TaxTMI Updates e-Newsletter
Apr 12,2019

Summary order. Notice issued returnable in six weeks; operation of the impugned judgment stayed in the meantime.

Duty of full and correct disclosure to the court - non-disclosure of material facts - misleading the court - dismissal of petition for non-disclosure - costs for misleading the court

Duty of full and correct disclosure to the court - non-disclosure of material facts - dismissal of petition for non-disclosure - costs for misleading the court - Whether the writ petition should be dismissed and costs imposed for failure to disclose the earlier filed and withdrawn petition seeking the same relief - HELD THAT: - The Court found that the petitioner had earlier filed W.P. (C) 3246/2019 seeking the same relief and had withdrawn that petition with liberty to individual members to file separate petitions. The present petition expressly stated that no other proceedings had been filed on the subject (para 31), a representation that was incorrect. Counsel for the petitioner attributed the omission to inadvertence and lack of a copy of the earlier order permitting withdrawal. The Court held that, given the same counsel had represented the petitioner on both occasions and was aware of the facts, the omission could not be excused. The petitioner thereby failed in the duty of full and correct disclosure to the Court and made a misleading statement. For this reason the writ petition could not be allowed to proceed; the Court dismissed it and directed imposition of costs as a consequence of the non-disclosure and misleading representation (paras 4-6). The Court also directed a mechanism for compliance with the costs order and for the Registry to place the petition before the Court for further directions if the costs are not paid within the stipulated time (para 7). [Paras 5, 6, 7]

Writ petition dismissed for failure to make full and correct disclosure; petitioner to pay costs of Rs. 1,00,000 to the Delhi High Court Legal Services Committee by 30 April 2019, with Registry to place the petition before the Court if costs are not deposited.

Final Conclusion: The petition was dismissed for non-disclosure/misleading the Court; costs of Rs. 1,00,000 were imposed to be paid to the Delhi High Court Legal Services Committee by 30 April 2019, and the Registry was directed to list the petition for directions if the costs are not paid.

Section 43B - mercantile system of accounting - deductibility of accrued liabilities - raising new grounds at appellate stage - strict timelines for tax proceedings - clarificatory amendment and retroactivity

Section 43B - mercantile system of accounting - deductibility of accrued liabilities - clarificatory amendment and retroactivity - Whether the enhanced licence fee and claimed damages fell within the scope of Section 43B and were therefore disallowable for AY 2007-08. - HELD THAT: - The court held that the assessee follows the mercantile system of accounting and properly booked the liability in the year in which it arose, even though its quantification and enforceability were subject to arbitration. The licence fee claimed arose from commercial contractual revisions and ongoing demands by Northern Railways; it was not a liability extinguished by law at the time of claim. Reading the expression 'fee' in Section 43B with the requirement of being payable 'under law for the time being in force', the court found that the disputed enhanced licence fee and damages in the present facts did not fall within Clauses (a) or (b) of Section 43B(1). The court also rejected the Revenue's contention that the later-inserted Clause (g) (w.e.f. 01.04.2017) operated as a clarificatory provision applicable retrospectively; the amendment applies prospectively and cannot be read into earlier years. [Paras 6, 7]

The enhanced licence fee and claimed damages were not covered by Section 43B for AY 2007-08 and the deduction as per mercantile accrual was properly allowable.

Raising new grounds at appellate stage - strict timelines for tax proceedings - permissibility under Section 260A - Whether the Revenue could be permitted at this stage to raise Section 43B as an additional ground of appeal. - HELD THAT: - The court declined to permit the Revenue to raise Section 43B at this stage. It noted that Section 43B had not been pressed in the earlier proceedings before the assessing officer, in reassessment, or in the first round of appeals. Allowing such a belated ground would undermine statutory limits and timelines governing tax scrutiny and appeals, creating uncertainty for the assessee. Given the prior reasoning in the earlier batch of appeals and the absence of earlier invocation of Section 43B, no question of law of the sort sought by the Revenue arose that warranted permitting the new ground. [Paras 5]

The Revenue was not permitted to raise Section 43B as an additional ground at this appellate stage; the belated invocation was rejected.

Final Conclusion: The appeal is dismissed: the disputed enhanced licence fee and damages were not disallowable under Section 43B for AY 2007-08 and the Revenue was not permitted to raise Section 43B as a new ground at this stage; the ITAT's allowance of the deduction is affirmed.

Deduction under Section 80IA - infrastructure facility - transferee enterprise entitlement under proviso to Section 80IA(4) - operation and maintenance of a rail system - Proviso to Section 80IA(4) does not require direct agreement with specified authority

Deduction under Section 80IA - transferee enterprise entitlement under proviso to Section 80IA(4) - operation and maintenance of a rail system - Whether a subcontractor/transferee recognised by the specified authority and operating and maintaining a rail system is entitled to deduction under Section 80IA by virtue of the proviso to sub section (4) even though it did not enter into the original contract with the specified authority - HELD THAT: - The Court accepted the Tribunal's finding that the assessee, under an Agreement dated 16.04.2002, was recognised by the Railways as the contractor undertaking development and operation and maintenance of railway sidings, which fall within the Explanation's definition of an "infrastructure facility" (including a rail system). The proviso to Section 80IA(4) extends the deduction to a transferee enterprise operating and maintaining an infrastructure facility as if the transfer had not occurred. The proviso does not mandate a direct agreement between the transferee and the specified authority; recognition/approval by the authority and performance of the contract's terms attract the benefit. The Tribunal's reliance on precedent (Bajaj Tempo Ltd. and Ocean Sparkle Ltd.) and CBDT guidance supported the conclusion that an entity performing integral and inseparable operation and maintenance of the infrastructure facility qualifies under the proviso. Distinguishing a Co ordinate Bench decision concerning a distinct factual and statutory context (maintenance of power plant without the benefit of a similar proviso) the Court held those authorities inapplicable here. Applying these legal principles to the undisputed facts and the Tribunal's unassailed findings of fact, the Court upheld allowance of the deduction to the assessee. [Paras 8, 9, 11]

Assessee entitled to deduction under Section 80IA by application of the proviso to Section 80IA(4); Revenue's appeal dismissed.

Final Conclusion: The High Court upheld the Tribunal's decision that the assessee, recognised as transferee/contractor by the Railways and engaged in operation and maintenance of railway sidings (an "infrastructure facility"), is entitled to deduction under Section 80IA by application of the proviso to sub section (4); the Revenue's appeal is dismissed.

Deduction under Section 80IA - Proviso to Section 80IA(4) - Transferee / subcontractor entitlement to section 80IA benefit - Definition of "infrastructure facility" including a rail system - Requirement of direct agreement with specified authority under section 80IA(4)

Proviso to Section 80IA(4) - Transferee / subcontractor entitlement to section 80IA benefit - Assessee, though a subcontractor/transferee recognised by the authority, is entitled to deduction under Section 80IA by virtue of the Proviso to sub section (4). - HELD THAT: - The Proviso to Section 80IA(4) extends the section to a transferee enterprise which operates and maintains an infrastructure facility transferred by the developer, treating such transferee as if it were the original enterprise for the unexpired period of deduction. The Court accepted the factual finding that the assessee was recognised by the Railways as contractor for the railway sidings and had undertaken development and operation/maintenance under the agreement with the principal contractor. Applying the Proviso, the Court held that the assessee is entitled to the deduction as if the transfer had not taken place. The Tribunal's conclusion that a direct contractual privity between the assessee and the specified authority was not required for the Proviso to apply was endorsed. [Paras 8, 9, 11]

Proviso to Section 80IA(4) applies to the assessee as transferee/subcontractor recognised by the authority, entitling it to deduction under Section 80IA.

Definition of "infrastructure facility" including a rail system - Requirement of direct agreement with specified authority under section 80IA(4) - Operation and maintenance of the Lignite Transport System (railway sidings) falls within the statutory definition of "infrastructure facility" and the Proviso does not mandate a direct contract between the transferee and the specified authority. - HELD THAT: - The Explanation to Section 80IA(4) expressly includes a rail system within "infrastructure facility." The Court found no dispute that the railway sidings constituted such an infrastructure facility. The Assessing Officer's denial was based on absence of direct agreement between the assessee and the Railways; however, the Proviso contemplates entitlement where infrastructure is transferred to a transferee to operate and maintain it in accordance with the agreement with the authority. On the material facts - recognition of the assessee by the Railways and its performance of obligations - the Court concluded that the Proviso's conditions were satisfied and that a direct agreement requirement is not a precondition for claiming the deduction under the Proviso. [Paras 8, 9]

The Lignite Transport System is an "infrastructure facility" under Section 80IA and the Proviso does not require a direct agreement between the transferee and the specified authority.

Final Conclusion: The appeals by the Revenue are dismissed. The Tribunal was right in allowing the assessee-recognised as transferee/subcontractor by the Railways-to claim deduction under Section 80IA pursuant to the Proviso to sub section (4), and the operation/maintenance of the railway sidings qualifies as an "infrastructure facility."

Deduction under section 80P of the Income-tax Act - Interest income on fixed deposits with nationalized banks - Revisional jurisdiction under section 263 of the Income-tax Act - Assessing Officer's computation of net interest income

Deduction under section 80P of the Income-tax Act - Interest income on fixed deposits with nationalized banks - Interest income earned on fixed deposits kept with nationalized banks qualifies for deduction under section 80P of the Act. - HELD THAT: - The Tribunal examined contrary views of High Courts and the Supreme Court precedents considered therein, and having regard to earlier decisions of the Pune Bench favouring allowance of deduction, held in principle that interest income on FDRs with nationalized banks is eligible for deduction under section 80P. The Tribunal relied on its earlier bench decisions and similar orders and observed that there was no change in the legal position to warrant a different conclusion. The determinative reasoning is that the interest received from bank FDRs falls within the scope of incomes eligible for deduction under section 80P as interpreted by the decisions followed by the Tribunal. [Paras 3]

The interest income on fixed deposits with nationalised banks is eligible for deduction under section 80P.

