TaxTMI Updates e-Newsletter
Apr 08,2013

Depreciation on intangible asset (stock exchange membership card) - acquisition-date requirement for depreciation - treatment of bad debt - binding effect of Special Bench decisions - remand to Assessing Officer for examination of default in payment of advance tax - power to remit or waive interest under section 234B - application of jurisdictional High Court precedent (Prime Securities Ltd.)

Depreciation on intangible asset (stock exchange membership card) - acquisition-date requirement for depreciation - Whether depreciation was available in respect of the first stock exchange membership card purchased in 1995-96. - HELD THAT: - The court recorded that this question is governed by the companion judgment in CIT v. Kotak Securities Ltd. (No. 1) and, in consequence of the statement of counsel, held that the question does not raise any substantial question of law for adjudication in this appeal. The court therefore declined to entertain the challenge on this point in the present proceedings. [Paras 2]

Question treated as governed by the companion judgment and not raising a substantial question of law.

Treatment of bad debt - binding effect of Special Bench decisions - Whether the issue of bad debt is covered by the Special Bench decision in Deputy CIT v. Shreyas S. Morakhia. - HELD THAT: - Both parties stated that the matter is covered in favour of the assessee by this Court's decision in CIT v. Shreyas S. Morakhia. Having received that statement, the court held that the question does not give rise to any substantial question of law in the present appeal and therefore does not require further adjudication here. [Paras 3]

Question held to be covered by the cited High Court decision and not a substantial question of law in this appeal.

Remand to Assessing Officer for examination of default in payment of advance tax - power to remit or waive interest under section 234B - application of jurisdictional High Court precedent (Prime Securities Ltd.) - Whether the Tribunal was right in remitting the matter to the Assessing Officer to examine and decide the levy of interest (including applicability of Prime Securities Ltd.). - HELD THAT: - The Tribunal had remitted the issue to the Assessing Officer because neither the AO nor the CIT(A) had examined or recorded whether there was a default in payment of advance tax, and directed that the AO decide the matter in the light of the jurisdictional High Court's decision in Prime Securities Ltd. The Revenue argued that Prime Securities is distinguishable and raised a contention about the limited administrative power to remit interest. The High Court construed the Tribunal's order as leaving all questions open for determination by the Assessing Officer, including consideration of the applicability of Prime Securities Ltd., and therefore declined to treat the remand as raising a substantial question of law for the present appeal. [Paras 4, 5, 6]

Matter remitted to the Assessing Officer for fresh examination and decision on the issue of default in payment of advance tax and related interest, with all questions left open for determination.

Final Conclusion: The appeal is dismissed: the questions on depreciation and bad debt were treated as governed by existing High Court decisions and not substantial for this appeal; the Tribunal's remand on the interest/advance-tax issue is maintained, leaving the Assessing Officer to examine and decide the matter (including applicability of Prime Securities Ltd.) after giving the assessee a reasonable opportunity of hearing.

Disallowance under section 40(a)(ia) - Tax deduction at source (TDS) on freight payments - Applicability of Double Taxation Avoidance Agreement - Article 8 - CBDT Circular No. 723 and its scope - Certificates under section 197 for non-deduction of TDS - Opportunity to Assessing Officer under Rule 46A of the Income tax Rules

Disallowance under section 40(a)(ia) - Tax deduction at source (TDS) on freight payments - Certificates under section 197 for non-deduction of TDS - Deletion of the disallowance of freight payments for non-deduction of TDS was set aside and remitted to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal found that the CIT(A) deleted the disallowance by accepting for the first time documentary particulars and treaty/circular-based exemptions without giving the Assessing Officer an opportunity to examine those materials. There was a factual conflict between the AO's finding that no certificates under section 197 were produced and the CIT(A)'s note of having received such certificates; further, payments were made to various intermediary parties from different countries and the applicability of treaty relief under Article 8 required examination in relation to each relevant treaty. In the interest of justice the Tribunal set aside the CIT(A)'s deletion and remitted the issue to the AO to decide afresh after taking into account the details and documents filed before the CIT(A), verifying the authenticity and legal effect of any section 197 certificates, determining whether the payments were made to non resident airlines (or merely to agents), and applying the relevant DTAA provisions or Circular No. 723 as appropriate, while affording the assessee a proper opportunity of being heard. [Paras 6]

Matter remitted to the Assessing Officer for fresh decision on the disallowance under section 40(a)(ia) after verification of documents, treaty applicability and section 197 certificates, with opportunity of hearing.

Applicability of Double Taxation Avoidance Agreement - Article 8 - CBDT Circular No. 723 and its scope - Opportunity to Assessing Officer under Rule 46A of the Income tax Rules - The CIT(A)'s reliance on Article 8 of DTAAs and on CBDT Circular No. 723 without providing the AO an opportunity to examine and verify the factual and treaty basis for exemption was held to be procedurally improper and required reconsideration. - HELD THAT: - The Tribunal observed that the CIT(A) accepted exemptions under Article 8 and the Board's circular without explaining the legal basis for each payment or allowing the AO to assess applicability of different treaties for payments to parties from different countries. This procedural lapse-failure to afford the AO an opportunity to examine newly produced material and to test treaty applicability under Rule 46A-vitiated the appellate conclusion. Accordingly, the Tribunal directed that the AO should be given proper and sufficient opportunity of being heard while re adjudicating the matter on merits. [Paras 6]

CIT(A)'s order set aside insofar as it relied on treaty/circular exemptions without AO's involvement; matter remitted for reconsideration with opportunity to the AO to examine documents and to the assessee to be heard.

Final Conclusion: Revenue appeal allowed for statistical purposes; the CIT(A)'s deletion of the disallowance under section 40(a)(ia) is set aside and the matter is remitted to the Assessing Officer for fresh adjudication after verification of documents, examination of treaty and circular applicability and section 197 certificates, with the Assessing Officer and the assessee being afforded proper opportunity of hearing.

Disallowance under Section 14A in relation to income exempt from tax - prohibition against reopening concluded assessments under the proviso to Section 14A - reopening of concluded assessments by reassessment or rectification - suo motu revisional powers of the Commissioner under Section 263 - vested right against reopening assessment

Disallowance under Section 14A in relation to income exempt from tax - prohibition against reopening concluded assessments under the proviso to Section 14A - suo motu revisional powers of the Commissioner under Section 263 - vested right against reopening assessment - Whether the Commissioner can invoke suo motu revisional powers under Section 263 to set aside concluded assessments so as to make disallowances under Section 14A which the Assessing Officer is barred from making by the proviso to Section 14A. - HELD THAT: - The Court held that the proviso to Section 14A, which prohibits the Assessing Officer from reassessing under Section 147 or rectifying under Section 154 for making disallowances or raising demands for assessment years beginning on or before 1-4-2001, protects the assessee's vested right against reopening concluded assessments. Allowing the Commissioner to use suo motu revisional powers under Section 263 to achieve the same result would neutralise the statutory prohibition and defeat the legislative protection. The decision distinguishes earlier authority where an assessment was not concluded because it had been set aside and remanded by the appellate authority; in those circumstances revision under Section 263 was not impermissible because the assessment was not a concluded assessment. In the present cases the assessments were concluded, and therefore the Commissioner could not, by invoking Section 263, direct reassessment or disallowance that the proviso to Section 14A bars the Assessing Officer from effecting. [Paras 4]

The Court dismissed the review petitions and held that the Commissioner cannot invoke Section 263 to reopen concluded assessments for making disallowances under Section 14A protected by the proviso.

Final Conclusion: Review petitions dismissed; where assessments are concluded the proviso to Section 14A precludes disallowance by reassessment or rectification and the Commissioner cannot circumvent that prohibition by exercising suo motu revisional powers under Section 263.

Estoppel by undertaking - finality of appellate undertaking - non-disclosure of earlier judgment to subsequent forum - setting aside tribunal order on account of procedural unfairness - restoration to Assessing Officer for fresh consideration

Estoppel by undertaking - non-disclosure of earlier judgment to subsequent forum - setting aside tribunal order on account of procedural unfairness - Whether the Tribunal's orders should be set aside because the assessee pressed a ground before the Tribunal contrary to an undertaking given in this Court and failed to inform the Tribunal of this Court's earlier judgment. - HELD THAT: - The Court held that counsel for the holding company had undertaken in this Court not to press the ground relating to the subsidiary's opening/closing stock, and the appeal against the holding company was dismissed on that specific condition. The subsidiary nevertheless argued the same matter before the Tribunal without bringing the Court's prior order to its notice, resulting in adjudication on merits and adverse Tribunal orders which prevented the Department from effectively resisting the holding company's position. The Court characterised the assessee's conduct as deprecable but noted the Department's equal failure to place the earlier judgment before the Tribunal. In view of the procedural unfairness arising from non-disclosure of the prior undertaking and judgment, the Court allowed the Revenue's appeals, set aside the Tribunal's orders and declined to impose heavy costs, treating both sides as culpable to some extent.

Tribunal's orders set aside and appeals allowed on the ground of non-disclosure of the Court's earlier undertaking and judgment.

