TaxTMI Updates e-Newsletter
Mar 09,2019

Transaction value under Section 15 of the CGST Act - value of taxable supply - amortised cost of tools - goods provided on free of cost (FOC) not constituting a supply - inclusion in value where recipient incurs supplier's liability - contractual allocation of ownership and obligations determining taxable value

Amortised cost of tools - transaction value under Section 15 of the CGST Act - goods provided on free of cost (FOC) not constituting a supply - contractual allocation of ownership and obligations determining taxable value - Whether the amortised cost of tools supplied free of cost by the OEM to the component manufacturer must be added to the value of the components for GST valuation purposes. - HELD THAT: - The tax under GST attaches to a taxable "supply" and the value of such supply is the transaction value, i.e., the price paid or payable by the recipient, with prescribed additions where the supplier is liable to pay amounts incurred by the recipient. The CBIC circular distinguishes two scenarios: (i) tools owned by the OEM and supplied FOC to the component manufacturer do not constitute a supply and their value need not be added to the component value; and (ii) where the contract requires the component manufacturer to provide the tooling but the OEM supplies it FOC, the amortised cost must be added. Examination of the contract and purchase orders with DICV shows that title and IPR in the tools vest in DICV once paid, the tools are identified as DICV property, the supplier is permitted only temporary possession to fulfil the supply contract, and DICV has assumed responsibility to provide tools (with specific obligations on the supplier to maintain them). Thus no contractual obligation cast the Appellant to incur the tool cost for manufacture; the agreed price for components does not exclude an obligation on the supplier to bear tool cost. Applying the statutory valuation principle and the CBIC clarification to these contractual terms, the amortised cost of tools supplied FOC by the OEM is not to be added to the value of the components supplied by the Appellant. The ruling is confined to contracts having the same terms and conditions as those examined in this case. [Paras 8, 14, 15, 16]

Set aside the AAR ruling; held that where the OEM supplies tools FOC and the contract places ownership and obligation with the OEM as in the case before the Authority, the amortised cost of such tools is not required to be added to the value of the components for GST valuation.

Final Conclusion: The AAAR set aside the AAR and held that, on the facts and contractual terms placed before it, the amortised cost of tools supplied free of cost by the OEM need not be included in the value of components for GST; the conclusion applies to other contracts of the appellant only if their terms are the same as those examined.

Classification by reference to chapter and heading - component part / part of an article - marketability test for component parts - consumable versus integral part - mandatory regulatory requirement not determinative of 'part' - entry for parts of ships in rate notification (Schedule I, Sr. No.252) - anti-fouling system for ships

Entry for parts of ships in rate notification (Schedule I, Sr. No.252) - component part / part of an article - consumable versus integral part - marketability test for component parts - mandatory regulatory requirement not determinative of 'part' - Marine paints are not 'parts of goods of heading 8901-8907' for the purpose of Sr. No.252 of Schedule I to Notification No.1/2017 and therefore are not taxable at the lower rate prescribed therein. - HELD THAT: - The Appellate Authority examined whether marine (anti fouling) paint supplied by the appellant could be classified as a 'part' of ships so as to attract the concessional rate under Sr. No.252 of Schedule I. The Authority applied the ordinary and judicial tests for 'part'-whether the article is an integral, essential component without which the completed article cannot exist or function-drawing on dictionary meanings and precedents cited by the parties. It found that paints, including anti fouling coatings, are commodities with independent existence and multiple uses, not identified with the ship in the manner of a stern, propeller or mast. Although application of certain paints may be mandated by regulatory norms (the anti fouling requirements in the Merchant Shipping Act), a statutory or mandatory requirement to apply a material does not transform a consumable into an integral component for classification purposes. The Authority further distinguished authorities relied upon by the appellant as arising under central excise law where the marketability test led to different conclusions on component parts (for items without an independent use), and relied on other authorities holding that an article with independent use is not a component part merely because it is used in or on the completed product. Applying these principles, the Authority concluded that marine paint is a consumable/standalone commodity that enhances durability and performance but is not indispensable to the existence or functioning of a ship and therefore does not fall within Sr. No.252. [Paras 51, 52, 53, 58, 59]

The Advance Ruling that marine paints are not parts of ships and are not eligible for classification under Sr. No.252 of Schedule I is upheld.

Final Conclusion: Appeal dismissed; the AAR's ruling that marine paints are not 'parts' of ships for the concessional entry (Sr. No.252, Schedule I of Notification No.1/2017) is affirmed.

Classification of goods - parts and accessories - essential part of a machine - classification by nature, design and function - filtering or purifying machinery and apparatus for liquids

Classification of goods - parts and accessories - essential part of a machine - classification by nature, design and function - Whether the Reactor manufactured by the appellant is a part of hand pumps (classifiable under HSN 8413 91 as 'Hand Pumps and parts thereof') or is classifiable as filtering or purifying machinery for liquids under heading 8421 21 90. - HELD THAT: - The authority examined the nature, design and function of the impugned product and observed that the Reactor is retrofitted to hand pumps after manufacture and its primary function is to purify and disinfect water, not to effect extraction of water. A hand pump can perform its main function of drawing water without the Reactor; therefore the Reactor is not an essential part of the hand pump but an accessory serving the separate function of purification. The appellant's claim that the Reactor is exclusively for hand pumps was found inconsistent with their own admission that it can be fitted to motorized water lines and other installations. The authority reiterated that classification under GST is governed by the nature, design, character and function of the article rather than the social utility or accolades of the product. Applying these principles, the Reactor does not meet the characteristics of parts of hand pumps and is appropriately classifiable as filtering or purifying machinery for liquids. [Paras 9, 10, 11, 12, 13]

The Reactor is not a part of hand pumps and is classifiable under heading 8421 21 90 as filtering or purifying machinery and apparatus for liquids; the Advance Ruling is upheld and the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Reactor is classifiable as filtering or purifying machinery for liquids under heading 8421 21 90 and not as a part of hand pumps under HSN 8413 91.

Summary order. Issue notice returnable on 8th March, 2019; direct service permitted.

Anticipatory bail - offence under Section 132 of the GST Act relating to issuance of invoice without supply - cognizable and non-bailable offences under the GST Act - compoundability of offences by the Commissioner under the GST Act - conditions for grant of anticipatory bail to protect investigation and trial

Anticipatory bail - offence under Section 132 of the GST Act relating to issuance of invoice without supply - compoundability of offences by the Commissioner under the GST Act - conditions for grant of anticipatory bail to protect investigation and trial - Petitioners entitled to anticipatory bail in respect of arrest in O.R.No.40/2018-19 under Section 132 of the GST Act, subject to conditions - HELD THAT: - The Court examined the nature and magnitude of the alleged offence under Section 132 of the GST Act, noting that the maximum punishment provided is imprisonment up to five years and fine and that the offences are, in the scheme of the Act, compoundable by the Commissioner. The Court observed that the alleged offences are not punishable with death or imprisonment for life and that the central consideration for anticipatory bail is whether the petitioners can be secured for investigation and trial. Given that investigation was in progress but there was no determinative finding that anticipatory bail must be refused, the Court held that release on anticipatory bail would be consistent with securing the ends of justice provided stringent conditions are imposed to ensure cooperation, prevent tampering with evidence and absconding. The Court relied on parity with a prior connected order in Crl.P.No.979/2019 connected with Crl.P.No.980/2019 where accused were released, and therefore concluded that similar relief should be granted here with conditions tailored to protect the investigation and trial.

Petitions allowed; petitioners Mr. Shravan A. Mehra and Mr. Anil K. Mehra shall be released on anticipatory bail on apprehension or arrest in O.R.No.40/2018-19 under Section 132 of the GST Act, subject to specified conditions including personal bonds with sureties, cooperation in investigation, restriction on leaving the country without permission, and prohibition on tampering with evidence or engaging in similar offences.

Final Conclusion: Anticipatory bail granted to the petitioners in relation to the proceedings under Section 132 of the GST Act, on terms and conditions designed to secure their presence and protect the integrity of the investigation and trial.

Pass on the benefit of reduction in rate of tax - commensurate reduction in prices - computation of profiteering on transaction value (cum-tax basis) - liability of registered supplier irrespective of MRP fixed by manufacturer - deposit of unidentifiable beneficiary amounts in Consumer Welfare Fund - penalty for issuing incorrect invoices

Pass on the benefit of reduction in rate of tax - liability of registered supplier irrespective of MRP fixed by manufacturer - Whether the Respondent failed to pass on the benefit of reduction in GST rate from 28% to 18% to recipients and whether his obligation arises despite MRP being fixed by the brand owner - HELD THAT: - The Authority applied Section 171 read with Rule 127 and held that every registered supplier is obliged to pass on the benefit of reduction in rate of tax to recipients by way of commensurate reduction in prices. The fact that the MRP was fixed by the brand owner did not absolve the Respondent of this statutory obligation where the Respondent himself sold the product and was registered under GST. The DGAP's finding that the Respondent increased the per unit base price post rate reduction (from the average pre-rate-change base to the higher post-rate-change base) and thus did not pass on the benefit was accepted. [Paras 32, 35, 36]

The Respondent failed to pass on the benefit of GST rate reduction and is liable despite the MRP being fixed by the manufacturer.

Computation of profiteering on transaction value (cum-tax basis) - commensurate reduction in prices - deposit of unidentifiable beneficiary amounts in Consumer Welfare Fund - Methodology for computation of profiteering and the amount due, and the direction for deposition where beneficiaries are not identifiable - HELD THAT: - The Authority examined the DGAP's methodology which compared the nearest available pre-rate-reduction transaction prices with post-rate-reduction transaction prices to arrive at the commensurate selling price and compute profiteering on a cum-tax basis. It rejected the Respondent's contentions that (a) a wider pre-rate comparison period should have been used, (b) calculations should exclude tax because tax was deposited to Government, and (c) purchase price/entitled margin should be the sole yardstick. The Authority accepted DGAP's computation and determined the total profiteered amount as Rs. 10,79,813.28 for the period starting w.e.f. 15.11.2017 to 31.07.2018 and directed deposit of the amount, along with interest, into the Central and State Consumer Welfare Funds in the prescribed ratio where beneficiaries could not be identified. [Paras 8, 31, 36, 38, 39]

Profiteering of Rs. 10,79,813.28 is determined for the period w.e.f. 15.11.2017 to 31.07.2018; the Respondent is directed to deposit the amount (with interest) into Consumer Welfare Funds as directed.

Complaint admissibility by interested party - prima facie examination by Standing Committee - Whether the complaint was invalid because the complainant was not the actual purchaser or the complaint/invoice details were incomplete - HELD THAT: - The Authority noted Rule 128 and Rule 137 and held that any interested person (including persons not being the purchaser) may file a complaint. The Standing Committee had examined the application and found a prima facie case, and thus forwarding to DGAP for investigation was proper. The Authority also observed that requisite details such as manufacturer, seller, invoice and product were available and that the manually noted MRP was admitted to be correct by the Respondent. [Paras 33, 34]

The complaint was admissible and the proceedings were not rendered infructuous by the complainant not being the actual purchaser.

Penalty for issuing incorrect invoices - Whether the Respondent is liable for penalty for issuing incorrect invoices - HELD THAT: - Having found that the Respondent had profiteered by increasing the base price and collected excess amounts, the Authority concluded that the Respondent is liable under the penal provisions for issuing incorrect invoices. However, recognising principles of natural justice, the Authority directed that a show-cause/notice for hearing be issued before imposition of any penalty. [Paras 40]

The Respondent is prima facie liable for penalty for issuing incorrect invoices; a notice for hearing on penalty is to be issued before any imposition.

Final Conclusion: The Authority found that the Respondent (Cloudtail India Pvt. Ltd.) did not pass on the benefit of GST rate reduction and had increased base prices, computed profiteering of Rs. 10,79,813.28 for the period w.e.f. 15.11.2017 to 31.07.2018, directed deposit of that amount (with interest) into Central and State Consumer Welfare Funds in the prescribed ratio, and held the Respondent prima facie liable for penalty for issuing incorrect invoices while directing issuance of a notice for hearing before imposing penalty.

