TaxTMI Updates e-Newsletter
Apr 25,2013

Rectification of order for mistake apparent from record - admissibility of additional evidence - deeming provision in Section 2(22)(e) and characterization of advances as deemed dividend - scope of recall/rectification under Section 254(2) of the Income-tax Act

Rectification of order for mistake apparent from record - Correction of the name recorded as appearing for the assessee in the cause-title of the Tribunal's order dated 14.12.2012. - HELD THAT: - The Bench found a clerical mistake in the appearances part of the cause-title where 'Shri P.V.Ramchandra Rao' was recorded instead of 'Shri N.Purnachandra Rao'. This error is a mistake apparent on the record and is capable of rectification under the limited remedial power invoked by the applicants. The Tribunal directed that the correct name be read in place of the incorrect one in the appearances portion of its order dated 14.12.2012. [Paras 2]

The cause-title is rectified to record 'Shri N.Purnachandra Rao' in place of 'Shri P.V.Ramchandra Rao'.

Admissibility of additional evidence - deeming provision in Section 2(22)(e) and characterization of advances as deemed dividend - Whether the letter of Andhra Bank (dated 27.9.2012) filed by the assessee should have been admitted as additional evidence and whether its admission would have altered the Tribunal's conclusion treating advances as deemed dividend under Section 2(22)(e). - HELD THAT: - On scrutiny of the record the Bench found no specific direction had been given by the Tribunal to produce the bank document; it may have been filed unilaterally by the assessee. The Appellate Tribunal treated the bank letter as additional evidence and declined to admit it for want of a petition seeking its acceptance. Independently, the Tribunal considered the contents of the letter and concluded that even if taken on record it did not establish that the property was actually mortgaged with the bank; therefore it did not affect the legal conclusion. The Tribunal further held that the language of Section 2(22)(e) is clear and a deeming provision which must be strictly interpreted, and that the payments to the assessee satisfied the characteristics of deemed dividend under that provision. Accordingly, non-admission of the letter did not prejudice the assessee and its admission would not have altered the substantive conclusion. [Paras 5, 6, 12]

The bank's letter was correctly treated as additional evidence and its non-admission did not vitiate the Tribunal's conclusion that the advances are deemed dividend under Section 2(22)(e).

Scope of recall/rectification under Section 254(2) of the Income-tax Act - Whether the present applications under Section 254(2) could be used to seek a review of the Tribunal's conscious decisions regarding admission of evidence and the consequential findings on merits. - HELD THAT: - The Bench emphasised the limited scope of proceedings under Section 254(2), which is confined to rectification of mistakes apparent from the record and does not permit review of conscious adjudicatory choices. The applicants' challenge sought re-examination of the Tribunal's deliberate decisions to treat the bank letter as additional evidence, not to admit it, and the consequent findings even if it were admitted. Such a request amounts to a review on merits and falls outside the corrective ambit of Section 254(2). Accordingly, those contentions were not maintainable in the present proceedings. [Paras 6]

Relief cannot be granted to re-open or review the Tribunal's conscious decisions; the applications are not maintainable to that extent.

Final Conclusion: The applications are partly allowed: the clerical error in the appearances portion of the Tribunal's order is rectified to reflect the correct name of the counsel for the assessee; the remainder of the applications seeking recall/review of the Tribunal's handling of the bank letter and the substantive finding that the advances constitute deemed dividend under Section 2(22)(e) are rejected as outside the limited remedy under Section 254(2).

Recording of satisfaction - Procedure under section 153C - Handing over/transfer of seized books to Assessing Officer - Jurisdiction of Assessing Officer - Distinguishing precedent - Remand for fresh adjudication on merits

Procedure under section 153C - Recording of satisfaction - Handing over/transfer of seized books to Assessing Officer - Validity of initiation and completion of assessment under section 153C where books were handed over after recording satisfaction - HELD THAT: - The Court held that Section 153C prescribes the procedure for initiating proceedings against a person who has not been searched and, where applicable, requires that the Assessing Officer of the searched person record satisfaction and hand over the seized books and documents to the Assessing Officer having jurisdiction over the other person. In the present cases the Assessing Officer recorded satisfaction on 28.09.2006 and handed over the books of account; notices under section 153C were issued and replies were received, and assessments were completed under section 153C/143(3). On these facts the procedural requirements were satisfied and the assessments proceeded in accordance with the statutory scheme.

