TaxTMI Updates e-Newsletter
Mar 23,2016

Summary order. Civil appeal dismissed under the Central Board of Direct Taxes circular as the tax effect at filing was below Rs. 25,00,000; question of law kept open; I.A. No.2 of 2016 disposed of. Delay condoned.

Validity of settlement application at the stage of Section 245D(2C) - requirement of true and full disclosure in settlement applications - non-speaking order and duty to consider objections at Section 245D(2C) - prima-facie view at interlocutory stage - preservation of Revenue's rights at subsequent Section 245D(4) proceedings

Validity of settlement application at the stage of Section 245D(2C) - non-speaking order and duty to consider objections at Section 245D(2C) - prima-facie view at interlocutory stage - Impugned order under Section 245D(2C) is not a non speaking order and validly held that, on the material before the Commission, the settlement applications could not be rejected as invalid for failure to make true and full disclosure. - HELD THAT: - The Court examined whether the Commission had considered the Revenue's objections before recording its view under Section 245D(2C). Unlike the decision in ITSC No.2 where the Commission had postponed consideration and thus failed to address the Revenue's contention, the impugned order expressly dealt with the submissions and concluded that there was no material to show failure of true and full disclosure at that stage. The High Court found the Commission's conclusion to be a prima-facie view based on the record and submissions, not a postponement or a perverse/arbitrary decision, and therefore within the permissible scope of judicial review under Article 226. [Paras 6, 7, 11]

Petition challenging the Commission's order under Section 245D(2C) dismissed on merits; the order is held to have considered Revenue's objections and to have validly recorded a prima-facie view that the applications were not invalid.

Requirement of true and full disclosure in settlement applications - preservation of Revenue's rights at subsequent Section 245D(4) proceedings - The Commission's prima-facie view at Section 245D(2C) does not estop the Revenue from urging the issue of true and full disclosure at the Section 245D(4) stage; the question remains open for fresh consideration on merits. - HELD THAT: - The Court clarified that a prima-facie acceptance of disclosure at the interlocutory stage is without prejudice to the substantive adjudication. The requirement of true and full disclosure must be satisfied at all stages, and the Revenue is free to press its objections during the subsequent proceedings under Section 245D(4). The Commission must consider the matter on merits at that stage and is not bound or influenced by the present prima-facie view. [Paras 8]

Revenue's right to contest true and full disclosure at the Section 245D(4) hearing is preserved; the Commission must decide the issue on merits thereafter.

Final Conclusion: The Petition is dismissed: the Settlement Commission's order under Section 245D(2C) was not non speaking and validly recorded a prima facie view that the applications were not invalid; however, the Revenue may still urge the issue of true and full disclosure at the subsequent Section 245D(4) proceedings.

Transfer pricing - arm's length price - comparability analysis - Function, Assets and Risk analysis - selection of comparable - transactional net margin method - cost plus remuneration - risk insulation - finding of fact - perverse finding

Comparability analysis - Function, Assets and Risk analysis - selection of comparable - arm's length price - Tribunal's conclusion that the assessee's advisory activity is comparable to Carlyle India Advisors Pvt. Ltd. and that IDC (India) Ltd. is an appropriate sole comparable for determining the ALP of services rendered. - HELD THAT: - The Tribunal applied a FAR analysis and concluded that the assessee performed investment advisory functions-identifying potential investee companies and advising its associated enterprise-while the associated enterprise took the final investment decision; assets and expertise relied upon were similar to those in the Carlyle India matter; remuneration was on a cost plus basis and both parties were risk insulated. The Tribunal noted that in its earlier decision in Carlyle India Advisors Pvt. Ltd. it had examined eight comparables proposed by Revenue and retained only IDC (India) Ltd. as appropriate; the same eight comparables were proposed in the present case and the Tribunal, applying identical reasoning and subject year figures for IDC (India) Ltd., adopted IDC as the sole comparable and determined ALP accordingly. The High Court held that selection of a comparable and the resulting arm's length determination are essentially findings of fact; the Tribunal's view was a reasonable possible view and not shown to be perverse. Consequently the question framed by Revenue did not raise any substantial question of law warranting interference. [Paras 5, 7, 8, 9]

Tribunal's finding that the assessee is an investment adviser comparable to Carlyle India Advisors Pvt. Ltd., and its adoption of IDC (India) Ltd. as the sole comparable for ALP determination, is upheld.

Final Conclusion: Appeal dismissed. The Tribunal's factual conclusion on comparability and its choice of comparable for determining the arm's length price are upheld as a reasonable view and do not raise any substantial question of law.

Disallowance under section 40(a)(i) read with deduction of tax at source under section 195 - managerial, technical or consultancy services under section 9(1)(vii) - income deemed to accrue or arise in India - no income accrues in India for services rendered and paid outside India - application of CBDT Circular No.786 - matching principle and treatment of expenditure shown in books and return

Disallowance under section 40(a)(i) read with deduction of tax at source under section 195 - managerial, technical or consultancy services under section 9(1)(vii) - application of CBDT Circular No.786 - no income accrues in India for services rendered and paid outside India - Whether payment of sub-arranger fees to non-residents attracted withholding under section 195 and consequent disallowance under section 40(a)(i). - HELD THAT: - The Tribunal and CIT(A) found the payments to non-resident sub-arrangers were commission/brokerage and not fees for technical, managerial or consultancy services within the meaning of section 9(1)(vii). The services were performed outside India and, following the Apex Court in Toshoku Ltd. and the CBDT Circular No.786, no income was held to accrue or arise in India in respect of such services; consequently no obligation to deduct tax under section 195 arose. The factual conclusion that the services were not technical or managerial was a possible view and was not shown to be perverse or arbitrary. In that view the disallowance under section 40(a)(i) did not survive. [Paras 4]

Tribunal's deletion of disallowance under section 40(a)(i) upheld; no obligation to withhold under section 195.

No income accrues in India for services rendered and paid outside India - application of CBDT Circular No.786 - Whether the challenge to taxation of interest on NOSTRO account (Questions framed (1) and (2)) could be entertained. - HELD THAT: - The Revenue conceded that these questions were concluded against it by this Court's earlier order dated 17th June 2015 in a related appeal. In view of that concession and the prior decision, the Court held that the questions did not give rise to any substantial question of law requiring fresh adjudication in the present appeal. [Paras 3]

Questions (1) and (2) not entertained as they are concluded by the earlier order.

Income chargeable at a special rate to be computed on gross basis - Whether income chargeable at special rate under section 10(15) should be computed on gross or net basis (Question (4)). - HELD THAT: - The Court observed that an identical question had been considered and not entertained by this Court in Income Tax Appeal No.1430 of 2013 by order dated 17th June 2015. No change in facts or law was shown to warrant a different view; accordingly the question did not raise a substantial question of law in the present appeal. [Paras 5]

Question (4) not entertained as substantially covered by an earlier order.

Matching principle and treatment of expenditure shown in books and return - treatment of revenue expenditure claimed in the return - Whether the expenditure of Rs. 14.87 crores paid to sub-arrangers, amortized by the assessee over five years in its books, was deductible only to the extent amortized or in full in the year of payment (Question (5)). - HELD THAT: - The Tribunal held the expenditure was incurred in collecting deposits and deductible in the year of payment. The High Court noted that the Supreme Court in Taparia Tools Ltd. has settled that ordinarily revenue expenditure incurred in a year is allowable in that year and that where an assessee claims a particular treatment in the return the Assessing Officer must proceed on that claim unless specific principles (such as matching) justify departure. As Taparia Tools Ltd. governs the issue, no substantial question of law was held to arise in the present facts. [Paras 6]

Question (5) not entertained as concluded by the Apex Court's decision in Taparia Tools Ltd.; the Revenue cannot sustain a different treatment on these facts.

Final Conclusion: The appeal is dismissed; the Tribunal's order for AY 2001-02 is upheld, and the questions framed either do not give rise to substantial questions of law or are concluded by binding precedent or earlier orders.

Reopening of assessment under section 147 - proviso requiring failure to disclose fully and truly all material facts - reopening based on change of opinion versus presence of tangible material - Explanation 1 to section 147 - production of documents will not necessarily amount to disclosure - requirement that reasons must disclose belief and link to escapement of income

Reopening of assessment under section 147 - proviso requiring failure to disclose fully and truly all material facts - requirement that reasons must disclose belief and link to escapement of income - Whether the reasons recorded by the Assessing Officer establish that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts, thereby validating reassessment initiated after four years - HELD THAT: - The Tribunal found and the High Court accepted that the material and documents relating to the joint development agreement and conversion of the Whitefield property into stock-in-trade were on record at the time of the original assessment and had been considered by the AO. The proviso to section 147 restricts reopening after four years to situations where escapement is by reason of failure to disclose fully and truly all material facts. Reasons must manifest the AO's belief that such failure occurred and must provide a live link between evidence and the conclusion of escapement. In the present case the reasons recorded did not state that escapement arose from any failure by the assessee to disclose material facts; para 19's reference to non-filing of information regarding capital gains was not held to constitute the requisite satisfaction. Explanation 1 to section 147 does not operate as a blanket bar where documents were produced, but it requires case-specific scrutiny; here the facts showed production and consideration of the relevant material in the original assessment and thus Explanation 1 could not be invoked to override the proviso. Having accepted the Tribunal's factual finding that all material was disclosed and available to the AO, the Court concluded that the proviso's condition for reopening was not satisfied. [Paras 4, 5, 6]

Reopening under section 147 is invalid as the reasons do not disclose a belief that income escaped due to the assessee's failure to fully and truly disclose material facts; the AO had the relevant material when making the original assessment.

Reopening based on change of opinion versus presence of tangible material - requirement of tangible material to justify reassessment (Kelvinator principle) - Whether initiation of reassessment proceedings was merely a change of opinion by the Assessing Officer and therefore impermissible - HELD THAT: - The Tribunal applied the Supreme Court's test in CIT v. Kelvinator of India Ltd. that post-amendment power to reopen must be exercised only where there is 'reason to believe' grounded on tangible material and not on a mere change of opinion. The record shows that the AO was aware of the conversion to stock-in-trade and the joint development agreement at the time of the original assessment but did not treat the JDA as amounting to a transfer under section 45(2). The reasons recorded relied on legal conclusions (and some later judicial pronouncements) rather than any new tangible material emerging after the assessment. Given that the facts were on record and no fresh material came to the AO's notice, the reassessment was held to be founded on a change of opinion, which is an impermissible basis for reopening under section 147. [Paras 4, 5, 6]

Reassessment was initiated on the basis of change of opinion without any new tangible material and is therefore improper.

Final Conclusion: The High Court dismissed the Revenue's appeal, upholding the Tribunal's conclusion that the reassessment proceedings under section 147 were invalid: there was no recorded belief that income escaped due to the assessee's failure to disclose fully and truly all material facts, and the reopening amounted to an impermissible change of opinion in the absence of new tangible material.

