorities where assets were let temporarily or where the letting formed part of continuing business operations. Given the long-term, fixed-rent nature of the arrangement and the inseparability of the building and fittings, the Tribunal concluded the receipts fall within the heads of income from house property rather than profits and gains of business [Paras 16, 18, 22, 23]

Lease/licence fee from letting the hotel with furniture and equipment is assessable as income from house property; order of the Assessing Officer restored.

Final Conclusion: Revenue appeal allowed; the licence/lease receipts from the hotel (with furniture and fittings) for AY 2005-06 are held to be income from house property and not business income, and the order of the Assessing Officer is restored.

Maintainability of show cause notice issued by Customs - jurisdiction to adjudicate penalty on registered owner - delay and laches in issuing show cause notice - burden of proof regarding ownership and illicit importation - scope of preliminary inquiry versus adjudication - consideration of seizure and mahazar by adjudicating authority

Maintainability of show cause notice issued by Customs - jurisdiction to adjudicate penalty on registered owner - Validity and maintainability of the show cause notice issued to the petitioner by the Customs Department for penalty as registered owner of the vehicle. - HELD THAT: - The court held that the show cause notice challenging penalty proceedings was properly issued and that questions of ownership and involvement with the seized goods are matters to be determined in adjudication. The petitioner's claim that she neither owned the vehicle nor the goods is a factual contention which the adjudicating authority must examine; the writ court will not pre-emptively decide such factual disputes at the show cause stage. The show cause notice therefore is not liable to be quashed on the ground that the Customs Department lacked jurisdiction to issue it. [Paras 7, 15]

Show cause notice is maintainable; factual disputes about ownership and involvement must be decided by the adjudicating authority.

Delay and laches in issuing show cause notice - Section 110 relevance to show cause proceedings - Whether delay from the date of seizure to issuance of the show cause notice invalidates the proceedings. - HELD THAT: - The court found that the goods were seized by Customs on 28.6.2011 and the notice issued on 23.12.2011, within six months of seizure; further, Section 110 (relating to detention beyond specified period) does not render the show cause notice invalid. Administrative or procedural intervals in handing over custody were not held to vitiate the notice, and the plea of delay/laches was rejected. [Paras 9, 12]

Delay does not invalidate the show cause notice; the plea of laches is unsustainable.

Scope of preliminary inquiry versus adjudication - Whether material gathered and explanations given during preliminary enquiry had to be accepted and proceedings dropped before issuance of show cause notice. - HELD THAT: - The court explained that at the preliminary enquiry stage the authority collects materials and that merits - including consideration of documents and explanations - are to be examined at the adjudication stage. It is impermissible for an authority conducting preliminary inquiry to prejudge and terminate proceedings by accepting the petitioner's version; the correct course is to issue a show cause notice and permit adjudication on merits. [Paras 10]

Preliminary enquiry does not preclude issuance of show cause notice; merits to be decided by adjudicating authority.

Burden of proof regarding ownership and illicit importation - Which party bears burden to prove licit origin or ownership once goods are seized. - HELD THAT: - The court held that the burden to show that a seized consignment is not liable to confiscation lies on the person who claims to be the owner of the goods. Consequently, the petitioner must satisfy the adjudicating authority that she was not the owner of the vehicle or the seized goods on the date of seizure; such proof is to be advanced and tested during adjudication. [Paras 8, 11]

Burden is on the claimant to establish non-involvement or lawful origin; adjudicating authority will consider such proof.

Consideration of seizure and mahazar by adjudicating authority - Whether the fact that goods were seized and mahazar drawn precludes imposition of penalty on the registered owner without adjudication of seizure details. - HELD THAT: - The court observed that factual matters such as whether the Customs or another authority seized the goods, the contents of the mahazar, and related correspondence are matters for the adjudicating authority to examine. Any contention that such material was suppressed or not considered can be urged and tested in adjudication; the writ court will not entertain these factual disputes at this stage. [Paras 11, 13]

Seizure, mahazar and related factual contentions are to be considered by the adjudicating authority in the adjudication proceedings.

Final Conclusion: Writ petition dismissed for lack of merit; petitioner granted liberty to reply to the show cause notice and to participate in adjudication, which shall be conducted in accordance with the Customs Act.

Penalty under the Customs law for alleged short landing based on Port Trust outturn report - tally-sheet as contemporaneous evidence of quantity actually discharged - reconsideration on merits by the Adjudicating Authority after taking relevant evidence into account

Penalty under the Customs law for alleged short landing based on Port Trust outturn report - tally-sheet as contemporaneous evidence of quantity actually discharged - Whether the Order-in-Original and the Revisional Order could be sustained where the Adjudicating Authority and the Revisional Authority did not consider the tally-sheet showing the quantity discharged. - HELD THAT: - The Court found that both the Adjudicating Authority and the Revisional Authority imposed the penalty by relying on the Port Trust outturn report without considering the tally-sheet which, according to the petitioners, demonstrates that the quantity discharged matched the Bill of Lading and that there was no short landing. Because the tally-sheet constituted relevant evidence regarding the quantity actually discharged, the failure to consider it rendered the impugned orders unsustainable. The matter was therefore remitted for fresh adjudication on merits with a direction that the Adjudicating Authority consider the tally-sheet and other relevant material before passing a fresh order in accordance with law.