Procedural requirements of section 153C were met by recording satisfaction and handing over books prior to issuance of notices; initiation and completion of assessment under section 153C held valid on the facts.

Distinguishing precedent - Manish Maheshwari - Applicability of the ratio in Manish Maheshwari to the facts where the Assessing Officer recording satisfaction and the Assessing Officer for the other person were the same or where satisfaction and handing over were recorded - HELD THAT: - The Court observed that the ratio in Manish Maheshwari , which set aside an assessment where the Assessing Officer had neither recorded satisfaction nor transferred the papers to the Assessing Officer having jurisdiction, is fact-specific. Since in the present cases the Assessing Officer recorded satisfaction and handed over the books on 28.09.2006, the factual premise of Manish Maheshwari does not obtain and its ratio is not applicable here.

Manish Maheshwari was distinguished and its ratio held inapplicable on the facts of these cases.

Distinguishing precedent - Application of jurisdictional High Court ratio - Digvijay Chemicals Ltd. - Whether the Tribunal erred in not following the jurisdictional High Court's reasoning in Digvijay Chemicals Ltd. where satisfaction was found and assessments by the same officer were sustained - HELD THAT: - The Court held that the ratio of the jurisdictional High Court in Digvijay Chemicals Ltd. , which sustained assessments where the Deputy Commissioner was satisfied that seized material related to the appellant and where the assessing officer who conducted the search made the assessment, is applicable to the present facts. The Tribunal failed to advert to this authority and erred in its conclusion. The Court accepted that where satisfaction is recorded and relevant material links the undisclosed income to the third party, findings of the assessing authority and the Tribunal on such facts should not be lightly disturbed.

Tribunal erred in not following the relevant ratio of the jurisdictional High Court; that ratio applies on the facts of these cases.

Remand for fresh adjudication on merits - Whether the matters should be remitted for fresh decision by the Tribunal - HELD THAT: - Having found that the Tribunal misapplied or failed to consider applicable precedents and having noted the factual distinctions from other adverse decisions, the Court set aside the impugned Tribunal order and remitted the appeals to the Tribunal for fresh adjudication on merits. The Court directed expeditious disposal within three months in view of the age of the matters.

Matters remanded to the Tribunal to decide all appeals strictly on merits expeditiously within three months.

Final Conclusion: The appeals by the revenue are allowed; the High Court set aside the Tribunal's order, held that the procedural requirements under section 153C were satisfied on the facts, distinguished Manish Maheshwari, found the Digvijay Chemicals ratio applicable, and remitted the matters to the Tribunal for fresh adjudication on merits within three months.

Reopening of assessment under section 147 - reason to believe - true and full disclosure of all material facts - adjustment under section 80IA(10) for transactions between closely connected persons - judicial scope of review of recorded reasons for reassessment

Reopening of assessment under section 147 - true and full disclosure of all material facts - judicial scope of review of recorded reasons for reassessment - Validity of reopening the assessment on grounds of alleged discrepancies in R&D figures and alleged double claim of R&D deductions (grounds I and II). - HELD THAT: - The Court held that the reasons recorded by the Assessing Officer in respect of the alleged discrepancies between Tax Audit Report figures and Annual Accounts and the suggestion of double claims were not germane to sustain reopening. The earlier examination (in the assessee's own related proceeding) showed reconciliation of entries and that the Assessing Officer, when disposing objections, relied on a different line of reasoning than that contained in the recorded reasons; a fresh ground subsequently thought of by the AO cannot validate the notice. Consequently, those recorded grounds did not furnish jurisdiction to reopen the completed scrutiny assessment beyond four years. [Paras 6]

Grounds I and II do not constitute valid reasons for reopening the assessment and the reopening on those bases is not sustainable.

Reopening of assessment under section 147 - true and full disclosure of all material facts - Validity of reopening the assessment on the basis of allocation of R&D expenditure and alleged excess 80IA deduction to Silvasa unit (ground IV). - HELD THAT: - The Court found that all relevant facts and figures concerning allocation and the claim had been available on record and were scrutinised in the original assessment, with part of the claim already disallowed. There was no material to show nondisclosure of primary facts such as would permit reopening beyond four years. The Assessing Officer had not pointed to new material that could reasonably give rise to a belief of escapement of income on this ground. [Paras 7, 8]

Ground IV does not justify reopening the assessment beyond the four year period and therefore must fail.