Revisional jurisdiction under section 263 of the Income-tax Act - Assessing Officer's computation of net interest income - Whether the Commissioner (Appeals)/Pr. CIT was justified in invoking section 263 to treat the assessment order as erroneous and prejudicial by directing taxation of gross interest instead of the net interest figure accepted by the assessee and assessed by the AO. - HELD THAT: - The Tribunal found that the Commissioner's exercise of revisional power was predicated on the view that the interest received should have been taxed at gross without allowing the deductions which the Tribunal held to be allowable under section 80P. In the present case the assessee had requested the AO to finalise assessment on the net interest figure and the AO completed the assessment on that basis. Since the Tribunal concluded that the interest income was eligible for deduction under section 80P, the Commissioner's direction to tax the full gross interest became untenable. Consequently, the revisional order directing taxation of the gross interest was unsustainable and was vacated. [Paras 4]

The Pr. CIT's order under section 263 directing taxation of gross interest is vacated as unsustainable once interest is held deductible under section 80P; the assessment completed on the net interest figure stands.

Final Conclusion: The appeal is allowed on merits: the Tribunal held that interest on fixed deposits with nationalised banks is deductible under section 80P and accordingly set aside the revisional order under section 263 that sought to tax the gross interest; the assessment as finalised on the net interest figure is sustained.

Disallowance under Section 40A(2)(b) for purchases from related parties - allowability of business expenditure on purchase of software for resale - treatment of closing stock and subsequent sale in determining effect on profit - relevance of market price and burden of proof on assessing officer - impact of open source nature versus tailor made customization on commercial valuation

Disallowance under Section 40A(2)(b) for purchases from related parties - allowability of business expenditure on purchase of software for resale - treatment of closing stock and subsequent sale in determining effect on profit - relevance of market price and burden of proof on assessing officer - impact of open source nature versus tailor made customization on commercial valuation - Addition of Rs. 86.49 lacs disallowed by AO under Section 40A(2)(b) for purchase of software from a related party was not justified and was correctly deleted by the CIT(A). - HELD THAT: - The assessee purchased software from a related party for resale and accounted for the purchases across sales and closing stock. The Tribunal noted documentary evidence in the record showing part of the software was sold in the impugned year and the balance was reflected as closing stock, with subsequent sales in later years. The assessing officer's assertion that the purchases were excessive because Linux is freely available was met by the uncontroverted explanation that the software was tailor made to user requirements. Crucially, the AO adduced no material to establish that the price paid was excessive or unreasonable in relation to market price. In these circumstances, there was no basis to sustain the disallowance under the provision governing payments to related parties; the deletion by the first appellate authority was upheld as there was no impairment of profit once closing stock and subsequent realisation were taken into account. [Paras 5]

The addition was rightly deleted by the CIT(A); the appeal by the revenue is dismissed.

Final Conclusion: The Tribunal dismissed the revenue's appeal, upholding the deletion of the disallowance in respect of purchases of software from a related party for AY 2014 15, on the basis of stock records, subsequent sales and absence of material to show the price paid was excessive.

Penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - invalidity of show cause notice for failure to specify limb of Section 271(1)(c) - requirement of Assessing Officer's clear satisfaction and specific charge in penalty initiation - deletion of penalty where notice does not disclose which limb is invoked

Invalidity of show cause notice for failure to specify limb of Section 271(1)(c) - deletion of penalty where notice does not disclose which limb is invoked - penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Whether the penalty imposed under Section 271(1)(c) is sustainable where the notice initiating penalty does not specify whether proceedings are for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal examined the show cause notice dated 28.03.2016 and found that the Assessing Officer did not clearly indicate which limb of Section 271(1)(c) was being invoked - concealment of particulars of income or furnishing inaccurate particulars. Following precedents of higher fora which hold that a notice omitting specification of the limb under Section 271(1)(c) is bad in law, the Tribunal concluded that initiation of penalty proceedings without such specification is contrary to law and unsustainable. Respectfully applying those decisions, the Tribunal set aside the impugned orders and cancelled the penalty. [Paras 5, 6]

Penalty under Section 271(1)(c) cancelled because the show cause notice failed to specify whether the penalty was for concealment of income or for furnishing inaccurate particulars.

Final Conclusion: Appeal allowed; the penalty imposed under Section 271(1)(c) is set aside for want of a valid show cause notice that specifies the limb of the section invoked.

Penalty under section 271(1)(c) of the Income tax Act - CBDT instruction restricting departmental appeals below specified monetary limit - maintainability of departmental appeal where tax effect is below prescribed threshold

CBDT instruction restricting departmental appeals below specified monetary limit - maintainability of departmental appeal where tax effect is below prescribed threshold - penalty under section 271(1)(c) of the Income tax Act - Departmental appeal against cancellation of penalty is not maintainable because the tax effect is below the monetary limit specified in the CBDT Circular and the Department did not press the appeal. - HELD THAT: - The Tribunal recorded that the tax effect in the appeal was less than the monetary threshold fixed by CBDT Circular No.3/2018 dated 11 July 2018, which directs that the Department shall not file appeals before Tribunals where the tax effect does not exceed Rs.20 lakhs and that the instruction applies retrospectively to pending appeals. The Revenue's case did not fall within the exceptions to the Circular and the Departmental Representative did not press the appeal in view of the Board's instruction. Consequently the appeal against the cancellation of penalty under section 271(1)(c) was held not maintainable and was not adjudicated on merits. [Paras 2, 3]

Appeal dismissed as not maintainable in view of CBDT Circular and the Department not pressing the appeal.

Final Conclusion: The departmental appeal challenging the cancellation of penalty for A.Y. 2009-2010 is dismissed as not maintainable because the tax effect falls below the monetary limit prescribed by CBDT Circular No.3/2018 and the Department did not press the appeal.

Penalty under section 271B - Mandatory audit under section 44AB - Time-bar and limitation for penalty under section 275 - Keeping penalty proceedings in abeyance pending disposal of appeal - Reasonable cause for failure to get accounts audited

Penalty under section 271B - Time-bar and limitation for penalty under section 275 - Keeping penalty proceedings in abeyance pending disposal of appeal - Validity of imposition of penalty under section 271B on the ground of time-bar and whether penalty proceedings were rightly kept in abeyance pending appellate disposal - HELD THAT: - The Tribunal held that section 275 prescribes the period within which a penalty order must be passed where the relevant assessment order is subject matter of appeal under section 246A, permitting the penalty to be passed either before the expiry of the financial year in which proceedings are initiated or within one year from the end of the financial year in which the Commissioner (Appeals)'s order is received - whichever is later. Because the quantum of penalty under section 271B depended on the outcome of the appeal against the assessment, the Assessing Officer validly kept the penalty proceedings in abeyance and passed the penalty on 30-10-2017 after disposal of the appellate order, which was within the statutory period. The Tribunal found no merit in the contention that the penalty was time-barred.

Penalty proceedings were not time-barred; the AO validly kept proceedings in abeyance and imposed penalty within the period permitted by section 275.

Mandatory audit under section 44AB - Reasonable cause for failure to get accounts audited - Penalty under section 271B - Whether the assessee had a reasonable cause for not getting accounts audited and therefore was exempt from penalty under section 271B - HELD THAT: - The Tribunal noted that the assessee did not file the return within the time under section 139 nor get accounts audited within the period prescribed by section 44AB. The assessment proceedings had already recorded failure to maintain supporting bills and vouchers and that only cash book and ledger were maintained, matters which were affirmed in the appellate proceedings. The assessee's explanation of family problems and voluntary late audit was not accepted as a reasonable cause. The Tribunal also distinguished the case law relied upon by the assessee on factual grounds. Applying these findings, the Tribunal concluded that there was no reasonable cause for non-compliance and that imposition of penalty under section 271B was justified.

No reasonable cause established; penalty under section 271B correctly imposed and confirmed.

Final Conclusion: The appeal is dismissed; the order imposing penalty under section 271B for failure to get accounts audited under section 44AB is upheld as not time-barred and justified on merits.

Gift in kind - undisclosed sale consideration - validity of gift: voluntary and without consideration - treatment of gifts as consideration in kind - taxation in year of transfer under section 45(1)

Gift in kind - undisclosed sale consideration - taxation in year of transfer under section 45(1) - validity of gift: voluntary and without consideration - Deletion of addition of the value of gifted shares (claimed as gift in kind) in the assessment year 2008-09 - HELD THAT: - The Tribunal examined the Assessing Officer's conclusion that shares received by the assessee were not genuine gifts but constituted part of undisclosed sale consideration flowing from the sale of Gotri land. Applying the requisites of a valid gift (notably that it must be voluntary and without consideration), the Tribunal accepted the view that while the gifts formed part of the total consideration for the Gotri land, the transfer of the land (and hence the taxable event in respect of sale consideration) arose in the subsequent assessment year. Following the findings of the Coordinate Bench and the jurisdictional High Court, the Tribunal held that where purported gifts are in fact consideration in kind for a sale, taxation of that sale consideration must occur in the year in which the sale took place; consequently no addition was warranted in AY 2008-09 and the deletion by the Commissioner (Appeals) was justified and is upheld. [Paras 8, 9]

Addition of Rs.75,39,521 treated as gift in kind is deleted for Assessment Year 2008-09; order of the CIT(A) is upheld.

Final Conclusion: The Revenue's appeal is dismissed and the CIT(A)'s deletion of the addition in respect of gifted shares for Assessment Year 2008-09 is upheld; the cross-objection by the assessee is accordingly infructuous and treated as dismissed.

Audi alteram partem - admission of additional evidence under Rule 46A - remand for de novo consideration - deduction under section 54 - treatment of sale proceeds of jointly held property - penalty under section 271(1)(c)

Audi alteram partem - admission of additional evidence under Rule 46A - remand for de novo consideration - deduction under section 54 - treatment of sale proceeds of jointly held property - Additional evidence filed during appellate proceedings and factual/legal claims regarding capital gains, deduction under section 54 and share of sale proceeds to be considered afresh by the assessing officer. - HELD THAT: - The Tribunal found that the assessee inherited the properties and only 50% of the sale proceeds may be taxable in her hands; that valuation reports and other supporting material were obtained after the assessment and therefore not available to the AO at that stage; and that the CIT(A) erred in refusing to admit material evidence without obtaining a remand report or seeking AO's comments. Principles of natural justice, notably audi alteram partem, require that the assessee be afforded a fair opportunity to place evidence and be heard. The additional evidence bears materially on the correctness of the addition and the claim for deduction under section 54, and the question whether the entire receipts or only the assessee's 50% share is assessable must be examined. Accordingly the Tribunal set aside the assessment issue to the file of the AO for fresh adjudication, directing that the assessee may tender all evidence, the AO shall give adequate opportunity of hearing, consider the section 54 claim and decide all issues de novo after confronting the material with the assessee. [Paras 6]

Assessment order set aside and matter remanded to the AO for de novo consideration after admitting and confronting additional evidence and adjudicating the section 54 claim and the question of taxability of the assessee's share.