Taxability of interest on enhanced compensation awarded under the Land Acquisition Act - Effect of amendment in Income Tax Act on taxation of interest component of enhanced land acquisition awards - Abrogation of the ratio in Commissioner of Income-tax, Faridabad v. Ghanshyam (HUF) by statutory amendment - Deduction at source at the time of deposit of award

Taxability of interest on enhanced compensation awarded under the Land Acquisition Act - Effect of amendment in Income Tax Act on taxation of interest component of enhanced land acquisition awards - Abrogation of the ratio in Commissioner of Income-tax, Faridabad v. Ghanshyam (HUF) by statutory amendment - Deduction at source at the time of deposit of award - Interest component of the additional/enhanced land acquisition award is taxable under the Income Tax Act and must be deducted at source at the time of deposit. - HELD THAT: - The Court accepted the submission that, after the statutory amendment effected by Section 145-A(b) of the Income Tax Act (with effect from April 2010), the earlier judicial conclusion in Commissioner of Income-tax, Faridabad v. Ghanshyam (HUF) is no longer applicable to awards made after the amendment. The Collector's award in this matter was passed on November 10, 2010, i.e., subsequent to the amendment; hence the interest element forming part of the enhanced compensation falls within the taxable ambit as amended. The Court noted that subsequent decisions of a Division Bench have reiterated the position of taxability post-amendment and that the earlier orders which followed the pre-amendment ratio were therefore incorrect. Consequently the earlier orders were recalled and the review was allowed to the extent of holding that interest on the additional award is taxable and subject to deduction at source when deposited. [Paras 1, 2]

Earlier orders recalled; review allowed; interest on the additional award is taxable and liable to deduction at source at the time of deposit.

Final Conclusion: Review allowed; previous orders recalled and it is held that interest on the enhanced land acquisition award made after the April 2010 amendment is taxable under the Income Tax Act and must be subjected to deduction at source at the time of deposit.

Deduction under Section 80HHC - income from other sources - business income - nexus with export activity - idle funds advanced to third parties

Deduction under Section 80HHC - income from other sources - nexus with export activity - idle funds advanced to third parties - Whether interest earned on advances of excess/idle funds to various persons qualifies as business income connected with export activity and is eligible for deduction under Section 80HHC, or is taxable as income from other sources and not eligible for such deduction. - HELD THAT: - The Court held that the question is no longer res integra in view of the Larger Bench decision in Reliance Trading Corporation v. ITO and the Division Bench decision in CIT v. Vimal Chand Surana, which examined comparable controversies and concluded that interest earned on advances of idle funds lacks the requisite direct nexus with the export business to be treated as business income for the purpose of Section 80HHC. Applying those precedents (including reliance on earlier authorities such as Murli Investment Co. Ltd. and Rajasthan Land Development Corporation), the Court accepted the Tribunal's conclusion that the receipts represented advances of idle funds and not income arising from the export business; accordingly such interest does not enure to the benefit of deduction under Section 80HHC. [Paras 9, 10]

Interest earned on advances of idle/excess funds is to be treated as income from other sources and is not eligible for deduction under Section 80HHC; the appeal is dismissed.

Final Conclusion: In view of binding decisions of the Larger Bench and Division Bench, the interest in question is held to be income from other sources not eligible for deduction under Section 80HHC; the appeal is dismissed.

Foreign exchange gains and losses - revenue v. capital treatment - treatment of foreign exchange gain/loss under section 43A and revenue account principles - application of Woodward Governor precedent to restatement of foreign currency loan - computation of book profits under section 115JB - treatment of provisions for contingencies in book profit computation - deductibility of advances/deposits written off as trading/business loss - allowance of income-tax depreciation on revised WDV after rectification

Foreign exchange gains and losses - revenue v. capital treatment - application of Woodward Governor precedent to restatement of foreign currency loan - treatment of foreign exchange gain/loss under section 43A and revenue account principles - Remand to Assessing Officer for fresh adjudication on the character and tax treatment of foreign exchange gain/loss arising on restatement and repayment of foreign currency loan. - HELD THAT: - The Tribunal admitted additional evidence (foreign currency loan agreement) and found that determinative facts were not finally considered by the lower authorities in the light of the Supreme Court's decision in Woodward Governor. The Tribunal directed the Assessing Officer to determine (a) whether the foreign currency loan was utilized for working capital (in which case resulting exchange gain/loss would be revenue in nature and taxable/allowable accordingly), (b) alternatively whether the loan proceeds (or original debentures) were applied for acquisition of fixed/capital assets (in which case exchange gain/loss should be adjusted under section 43A), and (c) to treat the actually incurred exchange loss on repayments in accordance with (a) or (b). The Tribunal also directed the AO to decide the matter in the light of any eventual decision of the Calcutta High Court in the related appeal and permitted the assessee to file fresh evidence. [Paras 3]

Issue remanded to the Assessing Officer for fresh adjudication in accordance with the directions (a)-(c) and in the light of the Calcutta High Court's decision; assessee's grounds allowed for statistical purposes.

Computation of book profits under section 115JB - treatment of provisions for contingencies in book profit computation - Whether amounts representing write-back of earlier provisions for contingencies should be added back while computing book profits under section 115JB. - HELD THAT: - The Tribunal examined the factual treatment of the provisions: the provisions for contingencies had been created in earlier years and voluntarily added back in the computation of book profits in those years under Explanation 1(c) to section 115JB. The assessee wrote back most of those provisions in the year under appeal and sought to reduce book profits to avoid double taxation. The CIT(A) deleted the addition and the Tribunal found no infirmity in that conclusion on the basis of the material on record and the uncontroverted factual findings that the amounts had been taxed in the year of creation; accordingly the amounts written back were not to be added again to book profits for AY 2005-06. [Paras 6]

Revenue's appeal dismissed; assessee entitled to reduce book profits by the written-back provision amount while computing book profits under section 115JB.

Deductibility of advances/deposits written off as trading/business loss - application of section 37(1) and section 28 to irrecoverable business advances - Whether various advances and deposits written off by the assessee constitute allowable business loss or are capital in nature and disallowable. - HELD THAT: - The Tribunal found that the advances and deposits were made in the ordinary course of business, remained unrecoverable for a long period, and were written off as irrecoverable. The CIT(A) accepted the assessee's position treating the write-offs as trading losses under section 28 and allowed the deduction under section 37(1). The Tribunal agreed with the factual conclusion and precedent treatment in the assessee's earlier years and held there was no infirmity in deleting the disallowance. [Paras 8]

Revenue's ground dismissed; disallowance of Rs. 37,087/- deleted and write-offs treated as allowable business loss.

Allowance of income-tax depreciation on revised WDV after rectification - effect of rectification/earlier admissions on subsequent years' WDV and depreciation - Whether the assessee is entitled to additional depreciation in later years consequent to rectification/allowance of tax depreciation for earlier year and restatement of WDV. - HELD THAT: - The Tribunal noted that the assessee had sought rectification and additional tax depreciation for AY 1999-2000 following an amendment and had adjusted WDV in subsequent years. The CIT(A) allowed additional depreciation relying on the tribunal's earlier decisions in the assessee's own case for prior years and directed the AO to verify the arithmetical correctness. The Tribunal, following those earlier orders and subsequent consistent tribunal decisions for later years, found no infirmity in the CIT(A)'s direction and upheld allowance of additional depreciation. [Paras 9]

Revenue's ground dismissed; assessee entitled to additional depreciation as directed by the CIT(A).

Final Conclusion: For A.Y. 2005-06: the assessee's appeal on foreign exchange loss is remanded to the Assessing Officer for fresh consideration in accordance with the Tribunal's directions and pending High Court decision; the revenue's appeal against computation of book profits under section 115JB is dismissed; the revenue's appeals on (i) disallowance of advances/deposits written off and (ii) excess depreciation claim are dismissed, upholding the CIT(A)'s deletions and directions.

Carry forward of excess application of income - application of income under Section 11 - accumulation up to 15% under Section 11 - sources of funds for application of trust income - prohibition on double deduction

Carry forward of excess application of income - application of income under Section 11 - sources of funds for application of trust income - prohibition on double deduction - Whether excess application of funds in one year can be carried forward and claimed as application of income under Section 11 in a subsequent assessment year - HELD THAT: - The Tribunal applied its earlier reasoning in Anjuman-E-Himayath-E-Islam (extract at para 4.4-4.6) and held that Section 11 permits exemption only in respect of application of the 'income derived from property held under the trust' and voluntary contributions (other than corpus contributions). Funds applied from corpus, accumulated funds, loans or sundry creditors are not application of 'income' for the purposes of Section 11; corpus and accumulated funds are already exempt when received and treating their later utilisation as application of income would result in double deduction. Amounts applied from loans or sundry creditors may be treated as application in the year such liabilities are repaid from income, but otherwise excess application arising from non-income sources cannot be carried forward as application of income. The Tribunal further noted that the assessee bears the onus to explain the earlier year's income and what was allowed; in absence of details for the earlier year, it was presumed the income had already been allowed in the earlier year and therefore nothing remained to be carried forward. Applying these principles to assessment year 2008-09 (and the expenditure said to have been incurred in assessment year 2007-08), the Tribunal found no reason to interfere with the lower authority's rejection of carry forward and confirmed the CIT(A)'s order. [Paras 5, 6]

Carry forward of the excess application of funds as application of income under Section 11 is not permissible on the facts; lower authorities' orders confirmed.

Final Conclusion: The appeal is dismissed and the order of the CIT(A) is confirmed; carry forward of the claimed excess application of funds was not allowed in assessment year 2008-09.

Penalty under Section 271AA for failure to keep, maintain or furnish transfer pricing information - Condonation of delay and sufficiency of cause for non-filing of information under Section 92D - Relevance of Transfer Pricing Officer's confirmation of Arm's Length Price (no upward adjustment)

Penalty under Section 271AA for failure to keep, maintain or furnish transfer pricing information - Condonation of delay and sufficiency of cause for non-filing of information under Section 92D - Relevance of Transfer Pricing Officer's confirmation of Arm's Length Price (no upward adjustment) - Deletion of penalty levied under Section 271AA for delayed submission of information called for under Section 92D. - HELD THAT: - The Tribunal accepted the assessee's explanation that the authorised representative was indisposed by his son's marriage and that an adjournment request and subsequent communications demonstrated a bona fide, non-wanton delay in furnishing the information called for under Section 92D. The record showed that the Transfer Pricing Officer issued notice and the assessee furnished details to the TPO, and the TPO did not make any upward adjustment to the Arm's Length Price. The Tribunal observed that, in the factual matrix involving technical transfer pricing issues and where the TPO confirmed the ALP without modification, the reasons for delay appeared genuine. Having considered the factual evidence (including the adjournment rejection and the marriage invitation) and the absence of any upward revision by the TPO, the Tribunal found that penal action under Section 271AA was not justified and directed deletion of the penalty. The Tribunal expressly noted that, having decided the main ground in favour of the assessee, it was unnecessary to adjudicate additional contentions regarding the applicability of Section 271G. [Paras 7, 8]

Penalty imposed under Section 271AA deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2011-2012, deleted the penalty levied under Section 271AA for delayed filing of transfer pricing information, relying on the genuine cause for delay and the TPO's confirmation of the ALP without upward adjustment.