Passing on of benefit of reduction in rate of tax under Section 171 of the CGST Act, 2017 - Determination of profiteering on transition from pre-GST to GST - Comparison of tax incidence by reference to MRP, base price and applicable duties/taxes - Attribution of tax rate change where pre-GST invoice shows no VAT/CST and excise duty applies

Passing on of benefit of reduction in rate of tax under Section 171 of the CGST Act, 2017 - Comparison of tax incidence by reference to MRP, base price and applicable duties/taxes - Whether the Respondent was obliged to pass on any benefit under Section 171 on account of a reduction in the rate of tax after introduction of GST. - HELD THAT: - The Authority examined pre- and post-GST invoices relied upon by the Kerala Screening Committee and the DGAP reports. The pre-GST invoice dated 27.04.2017 showed no VAT/CST and a Central Excise incidence which, when computed correctly (excise leviable at 12.5% on 60% of MRP with the transaction at a price lower than MRP), resulted in an effective tax incidence of 13.97%. The post-GST invoice dated 25.08.2017 attracted GST at 28%. The DGAP noted the discrepancy in the Screening Committee's annexure which had recorded a VAT rate not reflected in the invoice, and clarified that the MRP was not determinative where the transaction price was lower. On the facts and documentary record, there was no reduction in the rate of tax on the product on transition to GST; the tax incidence increased from 13.97% to 28%. Section 171 is engaged only where there is a reduction in tax rate or an increase in input tax credit benefit to be passed on; since no reduction was established, the statutory obligation to pass on a benefit did not arise. [Paras 5, 9, 11]

The allegation of profiteering is rejected as Section 171 is not attracted because there was no reduction in the rate of tax on the product after introduction of GST.

Final Conclusion: The application alleging profiteering against the Respondent is dismissed as the record establishes an increase, not a reduction, in tax incidence on the product after introduction of GST; no obligation to pass on benefit under Section 171 arises.

Arm's Length Price - comparability of transfer pricing comparables - business model comparability (in house activity versus outsourcing) - related party transactions affecting comparability - withdrawal of a party from its own list of comparables - substantial question of law

Arm's Length Price - comparability of transfer pricing comparables - business model comparability (in house activity versus outsourcing) - withdrawal of a party from its own list of comparables - Exclusion of SIRO Clinpharm Pvt Ltd from the list of comparables for determining ALP - HELD THAT: - The Tribunal's exclusion of SIRO was upheld. The Court rejected the Revenue's contention that the assessee is bound by having earlier included SIRO in its transfer pricing study, noting that an assessee may withdraw a party from its list of comparables if it can establish non comparability. More importantly, the Tribunal applied the then binding principle that a difference in business model - SIRO conducting activities in house while the tested party outsourced them - defeats comparability for ALP determination. The Court observed that subsequent decisions (including the Bombay High Court decision in Aptara Technology P Ltd and the Delhi High Court's ruling in Rampgreen) require exclusion where business models differ, and therefore no substantial question of law arises from seeking inclusion of SIRO.

SIRO Clinpharm Pvt Ltd is not a comparable; exclusion upheld and inclusion does not raise a substantial question of law.

Arm's Length Price - comparability of transfer pricing comparables - business model comparability (in house activity versus outsourcing) - Exclusion of Choksi Laboratories Ltd from the list of comparables for determining ALP - HELD THAT: - The parties agreed that Choksi's business model (conducting clinical trial activity in house) differs from the assessee's (outsourcing such activity). Applying the same precedents relied upon by the Tribunal - including Rampgreen and the Bombay High Court's Aptara decision - the Court found no error in excluding Choksi as non comparable. Consequently, attempting to include Choksi does not give rise to a substantial question of law.

Choksi Laboratories Ltd is not a comparable; exclusion upheld and inclusion does not raise a substantial question of law.

Arm's Length Price - comparability of transfer pricing comparables - related party transactions affecting comparability - Exclusion of Syngene International Pvt Ltd from the list of comparables for determining ALP - HELD THAT: - The Tribunal and the CIT(A) found Syngene to be a wholly owned subsidiary with substantial related party transactions, a factual finding not disputed by the Revenue. Given those related party linkages, the Court held Syngene was rightly excluded as non comparable for benchmarking the assessee's transactions. The concurrent factual conclusion was not shown to be perverse, and hence inclusion of Syngene does not raise a substantial question of law.

Syngene International Pvt Ltd is not a comparable; exclusion upheld and inclusion does not raise a substantial question of law.

Final Conclusion: The proposed substantial question of law is not established; the Tribunal's exclusions of SIRO Clinpharm Pvt Ltd, Choksi Laboratories Ltd and Syngene International Pvt Ltd from the list of comparables are sustained and the appeal is dismissed.

Reopening of assessment beyond four years - Failure to disclose fully and truly all material facts - Scope and sufficiency of reasons recorded for reopening - Validity of notice under Section 148 read with Section 147 - Conditions for deduction under Section 80IB(10)(f)

Reopening of assessment beyond four years - Failure to disclose fully and truly all material facts - Scope and sufficiency of reasons recorded for reopening - Validity of notice under Section 148 read with Section 147 - Conditions for deduction under Section 80IB(10)(f) - Impugned notice issued to reopen assessment for Assessment Year 2011-12 is without jurisdiction and liable to be quashed. - HELD THAT: - The Court held that where a scrutiny assessment under Section 143(3) has been completed, a notice under Section 148 issued beyond four years from the end of the relevant assessment year is permissible only if the reasons recorded expressly disclose a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The reasons must demonstrate the vital link between the alleged failure and the escapement of income, and cannot be supplemented by subsequent assertions or by reading facts not disclosed in the reasons themselves. In the present case the Assessing Officer had examined and accepted the Petitioner's claim for deduction under Section 80IB(10) during the original scrutiny assessment for AY 2011-12, after the assessee had supplied details of agreements, booking advances and dates of possession, and the assessment order dated 26-3-2014 recorded acceptance of the deduction. The reasons recorded for reopening rely on sales/registrations and on findings from the assessment of AY 2015-16, but do not particularize any failure by the assessee to disclose the material fact of commencement or dates at the time of the original assessment. The Court applied the principle that reasons must speak for themselves (as explained in Hindustan Lever v. R. B. Wadkar), and concluded that no clear allegation or material in the reasons showed non-disclosure by the assessee for AY 2011-12. Absent such particularized failure, the reopening notice issued beyond the four-year period was without jurisdiction. [Paras 7, 8, 9]

Impugned notice dated 27th March, 2018 under Section 148 insofar as it seeks reopening of assessment for AY 2011-12 is quashed and set aside.

Final Conclusion: The petition is allowed; the notice reopening assessment for Assessment Year 2011-12 is held to be without jurisdiction and is quashed and set aside.

Penalty under section 271D - penalty under section 271E - prohibition on cash receipt and repayment of loans under section 269SS and section 269T - genuine transactions and bona fide explanation as defence to penalty

Penalty under section 271E - prohibition on cash receipt and repayment of loans under section 269SS and section 269T - genuine transactions and bona fide explanation as defence to penalty - Whether penalty under section 271E is leviable in respect of the amounts received and repaid by the assessee - HELD THAT: - The Tribunal examined the documents filed by the assessee, including the agreement of sale, the demand drafts (DDs) purchased in favour of Stamp Duty Collection Account and CTO N S Road, bank account entries showing deposit, purchase and subsequent cancellation of DDs, and pay slips demonstrating source of funds. The assessee had executed the transactions to facilitate his family members' purchase of property by procuring DDs (as a premium bank customer) and later refunded amounts when the transaction did not proceed. On this material, the Tribunal found the receipts and repayments to be transactions of convenience done on behalf of his children and not loans or advances falling within the prohibitions of sections 269SS/269T. The Tribunal applied the established principle that where transactions are genuine and a satisfactory explanation is furnished for cash dealings, penalties under sections 271D/271E are not exigible, and relied on earlier decisions to the same effect (CIT vs. Deccan Designs (India) P Ltd ; Director of Income Tax (Exemption) vs. All India Deaf and Dumb Society ). The Tribunal concluded that the CIT(A) had failed to consider the details filed by the assessee and that penalty under section 271E was not justified. [Paras 7]

Penalty under section 271E deleted as the amounts were not loans or advances but genuine transactions of accommodation; penalty not leviable.

Penalty under section 271D - prohibition on cash receipt and repayment of loans under section 269SS and section 269T - genuine transactions and bona fide explanation as defence to penalty - Whether penalty under section 271D is leviable in respect of the cash transactions by the assessee - HELD THAT: - The Tribunal considered the same material facts and documents relied upon in relation to section 271E and concluded that the cash receipts and repayments were not loans or advances but transactions undertaken to obtain DDs for family members and subsequently reversed when the sale did not materialise. The Tribunal noted that the assessee furnished necessary particulars and that the CIT(A) did not adequately consider those explanations. Applying the principle that bona fide and genuine transactions supported by documentary evidence negate the levy of penalties under sections 271D/271E, the Tribunal held that the requirements for imposing penalty under section 271D were not satisfied. [Paras 7, 8]

Penalty under section 271D deleted as the cash transactions were genuine accommodation transactions and not prohibited loans or advances.

Final Conclusion: Both appeals are allowed; penalties levied under sections 271D and 271E are deleted as the amounts received and repaid were genuine accommodation transactions on behalf of family members and not loans or advances within the prohibitions of sections 269SS/269T.

Waiver of interest under Sections 234A, 234B and 234C - powers of the Settlement Commission under Chapter XIXA - reopening of concluded proceedings under Section 154 - terminal point for levy of interest under Section 234B - jurisdictional error - remand for fresh decision

Waiver of interest under Sections 234A, 234B and 234C - powers of the Settlement Commission under Chapter XIXA - jurisdictional error - High Court's modification of the Settlement Commission's order dated 11.08.2000 by adopting directions of the Settlement Commission's order dated 11.10.2002 in relation to waiver of interest. - HELD THAT: - The High Court, instead of remanding the matter to the Settlement Commission for fresh consideration in the light of later decisions of this Court, proceeded to adopt and give effect to the directions contained in the Settlement Commission's subsequent order dated 11.10.2002 and thereby modified the original order dated 11.08.2000. That approach was impermissible: the High Court could not lawfully incorporate or rely upon an order (11.10.2002) which it had itself set aside earlier as being vitiated by being passed under Section 154. Having regard to the law laid down by this Court in the cited Constitution Bench decisions concerning the scope of the Settlement Commission's powers to waive or reduce statutory interest, the High Court's adoption of the 11.10.2002 directions amounted to a jurisdictional error and was without authority. [Paras 22, 23, 24, 25]

High Court's modification of the Settlement Commission's 11.08.2000 order by adopting the directions of the 11.10.2002 order was set aside as a jurisdictional error.

Remand for fresh decision - waiver of interest under Sections 234A, 234B and 234C - reopening of concluded proceedings under Section 154 - Procedure to be followed for adjudication of waiver of interest: remand to the Settlement Commission for fresh decision in light of this Court's precedents. - HELD THAT: - Because the first Settlement Commission order (11.08.2000) was rendered at a time when the relevant legal position was unsettled, and subsequent authoritative rulings of this Court (including rulings on the Settlement Commission's competence to waive interest and on the terminal point for computation of interest) govern the matter, the appropriate course is to set aside the impugned orders insofar as they decide the issue of waiver of interest and remit the matter to the Settlement Commission. The Settlement Commission is to decide the issue afresh on merits, applying the legal principles laid down by this Court and affording the parties an opportunity to be heard. The Court expressly refrained from expressing any opinion on merits and directed the Settlement Commission to decide the matter uninfluenced by observations of this Court within six months. [Paras 26, 27, 28]

The matter is remanded to the Settlement Commission to decide afresh the question of waiver of interest, in accordance with the law laid down by this Court, after affording parties an opportunity; impugned orders set aside to that extent.

Final Conclusion: Appeals allowed. The High Court's order modifying the Settlement Commission's order is set aside as a jurisdictional error; the Settlement Commission's order dated 11.08.2000 is set aside insofar as it decides waiver of interest and the matter is remitted to the Settlement Commission for fresh decision in accordance with this Court's decisions, within six months.

Transfer pricing adjustment - Arm's Length Price - Comparability analysis - Transactional Net Margin Method (TNMM) - Public domain data and use of secret comparables - Restriction in Rule 10D applicable to auditor only - Functional dissimilarity and exclusion of comparables - Tolerance limit +/-5% under the proviso to section 92C(2) - Penalty under section 271(1)(c) - Explanation 7: good faith and due diligence - Allowability of bad debts written off after amendment - Deductibility of interest under section 36(1)(iii) as applicable to the year

Functional dissimilarity and exclusion of comparables - Comparability analysis - Transactional Net Margin Method (TNMM) - Exclusion of M/s South India Surgical Co. Ltd. (SISCO) from final set of comparables - HELD THAT: - The Tribunal analysed the material in SISCO's annual report, financial statements and catalogue and concluded that SISCO carried out significant manufacturing activity (raw materials, finished goods classification, CIF imports of raw materials and direct manufacturing expenses). A general statement in the director's report that the company was primarily engaged in trading could not outweigh specific accounting and disclosure evidence of manufacturing. In absence of segmental details and having regard to the assessee's purely trading profile, SISCO was held functionally dissimilar and therefore to be excluded from the comparable set when applying TNMM. The Tribunal directed exclusion of SISCO from the final comparables. [Paras 20, 21, 22, 23, 24]

SISCO excluded from the list of final comparables; Ground No. 2 of the assessee's appeal allowed.