Penalty under section 271(1)(c) - remand for de novo consideration - Validity of penalty imposed under section 271(1)(c) in view of remand of the assessment issues on which the penalty was based. - HELD THAT: - Since the Tribunal has set aside the additions and returned the assessment issues to the AO for fresh adjudication, the factual foundation for the penalty no longer survives at present. The Tribunal therefore deleted the penalty levied under section 271(1)(c). The AO, however, is left free to initiate or reinstate penalty proceedings after finalization of the reassessment if circumstances warrant. [Paras 9]

Penalty deleted for the present; AO may re-initiate penalty proceedings after finalization of the remanded assessment if justified.

Final Conclusion: For A.Y. 2011-12 the Tribunal set aside the assessment issues to the AO for de novo consideration after admitting and confronting additional evidence and adjudicating the section 54 claim and the question of the assessee's share; the penalty under section 271(1)(c) was deleted subject to the AO's right to re-initiate proceedings after the reassessment.

Assessment under section 153A in case of completed assessments - Requirement of incriminating material to interfere with completed assessments under section 153A - Distinction between "assess" and "reassess" in section 153A linked to search and requisition - Onus and evidentiary test under section 68 regarding identity, genuineness and creditworthiness of creditors - Evidentiary weight of statements/reports of Investigation Wing versus documentary bank and statutory records

Assessment under section 153A in case of completed assessments - Requirement of incriminating material to interfere with completed assessments under section 153A - Distinction between "assess" and "reassess" in section 153A linked to search and requisition - Sustained additions in proceedings under section 153A cannot be made in respect of assessment years whose assessments were completed on the date of search unless incriminating material relating to those years was unearthed during the search. - HELD THAT: - The Tribunal held that for assessment years which were not pending on the date of search (2010-11 to 2013-14), interference with completed assessments under section 153A is permissible only on the basis of incriminating material discovered in the course of the search or requisition and not on mere post-search information or investigative reports already available to the AO. The decision relies on binding High Court authority (Kabul Chawla and other decisions) that interprets the words 'assess' and 'reassess' in section 153A-'assess' relating to abated/pending proceedings and 'reassess' to completed assessments-and requires a nexus between the seized/incriminating material and the additions sought. In the present case the AO's additions rested principally on a report and third party statements of the Investigation Wing Kolkata (and a statement of Shri Anand Sharma) which were not incriminating material uncovered during the assessee's search; no independent incriminating material was found in the assessee's search. Consequently, the additions made under section 153A for the completed years were held unsustainable and were set aside. [Paras 6, 7]

Additions made under section 153A for the completed assessment years 2010-11 to 2013-14 are not sustainable in absence of incriminating material found in the assessee's search and are deleted.

Onus and evidentiary test under section 68 regarding identity, genuineness and creditworthiness of creditors - Evidentiary weight of statements/reports of Investigation Wing versus documentary bank and statutory records - Addition under section 68 in respect of amounts received from M/s Jalsagar Commerce Pvt. Ltd. cannot be sustained where the assessee produced bank records, financial statements, confirmations and assessments of the creditor and the only contrary material relied upon by the AO was investigatory statements/reports lacking documentary linkage. - HELD THAT: - On merits the Tribunal applied the established test under section 68: once the assessee produces documentary evidence regarding identity, genuineness and creditworthiness of the creditor (bank statements, financials, ROC data, confirmations, assessed returns of the creditor), the AO must undertake further inquiry and cannot rest the addition solely on investigation wing reports or third party statements that do not establish the flow of funds or insolubly connect the creditor to the alleged entry operator. In the facts, the AO relied mainly on the Investigation Wing report and the statement of an alleged entry operator; there was no documentary chain showing routing of funds from that operator to M/s Jalsagar Commerce Pvt. Ltd. or then to the assessee. The creditor had bank transactions, paid interest (with TDS) and had been assessed; the AO and CIT(A) had no other tangible material to displace the documentary evidence produced by the assessee. Following the Tribunal's earlier decision in the group matter, the section 68 addition in respect of share capital and unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. was deleted. [Paras 8]

Addition under section 68 in respect of share capital and unsecured loan from M/s Jalsagar Commerce Pvt. Ltd. is deleted.

Final Conclusion: The Tribunal allowed the appeal: deletions were directed of the additions made under section 153A for the completed assessment years (2010-11 to 2013-14) for want of incriminating material found in the assessee's search, and the addition under section 68 in respect of receipts from M/s Jalsagar Commerce Pvt. Ltd. was deleted on merits in view of documentary evidence produced by the assessee and absence of a documentary nexus in the investigative material.

Unaccounted sales - estimation of income on survey findings - application of estimated gross profit rate - penalty under section 271(1)(c) of the Income Tax Act - removal of penalty on estimated additions - precedential application of Anita Choudhary (coordinate bench/High Court)

Unaccounted sales - estimation of income on survey findings - application of estimated gross profit rate - precedential application of Anita Choudhary (coordinate bench/High Court) - Addition of amount deposited in third party bank accounts as unaccounted sales of the assessee and the appropriate gross profit rate to be applied thereon - HELD THAT: - The Tribunal examined survey statements and contemporaneous inquiries and noted that sale proceeds coded as NE (Naveen Enterprises) were collected through the bank accounts of third parties and were received by Shri Sachin Agarwal who managed purchases and sales of Naveen Enterprises. On this factual matrix the Tribunal upheld the finding that deposits totalling Rs. 1,40,71,468 were unaccounted sales of the assessee. While the Assessing Officer applied a GP rate of 22.7%, the Tribunal considered the coordinate bench/High Court authority in Anita Choudhary which upheld a 10% profit estimate for traders but distinguished the present case on facts because the assessee is a manufacturer (manufacturing yields higher margins than trading). Balancing the factual distinction and precedential guidance, the Tribunal directed that the AO estimate profit at 15% on the unaccounted sales and made the addition accordingly. [Paras 11]

Amount deposited in third party bank accounts treated as unaccounted sales of the assessee; profit on such sales to be estimated at 15% and addition made accordingly.

Penalty under section 271(1)(c) of the Income Tax Act - removal of penalty on estimated additions - Validity and sustainment of penalty under section 271(1)(c) in respect of the estimated addition - HELD THAT: - The Tribunal noted that the addition sustained in the quantum appeal was based on an estimated profit rate (reduced by the Tribunal from the AO's estimate). Relying on jurisdictional High Court authority that penalty is not imposable where additions are essentially based on estimation, and having regard to the estimated nature of the addition finally sustained, the Tribunal concluded that penalty under section 271(1)(c) could not be sustained. The Tribunal therefore directed deletion of the penalty. Although procedural objections regarding the framing of the penalty notice were raised, the decisive ground for relief was that the addition was estimate based and accordingly not a proper foundation for penalty. [Paras 18]

Penalty under section 271(1)(c) deleted.

Final Conclusion: The assessee's quantum appeal is allowed in part by upholding the addition of unaccounted sales but directing the AO to compute profit at 15% on such sales; the appeal against penalty is allowed and the penalty under section 271(1)(c) is deleted.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Estimate of income by rejecting books of account - Distinct adjudication in penalty proceedings despite confirmation of quantum

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - Estimate of income by rejecting books of account - Distinct adjudication in penalty proceedings despite confirmation of quantum - Whether penalty under section 271(1)(c) is leviable where the Assessing Officer has made an estimated addition by rejecting the books of account but the assessee has furnished documentary evidence to substantiate the purchases. - HELD THAT: - The Assessing Officer estimated income by applying a percentage to alleged bogus purchases, the Commissioner (Appeals) reduced that estimate and the Tribunal confirmed the reduced addition. However, penalty proceedings are separate from quantum and require independent satisfaction that the assessee concealed particulars or furnished inaccurate particulars. The assessee, a long standing exporter, produced purchase invoices, bank statements, export documents, supplier confirmation and supplier TIN to substantiate the purchases and receipts. Where the books are substituted by an estimate, such substitution does not ipso facto establish concealment or furnishing of inaccurate particulars; documentary evidence to substantiate the transaction may negate mens rea required for penalty. Applying these principles and having regard to relevant coordinate and High Court precedents, the Tribunal found that on the materials placed before the Assessing Officer the ingredients of section 271(1)(c) were not established and therefore penalty could not be sustained. [Paras 5, 7]

Penalty under section 271(1)(c) deleted.

Final Conclusion: The assessee's appeal is allowed and the penalty imposed under section 271(1)(c) for A.Y. 2007-08 is deleted.

Deduction under section 10AA - Arm's Length Price - International transaction - Transfer pricing adjustment on receivables - Amendment to Section 92B (retrospective inclusion of financing) - Average collection period - Remand to TPO for determination of industry average and computation

Deduction under section 10AA - Whether telecommunication charges excluded from export turnover must also be excluded from total turnover for computing deduction under section 10AA - HELD THAT: - The Tribunal followed its coordinate bench decision, which applied the ratio of the jurisdictional High Court and earlier Tribunal precedent holding that where an expenditure is excluded from export turnover it must also be excluded from total turnover for computing deductions under the relevant SEZ/export incentive provision. Applying that precedent to the facts, the Tribunal directed the Assessing Officer to exclude telecommunication charges from total turnover since they were excluded from export turnover. [Paras 10]

Telecommunication charges excluded from export turnover are to be excluded from total turnover for computing deduction under section 10AA; this ground is allowed.