Reopening of assessment under section 147 - reason to believe - adjustment under section 80IA(10) for transactions between closely connected persons - true and full disclosure of all material facts - Validity of reopening the assessment on the basis that interest charged by the assessee on overdue bills from a sister concern at an allegedly excessive rate inflated eligible profits for section 80IA and warranted adjustment under section 80IA(10) (ground III). - HELD THAT: - The Court held that the Assessing Officer had relevant material to form a prima facie belief: the assessee had disclosed aggregate interest income but had not made discernible disclosure that interest was received from the sister concern at the high rate of 24% on overdue bills. Given the close connection and the availability of section 80IA(10) to adjust profits where inter party arrangements produce more than ordinary profits, the AO had reasonable grounds to believe income chargeable to tax had escaped assessment. The Court emphasised that at the notice stage it is not for the Court to decide final correctness; sufficiency of reasons is not subjected to merits adjudication. However, the Court declined to decide whether subsequent material (communications and disclosures in the sister concern's assessment record) deprives the AO of power to reopen; that factual question must be examined during assessment proceedings and on appeal if necessary. [Paras 9, 13]

Ground III constitutes a valid recorded reason to reopen the assessment; the factual effect of additional materials disclosed in proceedings of the sister concern is left to the Assessing Officer and appellate fora to determine.

Final Conclusion: The petition is dismissed subject to the rider that reopenings based on grounds I, II and IV are invalid, while the reopening based on the section 80IA(10) ground (excess interest from a sister concern at 24%) is held to furnish reasonable grounds for reassessment; the factual effect of material disclosed in related proceedings is to be determined in the pending assessment and on appeal if necessary.

Survey under section 133A of the Income Tax Act, 1961 - application of gross profit rate to unexplained stock discrepancy - concurrent findings of fact - telescoping of additions - verification by appellate authority and deletion of additions

Application of gross profit rate to unexplained stock discrepancy - concurrent findings of fact - Reduction of gross profit addition to Rs. 75,916/- was correctly upheld by the Tribunal and CIT(A). - HELD THAT: - A survey under section 133A led to a stock discrepancy in CRC sheets and a small excess in steel cupboards. The Assessing Officer applied a higher gross profit rate to compute an addition. The CIT(A) applied the assessee's declared gross profit rate of 10.27% to the shortfall value and admitted the assessee's concession on steel cupboards, restricting the addition to Rs. 75,916/-. The Tribunal affirmed those conclusions, noting acceptance of the shortfall figure by the assessee, the absence of scope for manipulation given sales to Government agencies, and that the CIT(A)'s application of the declared GP rate was justified. These are concurrent findings of fact which the Court found no reason to disturb. [Paras 3]

Tribunal's confirmation of CIT(A)'s restricted addition of Rs. 75,916/- is sustained.

Telescoping of additions - set-off of trading addition against unexplained deposits - Reduction of the addition made on account of unsecured loans by allowing set-off of the trading addition (telescoping) was correctly upheld. - HELD THAT: - The Assessing Officer had added amounts as unexplained deposits. The CIT(A) accepted the proposition that the trading addition already sustained could legitimately be set off (telescoped) against the addition made in respect of deposits introduced in the garb of loans, relying on precedents and priniciples of fairness. The Tribunal upheld that approach and allowed the telescoping effect, reducing the addition accordingly. The High Court found no error in the reasoning or conclusion reached by the appellate authorities. [Paras 4, 5]

Telescoping of Rs. 75,916/- against the unsecured-loan addition is proper and was rightly allowed by the CIT(A) and Tribunal.

Verification by appellate authority and deletion of additions - Deletion of the addition on account of undisclosed cash deposits (Rs. 24,00,000/-) was justified and correctly upheld by the Tribunal after verification by the CIT(A). - HELD THAT: - The assessee explained that the cash amount originated from its Delhi branch. The CIT(A) carried out verification of the books and accepted the explanation, deleting the addition. The Tribunal agreed with the CIT(A)'s findings and deleted the addition made by the Assessing Officer. The High Court agreed with the concurrent appellate conclusions that the additions were illegal once verified and appropriately deleted. [Paras 6]

Deletion of the addition relating to the undisclosed cash deposit was correctly upheld.