Restoration to Assessing Officer for fresh consideration - reopening/remand for fresh consideration by Assessing Officer - Whether the matter should be restored to the Assessing Officer for reconsideration and revision of assessment in the light of this Court's judgment. - HELD THAT: - The Court directed that, because its earlier judgment concretely affected the basis on which the Tribunal determined gross profit and the treatment of stock between the holding company and the subsidiary, the appropriate remedy is to remit the matter to the Assessing Officer. The Assessing Officer was to reconsider the assessment afresh and revise the assessment orders made pursuant to the earlier judgment in ITA No.99/2009 in the case of the holding company. The Court also left the Revenue free to challenge any revised order in further proceedings if aggrieved.

Matter restored to the Assessing Officer for fresh consideration and revision of assessment; further appellate remedies left open to the appellant.

Final Conclusion: Appeals allowed; Tribunal orders set aside for non-disclosure of this Court's prior undertaking and judgment; matter remitted to the Assessing Officer for fresh reconsideration and revision of the assessment, with liberty to the Revenue to pursue further appeal against any revised order.

Disallowance of expenditure under section 14A for exempt income - classification of excess cash in suspense account as income or liability - treatment of longstanding suspense account entries versus recent surplus - allowability of deduction when claim arises

Disallowance of expenditure under section 14A for exempt income - Disallowance under section 14A - HELD THAT: - The Court held that the question of disallowance under section 14A is covered against the assessee by the earlier decision of this Court in CIT v. Catholic Syrian Bank Ltd. and accordingly answered this question in favour of the Revenue. The Court therefore confirmed the disallowance as per the cited precedent. [Paras 1]

Question of disallowance under section 14A answered against the assessee and in favour of the Revenue.

Classification of excess cash in suspense account as income or liability - treatment of longstanding suspense account entries versus recent surplus - allowability of deduction when claim arises - Assessment of excess cash shown in a suspense account - HELD THAT: - The Tribunal found, and the Court agreed, that amounts long retained as 'excess cash' in the suspense account did not represent a liability and were wrongly shown as such by the assessee. The Court observed the assessee conceded the amounts were excess cash retained for several years with no claimant, and therefore such arrears brought forward could not be treated as liabilities and were properly rejected by the Tribunal. However, the Court carved out an exception for the surplus discovered in the immediately preceding year, holding that that recent excess need not be treated as income and may be retained in the suspense account to meet any future claim; if a claim materialises and payment is made, the payment will be allowable as a deduction in the year of payment. [Paras 2]

Tribunal's finding that longstanding excess cash in the suspense account is not a liability is confirmed, except that the recent excess found in the previous year need not be treated as income and may be kept in the suspense account to meet any claim.

Final Conclusion: The Court affirmed the disallowance under section 14A against the assessee and upheld the Tribunal's finding that longstanding excess cash entries in the suspense account are not liabilities (and thus not allowable), while permitting the recent surplus discovered in the previous year to be treated as a suspense account surplus to meet any future claim, with actual payments to be allowed as deductions when made.

Reopening of assessment - reasons to believe - reassessment despite absence of scrutiny under section 143(2) - change of opinion

Reopening of assessment - reasons to believe - reassessment despite absence of scrutiny under section 143(2) - Validity of notice under section 148 (and consequential proceedings) issued for assessment year 2000-01 - HELD THAT: - The High Court held that issuance of notice under section 148 for assessment year 2000-01 was not invalid merely because no notice under section 143(2) had been issued in the original proceedings. Applying the principle in Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd., the court recorded that so long as the statutory ingredients for reopening under section 147 are satisfied, the Assessing Officer is competent to initiate reassessment proceedings even where original scrutiny under section 143(2) was not undertaken. The petition seeking quashing of the notice under section 148 (and the notice under section 142(1) attendant thereto) was dismissed on that basis, the court expressly refraining from expressing any opinion on the merits of the proposed reassessment. [Paras 10, 11]

Writ petition challenging the notice under section 148 dismissed; notice held not invalid for want of earlier section 143(2) scrutiny

Reasons to believe - change of opinion - Treatment of Transport Infrastructure Utilisation Fund (TIUF) and interest for assessment year 2000-01 left open for adjudication on merits - HELD THAT: - Although the court noted its contemporaneous decision upholding the taxability of amounts transferred to the Transport Infrastructure Utilisation Fund in earlier assessment years, it explicitly did not decide the taxability of the TIUF and interest for assessment year 2000-01 in the present writ. The court observed that the petitioner may explain and demonstrate that the Tribunal's and this Court's earlier orders for assessment years 1990-91 and 1991-92 should not be applied to 2000-01 due to change of facts or circumstances. Thus the substantive question of taxability for AY 2000-01 remains for consideration in the reassessment proceedings rather than being finally adjudicated in the writ. [Paras 8, 11]

Merits of taxability of TIUF and interest for AY 2000-01 not decided and remain open for the Assessing Officer and the assessee to address in the reassessment process

Final Conclusion: The writ petition was dismissed: the reopening notice for Assessment Year 2000-01 was held not invalid for want of prior section 143(2) scrutiny, while the substantive question of taxability of the Transport Infrastructure Utilisation Fund and interest for that year was left open for consideration in the reassessment proceedings.

Income from house property - annual value - arrears of rent - taxability in year of receipt - reassessment under Sections 147 and 148 - Section 25B - special provision for arrears of rent - chargeability and computation as integrated code

Income from house property - arrears of rent - taxability in year of receipt - reassessment under Sections 147 and 148 - Whether arrears of rent received in assessment years 1993-94, 1994-95 and 1995-96 (though relating to earlier years) could be subjected to tax in the years of receipt and lawfulness of reopening assessments under Sections 147/148 to bring such arrears to tax. - HELD THAT: - The Court held that arrears of rent retain their character as income from house property and are not excluded from the taxing code. Reading Sections 4, 5 and the charging and computation provisions together shows the Act contemplates taxation of income actually or deemed to be received. Where arrears relating to earlier years were not declared and were subsequently received, their non-declaration amounted to escapement of income and justified reassessment under Sections 147/148. The annual value under Section 23 may be determined by reference to higher amounts (including rates fixed by award) so that differences constituting arrears must be added to give effect to the computation provisions. Consequently the Tribunal's inclusion of the arrears in the assessment years 1993-94, 1994-95 and 1995-96 did not call for interference.

Arrears of rent received in the stated assessment years though attributable to earlier years are taxable in the years of receipt and could be validly brought to tax by reassessment under Sections 147/148.

Section 25B - special provision for arrears of rent - taxability in year of receipt - mechanism for computation - Whether the insertion of Section 25B by the Finance Act, 2000 aids the assessee or affects the taxability of arrears received prior to its insertion. - HELD THAT: - The Court observed that Section 25B creates a statutory fiction treating arrears received as income from house property in the year of receipt and prescribes a mechanism for computation (allowing a 30% deduction). While Section 25B clarifies treatment prospectively, its existence indicates that arrears were not intended to be outside the tax net. On the facts, even for periods prior to insertion, arrears could be assessed by reassessment provisions; the Court did not accept that Section 25B's prospective enactment immunises earlier arrears from tax.

Section 25B provides a mechanism for treatment of arrears but does not preclude assessment of arrears received prior to its insertion; such arrears can be brought to tax under the reassessment provisions.

Hamilton - Hope (India) - ratio of precedents - chargeability and computation as integrated code - Whether the ratios in Hamilton and Hope (India) preclude taxing the arrears in the year of receipt in the present case. - HELD THAT: - The Court examined Hamilton and Hope (India) and concluded neither decided that arrears which do not relate to the immediately preceding year are absolutely immune from tax when actually received later and reassessed. Hamilton emphasises that arrears retain character as income from house property and should not be taxed under a residuary head to evade computation rules; it does not hold that such arrears can never be taxed on receipt. Hope (India) likewise did not address the reassessment and computation issue determinatively for the facts here. The Full Bench decision cited merely reconciled the two lines and did not deal with the present aspect.

Precedents relied upon do not preclude taxing the arrears on receipt in the circumstances of this case; the Tribunal's reliance does not warrant interference.

Final Conclusion: The appeals were dismissed. The High Court upheld the Tribunal's dismissal of the assessee's appeals for assessment years 1993-94, 1994-95 and 1995-96, holding that arrears of rent received in those years (though relating to earlier years) could be assessed in the years of receipt and validly reopened under the reassessment provisions; Section 25B provides a computation mechanism but does not exempt earlier arrears from assessment.

Genuineness of payments to commission agent - Burden of proof for disallowance of expenditure - Acceptance of bank cheque and ledger entries as proof of payment - Disbelief only on affirmative evidence of fabrication

Genuineness of payments to commission agent - Acceptance of bank cheque and ledger entries as proof of payment - Burden of proof for disallowance of expenditure - Disbelief only on affirmative evidence of fabrication - Whether the addition of amounts paid to the commission agent could be sustained in absence of positive evidence that services were not rendered and when payments were made by account payee cheques pursuant to a written agreement. - HELD THAT: - The Tribunal found, and this Court accepted, that the assessee produced a written agreement with the commission agent and contemporaneous documentary proof of payments in the form of bank cheque clearance statements, ledger contra copies and correspondence, which sufficiently indicated the payments were genuine. Although the precise nature of the assistance rendered by the agent could not be proved by positive direct evidence, the Revenue produced no material to demonstrate that the agent was a sham or that the payments were not genuine or undisclosed by the agent. In these circumstances, and having regard to the nature of the agent's work (information procurement and influencing for early release of payments), mere inability to produce direct proof of services did not justify disbelieving the written agreement and documentary payment evidence. The Tribunal's acceptance of the documents and consequent deletion of the addition was therefore justified and did not raise any substantial question of law. [Paras 5, 7, 8]

Tribunal's deletion of the addition upheld and Revenue's appeal dismissed.