Arm's Length Price - Transfer pricing adjustment - Tolerance limit +/-5% under the proviso to section 92C(2) - Re-computation of Arm's Length Price by excluding SISCO and application of the +/-5% tolerance - HELD THAT: - The Tribunal directed the Assessing Officer/TPO to recompute the arm's length price excluding SISCO from the comparable set and to test whether the recomputed margin falls within the statutory tolerance of +/-5% of the price actually charged by the assessee. If the recomputed ALP falls within the tolerance limit, the transfer pricing addition was to be deleted. This direction effectively remands the quantification to the AO/TPO for limited recalculation in accordance with the Tribunal's comparables determination. [Paras 24, 25]

Matter remitted to AO/TPO for recomputation of ALP excluding SISCO and deletion of the addition if within +/-5% tolerance.

Public domain data and use of secret comparables - Restriction in Rule 10D applicable to auditor only - Comparability analysis - Permissibility of the TPO/AO using non-public (secret) comparables and applicability of Rule 10D restriction - HELD THAT: - The Tribunal held that the limitation in Rule 10D (restricting an auditor's analysis to publicly available records) applies to an auditor and does not fetter the Assessing Officer or the Transfer Pricing Officer. The TPO has inherent powers to obtain information (including under section 133(6)) and to use material not in the public domain for transfer pricing analysis. The assessee's objection based on Rule 10D was therefore rejected. [Paras 14]

The restriction in Rule 10D is not applicable to the AO/TPO; challenge to use of non-public comparables dismissed.

Allowability of bad debts written off after amendment - Deletion of disallowance of deduction claimed for bad debts written off - HELD THAT: - Both parties agreed and the Tribunal followed the Supreme Court decision in TRF Limited that, after the statutory amendment effective 01.04.1989, it is not necessary to prove that a debt had in fact become irrecoverable; it is sufficient that the bad debt was written off as irrecoverable in the assessee's accounts. On this legal position the Tribunal deleted the disallowance confirmed by lower authorities. [Paras 26, 27, 28]

Disallowance on account of bad debts written off deleted; Ground No. 7 of the assessee's appeal allowed.

Deductibility of interest under section 36(1)(iii) as applicable to the year - Allowability of interest paid on borrowed capital used to acquire a going concern - HELD THAT: - For Assessment Year 2002-03 the statutory position required only that interest be paid in respect of capital borrowed for the purpose of the business. The proviso disallowing interest for acquisition of assets was inserted only w.e.f. 01.04.2004. The Tribunal accepted that the assessee used borrowed funds to acquire a going concern and offered its profits to tax; accordingly the interest was held to be incurred for the purpose of business and allowable under section 36(1)(iii) as applicable to that year. [Paras 29, 30, 31]

Disallowance of interest deleted; impugned order of CIT(A) upheld and Revenue's ground dismissed.

Penalty under section 271(1)(c) - Explanation 7: good faith and due diligence - Transfer pricing adjustment - Upheld cancellation of penalty under section 271(1)(c) levied in relation to transfer pricing adjustment - HELD THAT: - The Tribunal agreed with the CIT(A) that penalty under Explanation 7 requires satisfaction of both lack of good faith and lack of due diligence. The assessee conducted a transfer pricing study, attempted CUP benchmarking and, where CUP was not available, used TNMM with comparables identified from public databases; the TPO/AO obtained additional data under section 133(6). Given the subjective nature of selection/rejection of comparables and the bona fide steps taken by the assessee, the CIT(A)'s cancellation of penalty was justified. Moreover, since the quantification of the transfer pricing addition sustained by CIT(A) was itself set aside by the Tribunal, the penalty was unsustainable on that ground as well. [Paras 32, 33]

Impugned cancellation of penalty upheld; Revenue's appeal against penalty dismissed.

Final Conclusion: The assessee's appeal is partly allowed: SISCO is excluded from the comparable set and the matter is remitted to the AO/TPO to recompute the ALP excluding SISCO and to delete the transfer pricing addition if the recomputed price falls within the +/-5% tolerance; the disallowance for bad debts and the disallowance of interest were deleted in favour of the assessee. The Revenue's appeals, including against imposition of penalty under section 271(1)(c), are dismissed.

Exemption under section 10B - 100% Export Oriented Unit (EOU) status by registration under STP - Validity of approval by Development Commissioner and ratification by Board of Approval - CBDT instructions interpreting eligibility for deduction under section 10B - Deduction under section 10A as alternative/analogous entitlement

Exemption under section 10B - Validity of approval by Development Commissioner and ratification by Board of Approval - CBDT instructions interpreting eligibility for deduction under section 10B - 100% Export Oriented Unit (EOU) status by registration under STP - Whether the assessee is entitled to deduction under section 10B despite lack of explicit ratification by the Board of Approval where the unit is registered/approved under the STP scheme by the designated officer/Director of STPI - HELD THAT: - The Tribunal followed its earlier coordinate-bench precedents holding that registration/approval under the STP scheme by the designated officer/Director of STPI (or under delegated authority akin to Development Commissioner) satisfies the purpose and requirements of section 10B when read with the delegation reflected in CBDT instructions and relevant policy documents. The Court noted CBDT Instruction clarifying that approvals by Development Commissioners (and by necessary delegation, approvals under STP by designated officers/IMSC) are to be treated as valid for the purpose of section 10B, and relied on earlier ITAT decisions where STP registration and issuance of a green card were held sufficient to confer 100% EOU status and entitlement to deduction. On that basis the Tribunal concluded the AO and the CIT(A) erred in denying exemption merely because a separate ratification by the Board of Approval was not on record. [Paras 8, 9]

Assessee entitled to deduction under section 10B; direction to AO to grant the deduction.

Deduction under section 10A as alternative/analogous entitlement - Exemption under section 10B - Whether the assessee is also entitled to deduction under section 10A in the facts and circumstances although the return claimed deduction under section 10B - HELD THAT: - The Tribunal observed the substantial parity between sections 10A and 10B and relied on precedent holding that a claim miscoded under one section should not be defeated where the conditions for the correct section are otherwise fulfilled. The Tribunal accepted authorities that administrative guidance and the duty of tax authorities to apply the correct provision may permit allowing relief under section 10A even if the return mentioned section 10B, and therefore found the assessee entitled to benefit under section 10A as well on the material before it. [Paras 17, 20]

Assessee entitled to deduction under section 10A as well (alternative/analogous entitlement).

Final Conclusion: Appeal allowed; impugned disallowance set aside and the Assessing Officer directed to grant deduction under section 10B (and, alternatively, section 10A) in accordance with the decision.

Substantial question of law - book profit u/s. 115JB - MAT computation - Admitted question regarding addition made in provision for bad and doubtful debts, revenue generated from trial run production and sales tax subsidy in computation of book profit u/s. 115JB. No substantial question of law admitted regarding - provision for Director's Retirement Benefit - excess expenditure on Voluntary Retirement - expenses on VRS pertaining to earlier years - addition made in respect of expenditure debited to P & L account - book profit u/s. 115JB - MAT computation - HELD THAT:- The CIT(A) and the Tribunal by concurrent orders deleted such additions on the ground of the liabilities being ascertained contrary to what the Assessing Officer had held and / or on the ground that the Assessing Officer cannot tinker with the assessee's books of accounts while computing income under Section 115JB of the Act by placing reliance on the judgment of the Supreme Court in case of Apollo Tyres Ltd Vs. CIT [2002 (5) TMI 5 - SUPREME COURT].

As perused the documents on record, we are broadly in agreement with the view of the Tribunal. The liabilities in question related to the provisions made for directors' retirement benefits, liability arising out of voluntary retirement scheme etc. These questions are, therefore, not considered.

Addition being expenditure claimed in respect of temporary structure - HELD THAT:- Question similar to one considered by this Court in M/S ASSOCIATED CEMENT COMPANY LTD[2015 (12) TMI 1787 - BOMBAY HIGH COURT] in which by order dated 9.12.2015, this question was not considered.

Addition in respect of provision for deferred tax liability - tribunal deleted addition made by the AO resulted into double disallowance to the assessee - HELD THAT:- CIT(A) and the Tribunal both have concurrently held the disallowance amounts to double disallowance and therefore, deleted the same. This additional question, therefore, not considered.

Capital receipt - pre commencement expenditure - profits or gains from foreign exchange fluctuation - revision under Section 263 - erroneous and prejudicial to the interest of revenue - applicability of CBDT instructions for foreign exchange transactions

Capital receipt - pre commencement expenditure - profits or gains from foreign exchange fluctuation - The gain arising on account of favourable fluctuation and cancellation of forward foreign exchange contracts was capital in nature and not taxable as revenue in AY 2009-10. - HELD THAT: - The court accepted the factual matrix that the assessee was a special purpose vehicle whose business had not commenced in the year relevant to AY 2009-10 and that the foreign exchange contracts were entered into in connection with acquisition of plant and machinery for the project. Applying settled precedents, the court held that receipts directly connected with and incidental to construction and acquisition of capital assets during pre commencement period are capital in nature and are to be adjusted against capital cost. The court relied upon earlier decisions including Challapalli Sugars Ltd. and Sutlej Cotton Mills Ltd. to conclude that profit or loss on appreciation or depreciation of foreign currency held for capital purposes is of capital character; it distinguished the facts from Tuticorin Alkali Chemicals and Fertilizers Ltd. , where prior period investment income was held revenue in nature. On the materials already on record, the Tribunal's conclusion that the gains were capital receipts was sustainable and the Commissioner's contrary conclusion was not justified. [Paras 11, 12, 13, 14, 15]

Gains on cancellation and favourable fluctuation of forward foreign exchange contracts, being inextricably linked to purchase of capital assets during pre commencement period, are capital receipts.

Revision under Section 263 - erroneous and prejudicial to the interest of revenue - applicability of CBDT instructions for foreign exchange transactions - The Commissioner was not justified in exercising revisional power under Section 263 because the assessment order was not shown to be erroneous and prejudicial to the interest of revenue on the material before the authority. - HELD THAT: - Section 263 permits revision only where the assessment order is both erroneous and prejudicial to the interest of the Revenue. Although the Assessing Officer may not have made all enquiries, the court held that where the legal answer can be concluded from materials already on record, it is futile to remit for re examination that would inevitably reach the same conclusion. The Commissioner's reliance on non compliance with CBDT instructions did not validate exercise of revision where the Tribunal, upon the record, correctly held the gains to be capital in nature. Consequently, the Tribunal's setting aside of the Commissioner's order was upheld. [Paras 2, 5, 8, 9]

Exercise of revisional power under Section 263 was unwarranted as the assessment order was not shown to be erroneous and prejudicial to revenue on the existing record.

Final Conclusion: The appeal is dismissed: the Tribunal correctly held that the gains from foreign exchange forward contracts were capital receipts appertaining to pre commencement capital expenditure and the Commissioner's invocation of revisional power under Section 263 was unjustified on the material before him.

Treatment of government subsidy as capital receipt - purpose test for characterisation of subsidy - subsidy not to be deducted from actual cost for depreciation (Section 43(1)) - subsidy as incentive for industrial development in backward areas - application of precedent authorities on subsidy characterisation - no disallowance under Section 14A where own surplus funds

Treatment of government subsidy as capital receipt - purpose test for characterisation of subsidy - application of precedent authorities on subsidy characterisation - Sales tax and excise duty incentives granted under the Kutch District subsidy schemes are capital receipts and not taxable as revenue receipts. - HELD THAT: - The Court applied the established "purpose" test, holding that nomenclature or the fact that the subsidy computation is linked to tax payable is not determinative; the true character depends on the object for which the subsidy is granted. The Gujarat sales tax and Central excise schemes were introduced to promote new investment and industrial development in the Kutch District after the earthquake, and were aimed at inducing capital formation and employment. Relying on the principles in the cited Supreme Court and High Court authorities, the Court concluded that the subsidy was granted as an incentive to establish new industry and therefore partakes of a capital nature rather than being assessable as revenue receipts. [Paras 6, 7, 8]

Subsidies under the Kutch incentive schemes are capital receipts and not taxable as revenue receipts.

Subsidy not to be deducted from actual cost for depreciation (Section 43(1)) - subsidy as incentive for industrial development in backward areas - application of precedent authorities on subsidy characterisation - Such capital subsidy is not required to be reduced from the assessee's actual cost of plant and machinery for purposes of depreciation computation. - HELD THAT: - The Court held that the subsidy was not granted in relation to acquisition of specific capital assets and therefore does not meet any portion of the 'actual cost' of the assets. The schemes used the value or cost of fixed assets merely as a quantification measure for determining the quantum of financial aid; that method of computation does not convert the subsidy into a payment towards the cost of acquisition. The Court endorsed the reasoning in Grace Paper and Swastik Sanitary Works, which held that subsidies intended to encourage industrial development in backward areas are not to be deducted from actual cost for depreciation calculations. [Paras 9, 10, 11]

The subsidy need not be reduced from the actual cost of capital assets and therefore does not diminish the depreciation claim.