Final Conclusion: The Tribunal's orders on all three contested additions are affirmed; none of the three questions of law raised by the Revenue amounts to a substantial question of law and the appeal is dismissed.

Diversion of borrowed funds - deductibility of interest where borrowed funds are not employed in business - commercial expediency test for advances to related companies - deduction under Section 80HHC

Diversion of borrowed funds - deductibility of interest where borrowed funds are not employed in business - commercial expediency test for advances to related companies - Allowance of interest deduction in respect of interest paid on borrowings to the extent funds were advanced interest free to subsidiary companies - HELD THAT: - The Court examined the factual sequence showing borrowings made shortly before interest free advances to wholly owned subsidiaries and rejected the assessee's contention that advances were made out of internal receipts. Noting that receipts and borrowings were pooled in a single account and that, had the interest free advances not been made, the assessee need not have borrowed to meet day to day needs, the Court held there was a direct nexus between the borrowings and the advances. Applying the principle that interest is deductible only insofar as borrowed funds are employed in the business, and following the reasoning in K. Somasundaram and Bros. (Madras High Court) and the commercial expediency approach in S.A. Builders Ltd. (Supreme Court), the Court concluded that proportionate interest relatable to the advances must be disallowed as a diversion of borrowed funds not used for the assessee's business. [Paras 13]

The disallowance of interest attributable to loans advanced interest free to subsidiary companies is sustained and the orders of the Tribunal and first appellate authority are reversed on this point.

Deduction under Section 80HHC - application of consolidated result of export activities - Entitlement to deduction under Section 80HHC where export business in manufactured goods incurred loss and trading exports generated claim - HELD THAT: - Relying on binding Supreme Court authorities, the Court held that results of export activities in both manufactured goods and trading goods must be taken together for computing deduction under Section 80HHC read with Section 80AB. Accordingly, a negative consolidated result disentitles the assessee to the claimed deduction. The Court therefore agreed with the Assessing Officer's disallowance that arose from computing the deduction on trading goods alone while manufactured goods produced a loss. [Paras 15]

The claim for deduction under Section 80HHC is disallowed; the orders of the Tribunal and first appellate authority are reversed on this point.

Final Conclusion: Appeal allowed. The High Court sustains the Assessing Officer's disallowance of interest attributable to interest free advances to subsidiary companies as diversion of borrowed funds, and disallows the claim under Section 80HHC by requiring consolidated consideration of export activities.

Exclusion of excise duty and sales tax from total turnover for deduction under section 80HHC - interpretation of the expression 'total turnover' in the formula for deduction under section 80HHC - treatment of excise duty refund under Explanation (baa) to section 80HHC - requirement of a speaking order under section 250(6) for appellate adjudication

Exclusion of excise duty and sales tax from total turnover for deduction under section 80HHC - interpretation of the expression 'total turnover' in the formula for deduction under section 80HHC - Excise duty and sales tax are not to be included in 'total turnover' for the purpose of computing deduction under section 80HHC. - HELD THAT: - The Court followed the reasoning of the Supreme Court in Laxmi Machine Works that the statutory formula in section 80HHC is aimed at conferring benefit with reference to export turnover; items which do not emanate from export turnover (such as commission, interest, and similarly excise duty and sales tax) are not part of 'turnover' for the formula. The amendments and object of section 80HHC indicate that receipts lacking nexus with export turnover are to be excluded; accordingly excise duty and sales tax cannot be included in 'total turnover' under section 80HHC(3). [Paras 4]

Question (A) answered in favour of the assessee; excise duty and sales tax excluded from 'total turnover' for computation under section 80HHC.