Final Conclusion: Revenue's appeal is summarily dismissed; the Tribunal correctly accepted the written agreement and documentary evidence of payment and deleted the addition for AY 2004-2005. Tax Appeal No.2290 of 2010 is dismissed for the same reasons in respect of the other assessment year.

Revenue expenditure versus capital expenditure - nexus of expenditure with business activity - allowability of commission as business deduction - onus of proof for commission payments and TDS compliance - valuation of work-in-progress for incomplete projects - appreciation of evidence and scope of appellate interference under Section 260A

Revenue expenditure versus capital expenditure - nexus of expenditure with business activity - Whether the expenditure incurred on an in-house produced 2D animation film, later written off, was revenue expenditure related to business and hence allowable. - HELD THAT: - The Court examined the factual findings of the authorities below that the assessee carried on business of 2D/3D animation and had produced the film in-house with an intention to generate revenue. After completion there was no market and the assessee wrote off the work in process. It was not a contract job and no amount was due from any third party. Both the Tribunal and the Commissioner found that the expenditure had nexus with the business, did not create an enduring advantage nor result in a capital asset, and accordingly treated the write-off as revenue loss. The High Court, on review of the record, found no reason to interfere with the concurrent factual findings and accepted that the addition made by the Assessing Officer was rightly set aside.

Addition disallowing the write-off was correctly deleted; expenditure held to be revenue in nature and allowable.

Allowability of commission as business deduction - onus of proof for commission payments and TDS compliance - Whether commission payments claimed by the assessee were allowable given past practice, particulars furnished and TDS deduction. - HELD THAT: - The Commissioner found that similar commissions had been allowed in earlier years, the assessee had deducted TDS on such payments, and commissions were paid to three agents who had brought business and clients. The Tribunal affirmed that the assessee had furnished addresses, project details and amounts paid, discharging the onus to justify the deduction. The High Court found no material produced by the Revenue to disprove these findings and declined to disturb the concurrent factual conclusion that the commission payments were properly allowable.

Addition disallowing commission payments was rightly deleted; commissions held allowable.

Valuation of work-in-progress for incomplete projects - appreciation of evidence and scope of appellate interference under Section 260A - Whether the Assessing Officer was justified in making an addition to work in process on the basis of estimates, despite the assessee's valuations and supporting particulars. - HELD THAT: - The Assessing Officer made an addition ostensibly because projects spanned several years and details of men-hours were not furnished. The Commissioner and Tribunal relied on sales bills raised in the subsequent year, project-wise completion percentages, bills aggregating specified amounts, valuations certified by the Officer In-charge and advances received, concluding the assessee's valuation of WIP was reasonable. The High Court held that these were findings of fact based on appreciation of evidence, not vitiated by lack of evidence or perversity, and therefore not amenable to interference under the narrow scope of Section 260A.

Addition to WIP was not justified; the Tribunal correctly upheld deletion of the addition.

Final Conclusion: All three additions made by the Assessing Officer were correctly deleted by the authorities below; no substantial question of law arises and the Revenue's appeal is dismissed.

Framing of charge on prima facie materials - admissibility of statements recorded under Section 108 of the Customs Act - role of Section 30 of the Indian Evidence Act in reception of extra-judicial statements - effect of retraction of statement at the stage of framing charge - prima facie inference of beneficiary from seizure evidence

Framing of charge on prima facie materials - prima facie inference of beneficiary from seizure evidence - Impugned order framing charge under Section 135(1)(a) of the Customs Act is sustainable and petitioner is not entitled to discharge at the threshold. - HELD THAT: - At the stage of framing the charge the court's scrutiny is limited and does not require meticulous examination of the truth, veracity or ultimate effect of the prosecution evidence. A very strong suspicion founded upon the materials before the Magistrate which leads to a presumptive opinion as to the existence of factual ingredients of the offence may justify framing of charge. The record discloses seizure of imported goods under surveillance and material suggesting that the petitioner was a beneficiary of the seized goods. In these circumstances, and having regard to settled law on the limited standard of proof required at the charge stage, there is no illegality in calling the petitioner to face trial, and discharge is not warranted. [Paras 1, 2, 7, 10, 11]

Charge framed against the petitioner is upheld and the petition for discharge is dismissed.

Admissibility of statements recorded under Section 108 of the Customs Act - role of Section 30 of the Indian Evidence Act in reception of extra-judicial statements - effect of retraction of statement at the stage of framing charge - Statements recorded under Section 108 cannot be excluded at the threshold merely because they have been retracted; their admissibility must be tested at trial in accordance with Section 30 of the Evidence Act and other relevant provisions. - HELD THAT: - A statement recorded by customs officers under Section 108 is admissible in evidence but must be examined for voluntariness and other vitiating factors at the appropriate stage. Mere retraction of such a statement is not by itself sufficient to exclude it at the charge-framing stage; the court must consider when and why the retraction occurred, and the question of admissibility under Section 30 of the Evidence Act has to be determined after evidence is led. Additionally, independent statements of other persons, even if not originally listed, cannot be pre-judged as inadmissible at the initial stage and may be relied upon subject to procedural opportunity to produce witnesses at trial. [Paras 8, 9, 10]

Section 108 statements and similar evidence cannot be summarily excluded at the initial stage; their admissibility and probative value are to be examined during trial.

Final Conclusion: Revision petition dismissed; impugned order framing charge is upheld and the petitioner is directed to stand trial, the court refraining from commenting on merits so as not to prejudice trial proceedings.

Classification of goods as 'worn clothing' under Chapter 63.09 - rejection of declared transaction value and application of Customs Valuation Rules (Rules 4-9) including Rule 9 - rejection procedure under Rule 12 of CVR - confiscation, redemption fine and penalty under Section 112 of the Customs Act, 1962

Classification of goods as 'worn clothing' under Chapter 63.09 - Classification of the imported consignment as 'old and used garments' classifiable under CTH 63.09 was accepted and upheld. - HELD THAT: - The adjudicating Commissioner found on the record of re examination that the panchanamas drawn by DRI did not support the allegation that the goods showed 'no signs of appreciable wear' and therefore accepted the importer's contention that the consignment comprised old and used garments under CTH 63.09. That finding was not challenged before the Tribunal and has therefore attained finality. The Tribunal recorded that the case was built on a premise contrary to that admitted and that, having accepted classification under 63.09, further attempts to treat the goods as new articles for valuation were inconsistent with that classification. [Paras 7]

The goods are 'old and used garments' classifiable under CTH 63.09 and that classification stands final.

Rejection of declared transaction value and application of Customs Valuation Rules (Rules 4-9) including Rule 9 - rejection procedure under Rule 12 of CVR - confiscation, redemption fine and penalty under Section 112 of the Customs Act, 1962 - Enhancement of assessable value and consequent confiscation/fines based on valuation treating the goods as other than 'worn clothing' was held unsustainable; the adjudicator's valuation was set aside to the extent it enhanced value beyond the transaction value. - HELD THAT: - The Tribunal analysed the valuation exercise against the scheme of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It noted that Rule 12 furnishes a procedure for rejection of declared value but does not itself determine value and that, before rejecting a transaction value, the department must establish reasonable doubt and follow the sequential valuation mechanism in Rules 4-9. Reliance was placed on the Supreme Court authorities cited in the order to the effect that invoice price (transaction value) cannot be lightly rejected and that comparable imports or cogent reasons must be recorded. In the present case the Commissioner had accepted classification under CTH 63.09 and there was no finding that the foreign invoices were fake or that there was any flow back of funds; accordingly the uplift of value by treating the goods as other than worn clothing and the consequential confiscation/penalties based on that enhanced valuation were not sustainable. The Tribunal therefore set aside the Commissioner's order insofar as it upheld the enhanced valuation and consequent duty/fines, and allowed the appeals of the importer and other noticees to that extent; the Revenue's appeal was dismissed. [Paras 7]

The valuation enhancement and consequential confiscation/fines based on treating the goods as other than worn clothing is set aside; the appeals of the importer and other noticees are allowed to that extent and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the classification of the consignment as old and used garments under CTH 63.09 (a finding not challenged) but held that the Commissioner's re determination of assessable value (and attendant confiscation/fines/penalties founded on that enhanced valuation) was unsustainable in law; the adjudicatory order is set aside to that extent and the appeals of the importer and other noticees are allowed, with the Revenue's appeal dismissed.