Arm's Length Price - International transaction - Transfer pricing adjustment on receivables - Amendment to Section 92B (retrospective inclusion of financing) - Average collection period - Remand to TPO for determination of industry average and computation - Treatment of outstanding trade receivables as an international transaction post-amendment to Section 92B and procedure for computing notional interest adjustment - HELD THAT: - The Tribunal held that by virtue of the amendment to Section 92B (with retrospective effect) outstanding trade receivables beyond a reasonable period fall within the scope of international transactions. The determinative question is what constitutes a reasonable/industry-average collection period. The Tribunal found that the TPO had not computed the assessee's average collection period for the whole year nor compared it with the industry average derived from the comparables used in the TP study. Consequently, the Tribunal remitted the matter to the TPO with specific directions: calculate the industry average collection period based on the comparable companies selected for the TP study, calculate the assessee's average collection period for the entire year (all transactions), allow collections within the industry average, and charge interest only on the portion of collections beyond the industry average at the LIBOR rate, since the transaction is international in nature. [Paras 13]

Issue remitted to the TPO to determine industry average collection period and the assessee's average collection period for the year; allow collections within the industry average and compute interest on amounts collected beyond that period at LIBOR; ground allowed for statistical purposes.

Final Conclusion: Appeal allowed for statistical purposes: deduction under section 10AA to be computed excluding the telecommunication charges from total turnover; the transfer pricing adjustment on outstanding receivables is remitted to the TPO to determine industry and assessee average collection periods and to compute interest only on collections beyond the industry average at LIBOR.

Assessment framed on non-existent entity - quashing of assessment as void ab initio - succession and substitution of successor-in-interest - Section 170 of the Income-tax Act - assessment on successor where predecessor cannot be found - prima facie enquiry under Order 22 Rule 10 CPC - jurisdictional defect v. procedural defect - Section 292B - curative provision for procedural defects - knowledge of the Assessing Officer

Assessment framed on non-existent entity - quashing of assessment as void ab initio - knowledge of the Assessing Officer - prima facie enquiry under Order 22 Rule 10 CPC - Section 292B - curative provision for procedural defects - succession and substitution of successor-in-interest - Whether the assessment order dated 01.02.2016 framed by the AO u/s 143(3) in the name of UTV Tele Talkies Limited, which had been merged into UTV Software Communications Ltd. w.e.f. 01.04.2013, is void and liable to be quashed. - HELD THAT: - The Tribunal found on the facts that the AO was repeatedly informed, and in his own order recorded, that UTV Tele Talkies Ltd. had been amalgamated into UTV Software Communications Ltd. w.e.f. 01.04.2013 and that the assessee had filed extensive documentary compliances of the High Court order. Despite this knowledge the AO did not conduct even a prima facie enquiry to bring the successor-in-interest on record as contemplated by Section 170 read with Order 22 Rule 10 CPC; instead an assessment was framed in the name of the dissolved/amalgamating company. The Tribunal held that where an assessment is framed against a non-existent entity with such factual matrix and with the AO having knowledge of amalgamation and successor, the defect is jurisdictional and goes to the root of the matter. Section 292B, which saves mere procedural mistakes, cannot cure such a jurisdictional infirmity in the circumstances of the case. Applying these legal principles to AY 2013-14, the Tribunal concluded that the assessment dated 01.02.2016 is not sustainable and must be quashed. Because the primary jurisdictional ground succeeded, the remaining additions and issues raised became academic and were not adjudicated. [Paras 3]

Assessment order dated 01.02.2016 passed u/s 143(3) in the name of UTV Tele Talkies Limited is quashed as void; other grounds become academic.

Final Conclusion: The appeal is allowed: the Tribunal quashed the assessment order dated 01.02.2016 for AY 2013-14 as having been framed on a non-existent entity despite the AO's knowledge of amalgamation; consequent grounds of appeal are academic.

Condonation of delay - appeal under Section 130(1) of the Customs Act, 1962 - remand for fresh decision - decision on merits after authoritative pronouncement - liberty to approach the High Court

Condonation of delay - Delay in refiling the appeal was condoned. - HELD THAT: - The Court examined the application for condonation of delay in refiling the revenue appeal and, finding the delay of 248 days explained and acceptable for the purpose of proceeding with the appeal, exercised its discretion to condone the delay and permit the appeal to be heard on merits. [Paras 1]

Delay of 248 days in refiling the appeal is condoned.

Remand for fresh decision - decision on merits after authoritative pronouncement - appeal under Section 130(1) of the Customs Act, 1962 - liberty to approach the High Court - Validity of the Tribunal order setting aside the Commissioner's order and remitting the matter to the Adjudicating Authority, and the appropriate forum and course for further adjudication. - HELD THAT: - The Tribunal had set aside the Commissioner's adjudication and remitted the matter to the Adjudicating Authority for fresh decision. Having considered earlier proceedings and this Court's prior treatment of a similar matter, the High Court held that the Tribunal's order (Annexure P-1) should be set aside. The proper course adopted by this Court is to remit the matter to the Tribunal to decide the appeals on merits after the authoritative decision of the Supreme Court in Mangali Impex Limited's case becomes available. The Court preserved the assessee's right to approach this Court again if aggrieved by the order ultimately passed. [Paras 5, 6]

The appeal is allowed; the Tribunal's order dated 29.8.2017 (Annexure P-1) is set aside and the matter is remitted to the Tribunal to decide the appeals on merits after the Supreme Court's decision in Mangali Impex Limited. Liberty granted to the assessee to move an application before this Court if aggrieved.

Final Conclusion: The High Court condoned the delay in refiling the revenue appeal, allowed the appeal under Section 130(1) of the Customs Act by setting aside the Tribunal's order that had remitted the matter to the Adjudicating Authority, and remitted the case to the Tribunal to decide the appeals on merits after the Supreme Court's decision in Mangali Impex Limited; liberty was reserved to the assessee to approach the High Court if aggrieved.

Condonation of delay - remand for fresh decision - judicial review of tribunal remand orders - liberty to aggrieved party to seek further remedy

Condonation of delay - Delay of 237 days in refiling the appeal was condoned. - HELD THAT: - The Court considered the application for condonation of delay in refiling the appeal and exercised its discretion to condone a delay of 237 days. The order records the grant of condonation, thereby permitting the appeal to be entertained despite the delay. [Paras 1]

Delay in refiling the appeal of 237 days is condoned.

Remand for fresh decision - judicial review of tribunal remand orders - liberty to aggrieved party to seek further remedy - Whether the Tribunal's order remitting the matter to the Adjudicating Authority should be set aside and the matter remitted to the Tribunal for decision on merits after the Supreme Court's decision in Mangali Impex Limited. - HELD THAT: - The Court noted that the Tribunal had set aside the Commissioner's order and remitted the matter to the Adjudicating Authority for fresh decision. Observing that the matter is no longer res integra in light of a similar decision in CUSAP-20-2018 and the intervening Supreme Court decision in Mangali Impex Limited, the Court concluded that the Tribunal's remand ought to be set aside. The Court set aside the Tribunal's order dated 29.8.2017 and remitted the matter back to the Tribunal with a direction to decide the appeal on merits after the Supreme Court's decision is available. The Court also preserved the assessee's right by granting liberty to move the High Court if aggrieved by the Tribunal's subsequent order. [Paras 2, 5, 6]

The Tribunal's order dated 29.8.2017 is set aside; the matter is remitted to the Tribunal to decide on merits after the Supreme Court's decision, and the assessee is granted liberty to approach the High Court if aggrieved.

Final Conclusion: The appeal is allowed: condonation of delay is granted; the Tribunal's remand order dated 29.8.2017 is set aside and the matter is remitted to the Tribunal to decide the appeal on merits after the Supreme Court's decision in Mangali Impex Limited, with liberty to the assessee to approach this Court if aggrieved.

Invocation of extended period under section 28 of the Customs Act, 1962 - classification of imported goods as glass beads vis-a -vis glass microspheres - requirement of suppression or wilful mis representation for extension of limitation - penalty liability under section 114A of the Customs Act, 1962 and section 112 of the Customs Act, 1962 - effect of contemporaneous documents and prior classification by customs on mens rea - CENVAT credit consequence of reclassification and its relevance to motive

Invocation of extended period under section 28 of the Customs Act, 1962 - requirement of suppression or wilful mis representation for extension of limitation - effect of contemporaneous documents and prior classification by customs on mens rea - Extended period under section 28 of the Customs Act, 1962 could not be invoked for demanding duty. - HELD THAT: - The Tribunal found that the very documents relied upon in the reclassification - certificate of origin and certificate of analysis - were available to the assessing officer at import and therefore there was no fresh suppression of facts. The existence of a differing classification adopted by Jawaharlal Nehru Custom House, Nhava Sheva and documentary material including supplier literature and test reports pointed to confusion over classification rather than deliberate obfuscation. The differential levy sought by Revenue was limited to additional customs duty (with CENVAT credit consequences) and thus no clear gain to the importer from misdeclaration could be established. On these findings, the requisite element of suppression or wilful mis representation necessary to invoke the extended period was absent, and the extended limitation under section 28 could not be applied.

Extended period under section 28 cannot be invoked; demand must be restricted to the normal period of limitation.

Classification of imported goods as glass beads vis-a -vis glass microspheres - CENVAT credit consequence of reclassification and its relevance to motive - The imported goods fall within the scope of the entry for glass microspheres (heading no. 70182000) and are distinct from glass beads. - HELD THAT: - Having considered Chapter structure and Explanatory Notes, the Tribunal accepted that the tariff schedule distinguishes glass beads, glass microspheres and others as different products. The Court observed that the nature and intended specialised use of glass microspheres mark them as a distinct category, and on the material before it the imported articles must squarely fall under heading no. 70182000. However, the Tribunal also noted the contemporaneous availability of certificates and prior inconsistent classification, which affected the assessment of intent.

Goods are classifiable under heading no. 70182000 as glass microspheres, but classification uncertainty existed in practice.

Penalty liability under section 114A of the Customs Act, 1962 and section 112 of the Customs Act, 1962 - requirement of suppression or wilful mis representation for extension of limitation - Penalties under section 114A and section 112 cannot be imposed in the absence of deliberate misclassification; penalties were set aside. - HELD THAT: - Because the Tribunal concluded that there was no deliberate suppression or wilful mis representation and that the demand was confined to the normal limitation period, the statutory prerequisites for imposing penalties were not satisfied. The appellants had also discharged the duty liability for the relevant contested period and there was no further amount due. On these bases, the Tribunal held that imposition of penalties under the cited provisions was not warranted.