Treatment of excise duty refund under Explanation (baa) to section 80HHC - requirement of a speaking order under section 250(6) for appellate adjudication - The question whether the excise duty refund falls within Explanation (baa) to section 80HHC was remanded for fresh consideration by the appellate authority with directions to pass a speaking, reasoned order. - HELD THAT: - The Tribunal observed that the learned CIT(A) rejected the assessee's claim regarding non-inclusion of the excise duty refund without passing a speaking order addressing the specific submissions; under section 250(6) the appellate authority must record reasons and deal with the point of determination. The High Court found the Tribunal's remand and directions to be proper and administrative in nature, noting that the appellate authority should reconsider and decide the issue in a reasoned manner in light of submissions and relevant decisions. [Paras 5, 6]

Issue as to the excise duty refund under Explanation (baa) is remanded to the CIT(A) for fresh, speaking adjudication; no substantial question of law arises for the High Court on this point.

Final Conclusion: The appeal is dismissed. The exclusion of excise duty and sales tax from 'total turnover' for computing deduction under section 80HHC is affirmed in accordance with Laxmi Machine Works; the question regarding the excise duty refund under Explanation (baa) is remitted to the CIT(A) for fresh, reasoned consideration, and no substantial question of law survives for the High Court.

Royalty on shrink-wrapped/off-the-shelf software - obligation to deduct tax at source under section 195 - interest under section 234B where tax deductible at source covers assessed tax - interest under section 234A mandatory - appealability of initiation of penalty proceedings under section 271(1)(c)

Royalty on shrink-wrapped/off-the-shelf software - obligation to deduct tax at source under section 195 - Payment received by the non-resident assessee from its Indian distributor for distribution of shrink-wrapped software amounts to royalty and attracts obligation to deduct tax at source. - HELD THAT: - The Tribunal affirmed the view of the lower authorities by following the jurisdictional High Court's reasoning in the line of decisions treating consideration for shrink-wrapped/off-the-shelf software as transfer of a right to use/copy the software (a right within the ambit of copyright) and therefore within the scope of 'royalty' under the DTAA and the Act. The Tribunal noted that the distributor/end user is licensed to make copies and load the software into the designated computer (rights which, absent a licence, would infringe copyright), and that the substance of the transaction is transfer of a right to use the copyrighted work. In view of that legal characterisation, the assessee was under an obligation to deduct tax at source under section 195 and the CIT(A) correctly confirmed the assessing officer's treatment. [Paras 3]

Assessee's appeal on the royalty/TDS issue dismissed; payment held to be royalty and obligation to deduct tax at source upheld.

Appealability of initiation of penalty proceedings under section 271(1)(c) - Whether initiation of penalty proceedings under section 271(1)(c) is appealable at the first appellate stage. - HELD THAT: - The Tribunal agreed with the CIT(A) that initiation of penalty proceedings under section 271(1)(c) itself does not give rise to a separate appealable order under section 246A; initiation alone, without imposition, does not cause prejudice that can be challenged by appeal. Consequently the first appellate authority was correct in treating the ground as premature and dismissing the appeal on this aspect. [Paras 4]

Ground challenging initiation of penalty proceedings under section 271(1)(c) dismissed as not appealable at that stage.

Interest under section 234A mandatory - Levy of interest under section 234A is mandatory and the assessee failed to demonstrate any error in its computation. - HELD THAT: - The Tribunal noted the CIT(A)'s finding that interest under section 234A is mandatory and observed that the assessee did not advance a case before the Tribunal to show mistake in the computation of such interest. Absent any successful challenge to the calculation, the appellate order upholding the levy was sustained. [Paras 5]

Assessee's challenge to interest under section 234A dismissed; interest sustained.

Interest under section 234B where tax deductible at source covers assessed tax - Whether interest under section 234B is leviable where tax deductible at source has been withheld and the deducted amount covers the assessed tax (such that assessed tax after credit is below the threshold in Explanation 1 to section 234B). - HELD THAT: - The Tribunal upheld the CIT(A)'s direction to delete interest under section 234B, following a line of judicial authorities which hold that when the payer is under a duty to deduct tax at source and tax has in fact been deducted such that the assessed tax (after credit) falls within the limits in Explanation 1 to section 234B, the payee cannot be saddled with interest under section 234B. The Tribunal found no infirmity in the appellate authority's reliance on those decisions and therefore sustained deletion of section 234B interest in the assessment before it. [Paras 6]

Revenue's appeal on levy of interest under section 234B dismissed; CIT(A)'s deletion of section 234B interest upheld.