Characterisation of income as business income or capital gain - intention at the time of purchase - holding period not sole criterion for classification - consistent past and subsequent treatment by revenue - use of own funds for investments - precedential value of coordinate-bench decisions

Characterisation of income as business income or capital gain - holding period not sole criterion for classification - intention at the time of purchase - consistent past and subsequent treatment by revenue - Whether the short term gains from sale of shares amounting to Rs. 7,79,403/- for AY 2008-09 are business income or short term capital gains - HELD THAT: - The Tribunal examined the assessee's conduct, books and earlier and subsequent assessment orders and found that (i) the assessee had been consistently treating and the department had accepted similar gains as short term capital gains in other assessment years; (ii) investments were made out of the assessee's own funds and were shown as investments in the balance sheet; and (iii) the period of holding of various share lots ranged widely, with some held for long periods, so that high frequency of transactions in the year under consideration was not by itself decisive. The Tribunal held that holding period alone cannot be the sole criterion for treating transactions as business activity and that the intention at time of purchase and overall conduct must be considered. Relying on coordinate-bench decisions which applied the principles laid down by higher courts and CBDT guidance, the Tribunal concluded that the facts of this case warranted classification of the receipts as short term capital gains rather than business income and directed the AO to treat the income accordingly. [Paras 7, 8]

Assessee's short term gains are to be treated as short term capital gains; appeal allowed and AO directed to treat the income as short term capital gain

Final Conclusion: The appeal is allowed: the Tribunal directed that the income from sale of shares for AY 2008-09 be treated as short term capital gains and not as business income.

Fee for Technical Services - Tax Deduction at Source - Limitation - Human intervention requirement for technical services - Application of coordinate-bench precedent

Fee for Technical Services - Tax Deduction at Source - Human intervention requirement for technical services - Roaming charges paid to other telecom operators do not qualify as fees for technical services attracting tax deduction at source under section 194J. - HELD THAT: - The Tribunal, following the reasoning of a coordinate Bench in an identical matter, held that the roaming process is automatic and does not involve human intervention in the provision of the roaming service itself; consequently the payments for providing airtime/roaming are not payments for technical services as contemplated by the statutory explanation and thus are not liable for deduction of tax at source under section 194J. The Tribunal applied the technical-fact findings and authorities relied upon in the coordinate decision and reversed the CIT(A)'s contrary conclusion.

Appeals allowed on this ground and the conclusion of the CIT(A) that roaming charges are FTS liable to TDS under section 194J is reversed.

Application of coordinate-bench precedent - Whether the TDS officer/CIT(A) should have been directed to verify payments and tax compliance in respect of recipient telecom operators for whom confirmations were not furnished. - HELD THAT: - The Tribunal, applying the coordinate Bench's decision on identical facts, reversed the CIT(A)'s direction and allowed the assessee's appeal. The coordinate reasoning was held to be equally applicable, obviating the need to direct further verification in the manner ordered by the CIT(A).

Appeals allowed on this ground and the direction for additional verification as ordered by the CIT(A) is set aside.

Tax Deduction at Source - Application of coordinate-bench precedent - Whether interest under section 201(1A) is leviable on the tax demand raised under section 201(1). - HELD THAT: - Following the coordinate Bench decision on the same factual matrix, the Tribunal reversed the CIT(A)'s direction to levy interest under section 201(1A) and allowed the assessee's appeal. The Tribunal observed that its decision is subject to the ultimate outcome of a pending Supreme Court adjudication and recorded a caveat permitting the assessing officer to take appropriate steps if higher authority rules otherwise.

Appeals allowed on this ground and the order directing levy of interest under section 201(1A) is set aside (with a caveat regarding the pending Supreme Court matter).

Final Conclusion: The Tribunal, following a coordinate-bench decision on identical facts, reversed the CIT(A) and allowed the assessee's appeals for A.Ys. 2004-05 to 2010-11 on grounds relating to characterisation of roaming charges (not FTS liable to TDS), directions for further verification, and levy of interest under section 201(1A); the Tribunal noted the Supreme Court proceedings on the broader issue and recorded a caveat permitting appropriate action if the Supreme Court rules otherwise.

Characterisation of subsidy as capital or revenue receipt - purpose test - subsidy under Technology Upgradation Fund Scheme (TUF Scheme) - Credit Linked Capital Subsidy

Characterisation of subsidy as capital or revenue receipt - purpose test - subsidy under Technology Upgradation Fund Scheme (TUF Scheme) - Receipt of Rs. 74,02,161/- from Ministry of Textiles was a capital receipt and not taxable as revenue in the hands of the assessee. - HELD THAT: - Both the Assessing Officer and the CIT(A) treated the subsidy as a revenue receipt on the view that it constituted a profit supplement. The Tribunal applied the "purpose test" as enunciated by the Hon'ble Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd., holding that the character of a subsidy must be determined with reference to the purpose for which it was granted. The subsidy in question was paid under the Technology Upgradation Fund Scheme / Credit Linked Capital Subsidy for acquisition of plant and machinery and was intended to encourage capital investment and modernization of the textile unit. The Tribunal accepted the assessee's factual position, including the mechanism whereby the funds were routed through the bank on certification of plant & machinery purchase, and found the objective of the grant to be capital in nature. Consequently, the authorities below erred in treating the amount as a revenue receipt and adding it to income. [Paras 9, 10]

Subsidy of Rs. 74,02,161/- received under the TUF Scheme is a capital receipt and is not taxable as revenue; the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, directing that the subsidy received under the Technology Upgradation Fund Scheme be treated as a capital receipt and not included in the assessee's taxable income for Assessment Year 2007-08.

Deduction under section 80IB(10) - Housing project versus works contract - Developer assuming financial risk - Multiplicity of building plan approvals not a bar - Completion certificate and ordinary building category - Built-up area limit for residential unit (1,500 sq.ft.)

Deduction under section 80IB(10) - Housing project versus works contract - Developer assuming financial risk - Entitlement to deduction under section 80IB(10) on facts of the case. - HELD THAT: - The Tribunal held that the assessee qualified as a developer of a housing project and not as a works contractor. The partners had purchased the approved layout, obtained building permissions and thereafter formed the partnership which executed construction as per approved plans, created common infrastructure and amenities, and handed over physical possession to purchasers who had no choice of selecting another builder. The Tribunal found that these features, together with the risk assumed by the assessee in developing and selling units, distinguish the activity from a mere works contract and bring it within the scope of deduction under section 80IB(10), relying on allied precedents and reasoning that the substance of the transaction demonstrates a project development activity rather than contract works. [Paras 6]

Claim for deduction under section 80IB(10) is allowable because the assessee acted as developer and not as a works contractor.

Multiplicity of building plan approvals not a bar - Completion certificate and ordinary building category - Whether multiple individual building approvals and absence of a single project completion certificate prevent entitlement to deduction. - HELD THAT: - The Tribunal rejected the Revenue's narrow approach that separate approvals for individual houses or the absence of a combined project approval/completion certificate would defeat the claim. It accepted the assessee's explanation that building plan approvals were obtained for individual units and that completion certificates were not mandatorily required for ordinary buildings of ground plus one configuration. The Tribunal observed that multiplicity of approvals and the mode of execution do not negate the existence of an eligible housing project when, on cumulative assessment of facts, the activity reflects development of a project. [Paras 4, 6]

Multiplicity of individual approvals and non-furnishing of a single completion certificate do not bar deduction under section 80IB(10).

Built-up area limit for residential unit (1,500 sq.ft.) - Effect of certain units exceeding the maximum built-up area prescribed for eligibility. - HELD THAT: - The Tribunal noted that the assessee had itself restricted the claim in the revised return by excluding profits attributable to units exceeding the maximum built-up area and that the statutory scheme permits deduction only in respect of qualifying residential units. The Tribunal referred to decisions holding that deduction is allowable in respect of units not exceeding the prescribed built-up area while excluding non-qualifying units. [Paras 4, 6]

Deduction is allowable only in respect of profits from units complying with the built-up area limit; profits attributable to non-complying units are excluded.

Final Conclusion: On the facts, the Tribunal held that the assessees were developers of an eligible housing project and not works contractors; multiplicity of individual approvals and lack of a single completion certificate did not defeat the claim; deduction under section 80IB(10) was therefore allowed subject to exclusion of profits from units exceeding the prescribed built-up area, and the appeals are allowed.

Disallowance under section 14A for expenditure attributable to exempt income - Rule 8D as method of apportionment (not automatic; pre-requisite of AO's satisfaction) - Disallowance under section 40A(2) for interest on diverted interest bearing funds - Capitalisation of interest under section 36(1)(iii) proviso for interest on borrowed capital used for expansion - Use of interest free funds presumption where interest free funds suffice for advances

Disallowance under section 14A for indirect administrative expenses - Rule 8D as method of apportionment (not automatic; pre-requisite of AO's satisfaction) - Disallowance under Section 14A r.w. Rule 8D(2)(iii) on account of indirect administrative expenses - HELD THAT: - The Assessing Officer applied Rule 8D(2)(iii) without recording any satisfaction or identifying expenditure incurred that was attributable to the earning of exempt dividend income. Section 14A requires that expenditure be shown to be incurred for an indivisible activity producing both taxable and non taxable income before apportionment; Rule 8D is a prescribed method of quantification to be invoked only when the AO is not satisfied with the assessee's claim. Where the AO made no ascertainment and the investment portfolio showed no movement (except an immaterial NSC), the Tribunal held Rule 8D(2)(iii) could not be applied automatically and deleted the disallowance. The Tribunal also observed that the computed disallowance cannot exceed the amount attributable to earning the exempt income and the formula in Rule 8D cannot override the absence of actual attributable expenditure.

Deleted the disallowance under Section 14A r.w. Rule 8D(2)(iii) for AYs 2008-09, 2009-10 and 2010-11.

Disallowance under section 14A - interest expenditure (Rule 8D(2)(ii)) - Disallowance under Section 14A r.w. Rule 8D(2)(ii) in respect of interest expenditure - HELD THAT: - The Tribunal found no fresh investment in AY 2008-09 and only immaterial or strategic investments in subsequent years; interest incurred during the years related to specific borrowings (term loans, working capital, vehicle loans, etc.) for specific purposes. In absence of diversion of those interest bearing funds to finance tax free investments during the year, and where earlier years showed no disallowance, the CIT(A)'s finding that interest payments were not attributable to earning exempt dividend income was sustained and the AO's Rule 8D(2)(ii) disallowance was deleted.

Deleted the disallowance under Rule 8D(2)(ii) in respect of interest expenditure for the relevant years.