State within the meaning of Article 12 - deep and pervasive State control - instrumentality or agency of the State - public or governmental function - hire and fire - unconscionable clause - violation of Article 14

State within the meaning of Article 12 - deep and pervasive State control - instrumentality or agency of the State - public or governmental function - Whether Balmer Lawrie & Co. Ltd. is an authority amenable to writ jurisdiction as a State under Article 12 of the Constitution - HELD THAT: - The court applied the established cumulative test of financial, functional and administrative domination to determine State character. It examined shareholding, statutory provisions in the Memorandum and Articles (including Presidential appointment and directive powers), administrative control by the Ministry of Petroleum, conformity of employee remuneration and reservation policies with governmental norms, submission of performance reports to the Ministry, promotion of Government language policy, and existence of grants and control over certain products related to the oil industry. Although the company is profitable and meets many of its capital needs internally and faces competition in several businesses, the aggregate of these factors - in particular majority shareholding through a government company, Presidential/directive authority over appointment and administration, Ministerial oversight of policy and budgets, and integration with government policy in respect of core functions - compels the conclusion that the appellant is an instrumentality of the State. Regulatory control alone would not suffice, but the degree and particularity of control here is found to be deep and pervasive. [Paras 22, 23, 25, 26, 27]

The appellant company is an authority within the meaning of Article 12 and thus amenable to writ jurisdiction.

Hire and fire - unconscionable clause - violation of Article 14 - natural justice - Whether Clause 11(a) of the appellant's letter of appointment permitting termination at sole discretion on three months' notice is enforceable - HELD THAT: - Applying constitutional principles and precedents restraining arbitrary termination by State authorities or their instrumentalities, the court held that unconstrained power to terminate without reason or enquiry effectuates a 'hire and fire' regime inconsistent with equality and basic standards of natural justice. Such an uncanalised power in a State instrumentality is arbitrary and unconscionable. The clause was therefore struck down to the extent that it permits termination at the sole discretion of the employer without justifying procedure or reasons, and the corresponding portion of the contract of employment is void as violative of Article 14. [Paras 18, 19, 28]

Clause 11(a) is unconscionable and violative of Article 14; the service condition to the extent permitting arbitrary termination without reason or enquiry is void.

Abatement of appeal - equitable relief to legal heirs - Relief consequent to death of a respondent and entitlement of legal heirs - HELD THAT: - Although the appeal abated qua the deceased respondent for non-substitution, the court exercised its equitable jurisdiction to ensure that the legal heirs receive the benefits that the deceased employee would have been entitled to. The heirs are directed to receive 60% of arrears of wages from termination to superannuation, calculated with periodic revisions and other terminal statutory benefits; payment to be made within three months with 9% interest thereafter if delayed. [Paras 29]

Appeal abated qua the deceased; legal heirs entitled to specified percentage of arrears and statutory terminal benefits with interest as directed.

Final Conclusion: The appeals are dismissed. Balmer Lawrie & Co. Ltd. is held to be an instrumentality of the State under Article 12; the clause permitting arbitrary termination is struck down as violative of Article 14 and is void to that extent; the deceased respondent's legal heirs are granted the directed monetary and statutory relief.

Input - input service - CENVAT credit - nexus between input/input service and output service - Renting of Immovable Property Service - Commercial and Industrial Construction Service - setting up of the premises of the service provider - pre-deposit for stay

Input - CENVAT credit - Renting of Immovable Property Service - nexus between input/input service and output service - Eligibility of credit on inputs (materials used in constructing buildings) for the output service of Renting of Immovable Property - HELD THAT: - The Tribunal observed that the terms 'input' and 'input service' are relative but emphasised the necessity of a direct nexus between the input and the output service. Materials such as cement, iron and steel, tiles, marbles and granite used in construction may qualify as inputs for earlier stages of production or for the contractors who actually constructed the buildings, but prima facie they do not qualify as inputs for the appellant's output service of Renting of Immovable Property. The Tribunal recorded the appellant's concession about portions of the claimed credit being attributable to inputs and indicated that, prima facie, approximately half the total credit claimed (relating to inputs) appears not to be allowable. [Paras 5]

Prima facie disallowed the credit claimed on construction materials as inputs for the Renting of Immovable Property service; appellant likely not eligible for a substantial portion of the input-related credit.

Input service - Renting of Immovable Property Service - nexus between input/input service and output service - Whether various services (security, interior partition/decoration, advertisement, repair and maintenance, etc.) qualify as input services for Renting of Immovable Property - HELD THAT: - The Tribunal held that many of the services employed in relation to the constructed buildings may qualify as input services for the Renting of Immovable Property service because they have a direct connection with the rendering of that output service. It noted that eligibility may vary service-by-service and that some claimed service credits may be allowable while others may not. The Tribunal treated prior stay orders in analogous cases as relevant for input services (noting the distinction that those orders did not concern inputs). [Paras 5]

Prima facie allowed that certain services directly connected to letting/rending of the property qualify as input services, while others may not; entitlement to credit must be determined service-wise.

Pre-deposit for stay - CENVAT credit - Relief by way of stay and pre-deposit required to maintain the appeal - HELD THAT: - Balancing the appellant's contentions and absence of documentary proof of financial hardship, the Tribunal nevertheless took the asserted financial difficulties into account. Viewing the case on a prima facie basis - disallowance of substantial portion of input credits but potential allowance of certain input services - the Tribunal exercised discretion under the stay jurisdiction to permit continuation of the appeals on condition of a partial pre-deposit. The Tribunal specified the quantum to be deposited and undertook to waive and stay recovery of the balance subject to compliance with the deposit direction. [Paras 5, 6]

Directed a pre-deposit of a specified sum and, on its deposit within the stipulated period, stayed recovery of the balance of the demand pending disposal of the appeals.

Final Conclusion: On a prima facie examination the Tribunal found that credits on construction materials cannot be treated as inputs for the Renting of Immovable Property service and are likely disallowable, whereas certain services directly connected with letting may qualify as input services; exercising its discretion, the Tribunal ordered a conditional stay subject to a partial pre-deposit and waived recovery of the balance pending appeal.

Eligibility of CENVAT credit on input services rendered at windmill site - prima facie case for waiver of pre-deposit - stay of recovery of interest and penalty subject to pre-deposit - limitation as mixed question of fact and law

Eligibility of CENVAT credit on input services rendered at windmill site - prima facie case for waiver of pre-deposit - Whether the appellant has made out a prima facie case for complete waiver of pre-deposit of the confirmed CENVAT credit demanded in respect of services rendered at the windmill site. - HELD THAT: - The Tribunal recorded that the controversy over admissibility of credit for services at the windmill site is prima facie covered by the Division Bench decision in Rajhans Metal Pvt. Ltd. The appellant relied on factual matrix that electricity generated at the windmills was transferred to the Gujarat Electricity Board which supplied equivalent electricity to the factory, and relied on other Tribunal decisions and limitation. The Bench observed that the Rajhans decision appears to go against the appellant's claim and that the Rajhans decision is pending before the High Court; on the question of limitation the Bench treated limitation as a mixed question of fact and law requiring consideration at final disposal. In view of the prima facie precedential position, the appellant was held not to have established a prima facie case for complete waiver of the pre-deposit of the confirmed CENVAT credit. [Paras 5, 6]

Appellant has not made out a prima facie case for complete waiver of the pre-deposit of the confirmed CENVAT credit and is directed to deposit the entire confirmed amount within eight weeks.

Limitation as mixed question of fact and law - Whether the claim is barred by limitation. - HELD THAT: - The Bench noted the appellant's submission that the Show Cause Notice relates to credit availed during a specified earlier period and contended that the demand is hit by limitation. The Tribunal observed that limitation involves mixed questions of fact and law which cannot be finally resolved at the interlocutory stage and should be considered at the time of final disposal of the appeal. [Paras 5]

Limitation is not adjudicated at this stage and is left to be considered at final disposal of the appeal.

Stay of recovery of interest and penalty subject to pre-deposit - Whether recovery of interest and equal penalty should be stayed pending disposal of the appeal. - HELD THAT: - While refusing complete waiver of the pre-deposit of the confirmed CENVAT credit, the Tribunal directed deposit of the confirmed credit amount within the stipulated time. The Bench granted, conditional on such compliance, a stay of recovery of the interest and the equal amount of penalty until disposal of the appeal. [Paras 6]

Upon deposit of the confirmed CENVAT credit within eight weeks and reporting compliance, recovery of interest and penalty is stayed until disposal of the appeal.

Final Conclusion: Direct deposit of the entire confirmed CENVAT credit is ordered within eight weeks; limitation is left open for final adjudication; subject to deposit and compliance, recovery of interest and penalty is stayed pending disposal of the appeal.

Value of taxable service - pure agent - services rendered by a sovereign authority - exemption under Notification No.18/09-ST - pre-deposit waiver and interim stay

Value of taxable service - pure agent - Whether fees and statutory levies incurred abroad by agents on behalf of the appellant form part of the agent's taxable service value - HELD THAT: - The Tribunal examined whether expenditures incurred by overseas agents for statutory compliance in foreign jurisdictions, and paid for by the appellant through those agents, can be included in the value of the agents' services for levy of service tax. Relying on the characterisation of the agents' act as acting on behalf of the appellant, the Court concluded prima facie that amounts spent by agents as pure agents of the appellant cannot be treated as part of the agent's consideration and therefore do not prima facie form part of the taxable value of the service rendered by the agents. The Tribunal noted the appellant's reliance on CBEC Circular No.89/7/2006-ST as supporting the view that fees for statutory compliance are not to be treated as value of service.