Order-in-Original dated 27th October, 2008 and Revisional Order dated 26th December, 2011 quashed; matter remanded to the Adjudicating Authority to pass a fresh order on merits after considering the tally-sheet.

Reconsideration on merits by the Adjudicating Authority after taking relevant evidence into account - Whether a fresh order should be passed by the Adjudicating Authority. - HELD THAT: - The Court directed that the Adjudicating Authority is to carry out a fresh adjudication on the merits during which the tally-sheet must be considered. The Court granted leave to amend pleadings as per the draft handed in and ordered that the amendment be carried out the same day, indicating that procedural formalities should not impede the remand for substantive reconsideration.

Direction issued to the Adjudicating Authority to pass a fresh order in accordance with law after considering the tally-sheet; leave to amend allowed and amendment to be carried out during the course of the day; no order as to costs.

Final Conclusion: The High Court quashed the impugned original and revisional orders for failure to consider the tally-sheet as relevant evidence and remitted the matter to the Adjudicating Authority for fresh adjudication on merits, with leave to amend as sought and no order as to costs.

Confiscation unsustainable where appellate authority sets aside - effect of appellate order of Tribunal on executive action - release of goods following setting aside of confiscation - perishable consignments - risk of irreparable loss - direction for compliance with tribunal order within stipulated time

Confiscation unsustainable where appellate authority sets aside - release of goods following setting aside of confiscation - perishable consignments - risk of irreparable loss - direction for compliance with tribunal order within stipulated time - Whether the customs authorities must release the petitioner's consignment after CESTAT set aside the order of confiscation and penalty - HELD THAT: - The Tribunal (CESTAT) allowed the petitioner's appeal by setting aside both the order of confiscation and the penalty, concluding that the confiscation was unsustainable. The High Court noted that once the Tribunal's order of 12-6-2012 set aside the Commissioner's confiscation, the customs authorities were obliged to act on that appellate order. Given that the goods are perishable and there was an imminent risk of loss or irreparable damage, the Court directed prompt execution of the Tribunal's decision. The Court recorded that no distinguishing factual argument was advanced by Revenue and that analogous earlier CESTAT orders had held such rice not to be prohibited, supporting release. In view of these considerations the Court imposed a specific short time-frame for compliance to prevent prejudice to the petitioner. [Paras 6, 7]

The respondent is directed to release the consignment subject of CESTAT's order within 72 hours; writ petition allowed.

Final Conclusion: The High Court granted the writ directing customs to implement the CESTAT order setting aside confiscation and penalty and to release the perishable consignment within 72 hours; petition allowed with no costs.

Appointment of Presiding Officer of the Securities Appellate Tribunal - temporary absence of Presiding Officer and validity of sittings presided over by technical members - maintainability of public interest litigation and locus standi of a stranger petitioner - challenge to vires of administrative order and rule invoked for continuity of tribunal functioning - constitution and competence of Selection Committee for appointment of members - allegation of illegal preference to civil servants in tribunal appointments

Appointment of Presiding Officer of the Securities Appellate Tribunal - temporary absence of Presiding Officer and validity of sittings presided over by technical members - Direction to the Government to move amendment to the SEBI Act in the current Parliamentary session and to take earnest steps to ensure appointment of the Presiding Officer of the Securities Appellate Tribunal at the earliest. - HELD THAT: - The Court recorded that no sitting or retired Judge of the Supreme Court or Chief Justice of a High Court had volunteered for appointment as Presiding Officer and that a proposal to amend the SEBI Act to broaden eligibility was to be placed before Parliament. In view of these records, the Court directed the Government to ensure that the proposed amendment is moved within the current Parliamentary session and that consequent steps be taken promptly to secure appointment of the Presiding Officer, as a measure to address the contingency caused by the vacancy and the interim arrangement of technical members presiding. [Paras 8, 9]

Government directed to move the proposed amendment in the current Parliamentary session and to take earnest steps to appoint the Presiding Officer forthwith.

Maintainability of public interest litigation and locus standi of a stranger petitioner - challenge to vires of administrative order and rule invoked for continuity of tribunal functioning - The writ petition filed in public interest by an Advocate who has no practice or locus before the Securities Appellate Tribunal is not maintainable and is dismissed (save for the limited direction in para 9). - HELD THAT: - The Court examined the question of locus and the scope of public interest litigation, noting that PILs originate to assist disadvantaged or helpless persons and that a mere stranger with no legal injury ordinarily lacks locus. The petitioner, an Advocate who has never practised before the Tribunal and is not affected by its functioning, could not demonstrate the requisite legal injury or a genuine public interest warranting continuation of the petition; the Court referred to authorities cautioning against meddlesome PILs and applied the guiding principles in Guruvayoor Devaswom and related decisions. Applying these principles, the Court declined to entertain the petition further and dismissed it except for the limited direction to the Government. [Paras 15, 16, 18, 19, 20]

Petition dismissed for want of maintainability/locus, subject only to the limited direction to the Government to seek amendment and expedite appointment.