Disallowance under section 40A(2) for interest on diverted funds to related parties - Use of interest free funds presumption where interest free funds suffice for advances - Disallowance of interest under Section 40A(2) in respect of interest free advances to related parties/sister concerns - HELD THAT: - The AO proportionately disallowed interest on the premise that interest bearing funds were diverted to interest free advances. The CIT(A) recorded that the assessee had sufficient interest free funds (capital, reserves and unsecured interest free funds) which equalled or exceeded the advances to sister concerns. Earlier Tribunal findings for prior years also established that a large part of advances were out of non interest bearing funds. In these circumstances, and absent any material showing diversion of borrowed funds towards the advances, the inference that borrowed funds were used for non business purpose could not be drawn; the disallowance under Section 40A(2) was therefore unjustified and deleted.

Deleted the disallowance made under Section 40A(2) in respect of interest free advances for the relevant years.

Capitalisation of interest under section 36(1)(iii) proviso - Disallowance of interest claimed as revenue expenditure in respect of loans taken for expansion of business (AY 2010-11) - HELD THAT: - The assessee had borrowed term loans for expansion and the proviso to Section 36(1)(iii) precludes deduction of interest paid in respect of capital borrowed for extension of existing business for the period from borrowing until the asset is first put to use. The interest related to capital work in progress therefore had to be capitalised and could not be allowed as a revenue deduction. The Tribunal found no error in the authorities below in disallowing the interest as revenue expense.

Confirmed the disallowance under Section 36(1)(iii); interest to be capitalised for AY 2010-11.

Final Conclusion: The Tribunal deleted the Assessing Officer's disallowances under Section 14A (including Rule 8D(2)(ii)/(iii)) and under Section 40A(2) for the Assessment Years 2008-09 and 2009-10 and partly for 2010-11, on findings that the AO had not recorded satisfaction or shown diversion of interest bearing funds and that the assessee had sufficient interest free funds; the Tribunal upheld the disallowance under Section 36(1)(iii) for AY 2010-11, holding interest on borrowings for expansion must be capitalised.

Deposit as condition for bail - interference with High Court bail conditions - stay of judicially imposed condition - admission of liability under the Customs Act, 1962 - direction to commence or continue trial

Deposit as condition for bail - stay of judicially imposed condition - interference with High Court bail conditions - direction to commence or continue trial - Whether the condition of deposit of Rs. 200 crores imposed by the High Court as a term for bail should be set aside and what consequential directions should follow. - HELD THAT: - The High Court had imposed a condition of deposit of Rs. 200 crores as a prerequisite for bail, apparently motivated by an alleged admission by the accused regarding liability under the Customs Act, 1962. This Court had earlier stayed that deposit condition on 17 August 2010, and the stay has remained in force, during which the appellant has continued on bail. The Court observed that nearly six years had elapsed since the stay and that the respondent was unable to inform the Court of the trial's stage, while the appellant's counsel stated that trial had not commenced. In these circumstances the continued maintenance of the deposit condition was no longer appropriate. The Supreme Court therefore interfered with the High Court's condition, permitted the appellant to remain on the bail already granted, and directed that the trial on the alleged offences shall commence or continue in accordance with law before the court of competent jurisdiction. [Paras 2, 3, 4, 5]

The deposit condition of Rs. 200 crores is set aside; the appellant shall remain on the High Court bail (the earlier stay of the deposit condition to be given effect to) and the trial shall commence or continue in accordance with law.

Final Conclusion: The appeal is allowed: the High Court's condition of deposit for bail is interfered with (given effect to the earlier stay), the appellant remains on bail, and the trial is directed to commence or continue in accordance with law.

Exemption - Special leave petition dismissed

Exemption - Exemption allowed. - HELD THAT: - The Court granted the exemption sought by the petitioner. The brief order records allowance of the exemption without further elaboration or recorded reasons.

Exemption allowed.

Special leave petition - Special leave petition dismissed. - HELD THAT: - Following the allowance of the exemption, the Court dismissed the special leave petition. The dismissal is recorded as the operative consequence of the order.

Special leave petition dismissed.

Final Conclusion: The Court allowed the exemption sought and, accordingly, dismissed the special leave petition.

Mandatory fumigation prior to export - requirement of original Phytosanitary Certificate - power to relax import conditions in public interest - importer's inability to substitute post import fumigation for mandatory export treatment - direction to initiate criminal proceedings for forged Phytosanitary Certificate

Mandatory fumigation prior to export - requirement of original Phytosanitary Certificate - importer's inability to substitute post import fumigation for mandatory export treatment - Scope and effect of the Plant Quarantine (Regulation of Import into India) Order, 2003 provisions requiring fumigation/treatment prior to export and presentation of an original Phytosanitary Certificate, and whether an importer can avoid the export end obligation by arranging fumigation in India. - HELD THAT: - The Court interpreted Rules 3(20) and 9(1) of the Quarantine Order as making pre export fumigation or specified treatment and the production of an original Phytosanitary Certificate mandatory for consignments of timber. The mandate that the exporter must fumigate prior to export cannot be treated as satisfied by post import fumigation in India; the regulatory scheme contemplates export end treatment and inspection as conditions precedent to permitting entry. Allowing retention of a consignment in India in the absence of the mandatory export treatments and an authentic Phytosanitary Certificate would set an impermissible precedent and risk serious harm to flora, fauna and the environment. The Court therefore upheld the legal requirement that consignments not meeting these mandatory pre export conditions cannot be permitted to remain in the country. [Paras 7, 8]

Rules 3(20) and 9(1) require pre export treatment and an original Phytosanitary Certificate; importer cannot rely on fumigation in India to excuse non fulfillment of these mandatory conditions and the consignment cannot be allowed to remain.

Power to relax import conditions in public interest - direction to initiate criminal proceedings for forged Phytosanitary Certificate - Validity of the impugned administrative order directing the Plant Protection Advisor to file an FIR against importer and exporter for a forged Phytosanitary Certificate, and the limits on exercise of relaxation powers under the Quarantine Order. - HELD THAT: - The Court recognised that Rule 14(1) confers a power to relax conditions in public interest but held that such power must be exercised only for cogent reasons and not routinely, particularly where repeat violations are involved. Given the confirmation from the country of export that the Phytosanitary Certificate was fraudulent, and the mandatory nature of pre export treatment, the Court found no reason to interfere with the administrative direction to initiate criminal proceedings. The Court observed that, while the petitioner may pursue civil remedies against the exporter for damages, the administrative action taken in light of the forged certificate and public safety considerations was lawful. [Paras 3, 5, 6, 9]

The impugned order directing filing of an FIR on account of the forged Phytosanitary Certificate is upheld; the relaxation power is constrained to cogent public interest cases and does not justify permitting the consignment to remain, and the petitioner is left free to sue the exporter for damages.

Final Conclusion: Writ petition dismissed; administrative order directing initiation of criminal proceedings in view of the forged Phytosanitary Certificate and mandatory pre export treatment upheld; petitioner permitted to pursue civil remedy against the exporter.

Assessment of imported goods as presented - Anti-dumping duty applicability - Misdeclaration of imported goods

Assessment of imported goods as presented - Anti-dumping duty applicability - Misdeclaration of imported goods - The imported goods were correctly declared as energy saving 32W 4 U shaped tubes and were not liable to anti-dumping duty under Notification No.55/2009-Cus. - HELD THAT: - On examination of the sample produced before it, the Tribunal found that the goods were a combination of four U-tubes joined together to make a 32W tube, capable of being used as one lamp, operable by one PCB, marketable as such, and not capable of segregation without breakage or wastage. Proceeding on the basis that the goods must be assessed as presented, the Tribunal rejected the foundation of the allegation that the import consisted of four separate 8W burners attracting anti-dumping duty. Since the imported item was a 32W product as declared, it did not fall within the scope of Notification No.55/2009-Cus., and the charge of misdeclaration failed. [Paras 6, 8]

No anti-dumping duty was leviable; the goods were not liable to confiscation and no penalty was imposable on either appellant.

Final Conclusion: The Tribunal held that the imported item was correctly declared as a 32W energy saving 4 U shaped tube and was outside the ambit of the anti-dumping notification invoked in the order. The impugned order confirming duty, confiscation and penalties was set aside, and the appeals were allowed with consequential relief.

Liability to pay duty on unaccounted imported goods - failure to comply with conditions of Notification No.137/2000-Cus and bond obligations - process loss limits under EXIM policy (prescribed wastage percentage) - penalty under Section 114A - requirement of wilful mis-statement or suppression - confiscation and redemption fine when goods are not available and absence of release on bond

Process loss limits under EXIM policy (prescribed wastage percentage) - liability to pay duty on unaccounted imported goods - failure to comply with conditions of Notification No.137/2000-Cus and bond obligations - Whether duty is payable on the shortfall of platinum found at the respondents' premises - HELD THAT: - The respondents had imported platinum subject to Notification No.137/2000-Cus and the EXIM policy which permits only a prescribed process loss (9% for studded platinum jewellery). The notification conditions required maintenance of financial year wise records and utilisation of imported material in the manner specified by the policy. Physical stock did not match books and the respondents consumed platinum in excess of the permitted process loss, offering explanations of process loss and possible recovery from dust but failing to account for the excess consumption. Consequently the conditions of the notification were not fulfilled and the respondents are liable to pay duty on the unaccounted platinum. [Paras 5]

Duty is payable on the unaccounted platinum as the respondents exceeded the prescribed process loss and failed to account for the imported material in terms of the notification and EXIM policy.

Penalty under Section 114A - requirement of wilful mis-statement or suppression - Whether penalty under Section 114A of the Customs Act could be imposed on the respondents - HELD THAT: - Section 114A applies where duty has not been levied due to collusion or wilful mis-statement or suppression of facts. The record contained only a bald allegation that respondents had knowledge of shortages and did not inform Revenue; there was no evidence of wilful mis-statement or suppression. The respondents contended shortages would be ascertained at year end and that they had no mens rea to evade duty. In absence of evidence of wilful mis-statement or suppression, imposition of penalty under Section 114A is not sustainable. [Paras 6]

Penalty under Section 114A cannot be upheld for want of evidence of wilful mis-statement or suppression.

Confiscation and redemption fine when goods are not available and absence of release on bond - failure to comply with conditions of Notification No.137/2000-Cus and bond obligations - Whether confiscation and redemption fine could be imposed in respect of the missing platinum - HELD THAT: - The Supreme Court's decision in Weston Components allows imposition of redemption fine where goods released on bond are subsequently found liable for confiscation. The facts here do not show the goods were seized and released on a conditional bond such that the authorities can treat them as available for confiscation; the position is that goods were not available for confiscation and the bond relied upon (B-17/general bond) did not create the specific release-on-bond circumstance contemplated by Weston. Tribunal and earlier authorities distinguish cases where goods were released on bond with conditions from cases where goods were simply not available. On the facts and precedents considered, Weston is not applicable to the instant case and redemption fine/ confiscation could not be imposed. [Paras 7]

No confiscation or redemption fine can be imposed in respect of the missing platinum on the facts of this case.