Final Conclusion: Both the assessee's and the revenue's appeals are dismissed: the payment for shrink-wrapped software was held to be royalty attracting TDS obligation (assessee's appeal dismissed), initiation of penalty proceedings under section 271(1)(c) was not appealable at that stage (assessee's ground dismissed), interest under section 234A was sustained, and the deletion of interest under section 234B by the CIT(A) was upheld (revenue's grounds dismissed).

Payments for procurement of shrink wrap or download software constituting royalty - obligation to deduct tax at source under Section 195 (TDS on payments to non residents) and related withholding provisions - license to use computer software as transfer of copyright/right to make copies - interpretation of 'royalty' under a Double Taxation Avoidance Agreement (DTAA) vis a vis domestic law - application of Copyright Act, 1957 to computer programmes in determining nature of payment

Payments for procurement of shrink wrap or download software constituting royalty - obligation to deduct tax at source under Section 195 (TDS on payments to non residents) and related withholding provisions - interpretation of 'royalty' under a Double Taxation Avoidance Agreement (DTAA) vis a vis domestic law - license to use computer software as transfer of copyright/right to make copies - Payment made for purchase of shrink wrapped or downloaded computer software held to be 'royalty' and attract obligation to deduct tax at source. - HELD THAT: - The Tribunal accepted and followed the decision of the Hon'ble Karnataka High Court in the Samsung Electronics matter which held that shrink wrapped/off the shelf software licences transfer only a licence to use the software while copyright and other intellectual property rights remain with the non resident supplier. The High Court's reasoning-relied upon by the Tribunal-recognises that the licence to copy and load the software into a designated computer, and to make backup copies, comprises part of the copyright right and that the payments made are not merely for a physical medium but for a combination of licence, copy and related rights. Consequentially, such payments fall within the meaning of 'royalty' under Article 12 of the DTAA and within clause 9(1)(vi) (and its Explanation) of the Income tax Act, as they impart information/technical or other protected rights. In view of section 90 (DTAA overriding domestic law) and the established interpretation of the Copyright Act (which treats computer programmes as literary works and protects the exclusive rights to reproduce and authorise reproduction), the Tribunal concluded that the assessee had an obligation to deduct tax at source under Section 195. The Tribunal distinguished the assessee's reliance on the Bench's earlier remand in Bodhi Professional Solutions, noting that in the present case the Assessing Officer had considered DTAA and domestic definitions and reached a conclusive finding, so remand was not warranted. Having applied the Karnataka High Court's ratio and the statutory framework, the Tribunal upheld the AO and CIT(A) findings that the payments constituted royalty and that consequent provisions for non deduction applied. [Paras 8, 9, 10]

Assessee's appeal dismissed; payments for procurement of shrink wrap/download software held to be 'royalty' and assessee liable for TDS; order of CIT(A) and AO restored.

Final Conclusion: The Tribunal, following the Karnataka High Court's reasoning, held that payments for shrink wrapped or downloaded software constitute 'royalty' (as reflecting transfer of licence/right to use/copy protected by copyright and covered by DTAA and domestic law) and that the assessee was obliged to deduct tax at source; the assessee's appeal is dismissed.

Royalty under Explanation 2 to section 9(1)(vi) - deduction of tax at source under section 195 - disallowance under section 40(a)(i) - second proviso to section 9(1)(vi) - software supplied with computer or computer-based equipment - treaty characterisation of royalty versus business profits - resale of shrink-wrapped software as sale of goods

Royalty under Explanation 2 to section 9(1)(vi) - disallowance under section 40(a)(i) - deduction of tax at source under section 195 - Whether payments for import of hardware and payments for services to non-residents constituted 'royalty' and were therefore liable to disallowance under section 40(a)(i) for failure to deduct tax at source. - HELD THAT: - The Tribunal found that none of the limbs of the statutory definition of 'royalty' applied to payments made for import of hardware or for services. Those payments could not be regarded as consideration for use of patents, designs, copyrights or similar intellectual property and therefore fell outside the scope of Explanation 2 to section 9(1)(vi). Consequently, such payments were not chargeable as 'royalty' and no obligation to deduct tax at source under section 195 arose in respect of them. The Assessing Officer's treatment of these items as 'royalty' and the consequent disallowance under section 40(a)(i) were not sustained by the Tribunal, which directed that no disallowance shall be made in respect of payments towards import of hardware and payments for services. [Paras 5]

Payments for import of hardware and payments for services are not 'royalty' and no disallowance under section 40(a)(i) shall be made in respect of those payments.