Penalties under sections 114A and 112 are set aside.

Final Conclusion: The appeals were allowed in part: the reclassification to heading no. 70182000 was recognised on the material, but the extended period under section 28 could not be invoked for demand of duty in view of absence of suppression or wilful mis representation; the demand is limited to duty and interest within the normal period of limitation and all penalties under sections 114A and 112 are set aside; the appellants have no further amount due for the specified import periods.

Summary order. Appeal dismissed for delay (delay of 242 days not satisfactorily explained) and on merits.

Appellate tribunal's duty to decide on merits or keep appeal pending - impropriety of disposing appeals by reference to pendency of similar matter in a higher forum - remand for fresh consideration

Appellate tribunal's duty to decide on merits or keep appeal pending - impropriety of disposing appeals by reference to pendency of similar matter in a higher forum - remand for fresh consideration - Validity of the Customs Excise and Service Tax Appellate Tribunal's disposal of appeals by leaving them undecided pending the Supreme Court's decision in a related matter. - HELD THAT: - The Tribunal disposed of the appeals without deciding the question on merits, citing the pendency of a related matter in this Court and granting liberty to the respondent to approach the Tribunal again after the Supreme Court's verdict. The Supreme Court held that such a mode of disposal was inappropriate. The Tribunal ought either to have kept the appeals pending until the determination of the related case by the Supreme Court or decided the appeals on their own merits. Leaving the appeals disposed in the manner adopted by the Tribunal did not meet the tribunal's duty to adjudicate the appeals properly and required correction.

Impugned order set aside and the matter remitted to the Tribunal for fresh consideration.

Final Conclusion: The appeals are allowed; the Tribunal's order is set aside and the matters are remitted to the Customs Excise and Service Tax Appellate Tribunal for fresh consideration, with the direction that it either decide the appeals on merits or keep them pending until the related Supreme Court decision.

Reliance on third-party evidence without independent corroboration - Procedure under Section 9D of the Central Excise Act - Validity of demand founded on loose private records/RUDs - Entitlement to Cenvat credit on invoices from registered suppliers - Proof requirement for clandestine removal/shortage detected during stock-taking - Limitation on invocation of Rule 26 penalty to cases involving confiscation

Reliance on third-party evidence without independent corroboration - Procedure under Section 9D of the Central Excise Act - Validity of demand founded on loose private records/RUDs - Sustainability of demand for undervaluation based on loose sheets seized from the consignment agent and statements of the agent without cross-examination or independent corroboration. - HELD THAT: - The Tribunal held that demand confirmed against the appellant on the basis of loose slips/pages recovered from the residence of the consignment agent and on the agent's statement could not be sustained. The loose sheets did not mention the appellant and there was no corroboration from the alleged buyers whose names appeared on those sheets. Further, the adjudicating authority failed to follow the procedure under Section 9D for placing reliance on statements of third parties and no cross-examination of the declarants was recorded; consequently the third-party material could not support the duty demand. [Paras 13, 14]

Demand based on those loose sheets and the uncorroborated statements of the consignment agent set aside.

Entitlement to Cenvat credit on invoices from registered suppliers - Reliance on third-party documents for denial of credit - Validity of denial of Cenvat credit where investigators did not examine identified suppliers or transporters and credit was denied on the basis of third-party diary/notebook entries. - HELD THAT: - The Tribunal found that the adjudicating authority denied credit without following the legal position established in the cited High Court authority and without examining the suppliers or transporters whose names were available to investigators. Mere reliance on third-party diary/notebook entries, without independent verification or examination of suppliers/transporters or enquiry with sales tax authorities, was insufficient to deny credit where invoices were from registered dealers and other documentary evidence (GRs, VAT-47) existed. [Paras 15]

Denial of Cenvat credit overturned and the disallowance held not sustainable.

Validity of demand founded on loose private records/RUDs - Reliance on third-party evidence without independent corroboration - Whether the adjudicating authority correctly dropped the demand in respect of sales to M/s Maa Beri Steel Co., Jodhpur. - HELD THAT: - The Tribunal observed that the Revenue failed to produce sufficient corroborative evidence to rebut the adjudicating authority's categorical findings. The alleged undervaluation for supplies to M/s MBSC was based on records seized from MBSC and statements which were not supported by independent evidence; in particular, the scale of alleged cash transactions was not evidenced by any cash recovery. Accordingly the Commissioner was correct to drop that demand. [Paras 16]

Dropping of the demand in respect of M/s MBSC upheld and the departmental appeal in that regard dismissed.

Proof requirement for clandestine removal/shortage detected during stock-taking - Limitation on invocation of Rule 26 penalty to cases involving confiscation - Sustainability of demand and penalties imposed for alleged shortage of finished goods detected during stock-taking. - HELD THAT: - The Tribunal noted that the alleged shortage demand was founded on an eye-estimate stock-taking carried out during search and seizure and that panchnama entries related to billets (raw material) rather than finished goods. There was no finding of clandestine removal, and the method/time available for stock-taking undermined reliability. In view of the infirmities in proof of shortage and absence of clandestine clearance, the demand and linked penal consequences could not be sustained. [Paras 7, 16]

Demand for alleged shortage and related penalty aspects not sustained.

Final Conclusion: The Tribunal allowed the appeals of the appellants, set aside the duty demands and disallowance of Cenvat credit that were unsupported by corroborative evidence or proper procedure, upheld the dropping of the demand against M/s Maa Beri Steel Co., and dismissed the departmental appeal.

Confirmation of demand based on assumption and presumption - quantification of assessable value on presumptive consumption - reliability of gate/outgoing register maintained by third-party security personnel - requirement of independent investigation from buyers and transporters to substantiate clandestine removals - burden of proof and corroboration of private records - suspicion cannot take the place of proof

Confirmation of demand based on assumption and presumption - quantification of assessable value on presumptive consumption - suspicion cannot take the place of proof - Validity of confirmation of excise demand by Adjudicating Authority based on assumed production/consumption and without documentary or technical support. - HELD THAT: - The Commissioner (Appeals) rightly held that the demand was affirmed on assumptions-e.g., inferred production figures and alleged exorbitant consumption per piece-without any documentary evidence or authenticated technical literature to support such inferences. The Tribunal agreed that the Adjudicating Authority relied on conjectural computation rather than proof and that the ratio in smuggling cases relied upon by Revenue was inapplicable; instead, the long-settled principle that suspicion however grave cannot substitute proof applies. Given this absence of corroborative material and reliance on assumed consumption/production, the confirmation of demand was unsustainable. [Paras 6]

Demand confirmed on the basis of assumed production/consumption and presumptions quashed; Commissioner (Appeals) order upheld on this ground.

Reliability of gate/outgoing register maintained by third-party security personnel - requirement of independent investigation from buyers and transporters to substantiate clandestine removals - burden of proof and corroboration of private records - Whether outward/gate register entries maintained by contractual security staff can sustain confirmation of clandestine clearances absent independent verification. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) finding that the outgoing register was maintained by contractual gatekeepers/security personnel and was not supervised or controlled by the assessee. The Department possessed buyer, quantity and transport details but had not made any enquiries of buyers or transporters to verify the register entries. In these circumstances, and in the absence of corroborative evidence from recipients/transporters, reliance solely on such private gate records to confirm clandestine removals was held to be improper and insufficient to prove liability. [Paras 6]

Outgoing/gate register maintained by third party security personnel cannot alone sustain demand where Department failed to verify entries with buyers/transporters; reliance on such register rejected.

Burden of proof and corroboration of private records - suspicion cannot take the place of proof - Applicability of precedents invoked and legal standard required to sustain excise demand where evidence is largely circumstantial. - HELD THAT: - The Tribunal found that the smuggling case precedent relied upon by the Adjudicating Authority was distinguishable and not determinative. Instead, the principle that suspicion, however grave, cannot take the place of proof (as laid down in relevant Supreme Court decisions) governs the present facts where the Department did not undertake available investigations to verify contested entries. Consequently, the case laws cited by Commissioner (Appeals) were held to be rightly applied and Revenue's bald assertion that they were inapplicable was unsupported. [Paras 6]

Precedents invoked by Commissioner (Appeals) correctly applied; absence of proof defeats Revenue's case and confirmation of demand cannot be sustained.

Final Conclusion: The Tribunal dismissed the Revenue appeals and upheld the Commissioner (Appeals) order setting aside the excise demand, interest and penalties, holding that the demand was founded on assumptions and on gate registers maintained by third parties without requisite independent verification, and that suspicion cannot substitute for proof.

Proof of clandestine removal and identification of manufacturer - seized cash as sale proceeds of clandestinely cleared excisable goods - application and scope of notification making Customs provisions applicable to Central Excise - limits of confiscation under Central Excise Rules (Rule 25) and non-applicability to traders - absolute confiscation not permissible for non-prohibited excisable goods

Proof of clandestine removal and identification of manufacturer - seized cash as sale proceeds of clandestinely cleared excisable goods - Seized Indian currency cannot be held to be sale proceeds of clandestinely removed cigarettes in the absence of identification of the manufacturer and cogent evidence of clandestine removal. - HELD THAT: - The Tribunal recorded that statements initially implicating the appellants were retracted and that Revenue failed to identify or investigate the manufacturer of the seized cigarettes. Prior orders of the Tribunal had set aside demand/confiscation in related proceedings for lack of evidence identifying clandestine clearance or manufacturer. In the absence of evidence such as procurement/production/flow of goods, transport traceability or inquiries of factory officers, the allegation that cash seized from the appellants represented sale proceeds of clandestinely cleared cigarettes was not sustainable. Consequently, confiscation of the seized cash on that basis could not be upheld. [Paras 7]

The finding that the seized currency represented sale proceeds of clandestinely removed cigarettes is set aside and the confiscation on that basis cannot be sustained.