Final Conclusion: Revenue's appeal is dismissed; the respondents remain liable to pay duty on the unaccounted platinum, but penalties under Section 114A and any confiscation or redemption fine are not sustainable; the respondents' cross objection is allowed.

Jurisdiction of the Commissioner (Appeals) to re-adjudicate - finalisation of provisional assessment - remand for fresh adjudication - recovery under Section 28 of the Customs Act - benefit of Notification No.6/2002-CE - availability of exemption under Notification No.6/2002-CE to steam turbine - binding precedent

Jurisdiction of the Commissioner (Appeals) to re-adjudicate - finalisation of provisional assessment - remand for fresh adjudication - Validity of the Commissioner (Appeals)'s subsequent order purporting to finalise assessment after the Tribunal's observations and whether that order was within his jurisdiction - HELD THAT: - The Tribunal examined the sequence of proceedings and the content of its earlier order dated 24/06/2009. It held that the Tribunal's observations identifying that the Commissioner (Appeals) had not passed appropriate directions for finalisation could not be construed as an order remanding the matter or authorising the Commissioner (Appeals) to re-decide issues already under challenge before the Tribunal. The observation in the Tribunal's earlier order was characterised as guidance on the correct procedure and not as a direction to re-adjudicate merits. Consequently, the Commissioner (Appeals) had no jurisdiction to re-open and decide afresh the availability of the notification in the proceedings which were sub judice before the Tribunal. The impugned order of the Commissioner (Appeals) was therefore held to be without jurisdiction and was set aside on that limited point. [Paras 8]

Impugned order of the Commissioner (Appeals) that purported to finalise the assessment was without jurisdiction and is set aside.

Benefit of Notification No.6/2002-CE - availability of exemption under Notification No.6/2002-CE to steam turbine - binding precedent - Whether the benefit of Notification No.6/2002-CE is available to steam turbine imported by the appellant - HELD THAT: - Separately, in appeal No. C/1368/05 the Tribunal considered the substantive question of entitlement to Notification No.6/2002-CE. The Tribunal noted that the issue had been examined by the Supreme Court in Triveni Engineering and that the Apex Court held that the benefit of Notification No.6/2002-CE is not available to steam turbine. Respectfully following that binding precedent, the Tribunal concluded that the appellants were not entitled to the benefit of the notification in respect of the steam turbine and upheld the denial of the exemption. [Paras 9]

Appeal dismissed; benefit of Notification No.6/2002-CE is not available to steam turbine and the denial of exemption is upheld.

Final Conclusion: The Commissioner (Appeals)'s order purporting to finalise assessment was set aside as being without jurisdiction; separately, on the substantive question the Tribunal upheld the denial of benefit under Notification No.6/2002-CE to the imported steam turbine, dismissing the related appeal.

Sanction of scheme of amalgamation under Sections 391-394 of the Companies Act, 1956 - supervisory jurisdiction of company court - transferee company liable for transferor's tax liabilities - relevance of Income Tax demand to sanction of amalgamation - role of Official Liquidator's report and Regional Director's objections - publication of notice to creditors, members and employees

Sanction of scheme of amalgamation under Sections 391-394 of the Companies Act, 1956 - role of Official Liquidator's report and Regional Director's objections - Sanctioning of the scheme of amalgamation between the transferor and transferee companies on the second motion. - HELD THAT: - The Court examined the scheme, the board approvals, the consent in writing of equity shareholders and unsecured creditors, publication of notice, the Official Liquidator's report and the Regional Director's affidavit. The Official Liquidator raised no objection and no person appeared to oppose the scheme despite publication. The Regional Director's contentions (Income Tax demand and alleged non-conferral of employee status) were considered but found not to bar sanction. The Court held that all required procedures had been followed and that nothing in the materials before it was prejudicial to the interests of creditors, members or public interest; accordingly the scheme could be sanctioned under the supervisory jurisdiction of the Company Court.

Scheme of amalgamation sanctioned and declared binding on creditors and equity shareholders of both companies.

Transferee company liable for transferor's tax liabilities - relevance of Income Tax demand to sanction of amalgamation - Effect of an outstanding Income Tax demand on sanction of the amalgamation and allocation of tax liability post-sanction. - HELD THAT: - The Court determined that an Income Tax demand against the transferor does not, by itself, preclude sanction of a scheme under Sections 391-394 where no allegation of tax evasion or statutory contravention is made. The approved scheme expressly provides that the transferee company shall be liable for all tax liabilities of the transferor, including any income tax liabilities (notably the demand for Assessment Year 2009-10), and the Court held that tax liabilities remain enforceable as per law both before and after sanction and are a matter distinct from the scheme's validity.

Outstanding Income Tax demand for Assessment Year 2009-10 does not prevent sanction; transferee company liable for such tax liabilities as provided in the scheme.

Publication of notice to creditors, members and employees - supervisory jurisdiction of company court - Whether absence of individual employee objections (regarding conferment of status) affects sanction of the scheme. - HELD THAT: - The Court noted that notices were published and no employee of the transferor approached the Court to contend for conferment of employment status in the transferee company. The issue of non-permanent employees' status was held not to be a matter that, on the Regional Director's say-so alone and in the absence of any employee approaching the Court, would impede sanction. The supervisory role requires ensuring no statutory breach or public prejudice; silence of affected persons and absence of material showing prejudice justified sanction.

Non-permanent employees' claimed conferment of status in the transferee company, unraised by any employee before the Court, did not bar sanction of the scheme.

Final Conclusion: The Company Petition is allowed; the scheme of amalgamation as annexed is sanctioned and declared binding on creditors and equity shareholders of the transferor and transferee companies, with the transferee company liable for the transferor's tax liabilities as provided in the scheme; parties may apply for further directions and the Registrar/Official Liquidator to take actions as ordered.

Sanction of scheme under Sections 391-394 of the Companies Act, 1956 - court's supervisory discretion in sanctioning schemes - public interest - device to avoid tax - requirement of pre-existing undertaking for de-merger under Explanation to Section 2(19AA) of the Income Tax Act, 1961 - bonafide restructuring vs. transfer of assets - allocation of non-cumulative compulsorily redeemable preference shares as indicia of transfer

Requirement of pre-existing undertaking for de-merger under Explanation to Section 2(19AA) of the Income Tax Act, 1961 - sanction of scheme under Sections 391-394 of the Companies Act, 1956 - Validity of sanction where the demerged company lacks a pre-existing operative undertaking in the business proposed to be demerged - HELD THAT: - The court found on the material that since incorporation the company had been engaged only in manufacturing and sale of edible oils and no separate operative real estate business or undertaking was reflected in its books by way of turnover, income or current-asset inventory treatment as would be expected under applicable accounting principles. The Explanation to Section 2(19AA) requires a pre-existing undertaking for a demerger; that prerequisite was not satisfied on the facts. A scheme seeking court sanction under Sections 391-394 cannot negate or contradict other statutory provisions; where a scheme would be in the cross-hair of a statutory provision it cannot be sanctioned. Consequently the proposed de-merger, predicated on a non-existent or non-functional real estate division, could not be validly sanctioned under the Companies Act.

Sanction refused because the company did not have the requisite pre-existing real estate undertaking necessary for a de-merger under the law.

Device to avoid tax - public interest - court's supervisory discretion in sanctioning schemes - Whether the scheme is a colourable device to evade stamp duty and capital gains tax and thus contrary to public interest such that it ought not be sanctioned - HELD THAT: - The court emphasised that while private tax planning within law is permissible, colourable devices to avoid tax or misuse of the court's sanction cannot be countenanced. On the facts the scheme proposed transfer of valuable land through the demerger mechanism at nominal book values, without evidence of an operative real estate undertaking, and thereby would circumvent liabilities under the Income Tax Act and Stamp Act. Sanctioning such a scheme would be contrary to public interest and public policy. The court, exercising its discretionary supervisory jurisdiction under Sections 391-394, must refuse sanction where the scheme appears to be formulated solely to avoid tax and lacks any evident commercial restructuring purpose.

Sanction refused because the scheme was a device to evade tax and sanctioning it would be contrary to public interest.

Allocation of non-cumulative compulsorily redeemable preference shares as indicia of transfer - bonafide restructuring vs. transfer of assets - Significance of allotting non-cumulative compulsorily redeemable preference shares (instead of equity) in the resultant companies to the shareholders of the demerged company for characterising the transaction - HELD THAT: - An important indicium of bona fide restructuring by demerger is continuity of interest and management in the restructured entities. In the present scheme the resultant companies propose to allot non-cumulative compulsorily redeemable preference shares rather than equity to the shareholders of the demerged company, a structure that severs ownership and managerial rights and reduces the arrangement to an effective transfer of land. This feature reinforced the conclusion that the scheme was not a bona fide demerger effected for business efficacies but a mechanism to transfer assets while avoiding tax consequences.

Allotment of preference shares rather than equity was a material factor indicating the arrangement was a transfer of assets and not a bona fide demerger; this militated against sanction.

Final Conclusion: The court refused to exercise its discretion to sanction the proposed scheme of de-merger: the company lacked a pre-existing operative real estate undertaking required for a de-merger, the scheme manifested features of a colourable device to evade capital gains tax and stamp duty and allocation of preference shares indicated transfer rather than bona fide restructuring; the petitions are dismissed.

Penalty for failure to take registration under Section 77(1)(a) - application of amended provision of Section 77(1)(a) w.e.f. 10.5.2013 - reduced penalty under the second proviso to Section 78 - computation of time when the last day falls on Sunday (General Clauses Act)

Penalty for failure to take registration under Section 77(1)(a) - application of amended provision of Section 77(1)(a) w.e.f. 10.5.2013 - Extent of penalty payable for failure to take registration under Section 77(1)(a). - HELD THAT: - The show cause notice was issued after the amendment to Section 77(1)(a) which came into effect w.e.f. 10.5.2013. The amended provision prescribes a maximum penalty of Rs. 10,000 for failure to take registration; the earlier pre-amendment provision imposing a daily penalty of Rs. 200 was no longer applicable. Both the adjudicating authority and the lower appellate authority had applied the pre-amended provision. In view of the statutory amendment effective before the date of the show cause notice, the amended provision governs the case and limits the penalty collectible for failure to take registration to the maximum fixed by that amendment. [Paras 5]

Penalty for failure to take registration is restricted to Rs. 10,000 in terms of the amended Section 77(1)(a).

Reduced penalty under the second proviso to Section 78 - computation of time when the last day falls on Sunday (General Clauses Act) - Whether the appellant is entitled to the 25% reduced penalty under the second proviso to Section 78 by depositing tax, interest and reduced penalty within 30 days. - HELD THAT: - The adjudication order was received on 6.6.2014. The 30th day for payment fell on 6.7.2014 which was a Sunday. Applying the General Clauses Act principle, the next working day is to be treated as the relevant date for payment. The appellant deposited the entire service tax, interest and the reduced penalty on the next working day (7.7.2014), and documentary evidence (GAR-7 challan dated 7.7.2014 and bank certificate showing a DD dated 5.7.2014) demonstrates the payment within the permissible period. Consequently the appellant complied with the second proviso to Section 78 and is entitled to the reduced penalty of 25%, which stands paid. [Paras 6]

Appellant is eligible for the 25% reduced penalty under the second proviso to Section 78; the reduced penalty already stands paid.