Royalty under Explanation 2 to section 9(1)(vi) - second proviso to section 9(1)(vi) - software supplied with computer or computer-based equipment - treaty characterisation of royalty versus business profits - resale of shrink-wrapped software as sale of goods - Whether payments for import of software amounted to 'royalty' and whether the second proviso to section 9(1)(vi) or relevant tax treaties excluded such payments from the ambit of 'royalty'. - HELD THAT: - The Tribunal recorded that the Assessing Officer and the CIT(A) had not properly examined the facts and materials to determine whether the impugned payments related solely to software or also to accompanying hardware, nor had they adequately considered the applicability of the second proviso to section 9(1)(vi) or the treaty positions relied upon by the assessee. Given these lacunae, the Tribunal did not decide the question on merits. Instead, it directed a fresh factual and legal examination by the Assessing Officer: verify the details of imports (software and hardware) and payments for services; determine whether the software was supplied along with computer or computer-based equipment so as to attract the second proviso; and examine on merits, after hearing the assessee and considering treaty provisions and the submissions placed before the Tribunal, whether the import payments for software constitute 'royalty'. The assessee was permitted to produce relevant documents before the Assessing Officer. [Paras 5]

Issue remitted to the Assessing Officer for fresh verification and adjudication on whether payments for import of software are 'royalty', including examination of the applicability of the second proviso to section 9(1)(vi) and relevant treaty provisions; the matter is to be decided on merits after allowing the assessee opportunity to be heard.

Final Conclusion: The Tribunal set aside the CIT(A)'s order and remitted the matter to the Assessing Officer: it held that payments for import of hardware and for services are not 'royalty' (no disallowance under section 40(a)(i) on those payments), and directed a fresh, detailed enquiry into whether payments for imported software constitute 'royalty' and whether the second proviso to section 9(1)(vi) or applicable tax treaties exclude such payments, with opportunity to the assessee to file supporting material.

Deduction under section 80IA - infrastructure undertaking/industrial undertaking engaged in infrastructure development - sub-contracting versus carrying out the principal works - interpretation of "new" in relation to long gestation infrastructure projects

Deduction under section 80IA - sub-contracting versus carrying out the principal works - Entitlement of the assessee to claim deduction under section 80IA for the assessment year 2005-06. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee, though later working under a JV company, was a member of the consortium awarded the NHAI contract and had effectively carried out the contract works itself. The evidence - consortium and JV agreements, letter of award, incorporation chronology and documentary material - established that the JV company came into existence after the consortium was awarded the contract and that the assessee had invested in plant and machinery and assumed responsibilities for performance of the contract. On these facts the Tribunal held that the assessee was not merely a sub-contractor simpliciter but carried on the infrastructure undertaking and thus satisfied the conditions for deduction under section 80IA. The Tribunal also accepted the CIT(A)'s interpretation that the requirement of the contract being "new" must be read in the context of long duration infrastructure projects and does not require a fresh contract every year; the object of section 80IA is to promote addition to infrastructure and cannot be defeated by the multi year nature of such projects. [Paras 6, 10]

Deduction under section 80IA allowed for the entire claimed amount for AY 2005-06.

Deduction under section 80IA - Whether the revenue's alternative plea to sustain disallowance to the extent admitted by the assessee should be upheld. - HELD THAT: - The Tribunal held that an admission by the assessee to a particular disallowance does not require the Tribunal to disallow that amount if, on the facts and law, the claim is otherwise allowable. Having found on the merits that the assessee qualified for deduction under section 80IA for the entire claim, the Tribunal rejected the revenue's submission to confirm disallowance to the extent of the assessee's earlier admission. [Paras 11]

Alternative plea of sustaining partial disallowance rejected; entire claim allowed.

Final Conclusion: Revenue's appeal dismissed; the assessee's entire claim for deduction under section 80IA for AY 2005-06 is upheld by the Tribunal.