Challenge to vires of administrative order and rule invoked for continuity of tribunal functioning - constitution and competence of Selection Committee for appointment of members - allegation of illegal preference to civil servants in tribunal appointments - The additional reliefs sought - quashing of the order dated 5th December, 2011, declaration of Rule 5(2) as ultra vires, quashing the selection process for a Member, directions to exclude civil servants from membership, and interim stays - are not granted by this Court. - HELD THAT: - The Court considered the petitioner's prayers for quashing the executive order permitting technical members to preside, for declaration of the rule as unconstitutional, for invalidation of the selection process, and for directions restraining appointment of civil servants, as well as interlocutory reliefs to stay functioning. Having found the petition itself not maintainable and given the Government's explanation and the existence of contrary consideration at the Bombay Division Bench, the Court declined to grant these substantive and interim reliefs and did not stay the Tribunal's functioning. The Court expressly confined its order to directing the Government to pursue the amendment and expedite appointment. [Paras 10, 11, 20]

Prayers for quashing the order, declaring the rule ultra vires, annulling the selection process, restraining civil servants' appointments, and for interim stays are refused.

Final Conclusion: Writ petition dismissed except for a limited direction that the Government shall move the proposed amendment to the SEBI Act in the current Parliamentary session and take earnest steps to ensure appointment of the Presiding Officer of the Securities Appellate Tribunal; no costs awarded.

Deletion of penalty against partners where penalty on firm confirmed - Liability of partners for penalty in absence of lapses, negligence or mala fides - Distinction of precedent on facts

Deletion of penalty against partners where penalty on firm confirmed - Liability of partners for penalty in absence of lapses, negligence or mala fides - Whether the Appellate-Tribunal for Foreign Exchange was justified in deleting the penalty imposed upon the partners of the firm when the penalty against the firm had been confirmed. - HELD THAT: - The Court applied the principle affirmed in Overseas Textiles Corporation v. Special Director, Enforcement Directorate and Anr. (FERA Appeal No. 57 of 2009) decided on 6-9-2012, namely that absent any findings of lapses, negligence or mala fides on the part of the partners in realizing export proceeds, imposing a penalty on the partners is unjustified particularly where the penalty on the firm has been confirmed. The Court found the facts of the present case to fall within that principle and saw no reason to interfere with the Tribunal's deletion of the penalty against the partners. The Court considered the decision in Textoplast Industries v. Additional Commissioner of Customs (2011 (272) E.L.T. 513 (Bom.)) relied on by the revenue, but held it distinguishable on facts and not laying down a rule that penalty upon a firm must invariably lead to penalty upon partners. On these bases the Tribunal's order was sustained. [Paras 2, 3]

Tribunal justified in deleting penalty on partners; appeal dismissed.

Final Conclusion: The High Court dismissed the appeal, upholding the Tribunal's deletion of the penalty against the partners on the ground that, in the absence of lapses, negligence or mala fides by the partners and with the penalty against the firm confirmed, imposition of penalty on the partners was unjustified.

Interest on delayed payment of Service Tax - Show Cause Notice as precondition for raising new grounds - Application of Rule 6 of the Service Tax Rules, 1994 - Remand for fresh consideration

Interest on delayed payment of Service Tax - Show Cause Notice as precondition for raising new grounds - Application of Rule 6 of the Service Tax Rules, 1994 - Whether the Commissioner (Appeals) should be directed to reconsider the period from which interest on delayed payment of service tax is leviable in view of grounds now raised by the department - HELD THAT: - The Tribunal recorded that the Commissioner(Appeals) had directed interest to be charged from 05.04.2008 despite the assessing officer having noted specific delays for February 2008 and March 2008. The Tribunal observed that the Commissioner(Appeals) did not adjudicate the departmental contentions now advanced before the Tribunal, including reliance on the provisions (notably Rule 6 of the Service Tax Rules, 1994), because those grounds were not placed before him and no show cause notice had been issued on those points. In these circumstances the Tribunal found it appropriate to remit the matter to the Commissioner(Appeals) for fresh consideration so that the department may raise all grounds now urged before the Tribunal and the Commissioner(Appeals) may decide them afresh after affording a reasonable opportunity to both parties. The remand preserves the department's right to press its contentions on the correct period for charging interest and on the applicability of Rule 6, while ensuring that the Commissioner(Appeals) deals with those grounds in the first instance. [Paras 4]

Matter remitted to the Commissioner(Appeals) for fresh decision on the period from which interest is leviable and on the departmental grounds (including Rule 6), after giving reasonable opportunity to both sides; appeal allowed by way of remand.

Final Conclusion: The Revenue's appeal is allowed by way of remand: the Commissioner(Appeals) is directed to examine and decide, afresh and after hearing both parties, the departmental grounds (including the applicability of Rule 6 of the Service Tax Rules, 1994) relating to the period from which interest on delayed service tax for February 2008 and March 2008 is chargeable.