No disallowance under Section 14A where own surplus funds - application of precedent authorities on subsidy characterisation - The question concerning application of this Court's decision in HDFC v. DCIT on Section 14A was not entertained by the Court. - HELD THAT: - The Third question recorded that the issue is covered by this Court's earlier decision in HDFC v. DCIT, and noted that the department has not accepted that decision; accordingly the Court declined to entertain the question in these appeals without further adjudication. No fresh principle was laid down on this point in the present judgment. [Paras 12]

Question on Section 14A (HDFC line of authority) not entertained in these appeals.

Final Conclusion: All appeals dismissed; subsidies under the Kutch sales tax and excise schemes are capital receipts not taxable as revenue, such subsidies are not to be deducted from the actual cost of capital assets for depreciation purposes, and the Section 14A point was not entertained.

Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - Institution or continuation of proceedings against the corporate debtor - Action to foreclose, recover or enforce security interest barred during moratorium

Moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 - Recovery or enforcement of security interest barred during moratorium - Effect of the NCLT-declared moratorium on the writ petition challenging the notice issued under the Income-tax Act. - HELD THAT: - The parties agreed that an application under Section 9 of the Code was admitted by the National Company Law Tribunal, Chandigarh Bench, and that a moratorium in terms of Section 14(1) of the Code had been declared, which, as reproduced in the order, prohibits institution or continuation of proceedings against the corporate debtor and actions to recover or enforce security interests. Having regard to the moratorium, the writ petition challenging the notice dated 16.02.2017 issued under the Income-tax Act became infructuous. The Court therefore did not adjudicate the substantive controversy regarding precedence of recovery but disposed of the petition on that basis. [Paras 3, 4, 5]

Petition disposed of as infructuous in view of the NCLT-declared moratorium; no adjudication on the merits of the competing claims to recover liabilities.

Final Conclusion: The writ petition was disposed of as infructuous because the NCLT had declared a moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016, precluding continuation of recovery proceedings against the corporate debtor; the substantive dispute on recovery precedence was not decided.

Valuation of obsolete stores and spares - Deduction for devaluation/write off of inventory - Change in accounting method not decisive for allowance - Application of Accounting Standard AS 2 to revaluation of inventory - Reliance on technical committee valuation appointed by Board

Valuation of obsolete stores and spares - Reliance on technical committee valuation appointed by Board - Application of Accounting Standard AS 2 to revaluation of inventory - Revaluation (devaluation) of old/non moving stores and spares as effected by the assessee on the basis of a Board appointed technical committee is in accordance with law and acceptable for income tax purposes. - HELD THAT: - The assessee appointed a committee, at the instance of the C&AG audit objection, which conducted technical evaluation and recommended devaluation of certain items (313 items at 50% and 14 items at 100%). The Tribunal accepted 80% of the claim in respect of items recommended for 100% devaluation (apportioning 20% as scrap value) but disallowed the 50% devaluation on the ground that the committee had not made a realistic appraisal. The High Court examined the origin and constitution of the committee (appointed by the Board and comprising senior executives), the technical evaluation recorded in the annual report, and the consistent accounting practice followed earlier (including prior years where similar devaluations were allowed to the extent of 80%). The Court held that a revaluation mandated by audit objection and supported by technical appraisal cannot be rejected merely because it prejudices the Revenue. The method of revaluation accorded with recognised accounting practice (AS 2) and there was no change in accounting principle that would disentitle the assessee to the claim. The Tribunal's finding that the committee's recommendation lacked basis was rejected; the 50% devaluation recommended on technical grounds was therefore allowable. [Paras 7, 8, 9, 10]

Reversal of Tribunal on this point and allowance of 50% devaluation of the 313 items as claimed by the assessee.

Deduction for devaluation/write off of inventory - Change in accounting method not decisive for allowance - The assessee is entitled to deduction in respect of the written off value of obsolete spares and stores as claimed, where revaluation is justified by technical evaluation and consistent accounting practice. - HELD THAT: - The Assessing Officer treated the adjustment as a change in accounting practice and a notional claim, and hence disallowed it. The first appellate authority had allowed the claim following earlier orders in which similar revaluations were accepted (subject to apportionment of scrap value). The Court found that the assessee's usual practice was to carry spares as stock and charge to profit and loss when used; here the items were never used and were revalued following audit objection and technical committee recommendation. Such revaluation is a permissible accounting exercise under AS 2 and is not rendered inadmissible solely because it results in prejudice to Revenue or because it departs from the manner of charging only on use. Prior acceptance of similar claims in earlier years (with limited disallowance for scrap value) reinforced the correctness of allowing the present deduction. Accordingly, the claim for write off/devaluation was held allowable. [Paras 2, 5, 8, 10]

Questions answered in favour of the assessee; deduction for the written off value of obsolete spares/stores allowed (including 50% devaluation on the 313 items).

Final Conclusion: The High Court allowed the appeal, reversing the Tribunal insofar as it disallowed the 50% devaluation, and held that the revaluation/write off of obsolete stores and spares based on the Board appointed technical committee and in accordance with accounting principles (AS 2) is admissible for income tax purposes.

Reopening of assessment - Grant of sanction by superior officer under Section 151(1) - requirement of application of mind - Quashing of reopening notice under Section 148 - Non-application of mind - Failure to fully and truly disclose material facts - Discoverability of material with due diligence

Grant of sanction by superior officer under Section 151(1) - requirement of application of mind - Non-application of mind - Quashing of reopening notice under Section 148 - Validity of the sanction under Section 151(1) and consequential validity of the notice issued under Section 148 for Assessment Year 2011-12. - HELD THAT: - The sanction issued by the Principal Commissioner was vitiated by non-application of mind because the sanctioning order proceeded on facts materially different from the reasons recorded by the Assessing Officer. The recorded reasons referred to accommodation entries received by the assessee from the Himanshu Verma group and described that group's modus operandi; the sanction, however, treated the assessee itself as the provider of accommodation entries and asserted siphoning of funds from public to private companies - conclusions not supported by the recorded reasons. Since the superior officer must apply his mind to the specific reasons recorded before granting sanction to reopen an assessment, a sanction which misconstrues or departs from those reasons without proper application of mind is legally defective. Because the sanction is invalid, the consequent notice under Section 148 also fails and must be quashed. [Paras 6, 7, 8, 9]

The sanction under Section 151(1) was issued without due application of mind and is invalid; the notice under Section 148 is quashed and set aside.

Final Conclusion: The petition is allowed; the sanction and the consequent notice reopening the assessment for Assessment Year 2011-12 are quashed and set aside.

Income-sharing arrangement versus commission - disallowance for failure to deduct TDS under Section 194H - characterisation of payments by reference to agreements and invoices - make available test for fees for technical services - scope of appellate court review of Tribunal's factual findings

Income-sharing arrangement versus commission - disallowance for failure to deduct TDS under Section 194H - characterisation of payments by reference to agreements and invoices - Payment made to M/s. TPL-TQ Services was a sharing of profit under the agreement and not a commission liable to TDS under Section 194H; the Tribunal's deletion of the disallowance was upheld. - HELD THAT: - The Tribunal examined the agreements (including Clause 6.6), the invoices and Schedule A showing the methodology of demarcation of fees and concluded that the assessee issued invoices for sharing of income and the payments were profit sharing rather than commission. The High Court declined to re open or re appreciate those factual findings made by the Tribunal, noting that the Tribunal had rendered a factual conclusion on the nature of the payments and that no substantial question of law arose warranting interference. Consequently the deletion of the disallowance under the provisions relating to non deduction of TDS was sustained. [Paras 8, 10, 12]

Tribunal's finding that the payments were income sharing and not commission is upheld and the disallowance deleted; the Revenue's appeal on this point is dismissed.

Make available test for fees for technical services - scope of remand for factual verification - Whether trainers were present in India for more than 90 days and whether any technical services were provided (and if such services satisfy the 'make available' test) was remanded to the Assessing Officer for fresh verification. - HELD THAT: - The Tribunal noted that particulars as to the exact number of days trainers were in India were not furnished and that the agreement with the parent organisation was not placed before it to determine whether technical services were provided or whether those services would satisfy the 'make available' test. For these factual and documentary deficiencies the Tribunal returned the issue to the file of the Assessing Officer for re adjudication and granted the assessee liberty to prove that trainers' days in India were less than 90 days and that the payments were not fees for technical services. The High Court left this remand undisturbed. [Paras 9, 10]

Matter remitted to the Assessing Officer for verification of trainers' presence in India and whether technical services were rendered and pass the 'make available' test; assessee granted liberty to produce evidence.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal's factual conclusion that the payments were income sharing and not commission is upheld, while factual issues concerning trainers' presence and the applicability of the 'make available' test are remitted to the Assessing Officer for verification.

Stay of recovery of demand - conditional stay on deposit - attachment of bank accounts - arguable case - deduction under section 80IA - notice under section 226(3) for attachment of receivables - submission of challan and paper books

Stay of recovery of demand - conditional stay on deposit - attachment of bank accounts - arguable case - submission of challan and paper books - Grant of interim stay of recovery of the outstanding income tax demand for the assessment years 2007-08 to 2011-12. - HELD THAT: - The Tribunal found that the assessee has an arguable case on merits arising inter alia from disallowance of deduction under section 80IA and certain expenditures, and that the assessee is facing severe cash constraints with departmental attachments of bank accounts. The Revenue relied on non-payment despite disposal by the CIT(A), dishonoured post dated cheques offered during survey, and unsuccessful attempts to attach receivables by notices issued under section 226(3). Balancing these factors, the Tribunal exercised its discretionary power to stay recovery but conditioned the stay on part payment and compliance requirements to protect the Revenue's interest. The stay was therefore made subject to the assessee depositing a specified sum by a fixed date, producing the challan and filing paper books in time for the scheduled hearing. The stay was limited in duration to 180 days or until final disposal of the appeal, whichever occurs earlier.

Stay of recovery allowed subject to the assessee depositing Rs. 3.00 crores on or before 15.03.2019, submission of the challan and filing of paper books for hearing on 27.03.2019; stay to remain in force for 180 days or till disposal of the appeal, whichever is earlier.

Final Conclusion: The assessee's stay applications are allowed on the stated conditional deposit and compliance terms; recovery is stayed for 180 days or until the appeal is disposed of, whichever is earlier.

Capital asset - transfer - long term capital gain - development agreement - possession and part consideration determining year of chargeability - allotment letter not decisive for chargeability - Chaturbhuj Dwarkadas principle

Development agreement - possession and part consideration determining year of chargeability - allotment letter not decisive for chargeability - long term capital gain - Whether the long term capital gain arising from transfer under the development agreement was assessable in AY. 2008-09. - HELD THAT: - The Tribunal found that the assessee had entered into the development and supplementary agreements in 2002 and had received part consideration and handed over possession pursuant to those agreements. Applying the principle in Chaturbhuj Dwarkadas Kapadia, the liability to capital gains tax arises upon entering the development agreement where possession is handed over and part consideration is received, and not by reference to a later formal allotment letter. The record, including the occupancy certificate dated 28-09-2006 and electricity bills indicating possession earlier, showed that the construction and handing over had been completed prior to the financial year relevant to AY. 2008-09. Consequently, the Assessing Officer was not justified in treating the allotment letter dated 15-04-2007 as the date of transfer for assessing capital gains in AY. 2008-09.

Capital gains arising under the development agreement are not assessable in AY. 2008-09; the assessment framed for that year is to be deleted.

Final Conclusion: The appeal is allowed; the order of the CIT(A) confirming long term capital gain in AY. 2008-09 is set aside and the Assessing Officer is directed to delete the capital gains assessed for AY. 2008-09.

Right to cross examine witnesses under Section 138B(2) of the Customs Act - Reliance on statements recorded under Section 108 of the Customs Act - Penalty under Sections 112(a) and (b) of the Customs Act - Reliance on uncorroborated and retracted statements - Principles of natural justice in adjudicatory proceedings

Right to cross examine witnesses under Section 138B(2) of the Customs Act - Principles of natural justice in adjudicatory proceedings - Adjudicating Authority was bound to follow the mandatory procedure in Section 138B and to permit cross examination of makers of statements relied upon. - HELD THAT: - The Court held that the Adjudicating Authority relied on statements recorded under Section 108 without affording the appellant the opportunity to cross examine those deponents despite a specific request in the reply to the show cause notice. In view of binding precedents and the statutory mandate in Section 138B(2), permitting cross examination of available witnesses whose statements are proposed to be used is required to protect the principles of natural justice. The authority's failure to permit cross examination rendered its reliance on those statements impermissible and its order unsustainable. [Paras 20, 26]

The Adjudicating Authority failed to follow the mandatory procedure under Section 138B(2) and therefore its order is not sustainable.