Prima facie payments made by agents abroad as pure agents for statutory compliance do not form part of the taxable value of the agents' service; no service-tax demand is prima facie sustainable on that count.

Services rendered by a sovereign authority - value of taxable service - Whether enforcement of law or statutory action by a foreign sovereign authority constitutes a service rendered to the appellant taxable under service tax - HELD THAT: - Revenue contended that even if payments were routed through agents, the sovereign authority abroad rendered services to the appellant for which service tax ought to be payable. The Tribunal, however, observed prima facie that enforcement of law by a sovereign authority of another country is not properly characterised as a service provided to the person obliged to comply with that law, notwithstanding that a fee may be charged. On this basis the Tribunal found no prima facie basis to treat such sovereign action as a taxable service received by the appellant.

Prima facie the sovereign authority's enforcement/compliance actions abroad are not taxable services received by the appellant.

Exemption under Notification No.18/09-ST - pre-deposit waiver and interim stay - Whether denial of exemption under Notification No.18/09-ST on ground of non-filing of specific half-yearly returns justified immediate confirmation of demand and refusal of pre-deposit waiver - HELD THAT: - The Tribunal considered the Revenue's denial of exemption on the ground that the appellant had not filed the specific half-yearly returns required by the notification, although statutory returns were filed. Observing that the issue appeared procedural in nature and that non-filing of the notification-specific returns constituted a matter of compliance rather than a substantive taxability dispute, the Tribunal held that there was a prima facie case for relief. Consequently, it found it appropriate to grant interim relief in the form of waiver of pre-deposit and stay of recovery during the pendency of the appeal.

Prima facie case established for waiver of pre-deposit and stay as the denial of exemption involved a procedural compliance issue; pre-deposit waived and collection stayed pending appeal.

Final Conclusion: Admission of the appeal is allowed with waiver of the pre-deposit and an interim stay on recovery of disputed dues; prima facie the expenditures incurred abroad by agents as pure agents and actions of foreign sovereign authorities are not taxable services to the appellant, and the denial of exemption under Notification No.18/09-ST raises procedural questions warranting waiver and stay pending adjudication on merits.

Nexus between input services and output service - CENVAT credit: availment and utilization - Commercial or Industrial Construction Service as input for renting - Renting of Immovable Property (output service) - extended period of limitation and suppression - pre-deposit and stay of recovery

Nexus between input services and output service - CENVAT credit: availment and utilization - Commercial or Industrial Construction Service as input for renting - Whether CENVAT credit availed on services used in construction can be treated as input services for the appellant's output service of Renting of Immovable Property - HELD THAT: - The Tribunal found that the services on which CENVAT credit was availed were input services for the contractors' Commercial or Industrial Construction Service. Those input services, used in construction by contractors, are remote from the appellant's output service of renting so as to lack the requisite nexus to qualify as input services for renting. The bench held that earlier orders relied upon by the appellant either found a nexus only in limited categories of services (e.g., repair/maintenance, partition/interior decoration, advertising) or were distinguishable on facts; consequently those precedents do not prima facie assist the appellant. Applying this reasoning, the appellant had no prima facie case against the demand arising from wrong utilization of CENVAT credit for renting. [Paras 5]

Prima facie rejection of the appellant's contention that the construction-related input services qualify as input services for Renting of Immovable Property; no case made against the impugned demand on that ground.

Extended period of limitation and suppression - Whether the extended period of limitation is invokable on the ground of suppression given the disclosure in periodical returns - HELD THAT: - The Tribunal observed that although the amounts of CENVAT credit utilized were disclosed in periodical returns, those disclosures were insufficient for the department to infer that the credits had been taken on input services lacking nexus with the output service of renting. On the facts, the limitation plea was held to be debatable but not strong - only an arguable case could be made on limitation; there was no finding of concealment sufficient to negate invocation of extended limitation at this prima facie stage. [Paras 3, 5]

Limitation plea is only arguable; no decisive finding in appellant's favour on extended limitation at this stage.

Pre-deposit and stay of recovery - Relief to be granted pending appeal in relation to the adjudged dues, penalties and interest - HELD THAT: - Balancing the prima facie view against the debatable limitation issue and absence of a specific plea of financial hardship by the appellant, the Tribunal declined to waive full pre-deposit. It exercised its discretion to require a partial pre-deposit while granting conditional relief: the appellant was directed to pre-deposit a specified sum within a time frame, and, subject to compliance, waiver of further pre-deposit and stay of recovery was ordered in respect of penalties and the balance of service tax and interest. [Paras 6]

Directed pre-deposit of the specified amount within six weeks; on compliance, stay of recovery in respect of penalties and waiver of further pre-deposit for balance tax and interest.

Final Conclusion: The Tribunal rejected the appellant's prima facie claim that construction-related input services qualified as input services for Renting of Immovable Property, found the limitation plea to be merely arguable, and granted conditional relief by directing a specified pre-deposit and, upon compliance, staying recovery of penalties and the balance of service tax and interest.

Service under Section 37-C - registered post and speed post as modes of service - substituted service by pasting on the factory gate - computation of limitation from date of knowledge of service - condonation of delay under Section 35 vis-a -vis Section 5 of the Limitation Act - appeal barred by limitation

Service under Section 37-C - registered post and speed post as modes of service - substituted service by pasting on the factory gate - computation of limitation from date of knowledge of service - Validity of service of the Order-in-Original by sending through speed post followed by pasting on the factory gate and the date from which limitation for filing appeal runs - HELD THAT: - The Court held that registered post and speed post are the same method of service for the purposes of Section 37-C since both are dispatched through the Post Office and maintain records of transmission. When the envelope was returned undelivered with the remark that no firm in that name exists, the department effected substituted service by pasting the order on the factory gate. The appellant admitted coming to know of the pasting on 26.12.2007. Having learnt of the pasting, the appellant's remedy was to procure a certified copy and file the appeal within the prescribed period; limitation must therefore be computed from 26.12.2007. The appellant's contention that only a notice (and not the order) was pasted, and that he had immediately sought a certified copy, did not negate the substituted service nor justify inaction; no averment was made that only the first page was pasted. [Paras 5, 6, 7, 10]

Service by speed post followed by pasting on the factory gate constituted valid substituted service under Section 37-C and limitation for filing the appeal ran from 26.12.2007.

Condonation of delay under Section 35 vis-a -vis Section 5 of the Limitation Act - appeal barred by limitation - Whether the CESTAT erred in holding the appeal time barred and whether delay beyond 30 days could be condoned - HELD THAT: - The Court noted the Supreme Court's exposition that Section 35 overrides Section 5 of the Limitation Act and that sufficiency of cause for condonation is essentially a question of fact. Applying that principle, the CESTAT's finding that the appeal was barred by limitation was not vitiated by any legal error. The appellant filed the appeal many months after expiry of the statutory period and after the short window for condonation; no sufficient factual cause was established to justify condonation of the delay. [Paras 11, 12]

CESTAT correctly held the appeal to be time barred; no ground for condonation of the extended delay was shown and the appeal was dismissed.

Final Conclusion: The High Court affirmed that service by speed post followed by pasting on the factory gate constituted valid substituted service under Section 37-C, limitation ran from the date of knowledge (26.12.2007), the delay was not satisfactorily explained for condonation, and the appeal was dismissed as barred by limitation.

Finality of tribunal orders under Section 35-C(4) - remedy of reference and appeal under the Central Excise appellate provisions (Section 35 G and Section 35 H) - binding effect of High Court opinion on the Tribunal - power of the Tribunal to list or accord effect to earlier orders after a High Court reference - effect of amendment by the Finance Act, 2003 (substitution of Section 35 G by Section 144)

Finality of tribunal orders under Section 35-C(4) - remedy of reference and appeal under the Central Excise appellate provisions (Section 35 G and Section 35 H) - effect of amendment by the Finance Act, 2003 (substitution of Section 35 G by Section 144) - Whether the impugned order of the Tribunal amounted to an impermissible review of its earlier order barred by the finality provision in Section 35 C(4), having regard to the remedial scheme then available and subsequent amendment. - HELD THAT: - The Court held that the contention that the Tribunal's subsequent order offended the finality conferred by Section 35 C(4) was misconceived. At the time the Tribunal's original order (09.10.2000) was passed the revenue's remedy lay in seeking a reference under the then Section 35 G from the Tribunal, and, if not referred, in invoking the High Court's jurisdiction under Section 35 H. The High Court's opinion on such a reference is binding on authorities under the Act and the Tribunal is required to give effect to that opinion. The appellant's argument blurred the pre amendment scheme and the position after the Finance Act, 2003 (which substituted Section 35 G by Section 144). In the circumstances the Tribunal's act of posting the appeal for final disposal to give effect to the Court's opinion could not be equated with an unlawful review of a final order protected by Section 35 C(4).