Application and scope of notification making Customs provisions applicable to Central Excise - limits of confiscation under Central Excise Rules (Rule 25) and non-applicability to traders - absolute confiscation not permissible for non-prohibited excisable goods - Currency seized cannot be confiscated under Section 121 of the Customs Act as applied to Central Excise by Notification No. 68/63-CE, and absolute confiscation of excisable (non-prohibited) goods or their proceeds is not permissible under the Central Excise scheme relied upon by Revenue. - HELD THAT: - The Tribunal examined the notification relied upon and observed that the provisions authorising confiscation in the Customs Act (Sections 111, 113 and 125) were not made applicable to Central Excise by the notification. Accordingly, confiscation under Section 121 of the Customs Act could not be invoked for Central Excise matters. Separately, the Tribunal noted that Rule 25 of the Central Excise Rules provides confiscation machinery for producers, manufacturers, registered persons or importers issuing invoices, and does not contemplate absolute confiscation of non-prohibited excisable goods or extend to unregistered traders. Given that the appellants were traders and not covered persons under Rule 25, and excisable cigarettes are not prohibited goods warranting absolute confiscation, the legal basis for absolute confiscation of the seized currency and goods was absent. [Paras 8, 9]

The confiscation of the seized currency under the Customs provision invoked is legally untenable; Rule 25 and the Central Excise scheme do not support absolute confiscation in the facts of this case, and the currency and seized goods are not liable to be confiscated on that basis.

Final Conclusion: The impugned order is set aside; the seized Indian currency and goods are not liable to confiscation and are to be released to the appellants, and no penalties shall be imposed.

Eligibility of CENVAT/service-tax credit on courier services - Inward transportation and services for goods sent for job work - Outward transportation up to buyer's premises - Place of removal determining eligibility of input credit - Effect of amendment with effect from 01.04.2008 on credit for outward transportation - Remand for determination of place of removal and quantification of credit

Eligibility of CENVAT/service-tax credit on courier services - Inward transportation and services for goods sent for job work - Credit on courier services used for inward transportation of raw materials and for sending goods for job work is eligible - HELD THAT: - The Tribunal found that the amounts for courier services include charges for inward transportation of raw materials and for dispatching goods to job workers. The definition of input service does not restrict eligibility with respect to inward transportation or services in relation to goods sent for job work. Consequently, credit availed on service tax paid for such charges is to be treated as eligible, subject to quantification. The Tribunal therefore confirmed eligibility in principle while directing quantification by the adjudicating authority.

Credit availed on courier services for inward transportation and for goods sent for job work is eligible; quantification to be carried out by the adjudicating authority.

Outward transportation up to buyer's premises - Place of removal determining eligibility of input credit - Effect of amendment with effect from 01.04.2008 on credit for outward transportation - Remand for determination of place of removal and quantification of credit - Eligibility of credit on courier services used for outward transportation to the buyer's premises is not finally adjudicated but remanded for determination of place of removal and quantification, having regard to the amendment effective 01.04.2008 and the Apex Court ruling in Ultratech Cement Ltd. - HELD THAT: - Relying on the Apex Court decision that, after amendment, credit on outward transportation beyond the place of removal is not allowable with effect from 01.04.2008, and on the Tribunal's earlier decisions and Board Circular dated 08.06.2018, the Bench directed that the adjudicating authority must first determine the place of removal for the assessee. The question whether outward courier services up to buyer's premises are eligible therefore requires fresh consideration in light of the place of removal determination and the cut-off date of 01.04.2008; consequently the matter is remanded for fresh adjudication and quantification. The Tribunal noted that credits attributable to the period up to 01.04.2008 would be eligible.

The issue of credit in respect of outward courier services to buyer's premises is remanded to the adjudicating authority for determination of the place of removal and quantification, keeping in view the Ultratech ruling and the post-01.04.2008 amendment; credits up to 01.04.2008 are to be treated as eligible.

Final Conclusion: Appeal allowed by way of remand: credit on courier services for inward transportation and job-work dispatches recognised as eligible (quantification to be done), while eligibility of credits for outward transportation to buyer's premises is remitted to the adjudicating authority to determine place of removal and quantify credit in light of the amendment effective 01.04.2008 and relevant precedents.

Applicability of Rule 6 of CENVAT Credit Rules, 2004 to electricity generated from waste heat - Excisability of electricity - Distinction between non-excisable/non-exempted goods and dutiable/exempted goods for CENVAT adjustment - Reversal of CENVAT credit vis-a -vis payment under Rule 6 - Validity of demand equal to percentage of value of electricity sold

Applicability of Rule 6 of CENVAT Credit Rules, 2004 to electricity generated from waste heat - Excisability of electricity - Demand equal to percentage of value of electricity sold - Reversal of CENVAT credit vis-a -vis payment under Rule 6 - Whether Rule 6 applies and a demand equal to 6% of the value of electricity sold is sustainable where electricity is generated from waste heat and is not a manufactured excisable or exempted good. - HELD THAT: - The Tribunal held that the issue is no longer res integra and is settled in favour of the assessee by earlier decisions. Applying the ratio of those decisions, electricity generated from waste heat recovered in the course of manufacture of sponge iron is not a manufactured excisable good nor an exempted good; consequently Rule 6 of the CENVAT Credit Rules, 2004 does not apply. Reliance was placed on precedents which conclude that where no other input or input service is used in generation of such electrical energy, it is not excisable under the Central Excise enactment and therefore cannot attract the accounting and payment consequences envisaged by Rule 6. On that basis the demand calculated as a percentage of the value of electricity sold to outsiders was held unsustainable and was set aside. [Paras 6]

Demand of 6% of the value of electricity sold (for electricity generated from waste heat) under Rule 6 is not sustainable; appeal allowed and the demand set aside.

Final Conclusion: Following settled precedents, the Tribunal allowed the appeal, holding that electricity generated from waste heat is neither excisable nor exempted goods and Rule 6 CENVAT Credit Rules, 2004 is not applicable; the demand based on a percentage of sale value of such electricity was set aside.

Cenvat credit on components of capital goods - Rule 14 of the Cenvat Credit Rules, 2004 - Chartered Engineer certificate as evidence of user - Application of the "user test" - Precedent in Monnet Ispat & Energy Ltd.

Cenvat credit on components of capital goods - Chartered Engineer certificate as evidence of user - Application of the "user test" - Precedent in Monnet Ispat & Energy Ltd. - Entitlement to cenvat credit on steel and fabricated items used in fabrication of supporting components of capital goods - HELD THAT: - The Tribunal found that the impugned goods were used in fabrication of supporting components of capital goods (conveyor, kiln, pollution control system, storage tanks and similar machinery) and were not used for laying foundations. The appellant furnished a Chartered Engineer certificate certifying the use of the said goods. Applying the user test and following the Division Bench decision in Monnet Ispat & Energy Ltd., wherein angles, beams, channels and similar steel items used in erection or fabrication of capital goods were held eligible for cenvat credit, the Tribunal held that mere characterization of certain fabricated steel items as 'supports' does not suffice to deny credit when they form part of the capital goods assembly. In view of these conclusions, the impugned denial under Rule 14 of the Cenvat Credit Rules, 2004 was found unsustainable. [Paras 5, 6]

Impugned order rejecting cenvat credit is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The appeal is allowed; the order of the Commissioner (Appeals) dated 26.03.2018 is set aside and cenvat credit on the disputed fabricated components is held admissible in accordance with the reasoning and precedent applied.

Eligibility to retain CENVAT credit on inputs and input services used in generation of electricity - requirement to reverse six percent of the value of electricity supplied - exciseability of electricity generated from bagasse - inapplicability of Rule 6 where no other inputs or input services are used in generation of electricity - distinction between captive use and sale of electrical energy

Eligibility to retain CENVAT credit on inputs and input services used in generation of electricity - requirement to reverse six percent of the value of electricity supplied - inapplicability of Rule 6 where no other inputs or input services are used in generation of electricity - exciseability of electricity generated from bagasse - Whether the demand to reverse six percent of the value of electricity supplied (and corresponding CENVAT credit) for the period January 2016 to March 2016 is sustainable - HELD THAT: - The Tribunal examined the matter in light of binding and persuasive precedents relied upon by the appellant, including the Tribunal's earlier decision in the appellant's own case for a different period and judicial authorities holding that electricity generated from bagasse does not involve use of other inputs or input services. Applying those ratios, the Tribunal concluded that such electrical energy is neither excisable nor an exempted good for the purposes that would trigger reversal under Rule 6, and consequently the obligation to reverse six percent of the value of electricity sold does not arise. On that basis the demand confirmed by the original authority and affirmed by the Commissioner (Appeals) was held unsustainable and set aside. [Paras 6]

Demand of reversal equal to six percent of the value of electricity for January 2016 to March 2016 set aside; appeal allowed

Final Conclusion: The Tribunal allowed the appeal and set aside the demand for reversal of six percent of the value of electricity (and related CENVAT credit demand) for the period January 2016 to March 2016, following precedent that electricity generated from bagasse does not attract Rule 6 reversal.

CENVAT credit reversal under Rule 6 - common inputs and input services used for dutiable and exempted goods - generation of electricity from bagasse as not using other inputs - non-applicability of Rule 6 where goods are neither excisable nor exempted - precedential effect of Supreme Court decision in UOI vs. DSCL Sugar Ltd.

CENVAT credit reversal under Rule 6 - common inputs and input services used for dutiable and exempted goods - generation of electricity from bagasse as not using other inputs - precedential effect of Supreme Court decision in UOI vs. DSCL Sugar Ltd. - Validity of demand under Rule 6 for 6% of value of bagasse/electricity sold where no separate records were maintained for inputs/input services used for both dutiable and alleged exempted goods for March 2015 to December 2015. - HELD THAT: - The Tribunal applied binding and persuasive precedents, including the Supreme Court's decision in UOI vs. DSCL Sugar Ltd. and the Allahabad High Court's reasoning in Gularia Chini Mills, as adopted by earlier Division Bench decisions. Those authorities hold that in generation of electricity from bagasse no other input or input service is used and accordingly the electrical energy so generated is neither excisable as manufactured goods nor an exempted good attracting Rule 6. Following these ratios, the demand for reversal equal to 6% of the value of electricity/bagasse sold is unsustainable in law. The Tribunal observed that the issue is no longer res integra and, applying the cited precedents to the facts for the period after the amendment (post 1.3.2015), concluded that Rule 6 is not applicable and the demand must be set aside. [Paras 6]

Demand under Rule 6 for the specified period set aside and impugned order in favour of the assessee upheld; Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the Commissioner (A)'s allowance of the assessee's appeal and setting aside the demand under Rule 6 for the period March 2015 to December 2015 by applying the Supreme Court and allied decisions that electricity generated from bagasse is not excisable or an exempted good and Rule 6 therefore does not apply.