Reliance on statements recorded under Section 108 of the Customs Act - Reliance on uncorroborated and retracted statements - Penalty under Sections 112(a) and (b) of the Customs Act - Tribunal and Adjudicating Authority were not justified in imposing and upholding penalty based solely on uncorroborated statements without independent material or opportunity to test those statements. - HELD THAT: - The Court noted that the material connecting the appellant to the alleged smuggling consisted essentially of statements of persons directly involved, which had been retracted and were uncorroborated by independent evidence (the mobile number linkage was not independently established). Because the Adjudicating Authority relied exclusively on those statements and did not allow their testing by cross examination, the penalty imposed under Sections 112(a) and (b) could not be sustained. The Tribunal's affirmation of that penalty without addressing this infirmity was also held to be unjustified. [Paras 21, 26]

The imposition and confirmation of penalty based solely on the impugned statements is set aside.

Principles of natural justice in adjudicatory proceedings - Remand for fresh consideration - Proceedings remitted for fresh consideration with direction to permit cross examination of the deponents whose statements are relied upon. - HELD THAT: - Having found procedural infirmity in the reliance on untested statements, the Court set aside the penalty order and allowed the appeal. The Court directed that, if so advised, proceedings may be recommenced, and in any such fresh proceedings the appellant must be afforded the opportunity to cross examine the witnesses whose statements are to be relied upon, thereby ensuring compliance with statutory procedure and principles of natural justice. [Paras 26]

Penalty order set aside; matter remitted for recommencement of proceedings with opportunity to cross examine relevant deponents.

Final Conclusion: The appeal is allowed: the penalty order imposed under Sections 112(a) and (b) is set aside because the Adjudicating Authority relied on statements recorded under Section 108 without permitting cross examination as required by Section 138B(2); the Tribunal's confirmation of the penalty is also set aside and the matter is remitted for fresh proceedings, if so advised, with directions to permit cross examination of the witnesses relied upon.

Jurisdiction under amended Section 28 of the Customs Act, 1962 - competence of the Directorate of Revenue Intelligence - remand for reconsideration - independent application of mind by the Tribunal - imposition of penalty - precedential effect of a stayed High Court judgment

Jurisdiction under amended Section 28 of the Customs Act, 1962 - competence of the Directorate of Revenue Intelligence - precedential effect of a stayed High Court judgment - CESTAT's remand based on divergent High Court precedents was not to be followed; Tribunal to independently determine its jurisdiction and the competence of the DRI without being influenced by the stayed Mangli Impex decision. - HELD THAT: - The Court noted a dichotomy of judicial opinion regarding the competence and jurisdiction under the amended provision and that matters were pending before the Supreme Court. Relying on the approach adopted in Forech India, the Court held that where a remand or decision has been influenced by a High Court judgment that is under stay or where conflicting precedents exist, the appellate Tribunal should independently apply its mind to the question of jurisdiction rather than remain bound by the stayed decision. Consequently, the earlier remand-order reliance on Mangli Impex was set aside to enable the Tribunal to reassess jurisdiction afresh in light of all material and competing authorities. [Paras 5]

Appeals allowed in part and CESTAT directed to decide jurisdiction and competence of DRI independently, uninfluenced by the stayed Mangli Impex decision.

Imposition of penalty - independent application of mind by the Tribunal - Tribunal to decide the appeals on merits, including the question of imposition of penalty, after independently considering jurisdictional questions. - HELD THAT: - The Court directed that having addressed the question of jurisdiction independently, the Tribunal should proceed to adjudicate the appeals on merits, which includes considering whether any penalty is leviable. The Tribunal's adjudication is to be uninfluenced by the stayed High Court decision and to include full consideration of the merits and penalty aspects as appropriate. [Paras 5, 6]

CESTAT to decide the appeals on merits, including imposition of penalty if any, after independent consideration of jurisdictional issues.

Final Conclusion: The appeals were allowed in part: the CESTAT's remand influenced by a stayed High Court decision was set aside and the Tribunal was directed to independently determine jurisdiction, the competence of the DRI and to decide the appeals on merits including the question of penalty.

Confiscation of goods under section 113(i) of the Customs Act - Drawback claim under section 74 and identity of goods - Mis-declaration and forged markings as ground for confiscation - Penalty under section 114(iii) consequent to confiscation - Power to impose redemption fine and judicial reduction of fine and penalty

Drawback claim under section 74 and identity of goods - Mis-declaration and forged markings as ground for confiscation - Confiscation of goods under section 113(i) of the Customs Act - Whether the goods entered for export under claim of drawback were liable for confiscation under section 113(i) on account of mis-declaration and manipulation of serial numbers, such that the identity of the goods as imported and duty paid was not established. - HELD THAT: - The Tribunal upheld the Commissioner's finding that Rule 4 required declaration and supporting import particulars for drawback claims under section 74, and that any mis declaration in those particulars falls within the scope of section 113(i). On examination the goods did not tally with the goods shown in the relevant B/Es; serial numbers on the exported items had been manually chiseled/embossed and altered. The Commissioner relied on authorities and factual findings (including comparison of description and serial numbers) to conclude that the markings were forged with the deliberate purpose of establishing a false identity to claim ineligible drawback. The Tribunal agreed that such manipulation and mis statement of material particulars amounted to mis declaration attracting confiscation under section 113(i). [Paras 4, 5]

Goods entered for export under the shipping bills were liable for confiscation under section 113(i) because the identity as imported duty paid goods was not established and serial numbers were manipulated to effect a false claim under section 74.

Penalty under section 114(iii) consequent to confiscation - Whether penalty under section 114(iii) could be imposed on the exporter in view of the confiscation under section 113(i). - HELD THAT: - Having held that the goods were liable for confiscation under section 113(i) on account of willful mis declaration and forged markings made to claim ineligible drawback, the Tribunal accepted that liability for penalty under section 114(iii) follows as a statutory consequence. The Commissioner's reasoning that the acts rendered the exporter liable to penalty was affirmed. [Paras 4, 5]

Penalty under section 114(iii) is justified and follows from the finding of confiscation under section 113(i).

Power to impose redemption fine and judicial reduction of fine and penalty - Whether the redemption fine and penalty imposed by the Commissioner should be maintained or reduced. - HELD THAT: - While upholding the findings of confiscation and liability to penalty, the Tribunal exercised its discretion to moderate the monetary burdens. Taking into account the facts including the denial of drawback and the appellants' stated intention not to export the goods due to delay (and to use them in future projects), the Tribunal found the Commissioner's redemption fine and penalty excessive. It accordingly reduced both the redemption fine and the penalty to more moderate amounts. [Paras 5, 6]

Redemption fine and penalty imposed by the Commissioner are reduced (quantum moderated) while the order of confiscation and denial of drawback is otherwise upheld.

Final Conclusion: The Tribunal upheld the Commissioner's findings that the exported goods were misdeclared and liable to confiscation under section 113(i), and that penalty under section 114(iii) was warranted; however, the Tribunal reduced the redemption fine and the penalty to more moderate amounts and otherwise affirmed the Commissioner's order.

Power of appellate tribunal to dismiss appeal for default - requirement to decide appeals on merits - exercise of powers under Section 86(7) of the Finance Act, 1994 read with Section 35-C(1) of the Central Excise and Salt Act, 1944 - Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982

Power of appellate tribunal to dismiss appeal for default - requirement to decide appeals on merits - exercise of powers under Section 86(7) of the Finance Act, 1994 read with Section 35-C(1) of the Central Excise and Salt Act, 1944 - Whether the Appellate Tribunal could dismiss the appeal for default when the appellant or its counsel was not present and whether the Tribunal was obliged to decide the appeal on merits. - HELD THAT: - The Tribunal acted under Section 86(7) of the Finance Act, 1994 which directs it to exercise the same powers and follow the same procedure as under the Central Excise and Salt Act, 1944. Section 35-C(1) of the Central Excise Act requires the Appellate Tribunal, after giving parties an opportunity of being heard, to pass orders confirming, modifying or annulling the decision appealed against or to remit the matter for fresh adjudication. The Court applied the ratio of the decisions construing Section 35-C(1) (and the comparable provisions considered in S. Chenniappa Mudaliyar) to hold that the statutory scheme contemplates disposal of appeals on merits and does not confer a power to short-circuit disposal by dismissing an appeal for default of appearance. Rule 20 of the Tribunal (Procedure) Rules, 1982 permits dismissal for default but that procedural power cannot be read so as to defeat the substantive mandate under Section 86(7) read with Section 35-C(1) to decide appeals on merits. Non-compliance with a conditional stay order or non-appearance does not empower the Tribunal to dismiss the main appeal instead of deciding it on merits. [Paras 14, 15, 16, 18, 19]

The Tribunal had no power to dismiss the appeal for default; it was bound to decide the appeal on merits.

Remand for fresh consideration - disposal of appeal on merits - Relief to be granted where the Appellate Tribunal dismissed the appeal for default. - HELD THAT: - Having found the dismissal for default to be legally impermissible, the Court quashed the ex parte dismissal and remitted the matter to the Appellate Tribunal for fresh consideration. The remand is for disposal of the appeal on merits in accordance with law. The Tribunal is directed to decide the appeal (S.T.No. 42381 of 2013) within a stipulated timeframe to ensure final adjudication without further delay. [Paras 20]

Impugned dismissal quashed; appeal remanded to the Appellate Tribunal for fresh consideration and disposal on merits within three months.

Final Conclusion: The ex-parte order dismissing the appeal for default was quashed as legally untenable; the matter is remitted to the Appellate Tribunal to decide the appeal on merits in accordance with law within three months.

Recovery of Government dues under Section 87 of the Finance Act, 1994 - Garnishee orders for recovery - Adjudication / show cause as precondition to statutory recovery - Short payment of service tax and CENVAT credit adjustment

Garnishee orders for recovery - Adjudication / show cause as precondition to statutory recovery - Recovery of Government dues under Section 87 of the Finance Act, 1994 - Validity of the garnishee orders issued to bankers for alleged short payment of service tax where no demand had been adjudicated. - HELD THAT: - The Court held that initiation of recovery under the Finance Act, 1994 requires that an amount be payable by the person. Where objections arising from an audit include an allegation of short payment, the departmental machinery must first proceed by appropriate adjudicatory steps (show cause notice and adjudication) before resorting to recovery by garnishee. In the present case the show cause notice issued on 29.02.2016 did not relate to the specific objection alleging short payment of service tax of Rs. 38,66,902/-, and that objection remained to be adjudicated. In those circumstances issuance of garnishee orders to the bankers without first adjudicating the liability was held to be without authority under Section 87 and not in conformity with the statutory preconditions for recovery. [Paras 7, 8]

The garnishee orders dated 29.03.2016 and 22.05.2018 are quashed as issued without authority of law.

Short payment of service tax and CENVAT credit adjustment - Adjudication / show cause as precondition to statutory recovery - Procedure to be followed on remand for the objection relating to alleged short payment of service tax. - HELD THAT: - The Court directed that the petitioner be afforded the opportunity to file a reply to the audit objections concerning the alleged short payment, and that upon such filing the competent officer must take a decision in the matter in accordance with law. The direction contemplates fresh consideration and adjudication of the objection rather than permitting recovery to proceed in the absence of such adjudication. [Paras 9]

Petitioner to file reply within two weeks of certified copy; respondent No.1 to decide the objection in accordance with law.

Final Conclusion: Writ petition allowed; impugned garnishee orders quashed and matter remitted for adjudication after the petitioner files its reply within two weeks, with respondent to decide in accordance with law.

Payment of service tax with interest before issuance of show cause notice - benefit of Section 73(3) of the Finance Act, 1994 - extended period and exception under Section 73(4) - fraud, collusion, willful mis-statement or suppression of facts - imposition of penalty under Section 78 of the Finance Act, 1994 - requirement of mens rea for invoking extended limitation and imposing penalty

Payment of service tax with interest before issuance of show cause notice - benefit of Section 73(3) of the Finance Act, 1994 - Whether payment of the admitted service tax with interest before issuance of the show cause notice attracts the protection of Section 73(3) and precludes initiation of proceedings under Section 73(1). - HELD THAT: - The Tribunal recorded that the service tax liability for the period September, 2011 to February, 2012 was paid along with interest immediately upon being pointed out in the EA-2000 audit and that payment was made well before the show cause notice dated 06.05.2016. Section 73(3) bars issuance of a notice if the tax and interest are paid before service of notice, unless the case falls within the exception in Section 73(4). The Tribunal relied on the settled principle that payment before notice ordinarily attracts Section 73(3) and prevents initiation of penalty proceedings under the proviso to Section 73(1), subject to proof of the excepted conduct in Section 73(4). Applying that principle to the admitted facts, the Tribunal held that the statutory protection of Section 73(3) was available to the appellant. [Paras 4]

Section 73(3) protection applies where tax and interest were paid before issuance of notice; initiation of proceedings was not justified on that ground.