Abatement of 75% on gross taxable value for Goods Transport Agency services - reliance on a general declaration furnished by the Goods Transport Agency in lieu of entries in consignment notes - compliance with conditions of Notification No.1/2006-ST for entitlement to abatement - remand for factual verification of nature of service and prior payment by specific transporters

Abatement of 75% on gross taxable value for Goods Transport Agency services - reliance on a general declaration furnished by the Goods Transport Agency in lieu of entries in consignment notes - compliance with conditions of Notification No.1/2006-ST for entitlement to abatement - Respondent entitled to claim 75% abatement on GTA services for the period April, 2007 to December, 2007 on the basis of general declarations furnished by the GTA service providers in compliance with the Notification - HELD THAT: - The Tribunal noted that the question whether a general declaration by the GTA service provider suffices for claiming the 75% abatement under Notification No.1/2006-ST is no longer res integra and that prior decisions of the Tribunal and the High Court have held in favour of allowing the abatement on the basis of such general declarations. The Commissioner (Appeals) had examined the declarations filed and disallowed abatement where deficiency was shown; otherwise he allowed the benefit. The Tribunal found no error in that approach and upheld the Commissioner (Appeals) having regard to the settled position in earlier decisions and the particulars of the declarations before the authority. [Paras 5]

Order of the Commissioner (Appeals) upholding entitlement to abatement on the basis of general declarations is affirmed and the Revenue's appeal is dismissed.

Remand for factual verification of nature of service and prior payment by specific transporters - Whether demands attributable to specified transporters should be upheld or set aside was directed to be verified by the Divisional Officer and accordingly left for factual verification - HELD THAT: - The Commissioner (Appeals) directed that for four named parties the Divisional Officer of Gangtok Division ascertain whether they had provided GTA services (and whether service tax had not been paid) or courier services (in which case demands would be set aside). In relation to another transporter, the Divisional Officer was directed to verify production of documents showing payment of tax, cess and interest. The Tribunal recorded these directions, noted that the respondent did not dispute the disallowances identified in those paras and that tax and interest had in part been paid, and left the factual inquiries to the designated Divisional Officer for verification consistent with the appellate order. [Paras 5]

Matters concerning the four named transporters and the transporter Shri Krishna Gupta are remitted for verification by the Divisional Officer as directed by the Commissioner (Appeals); consequent demands to be upheld or set aside per the Divisional Officer's findings.

Final Conclusion: The Commissioner (Appeals) order allowing the 75% abatement on GTA services on the basis of general declarations is affirmed; the Revenue's appeal is dismissed. Specific demands relating to certain transporters are remitted to the Divisional Officer for factual verification as directed by the Commissioner (Appeals).

Inclusion of cost of goods and materials in the assessable value of photography services - invocation of the extended/longer period of limitation - bonafide belief arising from divergent judicial/quasi-judicial views as a defence to invocation of extended limitation - reasonable cause for not paying tax / exemption claim based on administrative circulars and prior decisions

Inclusion of cost of goods and materials in the assessable value of photography services - invocation of the extended/longer period of limitation - bonafide belief arising from divergent judicial/quasi-judicial views as a defence to invocation of extended limitation - Demand of service tax for the period 2003 to 2006 raised in 2009 by invoking the extended period of limitation is barred by limitation. - HELD THAT: - The Tribunal accepted that earlier decisions and administrative communications created divergent views on whether the cost of goods and materials must be included in the taxable value of photography services, giving rise to a bonafide doubt on the part of the assessee. Noting precedents of the Tribunal and an administrative circular which supported the assessee's position, and applying the principle in the cited Supreme Court authority that divergent judicial views preclude invocation of the extended five-year period absent mala fides, the Court held that mere failure to furnish details when asked in 2008 did not establish sufficient cause to invoke the extended period for demands up to 2006. On these grounds, the demand raised in 2009 for 2003-2006 was held to be hopelessly time-barred and set aside. [Paras 5]

Impugned demand for 2003 to 2006 set aside as barred by limitation; appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: the service tax demand raised in 2009 for the period 2003 to 2006 (seeking inclusion of cost of goods in assessable value) is held time barred, the impugned order is set aside and consequential relief granted.

Extended period of limitation - application of proviso to Section 73 of the Finance Act, 1994 - service tax liability on works contract versus taxable service - resale/re-seller of taxable service and corresponding levy - scope of erection, commissioning and installation service in relation to structures - taxability based on value of services as distinct from value of materials - interest liability where tax not collected from customer - imposition of penalty under the statutory scheme

Service tax liability on works contract versus taxable service - The question whether civil work and electrical installation are in the nature of works contract service and not taxable prior to 1-6-2007 is to be re-adjudicated by the Tribunal. - HELD THAT: - The High Court observed that the CESTAT's impugned order did not sufficiently address the appellant's contention that the civil and electrical installation constituted works contract service and therefore were not liable to service tax before 1-6-2007. Given that the Tribunal failed to deal with this vital submission despite earlier directions, the matter is remitted for fresh consideration in accordance with the Court's prior directions of 2nd May 2009. [Paras 2, 3]

Remitted to CESTAT for fresh adjudication on the stated contention.

Resale/re-seller of taxable service and corresponding levy - The contention that the appellants were mere re-sellers of services for which the sub-contractor discharged service tax, and hence the appellants are not separately liable, is to be reconsidered by the Tribunal. - HELD THAT: - The Court recorded that the appellants pleaded that taxable services were provided and taxed by the sub-contractor and that re-selling of such service should not attract separate service tax. As the CESTAT did not adequately consider this submission, the issue is sent back for fresh adjudication as directed by this Court's earlier order. [Paras 2, 3]

Remitted to CESTAT for fresh consideration of the re-seller liability point.