The challenge that the Tribunal impermissibly reviewed its earlier order under the protection of Section 35 C(4) is rejected.

Power of the Tribunal to list or accord effect to earlier orders after a High Court reference - binding effect of High Court opinion on the Tribunal - Whether the Tribunal had power to pass the impugned order posting the appeal for final disposal without affording a fresh opportunity to the appellant and whether such posting was authorised in view of the High Court's earlier opinion. - HELD THAT: - The Court observed that after the High Court's opinion on the reference, the Tribunal was bound to give effect to that opinion and to proceed accordingly. The order dated 02.01.2013, which allowed a miscellaneous application by the revenue and listed the appeal for final disposal, was part of giving effect to the High Court's decision. The appellant's contention that the Tribunal was required to treat the action as a review necessitating a fresh opportunity was not accepted in the factual and legal matrix before the Court.

The Tribunal was entitled to list the appeal for final disposal in order to give effect to the High Court's opinion; no infirmity is found in posting the matter.

Final Conclusion: The appeal is dismissed: no substantial question of law arises for consideration and the Tribunal's order posting the appeal for final disposal to give effect to the High Court's opinion is upheld.

Unjust enrichment - Presumption under Section 12B of the Central Excise Act - Primary evidence requirement under Section 12A of the Central Excise Act - Evidentiary value of Cost/Chartered Accountant's certificate as corroborative evidence - Refund of Special Excise Duty on inputs

Presumption under Section 12B of the Central Excise Act - Primary evidence requirement under Section 12A of the Central Excise Act - Evidentiary value of Cost/Chartered Accountant's certificate as corroborative evidence - Unjust enrichment - Whether the assessee rebutted the statutory presumption of passage of duty under Section 12B and avoided the bar of unjust enrichment so as to entitle it to refund of SED paid on tyres and tubes. - HELD THAT: - The Tribunal found that the assessee was otherwise eligible for refund on merits but bore the statutory burden under Section 12B to prove that the incidence of SED on inputs was not passed on to buyers of the final products. That burden must be discharged by primary evidence, particularly invoices and documents required to be indicated under Section 12A, which would show whether duty formed part of the sale price. The assessee produced only Cost Accountant certificates purporting to certify uniformity of selling price pre- and post-1-3-2000, but admitted that the underlying invoices and books of account were not available for verification. The certificates did not specify the records examined and, in law, are merely corroborative; they cannot substitute for primary documentary evidence. Earlier authorities relied upon by the assessee were distinguishable because in those cases primary records and books were produced or special factors existed. In the absence of invoices or primary records, the Tribunal could not independently verify the certificates and therefore the assessee failed to rebut the presumption under Section 12B. Consequently the claim was barred by unjust enrichment. [Paras 7, 10, 11, 12, 14]

The assessee failed to discharge the burden to prove non-passage of duty; the refund claim is barred by unjust enrichment and the appeal is dismissed.

Final Conclusion: Refund claim for SED paid on tyres and tubes for the period 1-3-2000 to 31-1-2001 is barred by unjust enrichment because the assessee did not produce primary documents (invoices/books) required by Section 12A to rebut the presumption under Section 12B; Cost Accountant certificates alone were insufficient.

Inclusion of testing charges in assessable value - pre-delivery inspection and after-sales services includible in assessable value - erection, installation and commissioning as contractual component of sale - delivery and completion of sale - waiver of pre-deposit and stay of recovery

Inclusion of testing charges in assessable value - delivery and completion of sale - Cost of diesel used by the manufacturer for trial runs at the purchaser's site does not form part of the assessable value of the DG sets where erection, installation and commissioning are not part of the sales contract. - HELD THAT: - The Tribunal examined the purchase orders and terms and conditions for supply of DG sets and found that the orders were for delivery of complete DG sets at the purchaser's site, without any stipulation making erection, installation and commissioning part of the sales contract. Where erection, installation and commissioning are not incorporated in the sales contract, the cost incurred by the manufacturer for conducting trial runs (diesel consumed during testing) cannot be treated as a component of the value of the final product for assessment. The findings rest on the contractual scope recorded in the purchase orders and the moment of delivery specified therein, leading to the conclusion that reimbursement of actual diesel charges by separate debit notes does not convert those charges into assessable value of the goods. [Paras 6]

The cost of diesel used for trial runs is not includible in the assessable value of the DG sets on the facts of the case.

Pre-delivery inspection and after-sales services includible in assessable value - erection, installation and commissioning as contractual component of sale - The Revenue's contention that testing/trial runs amount to pre-delivery inspection or after-sales services includible in assessable value was rejected on the basis that such activities were not contractual components of the sale orders. - HELD THAT: - Revenue relied on the proposition that erection, installation, commissioning and trial runs constitute pre-delivery inspection or after-sales services which must be included in assessable value. The Tribunal considered that, although testing may be categorised as pre-delivery inspection where it is contractually mandated as part of the sale, the present purchase orders do not record any such requirement. Consequently, the legal basis for including testing charges in assessable value-i.e., that the services are part of the consideration for the sale-was absent. Reliance placed on precedents was noted, but the determinative factor remained the contractual terms recorded in the purchase orders. [Paras 4, 6]

Testing/trial runs are not to be treated as pre-delivery inspection or after-sales services includible in assessable value where the sales contract does not make erection, installation and commissioning part of the supply.

Waiver of pre-deposit and stay of recovery - Application for waiver of pre-deposit of duty, interest and equal penalty and for stay of recovery was allowed. - HELD THAT: - On consideration of the materials, including purchase orders and invoices evidencing separate reimbursement of diesel charges, the Tribunal found that the appellant had established a prima facie strong case against inclusion of the diesel cost in assessable value. In view of this prima facie case, the Tribunal granted relief sought in the stay petition by waiving the requirement of pre-deposit of the balance amounts and stayed recovery of those amounts until disposal of the appeal. [Paras 7]

The appellant's application for waiver of pre-deposit and stay of recovery is allowed; recovery stayed till disposal of the appeal.

Final Conclusion: On the contractual facts disclosed by the purchase orders, the cost of diesel used for trial runs at the purchaser's site is not includible in the assessable value of the DG sets; the Tribunal found a prima facie case in favour of the appellant and allowed waiver of pre-deposit and stayed recovery until disposal of the appeal.

Monetary limits for filing departmental appeals - department bound by its circular instructions - maintainability of appeal where disputed duty/tax is below threshold - National Litigation Policy - reduction of government litigation

Monetary limits for filing departmental appeals - department bound by its circular instructions - maintainability of appeal where disputed duty/tax is below threshold - Appeal by the Department was not maintainable in view of the Board's circular fixing monetary limits and therefore had to be dismissed. - HELD THAT: - The Court examined the Board's instructions (Circulars dated 20-10-2010 and 17-8-2011) which prescribe monetary thresholds below which the Department shall not file appeals in the Tribunal, High Courts or Supreme Court. The determinative element for applying the threshold is the disputed duty/tax; where the disputed amount falls below the prescribed limit, the Department should not prosecute the appeal. In the present case the Cenvat credit/amount in dispute and the penalty were within the monetary limit prescribed by the Board's instruction which had come into force before this Court admitted the appeal. The Department failed to bring the later circular to the notice of the Court at the time of admission. Consequently, the appeal filed by the Central Excise and Customs Department was not maintainable and could not be entertained, making it unnecessary to decide the substantial question of law framed in the appeal. The Court noted that such departmental decisions not to file appeals pursuant to the circular have no precedential value unless the Department records otherwise, but the circular binds the Department's conduct in filing appeals. [Paras 5, 6, 7]

Appeal dismissed as not maintainable under the Board's monetary-limit instruction; substantive question left open.

Final Conclusion: The appeal by the Commissioner was dismissed on the ground that the disputed amount fell within the monetary limits fixed by the Board's circulars and therefore the Department should not have filed the appeal; the substantial question of law was not decided.

Transaction value under Section 4(1)(a) - reference to valuation rules under Section 4(1)(b) - definition of "job worker" in Rule 10A of the Central Excise Valuation Rules - supply of inputs by principal as determinative for job-worker status - waiver of pre-deposit and stay of recovery pending appeal

Transaction value under Section 4(1)(a) - reference to valuation rules under Section 4(1)(b) - definition of "job worker" in Rule 10A of the Central Excise Valuation Rules - supply of inputs by principal as determinative for job-worker status - Whether the appellants' supplies to M/s. Honeywell are to be valued under the transaction value provision (Section 4(1)(a)) or treated as job-work governed by Rule 10A invoking Section 4(1)(b) valuation rules. - HELD THAT: - The Tribunal was not prima facie satisfied that the price at which the appellants sold goods to M/s. Honeywell failed to satisfy Section 4(1)(a); no material was shown to indicate any flow back of consideration, in money, materials or other direct benefit from M/s. Honeywell to the appellants. Under Rule 10A, a "job worker" is one who manufactures from inputs or goods supplied by the principal manufacturer or by a person authorised by him. In the present case M/s. Honeywell did not supply inputs or goods to the appellants; merely specifying the source of raw materials or prescribing suppliers, without actual supply or authorization resulting in transfer of inputs, does not render those suppliers "authorized by" the principal so as to bring the arrangement within Rule 10A. On these prima facie findings there was no reason to invoke the valuation rules under Section 4(1)(b) in place of transaction value under Section 4(1)(a). [Paras 4, 5, 6]

Prima facie transaction value under Section 4(1)(a) governs valuation; the appellants are not, on the material before the Tribunal, to be treated as job workers under Rule 10A.