Extended period and exception under Section 73(4) - fraud, collusion, willful mis-statement or suppression of facts - requirement of mens rea for invoking extended limitation and imposing penalty - imposition of penalty under Section 78 of the Finance Act, 1994 - Whether the Revenue proved fraud, collusion, willful mis-statement or suppression (mens rea) so as to invoke Section 73(4) and sustain penalty under Section 78. - HELD THAT: - The Tribunal found that the department adduced no evidence establishing fraud, collusion, willful mis-statement or suppression with intent to evade tax. The appellant admitted the liability and promptly paid tax with interest on being pointed out; the short payment was attributed to inadvertence in filing and absence of the person handling returns. Mere non-payment or short-payment without evidence of culpable mental state is insufficient to invoke the extended period or to sustain penalty. Culpable mens rea must be proved and cannot be presumed from the fact of short payment. In the absence of such proof the exception in Section 73(4) does not apply and penalty under Section 78 cannot be sustained. [Paras 5]

Revenue failed to prove requisite mens rea or suppression; Section 73(4) inapplicable and penalty under Section 78 is not sustainable; penalty waived.

Final Conclusion: The tax liability with interest having been discharged by the appellant before issuance of the show cause notice, Section 73(3) protection applies; Revenue did not prove fraud, suppression or mens rea to invoke Section 73(4) or sustain penalty under Section 78, and accordingly the penalty is waived while the confirmed tax and interest stand upheld.

Rectification / recall of judicial order - apparent mistake on the face of the record - non-consideration of filed written submissions - rehearing afresh - listing for fresh hearing

Rectification / recall of judicial order - apparent mistake on the face of the record - non-consideration of filed written submissions - Miscellaneous application for rectification of the Tribunal's order dated 13.04.2018 was allowed on account of an apparent mistake arising from non-consideration of Revenue's written submissions filed in Registry. - HELD THAT: - The Tribunal found that written submissions filed by the Revenue's Authorised Representative on 01.02.2018 pursuant to the Tribunal's direction were not placed on the file and hence were not considered when the order dated 13.04.2018 was passed. This omission constituted an apparent mistake on the face of the record. In those circumstances the Tribunal was justified in recalling/rectifying the earlier order so that the matter can be decided after hearing the submissions which had been filed but not taken into account. [Paras 2, 3]

Miscellaneous application allowed and the order dated 13.04.2018 recalled/rectified for failure to consider the filed written submissions.

Rehearing afresh - listing for fresh hearing - The appeal was directed to be heard afresh and listed for further hearing. - HELD THAT: - Having concluded that the earlier order was vitiated by non-consideration of the Revenue's written submissions, the Tribunal ordered that the appeal be placed for fresh hearing so that the parties' submissions can be considered on merits. The Registry was given a specific date for listing the appeal for rehearing. [Paras 4]

Appeal No. ST/89908/2014 to be listed for hearing afresh on 25.03.2019.

Final Conclusion: The Tribunal allowed the Revenue's miscellaneous application, held that the earlier order suffered from an apparent mistake due to non-consideration of filed written submissions, recalled/rectified that order and directed that the appeal be heard afresh and listed for hearing on 25.03.2019.

Double claim of refund - interpretation of amended Rule 5 of Cenvat Credit Rules, 2004 - definition of 'export turnover services' - refund calculation formula under amended Rule 5 - proviso to Rule 5(2) of Cenvat Credit Rules, 2004

Double claim of refund - definition of 'export turnover services' - Whether the respondent impermissibly claimed refund of cenvat credit twice for the same export invoices - once under earlier provisions and again after amendment when export proceeds were received. - HELD THAT: - The Tribunal found that the core dispute concerned whether refund of cenvat credit on input services used for export services had been claimed twice - during October 2011 to March 2012 on invoice value and again for April 2012 to September 2012 when export proceeds were received. The adjudicating authority reduced the export turnover while computing refund under the amended Rule 5, observing the same invoices had already been considered earlier. The Commissioner (Appeals) allowed the claim without explaining the error in the adjudicating authority's computation and relied on the possibility of claiming within one year, which the Tribunal found to be a misconstruction. The Tribunal held that the refund based on invoice value under the old provisions, if not earlier claimed, could be claimed within one year from the relevant date even after 1.4.2012, but the same invoice cannot be the basis for refund twice - once at invoicing and again on receipt of proceeds - when the amended definition of export turnover services and the proviso to Rule 5(2) are read together. [Paras 6]

The Commissioner (Appeals)'s allowance on the ground stated is not justified; duplicate refund claims for the same invoices are not permissible.

Interpretation of amended Rule 5 of Cenvat Credit Rules, 2004 - refund calculation formula under amended Rule 5 - Whether the refund amount must be recalculated by applying the amended formula in Rule 5, taking into account the correct export turnover of services and the corresponding effect on total turnover. - HELD THAT: - The Tribunal accepted the respondent's submission that if the export turnover of services is reduced in the numerator (to exclude amounts already accounted for), the total turnover in the denominator must also be correspondingly reduced when applying the formula under the amended Rule 5. The Court observed that this arithmetic effect requires factual verification and correct application of the statutory formula. Consequently, rather than pronouncing a final quantification, the Tribunal set aside the impugned order and remitted the matter to the adjudicating authority to recompute the refund strictly in accordance with the amended Rule 5, ensuring the correct export turnover and total turnover are applied. [Paras 6, 7]

Matter remitted to the adjudicating authority for recalculation of refund under the amended Rule 5, taking into account correct export turnover and the resulting effect on total turnover.

Final Conclusion: The appeal is allowed by way of remand: the Commissioner (Appeals)'s order is set aside, and the matter is remitted to the adjudicating authority to recompute the refund in accordance with the amended Rule 5 of the Cenvat Credit Rules, 2004, having regard to the correct export turnover of services and the consequent adjustment to total turnover; duplicate refunds for the same invoices are not permissible.

Penalty for non-payment of service tax under Section 76 - Service tax liability and interest deposited during adjudication - Liability to penalty despite post-facto deposit

Penalty for non-payment of service tax under Section 76 - Deposit during adjudication not a bar to penalty - Whether the appellant is liable to penalty under Section 76 for non-payment of service tax notwithstanding deposit of the tax and interest during adjudication proceedings. - HELD THAT: - The Tribunal noted that the appellant had reflected the service tax liability in revised returns but failed to deposit the service tax collected from the client into the government exchequer within the stipulated time. The department issued a show-cause notice and, by adjudication order dated 20.03.2013, confirmed the demand, appropriated amounts deposited during adjudication along with interest, and imposed penalty under Section 76. The Commissioner (Appeals) upheld the adjudication order. The Tribunal observed that Section 76 mandates imposition of penalty for non-levy, short levy, non-payment or short payment of service tax. Admission or subsequent deposit of the service tax and interest during adjudication did not negate the statutory provision exposing the appellant to penal consequences for the earlier non-payment. Having regard to these findings, the Tribunal found no infirmity in the concurrent orders confirming penalty under Section 76. [Paras 4, 5]

Penalty under Section 76 sustained; appeal dismissed.

Final Conclusion: The Tribunal upheld the penalty imposed under Section 76 for non-payment of service tax despite deposition of tax and interest during adjudication and dismissed the appeal.

Service tax liability - remand for computation of tax liability - penalty under Section 78 of the Finance Act, 1994 - fraud, suppression or misstatement with intent to evade tax - write-off of receivable - penalty under Section 77 of the Finance Act, 1994

Service tax liability - remand for computation of tax liability - Quantification of the correct service tax liability payable by the appellant - HELD THAT: - The appellant did not dispute the liability to pay service tax but challenged the quantum confirmed by the original authority. The Commissioner (Appeals) recorded the appellant's contention that the correct demand should be a lower figure but did not compute or record any finding quantifying the actual liability. In the absence of any adjudicated computation, the Tribunal held that the matter must be returned to the original authority for determination of the correct tax liability and for issuance of a fresh adjudication order in accordance with law. [Paras 4]

Matter remanded to the original authority for quantifying the actual tax liability and passing a fresh adjudication order.

Penalty under Section 78 of the Finance Act, 1994 - fraud, suppression or misstatement with intent to evade tax - write-off of receivable - Validity of penalty under Section 78 where the consideration for the taxable service was not received and was written off - HELD THAT: - Section 78 requires that non-payment of tax result from fraud, suppression, misstatement or intent to evade tax. The record showed that the service value was not received from the service recipient and the debtor amount was subsequently written off in the books. On these facts the Tribunal found that there was no intention to deprive the Government of tax and the essential elements for invoking Section 78 were absent. Consequently, the penalty imposed under Section 78 could not be sustained and was set aside. [Paras 5]

Penalty under Section 78 set aside.

Penalty under Section 77 of the Finance Act, 1994 - Sustainability of penalty imposed under Section 77 - HELD THAT: - While the Tribunal found the Section 78 penalty unsustainable on the facts, it expressly recorded that the impugned order stands to the extent of imposition of penalty under Section 77. No interference was made with the Section 77 penalty in the present order. [Paras 5]

Imposition of penalty under Section 77 sustained.

Final Conclusion: Appeal disposed by remanding computation of the correct service tax liability to the original authority; penalty under Section 78 of the Finance Act, 1994 set aside on the facts; penalty under Section 77 of the Finance Act, 1994 upheld.

Personal liability of directors for company's excise dues in absence of statutory provision - recovery under Section 11 of the Central Excise Act, 1944 - lifting the corporate veil

Personal liability of directors for company's excise dues in absence of statutory provision - recovery under Section 11 of the Central Excise Act, 1944 - Whether the department could recover excise duty and penalty of the company from the petitioner as a director in the absence of any specific statutory provision making directors personally liable - HELD THAT: - The Court held that, in the absence of any specific provision in the statute imposing personal liability on directors for the company's duty and penalty, the duty/penalty liability of the company could not be recovered from the personal assets of its directors. The reasoning relies on settled principle that a director is not personally liable for company liabilities unless statute so provides or there is a valid order under a specific provision enabling recovery from directors. The Court applied its earlier decision in Subhash Goyal v. State of Haryana which found recovery from directors impermissible without recourse to the specific statutory mechanism, and noted that an identical view was taken by this Court in CWP No.9363 of 2015 (Krishan Kumar). The Court distinguished authorities relied upon by respondents where courts pierced the corporate veil because of fraud, sham transfers, or common control used to evade liabilities; those facts were absent here. Consequently, recovery proceedings directed at the petitioner personally could not be sustained, while the respondents remained free to pursue recovery from the company in accordance with law. [Paras 5, 7]

The action of the respondents in seeking to compel the petitioner, as a director, to clear the company's dues was held unsustainable; the petition was allowed and respondents left free to proceed against the company itself in accordance with law.

Final Conclusion: Writ petition allowed; coercive recovery from the petitioner as a director set aside. Respondents may pursue recovery from the company by following the appropriate statutory procedure.

Limitation for refund under Section 11B of the Central Excise Act - Refund of service tax - Deposit under protest exception to limitation - Valuation of photography services vis-a -vis cost of materials - Application of precedent on photography service valuation

Limitation for refund under Section 11B of the Central Excise Act - Refund of service tax - Claim for refund was barred by limitation under Section 11B and therefore not admissible. - HELD THAT: - The Tribunal rejected the appellant's refund claim on the ground of delay and laches, holding that the refund application filed on 13.6.2009 in respect of service-tax amounts deposited earlier was barred by the one-year limitation prescribed by Section 11B. The High Court accepted the legal position that where a specific statutory limitation is provided for refund claims, that limitation must be adhered to. The Court noted that the appellant did not deposit the amounts under protest and therefore could not invoke the proviso to Section 11B to avoid the limitation. Reliance on the Supreme Court decision in Union of India v. Namdang Tea Estate was held to support the proposition that a refund claim made beyond the statutory period is not maintainable when the proviso does not apply.

Refund claim dismissed as time-barred under Section 11B; proviso in Section 11B not attracted as no payment was made under protest.

Valuation of photography services vis-a -vis cost of materials - Application of precedent on photography service valuation - The appellant's reliance on precedents settling that the value of photographic material is not includible in taxable service value did not save the delayed refund claim. - HELD THAT: - The appellant relied on Supreme Court dismissals of Revenue's appeals in cases concerning valuation of photography services (Shilpa Colour Lab and Roopchayya Colour Studio) and contended that, following those decisions, it filed its refund application within two months. The Court observed that those decisions address the substantive question of valuation and the authority to levy service tax on the cost of materials; they do not enlarge or alter the statutory limitation for refund claims under Section 11B. The Court therefore held that even if the substantive law favoured the appellant on valuation, that fact does not negate the statutory limitation when the payment was not made under protest and no assessment under section 72 was impugned.

Reliance on valuation precedents does not cure delay in filing the refund claim; those precedents do not displace the limitation in Section 11B.

Final Conclusion: The High Court dismissed the appeal: the refund claim was barred by the one year limitation in Section 11B of the Central Excise Act and the proviso excluding the limitation did not apply because the amounts were not paid under protest; precedents on valuation of photography services did not obviate the statutory limitation.