Scope of erection, commissioning and installation service in relation to structures - The question whether the amendment to the definition of erection, commissioning and installation service effective from 1-5-2006 excludes towers (as structures) from liability prior to that date is to be re-examined by the Tribunal. - HELD THAT: - The appellants contended that the amended definition expanded coverage to structures only from 1-5-2006 and that erection/installation of towers prior to that date could not be taxed; the High Court found that the Tribunal did not properly address this contention and directed fresh adjudication in line with earlier judicial directions. [Paras 2, 3]

Remitted for fresh adjudication by the CESTAT on the scope and temporal application of the amendment.

Taxability based on value of services as distinct from value of materials - The claim that service tax can only be levied on the value of services and not on the value of materials supplied by the appellants is to be re-considered by the Tribunal. - HELD THAT: - The appellants asserted that a large proportion of the contract value represented materials and that only the service component should be taxable; the Court noted that the Tribunal did not adequately adjudicate this quantitative and legal contention and therefore remitted the matter for fresh determination. [Paras 2, 3]

Remitted to CESTAT to determine the correct taxable value separating service and material components.

Interest liability where tax not collected from customer - The contention that Section 75 of the Finance Act, 1994 (interest levy) is inapplicable because the appellants did not collect service tax from customers is to be re-examined by the Tribunal. - HELD THAT: - The High Court observed that the Tribunal did not specifically address whether interest under the statutory provision could be levied where tax was not collected from the customer, and directed that this legal and factual question be considered afresh in the remand proceedings. [Paras 2, 3]

Remitted for fresh adjudication on the applicability of interest where tax was not collected from customers.

Imposition of penalty under the statutory scheme - The appellants' plea that penalty is not imposable is to be reconsidered by the Tribunal. - HELD THAT: - Because the CESTAT upheld penalties without dealing with specific pleas against imposition, and in view of the Court's finding that several substantive issues were not properly addressed, the question of penalty is remitted for fresh consideration together with the other issues outlined by this Court. [Paras 2, 3]

Remitted to CESTAT to re-examine the liability to penalty.

Application of proviso to Section 73 of the Finance Act, 1994 - extended period of limitation - The Tribunal's application of the proviso to Section 73 invoking the extended period of limitation is to be re-adjudicated. - HELD THAT: - The Court noted that the CESTAT applied the proviso to Section 73 to invoke extended limitation but did not sufficiently explain or consider all relevant grounds and submissions; consequently, the matter is remitted for a fresh, reasoned decision in accordance with this Court's earlier directions. [Paras 2, 3]

Remitted for fresh consideration of the applicability of the proviso and extended limitation.

Separate supplies/distinct components in composite contracts - The contention that there were four distinct supplies (civil work, electrical work, erection/commissioning of WTG, and final testing/commissioning) requiring separate treatment is to be reconsidered by the Tribunal. - HELD THAT: - As the Tribunal did not adequately address the appellants' submission that the contract comprised distinct supplies which might affect taxability and valuation, the High Court directed that this factual and legal issue be examined de novo on remand. [Paras 2, 3]

Remitted to CESTAT to determine whether the contract comprises separable supplies and the tax consequences thereof.

Valuation and incidence of material in electrical works - The appellants' contention that the material component in electrical works was not merely incidental and that its value requires proper consideration is to be re-adjudicated. - HELD THAT: - Given the appellants' assertion regarding the substantial value of materials in the electrical works and the Tribunal's finding that materials were only incidental without adequate consideration, the Court ordered fresh adjudication of the material-versus-service valuation issue by the CESTAT as per earlier directions. [Paras 2, 3]

Remitted for fresh examination of the role and valuation of materials in the electrical works.

Final Conclusion: The impugned CESTAT order dated 14-2-2012 is quashed and set aside and the matter is remitted to the CESTAT for fresh adjudication on all the issues specified, in accordance with this Court's earlier directions dated 2-5-2009; all contentions are kept open and the appeal is disposed of with no order as to costs.

Predetermination and bias in show-cause notice - violation of principles of natural justice in quasi-judicial proceedings - maintainability of writ petition at show-cause stage where the notice is premeditated - duty to furnish material and afford effective opportunity of defence before adjudication - setting aside impugned notice and directing fresh show-cause proceedings

Predetermination and bias in show-cause notice - violation of principles of natural justice in quasi-judicial proceedings - Impugned show cause notice is vitiated by predetermination and breach of the principles of natural justice and must be set aside. - HELD THAT: - The Court examined the language of the impugned notice and found multiple passages in which the authority used definitive expressions (for example, 'it is clear', detailed findings of irregularity and quantified recoverable amounts) that indicated the authority had already formed an opinion on the merits before affording an effective opportunity of defence. Although isolated qualifying words such as 'prima facie' appear in the notice, the overall tenor demonstrated prejudgment. Applying settled principles that quasi judicial authorities must act with an open mind and that a show cause notice should not confront the person with conclusive findings so as to render any response an empty formality, the Court held that the notice was unfair and vitiated the proceedings initiated thereunder. The Court relied on governing precedents recognising that a hearing that is post decisional or where premeditation is apparent is illusory and warrants intervention. [Paras 16, 17, 22]

Impugned show cause notice set aside insofar as it reflects predetermination and breach of natural justice.