Final Conclusion: The appeal is partly allowed: the penalty under Section 77(1)(a) is restricted to Rs. 10,000; the appellant is entitled to and has paid the 25% reduced penalty under the second proviso to Section 78.

Limitation - show cause notice issued after retrospective amendment - service tax liability as recipient of GTA services - effect of amendment of Section 73 w.e.f. 10-9-2004 - precedence of High Court decisions over Tribunal Larger Bench when latter did not consider those High Court decisions

Limitation - show cause notice issued after retrospective amendment - precedence of High Court decisions over Tribunal Larger Bench when latter did not consider those High Court decisions - Maintainability of demands raised in 2004 for service tax liability relating to the period 1997-1998 where liability as recipient of GTA services was involved. - HELD THAT: - The Tribunal noted that show cause notices for the period 1997-1998 were issued after amendments and litigation concerning the liability of the recipient for GTA services. While a Tribunal Larger Bench had held that show cause notices issued after substitution of Section 73 w.e.f. 10-9-2004 were sustainable, various High Courts had subsequently held that demands issued in 2004 for liabilities arising in 1997-1998 were barred by limitation. The Tribunal observed that those High Court decisions were not before the Larger Bench and, given the hierarchy, the High Court decisions must be followed. Following the Tribunal's earlier decision in Kisan Sahkari Chini Mills which preferred High Court rulings over the Larger Bench on this point, the present demands issued in 2004 in identical circumstances were held not maintainable and were set aside. [Paras 2, 3, 4, 5, 6]

Demands raised in 2004 for service tax liability relating to 1997-1998 are not maintainable; impugned orders set aside and appeals allowed with consequential relief.

Final Conclusion: Appeals allowed; demands issued in 2004 for the period 1997-1998 set aside by following High Court decisions; consequential relief granted and stay petitions disposed of.

Agreement to sell and its implication for service tax - self-service doctrine - service tax liability on construction services under joint development agreements - applicability of CBEC circular dated 29-01-2009 - existence of service provider-recipient relationship

Agreement to sell and its implication for service tax - self-service doctrine - applicability of CBEC circular dated 29-01-2009 - service tax liability on construction services under joint development agreements - existence of service provider-recipient relationship - Whether service tax is payable by the developer on the share of constructed property allotted to landowners under the joint development agreements for the period 2004-2005 to 2007-2008 - HELD THAT: - The Tribunal examined the CBEC clarification dated 29-01-2009 which treats the pre-sale arrangement between promoter and ultimate owner as an "agreement to sale" and clarifies that ownership transfers only on execution of the sale deed; services provided by the seller up to execution of sale deed are in the nature of self-service and do not attract service tax. The Commissioner (Appeals) had distinguished the circular on the ground that it related to residential construction, a distinction which the Tribunal found unsustainable because the circular's core clarification concerns the legal effect of an agreement to sell and the consequent question whether a service has been rendered to another or is self-service. Applying that principle to the facts-where the developer bears construction expenses and the landowners obtain 50% of constructed area only upon completion and transfer-there is no material to show a service provider-recipient relationship prior to transfer. The Tribunal also relied on the decision in R.F. Properties & Trading Ltd. which concluded that a mere agreement to sell does not create an interest in the property and that services, if any, are to the self. On these findings the demand confirmed in the original order could not be sustained.

The demand for service tax in respect of the 50% share of constructed property allotted to landowners is set aside and the appeal is allowed.

Final Conclusion: The impugned order confirming service tax demand in respect of property allotted to landowners under the joint development agreements is quashed; appeal allowed for the tax periods 2004-2005 to 2007-2008.

CENVAT credit on input services - eligibility of input service - Business Auxiliary Service - service used in providing taxable service - burden of proof for denial of credit

CENVAT credit on input services - eligibility of input service - service used in providing taxable service - Validity of disallowance of CENVAT credit on service tax paid to sub-brokers (commission) which was held to relate to goods other than those for which the appellant received commission - HELD THAT: - The Tribunal examined whether payments of commission to sub-brokers, in some instances higher than commission received by the appellant, justified denial of CENVAT credit on the ground that such sub-brokers' services related to different goods and were therefore not input services. The appellant's case, supported by agreements and explanation, showed that higher commission was sometimes paid to secure buyers for difficult-to-sell goods and that, in certain cases, higher commission was recovered from clients. The overall receipts exceeded payments to sub-brokers and there was no evidence in the show cause notice or the appellate order indicating that commissions to sub-brokers pertained to goods other than those for which the appellant received commission. The Tribunal held that mere suspicion arising from instances of higher commission is insufficient; denial of credit requires evidence elevating suspicion into a reasoned inference that the services were not used in providing the taxable service. The CENVAT Credit Rules permit credit where the services were used in providing taxable services on which service tax was paid, and the adjudicating authorities failed to demonstrate, on the materials before them, that the sub-brokers' services were unrelated to the appellant's taxable business. [Paras 5, 6]

Disallowance of CENVAT credit on commission paid to sub-brokers set aside for lack of evidence that such services related to goods other than those for which the appellant received commission; appeal allowed.

Final Conclusion: The appellate order disallowing CENVAT credit on input services (commission to sub-brokers) for April, 2007 to October, 2008 was set aside because the denial was not supported by evidence proving that the services were unrelated to the appellant's taxable service; appeal allowed.

Cenvat credit on input services - nexus between input services and output services - admissibility of credit for services used in export of services by EOUs/BPOs - wide ambit of definition of input service prior to 01-04-2011 - Board clarification on input services for BPOs/call centres

Cenvat credit on input services - wide ambit of definition of input service prior to 01-04-2011 - admissibility of credit for services used in export of services by EOUs/BPOs - Credit on the input services consumed by the appellant during the period prior to 01-04-2011 is admissible. - HELD THAT: - The period involved predates 01-04-2011 when the definition of input service had a wide ambit including "activities relating to business." The Tribunal noted that numerous judicial authorities have held that services of the kinds in dispute fall within activities relating to business and are eligible for credit. The Commissioner(A) erroneously relied on a narrower post-2011 conception and on authorities concerning inputs rather than input services. The Board's Circular dated 19-01-2010 specifically clarified that services such as renting of premises, software/IT services, telecom services and rent-a-cab, which are necessary for BPO/call centres to provide output services, are eligible for Cenvat credit. Having regard to the factual material produced (invoices, Cenvat registers) and the relevant judicial and administrative authorities, denial of credit was unjustified and the credit is allowable on the services listed in the impugned order. [Paras 6, 8]

The impugned denial of Cenvat credit is set aside and credit is held admissible on all the input services in issue.

Nexus between input services and output services - remand for verification of invoices and facts - Board clarification on input services for BPOs/call centres - Remand by Commissioner(A) of certain services for further verification was unjustified and the matter ought to have been decided on the material on record. - HELD THAT: - Several services (rent-a-cab, renting of immovable property, IT software services, cargo handling, security, manpower supply etc.) were remanded by the Commissioner(A) for verification though the appellants had produced invoices, Cenvat registers and other documents. The Tribunal observed that the Commissioner(A) did not specify any additional documents or facts required to decide those items; the earlier Tribunal remand had contemplated reconsideration but not further pointless referral to the adjudicating authority. In view of the documentary evidence produced and the Board circular recognizing these services as necessary for BPO operations, the remands lacked basis and the issues were decided in favour of the appellant. [Paras 7, 8]

The remands are set aside; the claims for credit on the remanded services are allowed.

Final Conclusion: The impugned order of the Commissioner(A) is set aside; the appeal is allowed and Cenvat credit is held admissible on all the input services in issue for the periods April, 2009 to September, 2009 and Oct. 2009 to March, 2010, with consequential reliefs if any.

Cenvat credit - reverse charge - interest liability under Rule 15(1) of Cenvat Credit Rules read with Section 75 of Finance Act, 1994 - penalty under Rule 15(1) of Cenvat Credit Rules - relief from penalty for bona fide/unintentional lapse under Section 80(1) of Finance Act, 1994 - remand for fresh consideration with opportunity of personal hearing - credit taken more than once / duplicate credit

Cenvat credit - reverse charge - interest liability under Rule 15(1) of Cenvat Credit Rules read with Section 75 of Finance Act, 1994 - Interest liability on cenvat credit wrongly taken for the period between April 2009 and November 2009 is payable and is to be confirmed. - HELD THAT: - The appellant admitted that cenvat credit was taken in April 2009 though service tax on input services received from abroad was paid on reverse charge basis only in November 2009. For the intervening period the availment of credit was erroneous and therefore attracts interest under the combined mandate of Rule 15(1) of the Cenvat Credit Rules and Section 75 of the Finance Act, 1994. The Tribunal, on the facts and submissions, holds that interest for the said period is payable and confirms the liability. [Paras 5]

Interest for the period April 2009 to November 2009 on the wrongly availed cenvat credit is confirmed.

Penalty under Rule 15(1) of Cenvat Credit Rules - relief from penalty for bona fide/unintentional lapse under Section 80(1) of Finance Act, 1994 - Penalty imposed under Rule 15(1) for the wrongly taken cenvat credit is set aside on the finding of an unintentional lapse and in view of the discretionary relief recognised by law. - HELD THAT: - Although the availment of credit in April 2009 was erroneous, the appellant demonstrated that the mistake was unintentional - arising from centralized processing of invoices and services received at a different office - and that the credit had become due only upon payment of service tax in November 2009. Applying the principle that penalty in quasi criminal proceedings is not ordinarily to be imposed where failure is bona fide or venial, and having regard to Section 80(1) of the Finance Act, 1994 (as then in force) and the guidance of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa, the Tribunal exercises its discretion to set aside the penalty. [Paras 6, 7]

The penalty imposed under Rule 15(1) for the wrongly availed cenvat credit is set aside.

Credit taken more than once / duplicate credit - remand for fresh consideration with opportunity of personal hearing - The claim relating to cenvat credit alleged to have been taken more than once is remanded to the original adjudicating authority for fresh adjudication on merits after giving the appellant opportunity of personal hearing and to produce documents. - HELD THAT: - The appellant contended that documents substantiating seven of eight credits are available and that one case is supported by a Board letter; the Tribunal found that the record requires fresh factual examination. Accordingly, the matter is remitted so that the adjudicating authority can hear the appellant, examine the documents and decide the eligibility afresh within the stipulated timeframe. [Paras 8]

Matter remanded to the original adjudicating authority for fresh consideration with full opportunity of personal hearing and submission of documents, to be decided within three months.

Final Conclusion: Interest on the wrongly availed cenvat credit for April 2009 to November 2009 is confirmed; the penalty imposed under Rule 15(1) is set aside on finding of an unintentional lapse and in exercise of discretion under Section 80(1) of the Finance Act, 1994; the claim of duplicate credit is remanded to the original adjudicating authority for fresh adjudication after hearing the appellant within three months.