Summary order. Case made over to the Division Bench to be clubbed and heard together with the main appeal.

Valuation of captively consumed goods - applicability of Rule 4 (value of identical goods cleared to independent buyers) versus Rule 8 (cost of production plus notional profit) - sequential application of Central Excise (Valuation) Rules - preference for Rule 4 where comparable independent-sale values exist - time-bar and extended period of limitation - requirement of suppression for invocation of extended period - penalty for duty shortfall - discretionary exercise where demand itself is time barred or explained

Valuation of captively consumed goods - applicability of Rule 4 (value of identical goods cleared to independent buyers) versus Rule 8 (cost of production plus notional profit) - sequential application of Central Excise (Valuation) Rules - preference for Rule 4 where comparable independent-sale values exist - Proper method of valuation for goods manufactured and captively consumed during the disputed period - HELD THAT: - The Tribunal applied the Larger Bench ratio in Ispat Industries Ltd., holding that Rule 8 applies only where the entire production is not sold and is exclusively consumed for manufacture or where goods are transferred to another unit for manufacture on behalf of the assessee. Where clearances to independent buyers are available for part of the production, Rule 4 (adoption of value of identical goods sold to independent buyers) is the appropriate basis. The Tribunal observed that Rules should be read sequentially so that a specific factual availability of independent-sale values under Rule 4 governs valuation notwithstanding a more general cost-based Rule 8. [Paras 7, 8]

Value for captive clearances in the disputed period is to be determined under Rule 4 on the basis of prices of identical goods cleared to independent buyers; appeal dismissed on this ground in favour of the Revenue.

Time-bar and extended period of limitation - requirement of suppression for invocation of extended period - Validity of invocation of extended period of limitation in respect of the first show-cause notice dated 02.08.2006 - HELD THAT: - The appellant had informed the Department by letters in December 2005 about its practice of captive clearances for construction, repair and maintenance and relied on a then-prevailing Tribunal decision (BOC India Ltd.) in adopting Rule 8. Given this disclosure and the change of view being resultant from a later Larger Bench decision, the Tribunal found that the Department could not reasonably allege suppression to justify invocation of the extended period. Accordingly, the demand arising from the first show-cause notice must be restricted to the normal period; the subsequent show-cause notice dated 22.03.2007 was held to be within time. [Paras 9]

Extended period invocation in respect of the first demand (02.08.2006) is not sustained; that demand is to be restricted to the normal limitation period, while the second notice (22.03.2007) is within time.

Penalty for duty shortfall - discretionary exercise where demand itself is time barred or explained - Sustainability of penalty imposed in the impugned orders - HELD THAT: - In view of the appellant's disclosure to the Department and the legitimate reliance upon earlier Tribunal precedent, the Tribunal found no justification for imposing penalty. The factual circumstances and the change in legal position militated against penalty being levied. [Paras 10]

Penalty set aside.

Final Conclusion: Appeals partly allowed: valuation of captive clearances for the disputed period upheld in favour of the Revenue and to be determined under Rule 4; the demand based on the first show-cause notice is restricted to the normal limitation period while the second notice is within time; penalties imposed are set aside.

Clandestine removal - burden of proof on the revenue - requirement of corroborative and tangible evidence - acceptance of shortage not equivalent to admission of clandestine removal - benefit of doubt - need for investigation of buyers, transporters, electricity and cash trail

Clandestine removal - burden of proof on the revenue - requirement of corroborative and tangible evidence - acceptance of shortage not equivalent to admission of clandestine removal - Whether demand of central excise duty on account of shortages of finished goods and inputs found in stock verification was sustainable in absence of corroborative evidence of clandestine removal. - HELD THAT: - The Tribunal held that allegation of clandestine removal is a serious charge which must be established by positive, tangible and corroborative evidence and cannot rest on suspicion, assumption or mere arithmetic discrepancies in stock records. The adjudicating authority and revenue relied on recorded shortages and payments made by the appellant as indicating clandestine removal, but the Tribunal found that the appellant did not admit clandestine clearance and that voluntary payment was made to avoid litigation; such payment did not substitute for independent proof. The Department had failed to conduct basic corroborative steps - for example, enquiries at buyer and transporter ends, investigation into procurement or use of unaccounted raw materials, examination of use of extra electricity or deployment of extra labour, or tracing any cash flow or seizure that would support clandestine removals - despite having buyer addresses. The Tribunal reviewed earlier decisions to emphasize that where shortages arise from manufacturing processes, storage (e.g., stock in furnace, slag), or accounting methods, or where stock-taking may have ignored in-process stocks, the revenue must produce independent evidence of removal (transportation, receipts by buyers, seizure, cash trail, or other corroboration) before sustaining a duty demand. Given the incomplete and non-probative investigation and absence of corroborative evidence, the Tribunal applied the rule of benefit of doubt and concluded the demand was not sustainable on the material on record. [Paras 19, 23, 24, 25]

Findings of clandestine removal and consequential demand of duty set aside; appeal allowed and appellant entitled to consequential relief.

Final Conclusion: The impugned adjudication confirming duty on alleged clandestine removal is set aside for lack of corroborative and tangible evidence and incomplete investigation; appeal allowed with consequential relief to the appellant.

Clandestine removal - corroborative evidence - admissibility of third party statements without cross examination - principles of natural justice - right to cross examine - presumption and surmise not sufficient to sustain demand - benefit of doubt

Clandestine removal - corroborative evidence - presumption and surmise not sufficient to sustain demand - benefit of doubt - Whether the demand for duty and penalties based on alleged clandestine manufacture and removal of MS billets was supported by adequate corroborative evidence. - HELD THAT: - The Tribunal found that the demand rested predominantly on the stock taking report, isolated statements and documents recovered from third parties, and assumptions about manufacture and movement of large quantities. There was no tangible evidence of actual outward movement of goods (no transport records, no receipts at buyers' end, no cash receipt evidence) and the department did not investigate or corroborate alleged receipts with the buyers or transporters. Reliance on another entity's show cause notice and documents recovered from a third party's premises, without independent corroboration, was held to be inadequate. The Tribunal reiterated that charge of clandestine removal is serious and cannot be sustained on mere surmise, conjecture or presumption; in absence of corroboration the benefit of doubt must go to the appellant. Applying these principles, the Tribunal concluded that the demand and penalties confirmed by the adjudicating authority were not sustainable. [Paras 11, 12, 13]

Demand and penalties confirmed for alleged clandestine manufacture and removal were set aside for lack of corroborative evidence.

Principles of natural justice - right to cross examine - admissibility of third party statements without cross examination - Whether reliance on statements and third party documents admitted in the show cause notice was permissible where the appellants were denied the opportunity to cross examine the declarants/transporters. - HELD THAT: - The Tribunal observed that several statements and ledger entries of transporters and of personnel of the third party (SSSIL) were relied upon by the adjudicating authority, while the appellant's requests to cross examine those persons were refused. Evidence obtained from third parties and relied upon by Revenue without giving the affected party a reasonable opportunity to test those statements through cross examination cannot be treated as admissible or conclusive. The adjudicating authority's reproduction of such statements without recording reasons for denying cross examination and without following the procedure for admissibility rendered reliance on them improper. Consequently, the Tribunal treated such evidence as inadmissible for sustaining the demand. [Paras 13, 14]

Reliance on third party statements and documents, without permitting cross examination, was impermissible and vitiated the basis of the adjudication.

Final Conclusion: The impugned adjudication confirming duty, interest and penalties for alleged clandestine manufacture and removal was set aside on grounds that the demand was based on surmise and uncorroborated material and that statements relied upon were inadmissible where the appellants were denied cross examination; the appeals were allowed with consequential relief.

Cenvat credit on Goods Transport Agency (GTA) services - place of removal - eligibility of input service credit up to the place of removal - interpretation of place of removal in light of Roofit and Ispat decisions - Board's Circular dated 08.06.2018 - binding nature of Board circulars on Revenue - remand for determination of place of removal

Cenvat credit on Goods Transport Agency (GTA) services - place of removal - Board's Circular dated 08.06.2018 - eligibility of input service credit up to the place of removal - Whether Cenvat credit on GTA services availed for outward transportation up to the buyer's premises is admissible and whether the matters require remand for determination of the place of removal before deciding eligibility of credit - HELD THAT: - The Tribunal examined the interplay between the Apex Court's decision in UltraTech Cements (holding that after the 01.04.2008 amendment the definition of 'input service' restricts credit to 'up to the place of removal') and earlier precedents (including Roofit and Ispat) dealing with the concept of 'place of removal' and valuation. The Board's Circular dated 08.06.2018 was held to set out the general principle (following Ispat) and recognised exceptions (including FOR/destination sales as in Roofit/Emco) and specifically interpreted UltraTech as holding that GTA credit is admissible only up to the place of removal. Given this legal matrix, the Division Bench observed that several Tribunal decisions have remanded similar matters for a factual determination of the place of removal before adjudicating the eligibility of GTA credit. Although earlier orders of a Single Member Bench had applied UltraTech to deny credit, the Division Bench concluded that appellants must be afforded an opportunity to establish their place of removal; the adjudicating authority must then examine eligibility of credit in light of UltraTech, Roofit and the Board's Circular. The Tribunal noted that Board Circulars are binding on the Revenue and therefore directed remand for fresh consideration rather than deciding the credit on the papers before it. [Paras 6, 8, 9, 12, 14]

Matters remanded to the adjudicating authority to determine the place of removal and thereafter reconsider eligibility of Cenvat credit on GTA services up to the buyer's premises in light of the Apex Court decisions and Board's Circular; impugned orders set aside and appeals allowed by way of remand.

Final Conclusion: The Tribunal set aside the impugned orders and remitted all appeals for fresh adjudication: the adjudicating authority is to determine the place of removal for each appellant and thereafter decide admissibility of Cenvat credit on outward transportation (GTA) services in accordance with the Apex Court precedents and Board's Circular dated 08.06.2018.