Maintainability of writ petition at show-cause stage where the notice is premeditated - duty to furnish material and afford effective opportunity of defence before adjudication - setting aside impugned notice and directing fresh show-cause proceedings - Writ petition was maintainable and the appropriate relief is to order fresh show cause proceedings with disclosure of material and an effective opportunity to be heard. - HELD THAT: - While ordinarily writ jurisdiction will not be exercised at the show cause stage, the Court held that where a show cause notice is issued with premeditation or demonstrates predetermination, a writ petition is maintainable. Accordingly, the Court directed that a fresh show cause notice be issued identifying the issues on which the petitioner prima facie appears to have availed Cenvat credit without justification; the authority must furnish the material on which the fresh notice is based, allow the petitioner reasonable opportunity to file objections with supporting material and to seek personal hearing, and thereafter pass a reasoned order in accordance with law. This remedy was fashioned because a post decisional hearing would be futile and would not cure the prejudice caused by the earlier notice. [Paras 23, 24]

Writ petition allowed to the extent of setting aside the impugned notice and directing issuance of a fresh show cause notice with disclosure of material, opportunity to be heard and a reasoned adjudication.

Final Conclusion: The writ petition is allowed insofar as the impugned show cause notice is set aside for predetermination and breach of natural justice; respondent directed to issue a fresh notice specifying prima facie issues, furnish the material relied upon, afford a reasonable opportunity of defence (including personal hearing if sought) and pass a reasoned order in accordance with law.

Recovery of CENVAT credit on inputs damaged in transit - Prematurity of demand for duty where inputs are potentially repairable or usable - Requirement of factual verification by the appellate tribunal regarding use of inputs and payment of duty - Imposition of penalty for suppression of material facts and rules governing penalties in CENVAT proceedings - Imposition of interest under Section 11AB in adjudication of CENVAT demands

Prematurity of demand for duty where inputs are potentially repairable or usable - Recovery of CENVAT credit on inputs damaged in transit - Tribunal's conclusion that the demand of duty on CENVAT credit was premature - HELD THAT: - The Tribunal had set aside the Commissioner's demand on the ground that damaged inputs remained in the factory and could not be ruled out as repairable or usable, and therefore the Revenue's demand was premature. The High Court found that the Tribunal did not examine the vital factual aspect whether the damaged inputs were in fact unusable and whether they had been used in manufacture and duty paid by the respondent; given the claim on insurance and the passage of time (period January 1997 to November 2000; Tribunal order dated 05.12.2005), the Tribunal should have verified whether the inputs were ultimately used or accounted for before holding the demand premature. The Court therefore did not decide the substantive correctness of the demand but concluded that the matter requires fresh fact-finding and reconsideration by the Tribunal in accordance with law. [Paras 9, 10, 11]

Tribunal's finding of prematurity set aside to the extent that the issue was not factually examined; matter remitted to the Tribunal for fresh consideration and verification.

Requirement of factual verification by the appellate tribunal regarding use of inputs and payment of duty - Whether the Tribunal was justified in holding there was a possibility of using the inputs despite the respondent's statement that they were unfit for use - HELD THAT: - The Tribunal accepted the possibility of future use without ascertaining the factual position whether the damaged inputs were repairable, actually repaired, used in manufacture, or whether duty had been discharged. The High Court held that the Tribunal ought to have examined and ascertained these factual matters before reaching the conclusion that use could not be ruled out. Consequently, the Tribunal's conclusion on possibility of use cannot stand without such verification, and the question must be reconsidered by the Tribunal with appropriate factual inquiry. [Paras 8, 9, 10, 11]

Question remitted to the Tribunal to examine the factual position regarding condition, repair, use of inputs and payment of duty and to decide afresh.

Imposition of penalty for suppression of material facts and rules governing penalties in CENVAT proceedings - Imposition of interest under Section 11AB in adjudication of CENVAT demands - Validity of penalties imposed under the Central Excise statute/rules and of interest under Section 11AB - HELD THAT: - Penalties and interest were part of the original adjudication (penalty under Section 11AC and Rule 173Q, and interest under Section 11AB was a framed question). The High Court did not determine the merits of the penalties or interest; instead, having found that the Tribunal failed to examine essential factual aspects necessary to determine liability, the Court left all contentions open and directed reconsideration by the Tribunal. The imposition of penalties and interest therefore remains subject to the Tribunal's fresh adjudication after factual verification. [Paras 7, 11]

Matters relating to penalty and interest are left open and remitted to the Tribunal for fresh consideration in accordance with law.

Final Conclusion: Appeal allowed; the Tribunal's decision is set aside to the extent that essential factual inquiries (condition, repairability, actual use of inputs and payment of duty) were not made; all contentions including demands, penalties and interest are left open and the matter is remitted to the Tribunal for fresh consideration in accordance with law.