Refund under Rule 5 of Cenvat Credit Rules - entitlement to refund of unutilized cenvat credit - treatment of supplies to SEZs and EOUs as exports - remand for quantification and processing on merits

Refund under Rule 5 of Cenvat Credit Rules - treatment of supplies to SEZs and EOUs as exports - entitlement to refund of unutilized cenvat credit - Appellants, being an EOU, are entitled to claim refund under Rule 5 of the Cenvat Credit Rules in respect of inputs and input services used in final products supplied to SEZs and EOUs. - HELD THAT: - The Tribunal observed that there is no dispute the appellant-EOU supplied goods to SEZs and EOUs under bond following prescribed procedures. It relied on precedents holding that clearances by an EOU to SEZs/EOUs which are deemed exports are to be treated as physical exports for the purpose of entitlement to refund of unutilized cenvat credit under Rule 5. The Tribunal noted consistent decisions of High Courts and this Tribunal - including the Gujarat High Court decision reproduced in the order and Tribunal decisions treating supplies to SEZs as eligible for benefits - and therefore concluded the appellant is entitled to refund. The adjudicating authority's rejection on the ground that supplies to SEZs are not eligible was set aside as contrary to the settled legal position relied upon.

Entitlement to refund under Rule 5 of CCR upheld and impugned order set aside on this issue.

Remand for quantification and processing on merits - The matter is remanded to the adjudicating authority to process the refund claim on merits and to determine the quantification of the refund. - HELD THAT: - The Tribunal found that the adjudicating authority had not examined the eligibility and quantification of the refund on merits. Accordingly, after holding the appellant entitled to refund, the Tribunal set aside the impugned order and remanded the case to the adjudicating authority for processing the refund claim and determining the quantification. The remand is limited to determination and computation of the refundable amount and verification on merits by the authority.

Appeal allowed by way of remand to the adjudicating authority for merits processing and quantification of refund.

Final Conclusion: Appeal allowed in part: appellant-EOU held entitled to refund under Rule 5 of CCR for supplies to SEZs/EOUs for the period July'09 to Sept'09; impugned order set aside and matter remanded to the adjudicating authority to process the refund claim on merits and determine quantification.

Exemption conditioned on finished goods being otherwise exempt or chargeable to nil rate - Benefit of a concessional notification to an EOU dependent on fulfillment of specific conditional clauses - Inapplicability of an exemption predicated on duty-paid inputs where inputs were procured duty-free - Distinction between notifications framed for EOUs and notifications applicable to domestic manufacturers

Exemption conditioned on finished goods being otherwise exempt or chargeable to nil rate - Benefit of a concessional notification to an EOU dependent on fulfillment of specific conditional clauses - Entitlement of the respondent (a 100% EOU) to benefit of Notification No. 13/98-CE for DTA clearances where condition (a) of the notification required that such finished products, when manufactured and cleared by a non-EOU, are wholly exempt or chargeable to nil rate - HELD THAT: - Notification No. 13/98-CE grants a concessional effective rate for finished goods cleared by an EOU to DTA subject to two conditions, the first of which requires that the finished products, if manufactured and cleared by a unit other than a 100% EOU, be wholly exempt or chargeable to nil rate. The court held that availing the benefit under Notification No. 13/98-CE is contingent on establishing that the finished product satisfies that exemption/nil-rate condition. The Commissioner (Appeals) had allowed the benefit on the basis that revenue did not dispute fulfillment of Notification 13/98-CE conditions, but the Tribunal found that the essential statutory condition (a) must actually be satisfied on the facts before entitlement can be recognized. The respondent failed to establish that the finished goods were otherwise exempt or nil-rated for the purposes of condition (a). [Paras 5, 6]

Benefit of Notification No. 13/98-CE cannot be availed by the respondent because condition (a) of the notification-requiring the finished product to be otherwise exempt or chargeable to nil rate-was not established.

Inapplicability of an exemption predicated on duty-paid inputs where inputs were procured duty-free - Distinction between notifications framed for EOUs and notifications applicable to domestic manufacturers - Whether Notification No. 6/2002 (referred to as 6/2006 in parts of the record) could operate to render the finished products exempt for the purpose of satisfying condition (a) of Notification No. 13/98-CE, where the respondent procured tapes duty-free as an EOU - HELD THAT: - Notification No. 6/2002/6/2006 exempts finished goods only if they are 'made from yarn, monofilament, tapes or strips on which the appropriate duty ... has already been paid.' In the present case the respondent procured primary raw material (tapes) without payment of duty due to its EOU status. Therefore the precondition in Notification No. 6/2002/6/2006-that inputs be duty-paid-was not fulfilled. The judgments relied upon by the respondent (including SRF Ltd. and Kent Introl) were factually distinguishable, involving imports or situations where the condition of duty-paid inputs was satisfied. Consequently Notification No. 6/2002/6/2006 could not be invoked to show that the finished products were otherwise exempt or nil-rated for the purposes of Notification No. 13/98-CE. [Paras 6, 7]

Notification No. 6/2002/6/2006 does not render the respondent's finished products exempt for the purpose of condition (a) of Notification No. 13/98-CE because the required condition of duty-paid inputs was not met where inputs were procured duty-free by the EOU.

Final Conclusion: The impugned order allowing benefit of Notification No. 13/98-CE to the respondent is set aside; the revenue's appeal is allowed because the respondent failed to establish fulfillment of condition (a) of Notification No. 13/98-CE and could not rely on Notification No. 6/2002/6/2006 where the required duty-paid-inputs condition was not satisfied.

Recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004 - Cenvat credit wrongly taken (as distinct from utilised) - Application of Sections 11A and 11AB of the Central Excise Act for effecting recovery - Effect of voluntary reversal after wrongful availment - Precedential effect of Union of India v. Ind Swift Laboratories Ltd. (Supreme Court) on interpretation of Rule 14

Recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004 - Cenvat credit wrongly taken (as distinct from utilised) - Application of Sections 11A and 11AB of the Central Excise Act for effecting recovery - Precedential effect of Union of India v. Ind Swift Laboratories Ltd. (Supreme Court) - Liability to pay interest where cenvat credit was wrongly taken but not utilised and later reversed and reported to the revenue - HELD THAT: - Rule 14 provides that where Cenvat credit has been taken or utilised wrongly the same along with interest shall be recovered and that Sections 11A and 11AB shall apply mutatis mutandis for effecting such recoveries. The disjunctive phrase "taken or utilised" in Rule 14 was interpreted by the Hon'ble Supreme Court in Ind Swift Laboratories Ltd. to mean that liability to pay interest accrues even if the credit was only taken wrongly and not utilised. The Tribunal relied on the subsequent decision of the Bombay High Court in GL & V India Pvt. Ltd., which applied Ind Swift and rejected the narrower view that interest arises only upon utilisation. The appellant's case of inadvertent double entry, voluntary reversal and non utilisation does not negate the statutory liability created by Rule 14 as construed by the Supreme Court and followed by the Bombay High Court. Distinctions drawn from decisions of some High Courts and Tribunals which treated reversal without utilisation as extinguishing interest liability are not acceptable in view of the Supreme Court's binding interpretation. Accordingly, the appellant remains liable to discharge the interest recovered under Rule 14 read with Section 11AB despite reversal and non utilisation. [Paras 6, 7]

Appellant liable to pay the interest of Rs. 9,51,112/-; refund of the interest already deposited is not admissible and the impugned order is upheld.

Final Conclusion: The appeal is dismissed; the levy and recovery of interest under Rule 14 read with Section 11AB is sustained and the appellant is not entitled to refund of the amount deposited.

Interest on delayed payment of duty under Section 11AA of the Central Excise Act, 1944 - determination of duty under Section 11A(2) - date of determination (Explanation 1 to Section 11AA) - recovery of erroneous refund / restitution

Interest on delayed payment of duty under Section 11AA of the Central Excise Act, 1944 - determination of duty under Section 11A(2) - date of determination (Explanation 1 to Section 11AA) - recovery of erroneous refund / restitution - Whether interest under Section 11AA is payable in respect of the disputed duty for the period 01.03.86 to 31.12.87 - HELD THAT: - Section 11AA applies only in respect of duty determined under sub section (2) of Section 11A; interest is chargeable from the date immediately after expiry of three months from the date of such determination. The show cause notices and original adjudication proceeded under the Central Excise Rules (Rule 9, Rule 173 & Rule 53) and the original orders do not record any determination under Section 11A(2). There is no authority to treat a demand made under the Rules as being deemed to have been determined under Section 11A(2). The case law relied on by Revenue concerning restitution of refunds (CCE v. Woodcraft Products Ltd.) is factually distinguishable, since that decision involved an undertaking and recovery of an erroneous refund after notice under Section 11A. In the present case the appellant paid the amount held due by the Supreme Court within three months of that determination; alternatively, the Authority's premise that the duty was determined under Section 11A(2) is factually incorrect. Applying Explanation 1 to Section 11AA, the date of determination for any amount first held payable was the date fixed by the Supreme Court, and the appellant's payment fell within the three month period contemplated by Section 11AA(1). Consequently the demand for interest was unsustainable. [Paras 4]

Adjudicating authority's order confirming interest under Section 11AA set aside; interest not payable.

Final Conclusion: Appeal allowed: demand for interest under Section 11AA in respect of the disputed duty for 01.03.86 to 31.12.87 is unsustainable and the adjudicating authority's order confirming such interest is set aside.

Revocation of Central Excise Registration - Principles of Natural Justice - Procedure for Revocation or Suspension of Registration - Common Registration - Judicial Review of Administrative Revocation

Revocation of Central Excise Registration - Principles of Natural Justice - Procedure for Revocation or Suspension of Registration - Common Registration - Validity of revocation of the respondent's common Central Excise registration having regard to compliance with principles of natural justice and prescribed procedure - HELD THAT: - The adjudicating authority revoked the common registration granted on 6.9.2013 by issuing a non speaking letter without affording the respondent an opportunity to be heard or communicating effective reasons for revocation. The Commissioner (Appeals) examined the revocation and found that the sole reason stated in the revocation letter did not correspond to the provisions relied upon and that the conditions for revocation or suspension under the relevant notification were not established. The appellate authority concluded that the revocation was arbitrary, effected without following the due procedure or principles of natural justice, and therefore liable to be set aside. The Tribunal, on review of the record and the Commissioner (Appeals) reasoning, found no infirmity in that conclusion; it noted that the Commissioner (Appeals) gave concrete findings on procedural infirmity and that the Commissioner had subsequently granted common registration which remains in force. [Paras 6, 7]

Revocation of the respondent's common Central Excise registration was set aside for failure to follow principles of natural justice and prescribed procedure; the Revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed; the order of the Commissioner (Appeals) setting aside revocation of the respondent's common Central Excise registration is upheld and the common registration granted by the Commissioner remains in force.