Admissibility of CENVAT credit on input services by a central/registered office - input service distributor registration not mandatory where credit is retained by central unit - manner of distribution of credit by input service distributor - pro rata distribution and conditions for distribution under Rule 7 of the CENVAT Credit Rules, 2004 - relevance of extended period where credit is found admissible (revenue neutrality)

Admissibility of CENVAT credit on input services by a central/registered office - input service distributor registration not mandatory where credit is retained by central unit - manner of distribution of credit by input service distributor - pro rata distribution and conditions for distribution under Rule 7 of the CENVAT Credit Rules, 2004 - Whether the appellant could avail CENVAT credit for common input services at its central/registered office without obtaining registration as an input service distributor and whether Rule 7 mandated compulsory IST registration for such availment. - HELD THAT: - The Tribunal examined the original and amended text of Rule 7 (the "manner of distribution of credit by input service distributor") and Rule 2(m) of the CENVAT Credit Rules, 2004. The rule contemplates that an input service distributor (ISD) may distribute credit to manufacturing/registered units subject to specified conditions, but it also permits the central/main unit to retain and utilise the credit itself. Registration as an ISD is required only if the entity intends to distribute credit to other units; there is no provision making IST registration mandatory where the central unit retains and utilises the input service credit. The conditions of registration and pro rata distribution apply once distribution is undertaken, but they do not prohibit centralized availment or utilisation of credit under a centralized accounting system. Applying these principles to the facts, the Tribunal found no irregularity in the appellant's availment and utilisation of CENVAT credit for common input services at its registered office without IST distribution registration. [Paras 6]

The availment of CENVAT credit by the appellant at its central/registered office without obtaining IST registration was held to be permissible; no fault was found in the appellant's credit utilisation under the rule as interpreted.

Relevance of extended period where credit is found admissible (revenue neutrality) - Whether the invocation of the extended period for recovery remained legally significant once the Tribunal held that the credit was admissible. - HELD THAT: - The Tribunal observed that because the credit was held to be admissible to the appellant, any discussion on the legality of invoking the extended period lost its significance. The contention on revenue neutrality-advanced to argue against extended period invocation-was noted, but the Tribunal's primary finding that the credit was admissible rendered the extended period issue academic in the outcome of this appeal. [Paras 6, 7]

Since the credit was held admissible, the question of invocation of extended period was rendered moot and did not affect the result.

Final Conclusion: The appeal is allowed; the Tribunal set aside the Commissioner (Appeals) order dated 28/02/2018 and upheld the appellant's right to avail and utilise the CENVAT credit at its registered/central office without mandatory IST registration where no distribution was undertaken.

Correction of wrong debit entry - suo motu re-credit in CENVAT credit register - refund claim barred by limitation under Section 11B of the Central Excise Act - reversal of accounting entry not constituting refund under Section 11B - unjust enrichment - reliance on BDH Industries Ltd. (Tri-LB) not applicable

Correction of wrong debit entry - suo motu re-credit in CENVAT credit register - refund claim barred by limitation under Section 11B of the Central Excise Act - unjust enrichment - Whether the refund claim was barred by limitation under Section 11B where excess duty paid in December 2014 was recredited suo motu in January 2015 and thereafter reversed on departmental direction with a refund claim filed on 01.07.2016. - HELD THAT: - The Tribunal held that the excess payment in December 2014 constituted a wrong or unintended debit which was corrected by the appellant by taking a suo motu re-credit in January 2015, and that such account adjustment cannot be equated to a refund claim within the meaning of Section 11B. The authorities below erred in treating the matter as a time barred refund, failing to appreciate that the transaction was essentially an accounting reversal rather than an expenditure entitling a Section 11B claim. The decision draws support from High Court precedents (including ICMC Corporation Ltd. and Motorola India Pvt. Ltd.) which recognize that reversal of entries made by mistake or excess payment may not engage the one year limitation under Section 11B and that the concept of unjust enrichment does not automatically apply to technical account adjustments of CENVAT credit. The Tribunal also observed that the subsequent reversal of the re credit on the instructions of the Range Superintendent and the prompt filing of the refund claim thereafter cannot prejudice the appellant where the reversal was undertaken at the instance of revenue authorities and where the original re credit was permissible. The Larger Bench decision relied upon by the Commissioner was found not to be applicable on the facts of this case. [Paras 4, 5, 6]

The one year limitation under Section 11B does not apply to the present claim which arises from correction of a wrong CENVAT entry; the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the claim arose from correction of a wrong accounting entry (suo motu re credit) and was not a refund barred by the one year limitation under Section 11B; the reversal at departmental instance and subsequent refund filing did not attract the time bar.

Definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - components, spares and accessories criterion for capital goods - classification by chapter-headings for capital goods eligibility - definition of input under Rule 2(k) of the Cenvat Credit Rules - eligibility of Cenvat credit for goods used in the factory

Definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - components, spares and accessories criterion for capital goods - classification by chapter-headings for capital goods eligibility - Disputed M.S. plates are not capital goods for the purpose of Cenvat Credit. - HELD THAT: - The definition of "capital goods" in Rule 2(a) expressly limits eligible goods to those falling within specified chapters (e.g., Chapters 82, 84, 85, 90, heading 6805) and also permits components, spares and accessories of such specified goods. The plates in question are classifiable under Chapter 72 of the CETA, 1985, which is not among the chapters enumerated as eligible. Further, on the material before the Tribunal, the plates cannot be regarded as components, spares or accessories of the goods specified in the eligible chapters. For these reasons the plates do not meet the statutory definition of "capital goods" and cannot be treated as such for Cenvat purposes.

The plates cannot be considered capital goods.

Definition of input under Rule 2(k) of the Cenvat Credit Rules - eligibility of Cenvat credit for goods used in the factory - Disputed M.S. plates qualify as "input" and are eligible for Cenvat credit. - HELD THAT: - Rule 2(k) defines "input" to include all goods used in the factory by the manufacturer of the final product, subject to specified exclusions. It is an undisputed fact that the duty-paid plates were received and used within the appellant's registered factory and were employed in the manufacture of cement bricks and blocks. The authorities below did not specifically allege that the plates fall within any of the excluded categories under the definition. Applying the definition in Rule 2(k), the plates therefore qualify as "input" for the purpose of claiming Cenvat credit.

The plates are inputs and eligible for Cenvat benefit.

Final Conclusion: The Tribunal set aside the impugned order insofar as it denied Cenvat credit on the disputed M.S. plates, holding that while the plates are not capital goods, they qualify as inputs used in the factory and the appellant is entitled to Cenvat benefit.

Denial of Cenvat credit on Goods Transport Agency service - availability of Cenvat credit for transportation services up to the place of removal - precedential effect of Supreme Court decision in Commissioner of Central Excise & Service Tax v. Ultra Tech Cement Ltd. - penalty for wrongful availment where the issue was debatable

Denial of Cenvat credit on Goods Transport Agency service - availability of Cenvat credit for transportation services up to the place of removal - precedential effect of Supreme Court decision in Commissioner of Central Excise & Service Tax v. Ultra Tech Cement Ltd. - Denial of Cenvat benefit on GTA service was sustained. - HELD THAT: - The Tribunal held that the question of whether GTA services qualify as input services for Cenvat credit is no longer res integra in view of the Apex Court's decision in Commissioner of Central Excise and Service Tax v. Ultra Tech Cement Ltd., which interpreted the amended definition of 'input service' effective from 01.03.2008 to include only services used or utilized for transportation 'up to the place of removal'. It was an admitted fact that the appellant used GTA service for removal of goods from its factory for sale; applying the Supreme Court's ruling, such GTA service does not qualify for Cenvat credit. The Tribunal therefore sustained the impugned order insofar as it denied Cenvat benefit on the GTA service. [Paras 2, 3]

Impugned order sustained to the extent of denial of Cenvat benefit on GTA service.

Penalty for wrongful availment where the issue was debatable - precedential effect of Supreme Court decision in Commissioner of Central Excise & Service Tax v. Ultra Tech Cement Ltd. - Penalty imposed on the appellant was set aside. - HELD THAT: - The Tribunal found that the controversy over availment of Cenvat credit on GTA services was a contested question until resolution by the Apex Court in the Ultra Tech Cement Ltd. case. Given that the legal position was debatable at the relevant time, penal provisions could not be justifiably invoked. The Tribunal also relied on an identical earlier decision of the Tribunal in CCE & ST, Pune-I v. Bilcare Ltd., which upheld denial of credit but set aside penalty on the ground of debatable law. On this basis, the Tribunal set aside the penalty imposed on the appellant. [Paras 2, 3]

Penalty set aside as not sustainable where the issue was debatable prior to the Supreme Court decision.

Final Conclusion: The appeal is partly allowed: the denial of Cenvat benefit on GTA service is upheld, but the penalty imposed on the appellant is set aside.

Rectification of clerical/typographical error - correction of order/judgment - miscellaneous application for rectification - absence of specific recorded finding on penalty

Rectification of clerical/typographical error - correction of order/judgment - Rectification of incorrect monetary figures in the Tribunal's final order dated 13.03.2018. - HELD THAT: - Revenue pointed out that two amounts in the final order were typographically incorrect and provided the correct figures; the appellant's consultant accepted the correction. The Tribunal treated the error as typographical in nature and concluded that rectification of the final order in the interest of justice was appropriate. Accordingly, the order dated 13.03.2018 was modified to substitute the correct amounts in the specified paragraphs and serial entries. [Paras 2]

Miscellaneous application filed by Revenue allowed and the final order dated 13.03.2018 is rectified to replace the erroneous figures with the stated correct amounts.

Miscellaneous application for rectification - absence of specific recorded finding on penalty - Whether the Tribunal should rectify the record to reflect an oral pronouncement that no penalty be imposed on the appellant. - HELD THAT: - The appellant contended that the operative portion pronounced in open court recorded that no penalty should be imposed. On examination of the case records, the Tribunal found no specific order or observation recorded dispositively on the question of penalty. In the absence of any such recorded finding in the written order, the Tribunal held that the appellant's prayer for rectification on this ground could not be entertained. [Paras 3]

Miscellaneous application filed by the appellant dismissed as there is no specific recorded finding on penalty that can be the subject of rectification.

Final Conclusion: The Revenue's rectification application is allowed and the two typographical errors in the Tribunal's order dated 13.03.2018 are corrected as specified; the appellant's application seeking a rectification to record a finding of no penalty is dismissed for want of any specific recorded order to that effect.

Re-credit of Cenvat credit - technical book adjustment - refund under Section 11B of the Central Excise Act, 1944 - unjust enrichment - application of Rule 6(5) of the Cenvat Credit Rules, 2004

Re-credit of Cenvat credit - technical book adjustment - refund under Section 11B of the Central Excise Act, 1944 - unjust enrichment - application of Rule 6(5) of the Cenvat Credit Rules, 2004 - Lawfulness of taking suo motu re-credit of excess Cenvat credit instead of filing a refund application under Section 11B. - HELD THAT: - The appellant had inadvertently reversed 7% in its Cenvat account though the prescribed amount was 6%, and subsequently re-credited the excess amount. The Tribunal held that such reversal and re-credit are accounting/book adjustments without any actual outflow of funds. In these circumstances, a claim under Section 11B for refund does not arise. The court accepted the reasoning in ICMC Corporation Ltd. (Madras High Court) that where the transaction is essentially an account-entry correction and the amount pertains to inputs/services covered by Rule 6(5) of the Cenvat Credit Rules, 2004, the concept of unjust enrichment is inapplicable and the requirement to file a refund application under Section 11B is not attracted. Applying this principle, the impugned order disallowing the suo motu re-credit was set aside.

Impugned order set aside; suo motu re-credit of the excess Cenvat credit upheld.

Final Conclusion: The appeal is allowed: the re-credit of the excess Cenvat credit, being a technical book adjustment with no outflow of funds and involving amounts covered by Rule 6(5), did not require filing a refund under Section 11B and is legally permissible.

Assessment under Section 12-A - under-invoicing / sales shown at abnormally low prices - requirement of enquiry to ascertain prevailing market price - distinction between Section 12-A and Section 16 - best judgment assessment - burden on Revenue to prove collection in excess of ostensible consideration

Assessment under Section 12-A - under-invoicing / sales shown at abnormally low prices - best judgment assessment - Validity of the assessment insofar as it was held to be under Section 12-A and founded on alleged under-invoicing/abnormally low prices without requisite enquiry. - HELD THAT: - The Court found that the assessing authority invoked powers under Section 12-A and that Section 12-A requires satisfaction that the dealer, with a view to evade tax, has shown sales at prices abnormally low compared to the prevailing market price. The assessment, however, was completed without any enquiry to ascertain the prevailing market price and was based solely on prices recorded in the dealer's books. The Court emphasised that Section 12-A cannot be invoked absent a comparison with prevailing market prices and satisfaction of the intent to evade tax. In the absence of such enquiry and satisfaction, the assessment was held to be unsustainable. The Court therefore concluded that the Tribunal erred in reversing the first appellate authority which had set aside the best judgment assessment as being based on surmises and conjectures. [Paras 11, 13, 17, 19, 20]

Assessment under Section 12-A is unsustainable where the Assessing Officer did not make any enquiry to ascertain prevailing market price and did not satisfy the twin tests required by Section 12-A.