Abatement of retail sale price - eligibility for exemption under Notification No. 14/2008-C.E. (N.T.) - scope of show cause notice - pre-deposit requirement for waiver of stay - confirmation of excise duty demand

Eligibility for exemption under Notification No. 14/2008-C.E. (N.T.) - abatement of retail sale price - Whether the appellant (manufacturer of grey Portland cement) was entitled to abatement under Notification No. 14/2008-C.E. (N.T.). - HELD THAT: - The Tribunal examined the relevant entry of Notification No. 14/2008-C.E. (N.T.), noting the table entry confines the abatement to goods described in column (3) and falling under the specified tariff headings in column (2). The entry at Serial No. 28 specifies 'White cement, whether or not artificially coloured and whether or not with rapid hardening properties' under headings 2523 21 00 or 2523 29. The product manufactured and cleared by the appellant is admitted to be grey Portland cement, not white cement. On this reading, entitlement to the 30% abatement under the notification is limited to white cement as described, and does not extend to grey Portland cement. Hence, prima facie the Commissioner (Appeals) was correct in holding that the appellant was not entitled to the abatement and in confirming the differential duty demand. [Paras 8, 9]

Abatement under Notification No. 14/2008-C.E. (N.T.) is not available to the appellant's grey Portland cement; the Commissioner (Appeals) was right to disallow the claim.

Scope of show cause notice - confirmation of excise duty demand - Whether the Commissioner (Appeals) went beyond the scope of the show cause notice in confirming the duty demand. - HELD THAT: - The Tribunal reproduced paragraphs 6 and 8 of the show cause notice which put the appellant on notice that, for the period in question, excise duty liabilities were being examined under Notification No. 4/2006-C.E., as amended, including applicability of rates tied to retail sale price and relevant tariff item 2523 29. The show cause notice specifically alleged short payment of duty for the periods indicated and referenced the effective rates under Notification No. 4/2006. On this basis the Tribunal concluded that the appellant had been sufficiently put on notice that duty under Notification No. 4/2006-C.E. was in issue and therefore the impugned order did not travel beyond the scope of the show cause notice. [Paras 10, 11]

The impugned order is within the scope of the show cause notice; it did not exceed the matters put to the appellant.

Pre-deposit requirement for waiver of stay - confirmation of excise duty demand - Whether the condition of pre-deposit of the duty demand should be waived pending appeal. - HELD THAT: - Applying the prima facie assessment, the Tribunal found no merit in the appellant's contention that abatement applied. Having found that the Commissioner (Appeals) was right on the core legal question and that the impugned order was within the show cause notice, the Tribunal held there was no prima facie case to justify waiver of the pre-deposit condition. Consequently, the application for waiver was rejected and the appellant was directed to deposit the entire duty demand with interest within four weeks. [Paras 12]

No waiver of the pre-deposit condition; appellant directed to deposit the duty demand with interest within four weeks.

Final Conclusion: Application for waiver of the pre-deposit was refused: the Tribunal found prima facie that the abatement under Notification No. 14/2008-C.E. (N.T.) did not extend to grey Portland cement, the impugned order was within the scope of the show cause notice, and directed deposit of the entire duty demand with interest within four weeks.

Abatement in case of non-production of goods - continuous period of non-production - entitlement to abatement under Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - sealing of packing machines under physical supervision of Superintendent of Central Excise

Continuous period of non-production - entitlement to abatement under Rule 10 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Whether Rule 10 requires the continuous period of non-production to fall within a given calendar month for entitlement to abatement. - HELD THAT: - The Court construed Rule 10 by reference to its plain language. The Rule entitles a manufacturer to abatement where the factory did not produce the notified goods during any continuous period of fifteen days or more, subject to filing prescribed intimation and sealing of packing machines under supervisory authority. The Rule contains no requirement that the continuous period of non-production must be confined to a single calendar month. In the present case, the factory had a continuous non-production period of 36 days and the packing machines were sealed; accordingly the statutory prerequisites for abatement under Rule 10 were satisfied. The departmental contention that the 15-day continuous period must fall within a calendar month was rejected as based on an incorrect reading of the Rule. The Commissioner (Appeals) correctly allowed abatement for the machines found to be non-operational and sealed, and his order was upheld. [Paras 5, 7]

Rule 10 does not require the continuous period of non-production to be within a calendar month; the assessee's continuous non-production of 36 days with sealing of machines entitled it to abatement and the Commissioner (Appeals) order allowing abatement is sustained.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals)'s allowance of abatement under Rule 10 is upheld and the stay application is dismissed in limine.

Abatement for closure period - compliance with Rule 96ZP(2) - onus on assessee to intimate meter reading and closing stock - duty of excise officers to verify stock - adverse presumption against department for non production of verification reports

Abatement for closure period - compliance with Rule 96ZP(2) - onus on assessee to intimate meter reading and closing stock - duty of excise officers to verify stock - adverse presumption against department for non production of verification reports - Validity of the Commissioner's order allowing abatement for 135 days from 17-11-1997 despite the assessee not furnishing electricity meter reading and closing stock as per the intimation requirement - HELD THAT: - The Tribunal upheld the Commissioner's allowance of abatement. The Commissioner found that the rolling mill had no main electric connection and operated on a diesel generator, rendering non furnishing of an electricity meter reading immaterial. Although the assessee failed to intimate closing stock, departmental officers visited the premises on three occasions after receipt of the intimation and found the unit closed; however, the department did not place on record any verification reports showing the stock position. The Tribunal held that the statutory obligation on the assessee to furnish closing stock information does not absolve excise officers of the duty to verify stock when they inspect the unit, and the absence of any verification report or evidence from the department requires drawing an adverse presumption against the department. In those circumstances there was no infirmity in the Commissioner's exercise of discretion to allow abatement for the period beginning 17-11-1997.