Liability of subsequent purchaser for predecessor's excise dues - applicability of section 11 to a subsequent purchaser - refund of wrongly recovered dues - statutory liabilities "arising out of the property" distinguished from excise dues

Liability of subsequent purchaser for predecessor's excise dues - statutory liabilities "arising out of the property" distinguished from excise dues - refund of wrongly recovered dues - The appellant is not liable to discharge excise dues of the predecessor and is entitled to refund of the amount collected from it. - HELD THAT: - The Tribunal applied the legal principle adopted by the Hon'ble Supreme Court in Rana Girders Ltd. that statutory liabilities referred to in sale deeds as liabilities "arising out of the land" or "arising out of the properties" do not include excise dues which arise from manufacture by the erstwhile owner and not from ownership of land, building or plant and machinery. Relying on that distinction, the Tribunal held that the appellant, as a purchaser in open auction, was not under a legal obligation to bear the excise dues confirmed against the predecessor. Consequently, amounts recovered from the appellant in respect of those predecessor dues were held refundable and the order rejecting the refund claim was set aside. [Paras 7, 8]

Refund claim allowed; impugned order set aside and appellant entitled to consequential relief.

Applicability of section 11 to a subsequent purchaser - liability of subsequent purchaser for predecessor's excise dues - Section 11 could not be enforced against the appellant for dues of the predecessor because it was not in force when the appellant took possession. - HELD THAT: - The Tribunal noted that the appellant took possession in July 2004 whereas the provision relied upon for recovery from subsequent purchasers (section 11) came into effect only on 10.9.2004. Since section 11 was not in force at the time the appellant acquired the premises, it could not be retrospectively invoked to fasten liability for predecessor's dues on the appellant. That temporal inapplicability supported allowing the refund of amounts collected. [Paras 7]

Recovery under section 11 could not be sustained against the appellant; refund ordered.

Final Conclusion: The Tribunal allowed the appeal, holding that excise dues of the predecessor (1992-1993) could not be recovered from the appellant - both because excise dues do not constitute statutory liabilities "arising out of the property" and because section 11 was not in force when the appellant took possession - and directed refund with consequential relief.

Opportunity of hearing - quashing and remand for fresh consideration - assessment proceedings under the Karnataka Value Added Tax and Central Sales Tax Acts - consideration of objections and material before assessment

Opportunity of hearing - consideration of objections and material before assessment - Assessment orders were passed without giving the petitioner adequate opportunity to be heard and without considering the specific objections and material placed by the petitioner. - HELD THAT: - The Court found that the assessing authority proceeded to pass assessment orders after issuing notices and endorsements but overlooked or did not take into account the detailed objections, explanations and materials furnished by the petitioner. The petitioner had specifically highlighted that the original notice did not state the grounds on which the assessment was ultimately made and that cumulative figures were wrongly adopted without appreciating the filings in statutory returns. In view of the omission to afford a proper hearing and to consider the pointed material and objections, the Court concluded that the assessment was vitiated for want of compliance with the requirement of fair hearing. [Paras 7, 9]

Impugned assessment orders quashed for failure to afford adequate opportunity of hearing and failure to consider the petitioner's objections and material.

Quashing and remand for fresh consideration - assessment proceedings under the Karnataka Value Added Tax and Central Sales Tax Acts - The matters were remitted to the assessing authority for fresh consideration after affording the petitioner an opportunity of hearing and considering the material pointed out by the petitioner. - HELD THAT: - Having quashed the impugned orders, the Court directed that the assessing authority shall re-examine the matter and decide afresh in accordance with law after giving the petitioner an opportunity to make submissions and produce relevant material. The Court recorded that the Government Advocate conceded that if an opportunity had not been given on several aspects, the petitioner should be permitted to make submissions. The remand is for fresh adjudication and consideration of the petitioner's contentions, not for the Court itself to re-assess the substantive tax questions. [Paras 9]

Matter remitted to the assessing authority for fresh consideration after affording opportunity of hearing; petitioner to appear before the respondent on 10.3.2016 and implead the State of Karnataka as party.

Final Conclusion: Petition allowed; impugned assessment orders quashed and matter remitted to the assessing authority for fresh consideration after giving the petitioner an opportunity of hearing and considering the materials pointed out; administrative directions given for appearance and impleadment.

Power to seize goods at notified check-posts or barriers under section 68(4)(b) of the GVAT Act - officer-in-charge of a notified check-post or barrier - lack of jurisdiction where seizure is effected off a notified check-post by an officer who is not officer-in-charge - section 69 of the GVAT Act does not empower seizure of vehicle or goods

Power to seize goods at notified check-posts or barriers under section 68(4)(b) of the GVAT Act - officer-in-charge of a notified check-post or barrier - lack of jurisdiction where seizure is effected off a notified check-post by an officer who is not officer-in-charge - Seizure memo issued under section 68(4)(b) by an officer who is not the officer in charge of a notified check post or barrier is without authority and cannot be sustained. - HELD THAT: - Sub section (1) contemplates constitution of notified check posts or barriers. Sub section (4) empowers the officer in charge of such check post or barrier, upon recording reasons, to seize goods and detain the vehicle; sub section (5) provides for imposition of penalty by the officer in charge after giving reasonable opportunity of hearing. In the present case the goods were seized off the highway and the second respondent admittedly is not an officer in charge of a notified check post or barrier; nonetheless the impugned memo was issued invoking section 68(4)(b). Since the statutory power to seize under section 68 is expressly vested in the officer in charge of a check post/barrier, exercise of that power by an officer who does not hold that statutory office is without jurisdiction. The impugned seizure memo therefore lacks authority of law and cannot be sustained. [Paras 7, 8]

Impugned seizure memo dated 03.03.2016 issued under section 68(4)(b) is quashed and set aside; respondents directed to forthwith release the truck and goods.

Section 69 of the GVAT Act does not empower seizure of vehicle or goods - Section 69 does not confer power to seize vehicle or goods and therefore cannot validate a seizure purportedly made under section 68(4)(b). - HELD THAT: - The respondents' reliance on section 69 (penalty for failure to possess transit pass and related levy of tax/penalty) does not support or validate a seizure under section 68(4)(b). Section 69 does not authorise seizure of the vehicle or goods; while action under section 69 may be open where its requirements are met, it cannot retrospectively cure a seizure lawfully required to be made only by the officer in charge under section 68(4). Consequently, invocation of section 69 cannot sustain the impugned action taken under section 68(4)(b). [Paras 9]

Section 69 is not a justification for the seizure effected under section 68(4)(b) and does not cure the lack of jurisdiction.

Final Conclusion: The petition is allowed; the seizure memo dated 03.03.2016 is quashed and set aside and the respondents are directed to release the truck and goods forthwith, subject to their liberty to take action in accordance with law under any provision properly available to them.

Abuse of the process of court - double prosecution for the same transaction - conviction under Section 138 of the Negotiable Instruments Act and subsequent prosecution under Sections 409 and 420 of the Indian Penal Code - applicability of Kolla Veera Raghav Rao principle - effect of a civil decree on subsequent criminal proceedings arising from the same cause of action - prohibition on claiming a higher amount after obtaining a decree

Abuse of the process of court - double prosecution for the same transaction - applicability of Kolla Veera Raghav Rao principle - effect of a civil decree on subsequent criminal proceedings arising from the same cause of action - prohibition on claiming a higher amount after obtaining a decree - Whether prosecution of the appellant for offences alleged under Sections 409 and 420 IPC constituted an abuse of the process of court in view of the decree obtained by the respondents and the prior proceedings under Section 138 NI Act, warranting setting aside of the impugned order. - HELD THAT: - The Court found that the complaints prosecuted under Sections 409 and 420 IPC arose out of the very same transactions in respect of which the respondents had earlier obtained a decree in a civil suit and where proceedings under Section 138 NI Act had also been pursued. Relying on the principle articulated in Kolla Veera Raghav Rao, the Court held that instituting criminal proceedings in respect of the same subject-matter after availing civil remedies and NI Act proceedings amounted to an abuse of the court's process. The High Court's order sustaining the criminal prosecution was therefore unsustainable. The Court further held that once a decree had been obtained by the respondents in respect of the same matter, they could not be permitted to claim a higher amount in the criminal proceedings. Applying these principles to the facts, the Court concluded that the impugned judgment and order must be set aside.

Impugned judgment and order set aside; appeal allowed; respondents are not entitled to claim a higher amount against the appellant.

Final Conclusion: The Supreme Court allowed the appeal, setting aside the High Court order permitting prosecution under Sections 409 and 420 IPC as an abuse of process in view of the prior civil decree and related NI Act proceedings, and ruled that the respondents cannot claim a higher amount against the appellant.

Alibi - Ocular testimony - Corroboration by medical evidence - Burden of proof after prosecution discharge - Appreciation of evidence on reversal of acquittal

Alibi - Burden of proof after prosecution discharge - Plea of alibi raised by appellant Darshan Singh is false and not proved. - HELD THAT: - The trial court accepted the plea of alibi but on re appreciation the High Court found the alibi to be vacillating and false. The Court noted that appellant was required to be present in proceedings under Section 107/151 Cr.P.C. on the date of occurrence, that his presence and role were narrated in detail by injured eye witnesses, and that the alleged school attendance and leave entry were not corroborated by immediate seizure of the attendance register. Having found that the prosecution had discharged its initial burden, the Court applied the rule that the burden to prove an alibi rests on the accused and held that this burden was not satisfactorily discharged by the defence. [Paras 16, 17]

Alibi plea rejected; alibi found false.

Ocular testimony - Corroboration by medical evidence - Ocular testimony of injured witnesses is reliable and is corroborated by medical and post mortem evidence. - HELD THAT: - The incident occurred in daylight and there are three injured eye witnesses whose testimonies assign specific roles to the accused. Their evidence of injuries and the nature of assaults is supported by medical examination reports and the autopsy of one deceased (detailing multiple ante mortem stab wounds). The Court emphasised that ocular testimony cannot be discarded lightly where it is corroborated by medical evidence and thus supports the prosecution case against the appellant. [Paras 12, 13, 14, 15]

Ocular evidence, corroborated by medical and autopsy reports, upheld.

Appreciation of evidence on reversal of acquittal - High Court was entitled to reverse the trial court's acquittal after re appreciation of evidence; no illegality in convicting the appellant. - HELD THAT: - The appellant contended that when two views are possible the High Court should not disturb an acquittal. The Court examined the record, including the eye witness statements, medical reports and defence evidence, and concluded that the High Court's re appreciation legitimately led to a finding of guilt. The Court found no error in the High Court's evaluation of evidence and affirmed that interference with an acquittal is not precluded where appellate re appraisal shows the conviction is sustainable. [Paras 10, 18, 19, 20]

Reversal of acquittal and conviction by the High Court sustained; appeal dismissed.

Final Conclusion: The appeal is dismissed; the High Court's reversal of the trial court's acquittal and conviction of Darshan Singh (including findings rejecting the alibi and accepting ocular evidence corroborated by medical reports) is upheld and the sentence is to be executed.