Penalty under Section 11(6) of the Punjab General Sales Tax Act, 1948 - remand for fresh decision by the Assessing Officer - overruling of earlier Division Bench precedent by a subsequent Full Bench and affirmation by the Apex Court - non-compliance with procedural requirement under Section 63(3) of the PVAT Act

Penalty under Section 11(6) of the Punjab General Sales Tax Act, 1948 - overruling of earlier Division Bench precedent by a subsequent Full Bench and affirmation by the Apex Court - Validity of the penalty imposed under Section 11(6) of the PGST Act in light of subsequent overruling of the Division Bench authority relied upon by the Assessing Officer. - HELD THAT: - The assessing authority framed assessment and imposed penalty relying upon a Division Bench decision of the Madhya Pradesh High Court (Battulal). That Division Bench view was subsequently overruled by a Full Bench decision (Shyama Charan Shukla) which was thereafter affirmed by the Apex Court. Given the change in binding precedent, the High Court declined to express any final view on the merits of the penalty and directed that the matter be reconsidered by the assessing authority afresh in accordance with law. The Court therefore set aside the impugned penalty order and remitted the matter for fresh adjudication rather than deciding the substantive question on merits. [Paras 8, 9]

Penalty order set aside and matter remitted to the Assessing Officer for fresh decision in accordance with law.

Non-compliance with procedural requirement under Section 63(3) of the PVAT Act - remand for fresh decision by the Assessing Officer - Sustainability of the Tribunal's dismissal of the appeal for non-maintainability/non-compliance with Section 63(3) of the PVAT Act. - HELD THAT: - The Tribunal dismissed the appeal on grounds including non-compliance with statutory procedure under Section 63(3) and on merits. The High Court, however, set aside the orders of the Tribunal (and earlier appellate authority) without expressing a final opinion on maintainability or merits, and remitted the entire matter to the assessing authority to decide afresh. The Court's order therefore removes the finality of the Tribunal's dismissal and requires reconsideration of procedural compliance and any attendant issues by the assessing authority in the first instance. [Paras 9]

Tribunal's dismissal set aside and matter remitted for fresh decision on procedure and merits as appropriate.

Final Conclusion: The impugned orders of the assessing authority, the appellate authority and the Tribunal are set aside and the matter is remitted to the Assessing Officer to be decided afresh in accordance with law, without any expression of final opinion on the merits.

Exemption from State VAT for goods in Special Economic Zone - developer and co-developer entitlement to VAT exemption - exemption under Section 7(6) of the Haryana Value Added Tax Act, 2003 - exemption under Section 11(1)(i) of the Haryana Special Economic Zone Act, 2005 - condonation of delay under Section 5 of the Limitation Act, 1963

Exemption under Section 7(6) of the Haryana Value Added Tax Act, 2003 - exemption under Section 11(1)(i) of the Haryana Special Economic Zone Act, 2005 - developer and co-developer entitlement to VAT exemption - Whether a developer or co-developer of an SEZ is entitled to exemption from payment of VAT under the Haryana VAT Act by virtue of the HSEZ Act. - HELD THAT: - Section 7(6) of the HVAT Act grants exemption only to an individual industrial unit or dealer for sales made to a registered dealer for purposes of setting up or operating a unit in a SEZ; it does not, on its face, exempt a developer or co-developer. Section 11(1)(i) of the HSEZ Act, however, exempts 'any goods exported out of or imported into the Special Economic Zone' from payment of any tax, duty, cess or other levies under existing State law. The Tribunal correctly observed that while Section 7(6) does not expressly exempt developers or co-developers, the broader exemption in Section 11(1)(i) of the HSEZ Act operates to relieve goods in relation to the SEZ from state levies, and accordingly supplemented the earlier order to hold that a developer and co-developer are entitled to exemption from payment of tax under the HVAT Act by virtue of the HSEZ Act. This Court found no illegality or perversity in the Tribunal's conclusion and declined to interfere. [Paras 6, 7, 8]

The Tribunal's conclusion that developers and co-developers of an SEZ are entitled to exemption from payment of VAT by virtue of Section 11(1)(i) of the HSEZ Act is sustained; no question of law arises warranting interference.

Condonation of delay under Section 5 of the Limitation Act, 1963 - limitation - Whether the applications for condonation of delay in filing the appeals should be allowed. - HELD THAT: - The appeals were barred by time and applications under Section 5 of the Limitation Act were filed. The Court examined the reasons recorded in the applications and found that no sufficient ground was made out for condonation of delay. [Paras 9, 10]

Applications for condonation of delay are rejected; the appeals are dismissed as being barred by time.

Final Conclusion: The Tribunal's order allowing exemption to developers and co-developers of the SEZ under Section 11(1)(i) of the HSEZ Act is upheld and the State's appeals are dismissed on merits; the appeals are also dismissed for want of condonation of delay.

Benami transaction - intention of the person supplying the purchase money - burden of proof in benami cases - indicia for determining benami nature (source of purchase money; possession and nature of property; motive; relationship of parties; custody of title deeds; conduct after purchase)

Benami transaction - intention of the person supplying the purchase money - source of purchase money - burden of proof in benami cases - indicia for determining benami nature (source of purchase money; possession and nature of property; motive; relationship of parties; custody of title deeds; conduct after purchase) - Whether the purchases of suit properties Item Nos. I(a) to I(c) made in the names of defendant Nos. 1 to 3 were benami transactions - HELD THAT: - Applying established principles, the Court held that mere provision of financial assistance by the father is not by itself determinative of a benami transaction. The burden to prove benami lies on the person asserting it and must be discharged by cogent evidence. The Court applied the recognized indicia - including the source of purchase money, possession and nature of the property, motive, relationship of parties, custody of title deeds and conduct after purchase - and found that except for the fact that some financial assistance came from the father, none of the other indicia supported a finding of benami. The plaintiff did not testify; her evidence was through her husband, who was an outsider to the joint family, and the record showed the father provided similar assistance to the daughter and otherwise maintained family members. On the totality of surrounding circumstances, the father's assistance was held to be for the welfare of his children (shelter and support) and not an intention to purchase for himself or the family by using his sons as benamidar. Consequently, the transactions were not benami. [Paras 10]

The purchases of Item Nos. I(a) to I(c) in the names of defendant Nos. 1 to 3 were not benami transactions.

Entitlement to share following benami finding - effect of negative benami finding on claim to inheritance/partition - Whether the plaintiff is entitled to one fourth share in the suit properties Item Nos. I(a) to I(c) - HELD THAT: - Having held that the purchases were not benami and were the self acquired properties of the sons who were the registered purchasers, the Court concluded that the plaintiff has no right to claim one fourth share in those properties. The High Court's and the trial Court's findings that the properties belonged to the defendants were affirmed because the essential ingredient establishing benami character was absent. [Paras 10, 11]

The plaintiff is not entitled to one fourth share in suit properties Item Nos. I(a) to I(c).

Final Conclusion: The appeal is dismissed; the purchases in the names of defendant Nos. 1 to 3 are not benami and the plaintiff has no right to a one fourth share in those properties.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption and burden of proof on accused - probable defence and preponderance of probabilities - presumptions under Section 118 of the Negotiable Instruments Act - reverse onus clause and proportionality - perverse finding and appellate interference with acquittal

Presumption under Section 139 of the Negotiable Instruments Act - presumptions under Section 118 of the Negotiable Instruments Act - Where the signature on the cheque is admitted, a presumption under Section 139 arises that the cheque was issued for discharge of a debt or liability. - HELD THAT: - The Court reaffirmed that admission of the accused's signature on the cheque attracts the statutory presumption in favour of the holder that the cheque was issued for discharge of any debt or liability. The presumption under Section 139 is rebuttable and operates alongside the presumptions in Section 118; it shifts the evidentiary burden to the accused once the execution is admitted. The expression 'shall presume' does not make the presumption conclusive and it can be displaced by proof to the contrary. [Paras 6, 8, 9, 10]

Statutory presumption under Section 139 is attracted on admitted signature but remains rebuttable.

Rebuttable presumption and burden of proof on accused - probable defence and preponderance of probabilities - reverse onus clause and proportionality - The accused can rebut the presumption under Section 139 by raising a probable defence on the preponderance of probabilities; the evidentiary burden is not an unduly high persuasive burden. - HELD THAT: - Relying on this Court's precedents, the Court held that Section 139 constitutes a reverse onus clause that imposes an evidentiary (not persuasive) burden on the accused. The standard for displacing the presumption is preponderance of probabilities: the accused may rely on materials on record, including the complainant's own evidence, and need not necessarily lead direct or positive evidence or himself testify. If the accused brings facts or circumstances that make non-existence of debt probable, the burden shifts back to the complainant. [Paras 16, 17, 18, 19, 20]

Accused may rebut Section 139 by adducing material to raise a probable defence proved on preponderance of probabilities; the burden imposed is evidentiary and proportional.

Probable defence and preponderance of probabilities - perverse finding and appellate interference with acquittal - On the facts, the accused raised a probable defence by challenging the complainant's financial capacity and inconsistencies in the complainant's case; the High Court erred in holding the trial court's acquittal perverse and therefore erred in reversing it. - HELD THAT: - The Court examined the evidence: the complainant admitted multiple substantial payments/loans during the relevant period and failed to satisfactorily explain his financial capacity to have advanced the loan alleged. There were contradictions between the complaint and the complainant's examination-in-chief about the date of the loan. The trial court found these defence materials created doubt as to existence of a legally enforceable debt; the Supreme Court held that the defence materials were sufficient to raise a probable defence on preponderance of probabilities and that the High Court could not characterise the trial court's factual finding as 'perverse' when it was based on defence evidence. The appellate court's reappraisal could not supplant the trial court's permissible evaluation of such evidence. [Paras 26, 27, 28, 29, 30]

Accused successfully raised a probable defence; High Court's interference with acquittal as 'perverse' was unsustainable and its conviction restored is set aside.

Final Conclusion: The appeal is allowed; the judgment of the High Court convicting the accused under Section 138 is set aside and the trial court's order of acquittal is restored.