Requirement of enquiry to ascertain prevailing market price - best judgment assessment - Whether it was permissible to invoke Section 12-A without making enquiries (including of competing dealers) to verify market prices and to disbelieve the dealer's explanation. - HELD THAT: - The Court held that where a dealer offers an explanation for variance in prices-here, differences due to purity, cylinder size, mode of sale and existence of other suppliers charging similar rates-the Assessing Officer, if disbelieving that explanation, must make enquiries (for example, of other dealers) to verify prevailing market prices. The Assessing Officer's order was described as cryptic and devoid of reasons, and no incriminating records were found during inspection. The first appellate authority's conclusion-that the best judgment assessment was unsustainable for want of enquiry-was upheld. The Tribunal erred in holding that such enquiry was unnecessary. [Paras 11, 15, 18, 19]

An enquiry to ascertain prevailing market price (including verification from competing dealers) is necessary before invoking Section 12-A; absence of such enquiry renders a best judgment assessment unsustainable.

Burden on Revenue to prove collection in excess of ostensible consideration - distinction between Section 12-A and Section 16 - Whether the Tribunal was correct in holding that it was not mandatory to make an enquiry and in its treatment of burden/shifting of burden between the assessing authority and the Revenue. - HELD THAT: - The Court noted jurisprudence that provisions analogous to Section 12-A place a duty on the Revenue to prove that the dealer actually collected more than the ostensible consideration shown in accounts. The Court rejected the Revenue's contention that the assessment could be treated as one under Section 16; it emphasised the marked distinction between Sections 12-A and 16 and held that the former cannot be invoked without satisfying its specific tests. By failing to enquire and to establish that the dealer collected more than shown, the assessing authority did not discharge the burden required to sustain a Section 12-A assessment. The Tribunal's observations that enquiry was unnecessary and its approach to burden were therefore held to be erroneous. [Paras 12, 13, 16, 17, 18]

The Tribunal was wrong to treat enquiry as unnecessary and to ignore the Revenue's burden to establish collection in excess of ostensible consideration; Section 12-A requires specific proof distinct from an escapement assessment under Section 16.

Final Conclusion: The tax case revisions are allowed: the Tribunal erred in reversing the first appellate authority. The assessments purportedly made under Section 12-A are unsustainable because the Assessing Officer failed to make necessary enquiries to ascertain prevailing market price or to establish that the dealer had collected more than shown; the appeals are allowed in favour of the dealer and the substantial questions of law are answered for the petitioner.

Right of personal hearing - principles of natural justice - compliance with departmental circular instructions - pre-assessment notice under Section 22(4) of the TNVAT Act, 2006 - quashment of assessment and remand for fresh consideration

Right of personal hearing - principles of natural justice - compliance with departmental circular instructions - Whether the assessment and demand could be sustained where no personal hearing was afforded and departmental circular procedures were not complied with. - HELD THAT: - The Court held that the circular dated 03.02.2014 required that a personal hearing be afforded to the dealer irrespective of whether the dealer opted for it and that assessing officers must ensure compliance with basic procedures before passing assessment orders. Having regard to that circular and the Division Bench authority cited, the Court concluded that the assessing authority failed to afford sufficient opportunity including the right of personal hearing, thereby violating the principles of natural justice. For these reasons the impugned assessment and demand could not be sustained and required quashment and reconsideration. [Paras 8, 10, 11]

Impugned order dated 13.03.2015 and notice dated 09.06.2015 quashed; matter remanded for fresh consideration after affording sufficient opportunity including personal hearing.

Pre-assessment notice under Section 22(4) of the TNVAT Act, 2006 - quashment of assessment and remand for fresh consideration - Scope of fresh consideration on remand in relation to the basis of valuation adopted by the assessing authority (use of department's website as sole source). - HELD THAT: - The Court observed that the assessing officer derived values from the department's own website rather than from invoices or material furnished by the petitioner or any independent source. Rather than adjudicating the correctness of that valuation on the merits, the Court remanded the matter for fresh consideration. On remand the assessing authority is to afford the petitioner a full opportunity, including personal hearing, and then decide the tax demand on merits and in accordance with law. [Paras 9, 11]

Issue of valuation and basis of assessment left open for fresh consideration by the assessing authority after affording the petitioner opportunity and personal hearing.

Final Conclusion: The High Court set aside the impugned assessment order and notice for failure to afford personal hearing and non-compliance with departmental procedure, and remanded the matter to the assessing authority to decide afresh on merits after giving the petitioner a full opportunity including personal hearing within twelve weeks.

Reduction in rate of tax - notification G.O.P. No.253 dated 17.03.1986 - milk food - baby milk foods - skimmed milk powder - First Schedule Entry 103(viii) - inclusive entry - construction of tax notification

Notification G.O.P. No.253 dated 17.03.1986 - milk food - skimmed milk powder - First Schedule Entry 103(viii) - construction of tax notification - inclusive entry - Skimmed milk powder is not entitled to the reduced rate of tax under G.O.P. No.253 dated 17.03.1986 for the assessment year 1990-91 and is taxable at 10% under Entry 103(viii). - HELD THAT: - The notification G.O.P. No.253 of 17.03.1986 reduced the rate of tax from 10% to 4% in respect of "milk food including baby milk foods"; it was subsequently amended on 26.09.1991 to restrict the benefit to "baby milk foods only". The petitioner contended that skimmed milk powder, being milk in dry form, fell within "milk food" and thus qualified for the reduced rate for the period prior to 26.09.1991. The Court held that the text of Entry 103(viii) in the First Schedule separately refers to "Milk Foods" and "milk powder", and that the Entry is an inclusive entry which lists distinct products; the presence of the words "milk powder" in the entry does not mean that all milk powder necessarily falls within the category "milk food" for purposes of the exemption notification. A court cannot read words into the notification; construction must follow the plain language of the entry and the notification. Applying that principle, the Assessing Officer correctly treated the sale of skimmed milk powder as falling under Entry 103(viii) taxable at 10%, and the Tribunal's confirmation of that view required no interference. [Paras 7, 8, 9, 10, 11]

The petition is dismissed; skimmed milk powder is taxable at 10% under Entry 103(viii) and is not entitled to the reduced rate under G.O.P. No.253 for AY 1990-91.

Final Conclusion: Tax Case Revision dismissed; substantial question of law answered against the petitioner and the sale of skimmed milk powder for assessment year 1990-91 is held taxable at 10% under Entry 103(viii).

Powers of second appellate authority under Section 58 of the TNVAT Act - Power to enhance assessment - Appellate Tribunal's jurisdiction - Right to appeal and cross-objections - Acquiescence by failure to appeal - Limitation on suo motu adjudication by Tribunal

Powers of second appellate authority under Section 58 of the TNVAT Act - Power to enhance assessment - Right to appeal and cross-objections - Acquiescence by failure to appeal - Limitation on suo motu adjudication by Tribunal - Whether the Tribunal could lawfully restore the assessment of turnover of Rs. 5,25,000/- and reinstate penalty when the Revenue did not challenge that part of the order before the Tribunal or file a petition for enhancement. - HELD THAT: - The Tribunal functions as a second appellate authority under Section 58 of the TNVAT Act and not as a revisional forum; its powers include enhancement of assessment only where the State has filed a petition for enhancement under sub Section (5) of Section 58 (subject to the condonation of delay rules). The memorandum of appeal filed by the Revenue before the Tribunal disputed only two specific turnovers and consciously did not challenge the assessment of turnover of Rs. 5,25,000/- nor the deletion of the penalty by the first appellate authority. Absent an appeal or a petition for enhancement by the Department, the normal rule of acquiescence applies and the Tribunal had no jurisdiction to suo motu frame and decide issues beyond those agitated by the Revenue. The Tribunal's restoration of the Assessing Officer's order on the unchallenged turnover and penalty was therefore beyond its jurisdiction and contrary to the principle that a party not appealing a decision is bound by it, as explained in the judgment of M/s.Vijaya Stores . Accordingly the Tribunal's order is set aside and the order of the first appellate authority is restored. [Paras 6, 7, 8, 9, 10]

Tribunal exceeded its jurisdiction in restoring the assessment and penalty on the unchallenged turnover; impugned order set aside and the first appellate authority's order restored.

Final Conclusion: Tax revision allowed; Tribunal's order dated 27.05.2015 set aside and the order of the Appellate Deputy Commissioner dated 17.05.2013 restored; substantial questions answered in favour of the petitioner; no costs.

Ultra vires challenge to Section 174 of the KSGST Act - limitation defence under Section 25(1) of the KVAT Act - application of precedent / ratio of earlier judgment

Ultra vires challenge to Section 174 of the KSGST Act - application of precedent / ratio of earlier judgment - Validity of Section 174 of the KSGST Act was challenged and decided against the petitioners by application of the ratio of an earlier judgment. - HELD THAT: - The petitioners contended that Section 174 of the KSGST Act was ultra vires the State's legislative competence. The High Court held that the question stands squarely covered against the petitioners by the Court's earlier decision in W.P.(C) No.11335 of 2018 and connected cases, applied that ratio and therefore rejected the ultra vires challenge. No fresh examination of the constitutional competence was undertaken in these petitions in view of the earlier binding determination. [Paras 2]

The ultra vires challenge to Section 174 of the KSGST Act is negatived and the petitions are dismissed applying the earlier ratio.

Limitation defence under Section 25(1) of the KVAT Act - application of precedent / ratio of earlier judgment - The plea that the demand is barred by limitation under Section 25(1) of the KVAT Act was considered and rejected by applying the ratio of the earlier judgment. - HELD THAT: - Petitioners raised limitation under Section 25(1) of the KVAT Act as a defence in some matters. The Court observed that this point, like the challenge to Section 174, is squarely covered against the petitioners by the earlier judgment referred to and, accordingly, applied that precedent to reject the limitation defence. No separate or additional relief was afforded on the ground of limitation in these petitions. [Paras 2]

The limitation plea under Section 25(1) of the KVAT Act is negatived and the petitions are dismissed applying the earlier ratio.

Final Conclusion: All writ petitions are dismissed by applying the ratio of the Court's earlier judgment; the challenges to the validity of Section 174 of the KSGST Act and the limitation defence under Section 25(1) of the KVAT Act were rejected.

Validity of Clause 3(2)(iii) of the Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1970 - Nomination of a workman director and representative union's right to furnish a panel - Reasonable classification and Article 14 - distinction between workmen and officers for eligibility - Legislative competence to prescribe category specific qualifications and disqualifications for directors

Nomination of a workman director and representative union's right to furnish a panel - Relief rendered infructuous by superannuation and subsequent nominations - Whether the appellants' prayer to quash the communication rejecting their June 2009 panel and to command nomination from that panel remained maintainable - HELD THAT: - The Court held that the reliefs seeking quashing of the communication dated 10.10.2009 and mandamus to nominate one of the persons named in the panel dated 08.06.2009 had become infructuous. The employees whose names were recommended had long since retired and, in the intervening period, other persons had been nominated from the worker/employee category to the Board. Consequently, those specific reliefs no longer survived for adjudication and were not entertained. [Paras 21, 22]

The prayers for quashing the 10.10.2009 communication and for mandamus to appoint a nominee from the June 2009 panel were rendered infructuous and do not survive.

Validity of Clause 3(2)(iii) of the Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1970 - Reasonable classification and Article 14 - distinction between workmen and officers for eligibility - Legislative competence to prescribe category specific qualifications and disqualifications for directors - Whether Clause 3(2)(iii) of the Scheme, which prescribes continuous service and residual service qualifications for a workman to be eligible as a director, is violative of Article 14 - HELD THAT: - The Court upheld Clause 3(2)(iii) as constitutionally valid. It observed that Section 9(3)(e) and (f) of the Act create distinct categories - workmen (as defined under the Industrial Disputes Act) and officers - and that the legislature may prescribe different qualifications and disqualifications for distinct categories. The classification between workmen and officers is not arbitrary: workmen are governed by the Industrial Disputes Act while officers are governed by separate service rules, and the Board comprises persons drawn from diverse fields for whom uniform eligibility criteria are neither feasible nor required. Article 14 applies to equals and not to unequals; therefore differential disqualifications directed at the worker category do not amount to unconstitutional discrimination. [Paras 26, 28, 29, 31, 32]

Clause 3(2)(iii) of the Scheme is legal and not violative of Article 14; the High Court's decision upholding the clause is affirmed.

Final Conclusion: The appeal is dismissed. The specific reliefs seeking quashing of the 10.10.2009 communication and nomination from the June 2009 panel are infructuous, and Clause 3(2)(iii) of the Scheme, 1970 is held to be valid.