The Commissioner's order allowing abatement for 135 days from 17-11-1997 is sustained and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal and upheld the Commissioner's order granting abatement from 17-11-1997 for 135 days, relying on the material finding that meter reading was immaterial for a diesel operated mill and on the department's failure to produce verification of closing stock, warranting an adverse presumption against the department.

Classification of goods under Central Excise Tariff - principal function rule for composite machines - application of Section and Chapter notes and Rules of Interpretation to tariff headings - finality of classification approval by an adjudicating officer

Classification of goods under Central Excise Tariff - principal function rule for composite machines - application of Section and Chapter notes and Rules of Interpretation to tariff headings - Whether the goods (C.S. Casting of Frame Middle Section as part of pallet assembly) are correctly classifiable under Heading 84.74 - HELD THAT: - The Commissioner (Appeals) examined the nature and use of the pallet assembly, noting it performs dual functions - shaping/leveling sintered ore and conveying it - and applied the tariff construction rules including the Section and Chapter notes and Rule 3 of the Rules of Interpretation to determine the principal function. The Commissioner (Appeals) concluded that, applying the principal-function rule and the applicable notes, the pallet assembly and its parts are appropriately classifiable under Heading 84.74. The Tribunal found no infirmity in that reasoning, observed that the departmental representative did not address merits to challenge the classification, and accepted the Commissioner (Appeals) conclusion that the impugned goods fall under Heading 84.74. [Paras 4, 7, 8]

Classification of the goods under Heading 84.74 is upheld and the departmental appeal is not sustained on this ground.

Finality of classification approval by an adjudicating officer - Whether an earlier classification approval by the Assistant Commissioner under sub-heading 8431, not challenged by the assessee, attained finality so as to preclude reclassification by the Commissioner (Appeals) - HELD THAT: - The Department contended that the Assistant Commissioner's prior approval of classification under sub-heading 8431, which the assessee did not challenge, had become final and barred the Commissioner (Appeals) from altering classification. The Tribunal rejected this contention, reasoning that a prior (and possibly incorrect) classification approval by the Assistant Commissioner does not bind future proceedings and does not prevent the assessee from contesting a demand raised on that basis. The Tribunal further noted the factual sequence whereby a show cause notice was issued and contested by the assessee on the ground that the earlier approval was incorrect, demonstrating that the approval had not been accepted as final by the assessee. [Paras 5, 6]

The earlier classification approval by the Assistant Commissioner did not attain finality to bar reconsideration; the Commissioner (Appeals) could re-examine and reclassify the goods.

Final Conclusion: The departmental appeal is dismissed; the Commissioner (Appeals) correctly re-examined classification and the goods are held classifiable under Heading 84.74, and a prior unchallenged approval by the Assistant Commissioner under sub-heading 8431 did not preclude such reclassification.

Opportunity of personal hearing under Rule 12-A of the Tamil Nadu Value Added Tax Rules, 2007 - Violation of principles of natural justice - Clarification issued by tax authority binding on applicant - Remand for fresh consideration with notice and personal hearing

Opportunity of personal hearing under Rule 12-A of the Tamil Nadu Value Added Tax Rules, 2007 - Violation of principles of natural justice - Validity of the clarification dated 27.7.2012 issued by the Commercial Tax Officer where no personal hearing was afforded to the petitioner - HELD THAT: - The Court found on the record that no opportunity of personal hearing was given to the petitioner before the impugned clarification was issued. Although the respondents contended that a personal hearing under Rule 12-A would be afforded only if the party so desired (as per clause 7), the absence of any hearing rendered the procedure defective. For that reason the Court set aside the impugned proceedings dated 27.7.2012 as having been passed without affording the petitioner the requisite opportunity of personal hearing, thereby implicating principles of natural justice. [Paras 5]

Impugned clarification dated 27.7.2012 set aside for want of personal hearing

Remand for fresh consideration with notice and personal hearing - Clarification issued by tax authority binding on applicant - Procedure to be followed on remand for fresh adjudication of the clarification sought by the petitioner - HELD THAT: - The matter was remitted to the second respondent for fresh consideration of the clarification sought by the petitioner by letter dated 6.3.2012. The Court directed that the second respondent shall issue notice to the petitioner and provide an opportunity of personal hearing before passing an appropriate order. The Court directed that such order be passed as expeditiously as possible, thereby preserving the binding character of any valid clarification finally issued after compliance with the required procedure. [Paras 5]

Matter remitted to the second respondent to pass an appropriate order after issuing notice and affording personal hearing; to be done expeditiously

Final Conclusion: The writ petition is allowed by setting aside the Clarification dated 27.7.2012 for failure to afford personal hearing; the matter is remitted to the Commercial Tax Officer for fresh decision after issuing notice and granting an opportunity of personal hearing, to be completed expeditiously; no costs.