Waiver of pre-deposit and stay of recovery pending appeal - Whether the requirement of pre-deposit of dues arising from the impugned order should be waived and recovery stayed during the pendency of the appeals. - HELD THAT: - Having found prima facie merit in the appellants' stance that transaction value applies and that the job-worker contention lacks substance on the material, the Tribunal exercised its discretion to relieve the appellants of the pre-deposit obligation. The Tribunal also stayed the collection of the dues payable under the impugned order for the duration of the appeals. [Paras 6]

Pre-deposit requirement waived and recovery of dues stayed during pendency of the appeals.

Final Conclusion: On prima facie consideration the Tribunal found no basis to treat the appellants as job workers under Rule 10A and concluded that transaction value under Section 4(1)(a) prima facie applies; accordingly the Tribunal waived the pre-deposit requirement and stayed recovery of the dues pending disposal of the appeals.

Compounding under section 7-D of the U.P. Trade Tax Act - State Development Tax cannot be levied on contractors who have opted for compounding - modification of assessment to the extent of State Development Tax

Compounding under section 7-D of the U.P. Trade Tax Act - State Development Tax cannot be levied on contractors who have opted for compounding - Whether State Development Tax could be levied upon the petitioner who had opted for compounding under section 7-D of the U.P. Trade Tax Act - HELD THAT: - The Court applied the precedent of a Division Bench in M/s Systematic Conscom Limited versus State of U.P & Others , which held that contractors who opt for compounding under section 7-D are not liable to be levied State Development Tax. Having regard to that decision, the Court accepted the petitioner's contention that the demand of State Development Tax in the assessment order framed under Rule 41(8) read with section 7-D was not sustainable. The determinative reasoning is that the compounding regime under section 7-D excludes the levy and realisation of State Development Tax from contractors who have availed the compounding option, and therefore the portion of the assessment imposing State Development Tax cannot stand.

The demand of State Development Tax is quashed; the assessment order is modified and set aside to the extent it relates to State Development Tax.

Final Conclusion: Writ petition allowed; assessment order dated 3.7.2008 is set aside insofar as it pertains to State Development Tax for assessment year 2005-2006.

Detention of consignment on grounds of undervaluation - notice under Section 47(2) of the KVAT Act - adjudication and interim release subject to bank guarantee - power to purchase goods under Section 45 of the KVAT Act - administrative circular clarifying exercise of power (Circular No.47/06) - enabling not mandatory nature of statutory power

Detention of consignment on grounds of undervaluation - notice under Section 47(2) of the KVAT Act - adjudication and interim release subject to bank guarantee - Challenge to Ext.P3 (detention notice) and interim relief sought for release of detained goods. - HELD THAT: - The Court observed that a similarly placed manufacturer obtained relief in WP(C) No. 27135/12 by an order directing adjudication and interim release of detained goods subject to furnishing of bank guarantee. Having regard to the similarity of issues, the same direction was issued in the present petition. The Court therefore confined its relief to mandating adjudication and permitting release in the interim on security by way of bank guarantee, following the precedent in the earlier disposed writ petition. [Paras 3, 4]

Adjudication to be conducted and detained goods released in the meantime subject to the petitioner furnishing a bank guarantee.

Power to purchase goods under Section 45 of the KVAT Act - administrative circular clarifying exercise of power (Circular No.47/06) - enabling not mandatory nature of statutory power - Whether Section 45 of the KVAT Act and Circular No.47/06 mandate purchase of detained goods in every case of alleged undervaluation. - HELD THAT: - The petitioner contended that detention on allegation of undervaluation requires the respondents to invoke Section 45 and the procedure in Circular No.47/06 to purchase the goods. The Government Pleader opposed this contention. The Court examined the provision and the circular and concluded that they constitute an enabling power for the respondents rather than imposing a mandatory obligation to purchase goods in every case where statutory powers are exercised. On that basis the Court declined to issue the specific direction sought by the petitioner to compel purchase of the goods. [Paras 5, 6, 7]

Request for direction to purchase the goods under Section 45/Circular No.47/06 refused; those provisions are enabling and not mandatory in the circumstances.

Final Conclusion: Writ petition disposed: detained consignment to be adjudicated and released on furnishing of bank guarantee; prayer to compel purchase of goods under Section 45/Circular No.47/06 refused as those are enabling powers, not mandatory obligations.

Transfer of right to use goods - taxability under Section 5 E - packing material - applicability of Section 6 C - packing material - applicability of Section 6 of AP VAT Act, 2005 - invoice as evidence of contractual intention - adverse inference for non production of alleged written agreement

Transfer of right to use goods - taxability under Section 5 E - invoice as evidence of contractual intention - Whether charges described as rentals for bottles and crates are part of the sale price of soft drinks or constitute consideration for transfer of the right to use packing material exigible to tax under Section 5 E. - HELD THAT: - The Tribunal's conclusion that the bottle and crate charges were part of the sale price was rejected. The court accepted the undisputed factual finding that bottles and crates are returned in a cycle from end customer to retailer to wholesaler to manufacturer, and held that absence of sale to the end customer permits characterization of the transaction as a transfer of right to use the bottles/crates for storing and transporting contents. Reliance on Asiatic Gases Ltd. was held to be apposite: where containers are given on loan and consideration is charged for their use, there is a transfer of right to use exigible to tax. The court further held that invoices showing separate charges for soft drink and rentals, uncontradicted by the Revenue, furnish cogent evidence of the contractual arrangement and must be accepted. Consequently, the rentals are assessable under Section 5 E and are not to be treated as part of the sale price of the soft drink. [Paras 31, 33, 34, 35, 39]

Charges for bottles and crates represent consideration for transfer of the right to use packing material and are taxable under Section 5 E; they are not necessarily part of the sale price of the soft drink.

Packing material - applicability of Section 6 C - packing material - sale with goods - Whether Section 6 C of the A.P. General Sales Tax Act, 1957 (levy of tax on packing material sold with the goods at the rate of the goods) applies to the bottle/crate rentals in issue. - HELD THAT: - Section 6 C applies only where packing material is sold with the goods. On the facts, bottles and crates were delivered on returnable/bailment basis and were not sold; they were recycled and returned to the manufacturer. Therefore Section 6 C has no application to the crate/bottle rentals in these cases. [Paras 42, 43]

Section 6 C is inapplicable because packing material (bottles/crates) was not sold with the goods but given on returnable/bailment basis.

Packing material - applicability of Section 6 of AP VAT Act, 2005 - invoice as evidence of contractual intention - Whether, under the AP VAT Act, 2005, the assessing officer was entitled to tax the entire consideration (including bottle/crate charges) at the higher rate applicable to soft drinks for the periods April-July 2005 and September 2005. - HELD THAT: - The court held that under the VAT regime the bottes and crates constituted packing material which, on the accepted facts of returnable/bailment arrangement and separate invoicing, were properly taxable at the lower rate prescribed for such packing material (4% under the scheme relied upon) and not at the higher rate applicable to the soft drink content. The assessing officer erred in treating the whole turnover at 12.5% and in issuing notices under Section 6 without having relied upon or pleaded that section in the show cause; the assessing authority also failed to make necessary enquiries from wholesalers/retailers. The orders and notices based on taxing the entire consideration at 12.5% were therefore unsustainable and were set aside. [Paras 45, 46, 47]

The assessing officer cannot treat the entire turnover as taxable at the higher rate; packings (bottles/crates) given on returnable basis with separate charge are taxable at the lower rate under the VAT Act and the impugned assessment orders/notices are set aside.

Adverse inference for non production of alleged written agreement - invoice as evidence of contractual intention - Whether the Tribunal was justified in drawing an adverse inference against the manufacturers for non production of an alleged written agreement between manufacturers and wholesalers, and in treating invoices as not conclusive. - HELD THAT: - The court found that the statement in the grounds of appeal that a written contract existed was erroneous and no such written agreement was filed by either party. In the absence of any material from the Revenue challenging the genuineness of invoices, the invoices showing separate charges must be accepted as evidence of the parties' contractual intention. Accordingly, drawing an adverse inference and rejecting the invoices as conclusive evidence was held to be unwarranted in the facts of these cases. [Paras 39]

Adverse inference for non production of a non existent written contract was unwarranted; the unchallenged invoices must be accepted as evidence of the separate rental arrangements.

Final Conclusion: The revisions and writ petitions are allowed: the STAT order insofar as it rejected the manufacturers' claim was set aside; bottle and crate charges were held to be consideration for transfer of the right to use packing material taxable under Section 5 E (and under the VAT Act at the packing material rate), Section 6 C of the General Sales Tax Act does not apply where packing material is given on returnable/bailment basis, and the impugned VAT assessments and recovery notices treating the entire turnover at the higher rate are quashed.

Valuation of buildings under Rule 1-BB of the Wealth Tax Rules, 1957 - Use of co-owner's assessed valuation for valuation of assessee's undivided share - Computation of break-up value of company shares excluding extra rent - Treatment of land extent as covered by houses or as appurtenant to constructions - Classification of adjoining lands as agricultural land

Use of co-owner's assessed valuation for valuation of assessee's undivided share - Value of assessee's 1/12th share in the residential bungalow was to be determined. - HELD THAT: - The question as to whether the value of the assessee's 1/12th share should be taken at the figure adopted by the revenue in the assessment of a co-owner was not finally answered by this Court in the reference. The Court recorded that this question has been returned unanswered in light of the earlier decision in the related reference concerning a co-owner and accordingly refrained from answering this specific point.

Returned unanswered

Valuation of buildings under Rule 1-BB of the Wealth Tax Rules, 1957 - Valuations of residential house, kitchen, servants' quarters, garages, godown and cowshed at Sukhbir Sinha Park were to be made as per Rule 1-BB of the Wealth Tax Rules, 1957. - HELD THAT: - The Tribunal directed valuation of the stated constructions at Sukhbir Sinha Park in accordance with Rule 1-BB. Having regard to the decision of the Apex Court in Commissioner of Wealth Tax vs. Sharvan Kumar Swarup and Sons and the earlier decision of this Court in the related co-owner reference, the Court answered this reference question in favour of the assessee and upheld the Tribunal's direction to apply Rule 1-BB for valuation.

Decided in favour of the assessee

Valuation of buildings under Rule 1-BB of the Wealth Tax Rules, 1957 - Valuations of East Kothi, West Kothi, kitchen store rooms, servant quarters, garages at Ram Bagh and appurtenant land were to be made as per Rule 1-BB of the Wealth Tax Rules, 1957. - HELD THAT: - The Tribunal's direction to value the listed constructions and appurtenant land at Ram Bagh under Rule 1-BB was sustained by this Court. The Court, applying the principle endorsed by the Apex Court in Commissioner of Wealth Tax vs. Sharvan Kumar Swarup and Sons and in harmony with the earlier co-owner reference, answered this question in favour of the assessee and directed that valuation be made as per Rule 1-BB.

Decided in favour of the assessee

Computation of break-up value of company shares excluding extra rent - Whether break-up value of shares held by the assessee in the company should be computed without taking the extra rent as its assets. - HELD THAT: - The Court did not pronounce a final decision on the correctness of directing computation of break-up value of the shares without including extra rent as assets. This reference question was left unanswered by the Court and returned accordingly.

Returned unanswered

Treatment of land extent as covered by houses or as appurtenant to constructions - Whether the extent of 10 bighas of Ram Bagh property and 5 bighas of Sukhbir Sinha Park should be treated as covered by houses or as appurtenant to the respective constructions. - HELD THAT: - The Court did not adjudicate this question on the merits and returned it unanswered. No final determination was recorded on whether the specified extents should be treated as covered by houses or as appurtenant to constructions.

Returned unanswered

Classification of adjoining lands as agricultural land - Whether the lands measuring 28.6 bighas pucca adjoining the appurtenant land of Ram Bagh Kothies in which the assessee had 1/12th share should be treated as agricultural land. - HELD THAT: - The reference question concerning classification of the adjoining 28.6 bighas as agricultural land was not decided by this Court and was returned unanswered in the order.

Returned unanswered

Final Conclusion: In the reference under section 27 of the Wealth Tax Act for assessment years 1973-74 and 1974-75, Questions 2 and 3 were answered in favour of the assessee (valuation under Rule 1-BB to be followed), while Questions 1, 4, 5 and 6 were returned unanswered.

Computation of limitation for setting aside arbitral award - exclusion of period under Section 14 of the Limitation Act - territorial jurisdiction under Section 2(e) of the Arbitration and Conciliation Act, 1996 - principal civil court for causes of action arising at port localities - return of petition for filing in appropriate court

Computation of limitation for setting aside arbitral award - exclusion of period under Section 14 of the Limitation Act - Whether the application under Section 34 was filed within the prescribed period having regard to the date of receipt of the award and the time taken by the Delhi High Court, and whether Section 14 of the Limitation Act excludes the period during which the petition was before the wrong court. - HELD THAT: - The Court examined the filing and departmental notings and accepted that the petition was presented to the Delhi High Court on December 17, 1999, and that the date of receipt of the award (as reflected in the record) is the relevant commencement date for computing the period under Section 34. The Court held that the time taken by the Delhi High Court in deciding that it had no territorial jurisdiction and in returning the petition must be excluded under Section 14 of the Limitation Act, because the petitioner had bona fide approached the wrong court and the Delhi High Court directed return of the petition with liberty to file in the proper court. Administrative delay in processing the return (including preparation and delivery of the petition) is to be excluded. On these facts the petition as filed in this High Court fell within the prescribed period and did not require condonation of delay.

The application was within time; the period during which the petition was before the Delhi High Court is excluded under Section 14 of the Limitation Act.

Territorial jurisdiction under Section 2(e) of the Arbitration and Conciliation Act, 1996 - principal civil court for causes of action arising at port localities - return of petition for filing in appropriate court - Whether the Calcutta High Court was the appropriate forum to entertain the Section 34 application, and if not, which court(s) should properly exercise jurisdiction. - HELD THAT: - The Court analysed the factual matrix: the charterparty was executed at Chennai, performance and the events giving rise to the dispute (crane failure, delay in unloading) occurred at Paradip and Haldia, and documentary/oral evidence relevant to liability and quantum lay predominantly at those ports. While acknowledging that calculations and correspondence concerning laytime were made from Calcutta and that such acts could attract jurisdiction, the Court emphasised that the genesis of the controversy (cause of action) lay at Paradip/Haldia and that for effective adjudication the principal civil courts at Paradip or Haldia would be the appropriate fora. The Division Bench declined to follow a coordinate-bench decision on Clause 12 where facts differ, and held that even if Calcutta jurisdiction could be argued, the balance of convenience, proximity of evidence and the real issues of the dispute made Paradip or Haldia the proper courts. Accordingly, the Court directed that the petition be returned so it may be filed in the appropriate principal civil court having jurisdiction over Paradip or Haldia.

The Calcutta High Court should not entertain the Section 34 petition; the petition is to be returned to the appellant for filing before the principal civil court having territorial jurisdiction over Paradip Port or Haldia Port.

Final Conclusion: The appeals succeed in part: the Court held the Section 34 application to be within time by excluding the period during which the petition was before the Delhi High Court under Section 14 of the Limitation Act, but on grounds of convenience and the locus of the cause of action directed return of the petition so the appellant may file it before the principal civil court having territorial jurisdiction over Paradip or Haldia; costs reserved (no order as to costs).

Handing over of muddamal - Transfer of dematerialised shares - Interplay with Income Tax inquiry - Conditional transfer subject to trial outcome

Handing over of muddamal - Transfer of dematerialised shares - Interplay with Income Tax inquiry - Conditional transfer subject to trial outcome - Impugned orders refusing delivery of seized Slip/Instruction Books and directing delivery to the Income Tax Department were quashed and petitioner permitted to take possession of the Slip/Instruction Books and to transfer the alleged misappropriated shares to his Demat accounts subject to conditions. - HELD THAT: - The petitioner, being the original complainant, sought delivery of Slip/Instruction Books and transfer of shares seized as muddamal. The learned Magistrate had issued notice to the Income Tax Department, which conducted an inquiry and reported that the disputed shares were reflected in the petitioner's books and that certain clients confirmed purchases through the petitioner; consequently no further action was warranted against the petitioner under the Income Tax Act (communication dated 29/2/2012). The original accused had given no objection to handing over the Slip/Instruction Books and transfer of shares to the petitioner. In view of the Income Tax Department's stated position and the fact that the accused are charge-sheeted, the Court found it appropriate to quash the orders which had withheld delivery and to permit handing over of the signed Slip/Instruction Books and transfer of the shares to the petitioner's Demat accounts, while safeguarding the prosecution process. The Court imposed conditions: if after transfer the petitioner seeks to deal with any of the transferred shares he must apply to the concerned Magistrate; the Magistrate may impose reasonable conditions including furnishing security to the court's satisfaction based on the prevailing value of the shares and the petitioner must undertake to deposit the amount in the event of an adverse order at trial; any transfer remains subject to the ultimate outcome of the criminal trial. [Paras 6, 7]

Petition allowed; impugned orders dated 20/4/2006, 2/1/2007 and 26/4/2007 quashed and set aside; instruction/slip books to be handed over and alleged misappropriated shares transferred to petitioner's Demat accounts subject to the stated conditions and to the ultimate result of the trial.

Final Conclusion: The writ petition under Articles 226/227 is allowed to the extent that the challenged orders withholding delivery of muddamal and directing custody to the Income Tax Department are quashed; the petitioner is permitted to take the Slip/Instruction Books and to transfer the alleged misappropriated shares to his Demat account on the conditions stated, with any subsequent dealings to be regulated by the Magistrate and the transfers remaining subject to the final outcome of the criminal trial.