Confiscation of export goods - penalties under the Customs Act, 1962 - misdeclaration of export goods - reconciliation of conflicting laboratory test reports - knowledge and bona fide belief of the exporter - liability of Customs House Agent without knowledge

Confiscation of export goods - misdeclaration of export goods - reconciliation of conflicting laboratory test reports - knowledge and bona fide belief of the exporter - Validity of confiscation and penalties imposed on appellant No.1 (exporter) where Agmark certificate and DGFT communication existed but subsequent DNA test classified the rice as non-basmati. - HELD THAT: - The Tribunal examined documentary evidence showing that appellant No.1 obtained source Agmark laboratory certification declaring the consignments as Parboiled Basmati Rice and filed shipping bills after a DGFT DO clarifying that DNA testing was not mandated. The DNA report from BEDF subsequently classified two consignments as non-basmati. The Bench applied the principle in Sachdeva & Sons that when conflicting expert/test reports exist, authorities must not summarily proceed to confiscation and heavy penalties against an exporter who, on the available record, had a bona fide belief supported by an Agmark certificate and the DGFT clarification. There was no finding that appellant No.1 had knowledge of the prohibited nature of the rice at the time of filing the shipping bills; the exporter sought return of goods after being informed of the DNA result. In these circumstances confiscation and penalties could not be sustained. [Paras 6, 8]

Confiscation and penalties against appellant No.1 set aside; appeal allowed.

Penalties under the Customs Act, 1962 - knowledge and bona fide belief of the exporter - Sustenance of penalties imposed on appellant No.2 where there was no contemporaneous knowledge that the consignments were prohibited. - HELD THAT: - The Tribunal found that appellant No.2, like appellant No.1, had no contrary finding against him indicating knowledge of the prohibited nature of the rice when shipping bills were filed. Given the absence of evidence of mens rea or knowledge at the relevant time, and in view of the appellants' reliance on Agmark certification and the DGFT communication, imposition of penalties under the Customs Act could not be justified. [Paras 8]

Penalties imposed on appellant No.2 set aside.

Liability of Customs House Agent without knowledge - penalties under the Customs Act, 1962 - Whether penalty could be imposed on the Customs House Agent (appellant No.3) who had no knowledge of the prohibited nature of the export cargo prior to DNA testing. - HELD THAT: - Applying the Tribunal's precedent in Anchor Logistics and the factual finding that the CHA had no knowledge of the prohibited character of the rice until DNA results were communicated, the Bench held that penalty on the CHA was not tenable. The CHA's lack of knowledge until after DNA testing and cancellation of export orders negated the basis for imposing the penalty under the Customs Act in the circumstances of the case. [Paras 8]

Penalty on appellant No.3 under Section 114(i) set aside.

Final Conclusion: The original adjudication order dated 25.5.2012 is set aside; appeals of all three appellants are allowed and confiscation and penalties imposed in respect of the said consignments are quashed, with consequential relief, if any.

Condonation of delay - Limitation under Section 129A of the Customs Act, 1962 - Exclusion of time spent in parallel judicial proceedings - Non-application of merger doctrine where specific direction for exclusion is given

Condonation of delay - Limitation under Section 129A of the Customs Act, 1962 - Application for condoning the delay in filing the appeal is rejected. - HELD THAT: - The Tribunal found that the impugned order was communicated to the applicant on 2.8.2010 and the appeal was filed on 23.6.2011. Section 129A requires that an appeal be filed within three months from communication of the order. Even allowing for the period of time the applicant says proceedings were taken in the High Court, the Division Bench of the Madras High Court gave a specific direction that if an appeal is preferred the time spent in the High Court proceedings shall be excluded for limitation purposes. Calculating three months from the High Court decision, the appeal ought to have been filed on or before 24.2.2011. The appeal was filed well after that date and therefore beyond the statutory period under Section 129A. The Tribunal accordingly held that condonation of delay could not be granted. [Paras 4]

Condonation application rejected and appeal (and stay application) dismissed for being time-barred.

Exclusion of time spent in parallel judicial proceedings - Non-application of merger doctrine where specific direction for exclusion is given - The submission that the High Court order merged with the Supreme Court order and limitation should be reckoned from the Supreme Court order was not accepted. - HELD THAT: - The applicant relied on the contention that the High Court order merged with the Supreme Court order and therefore limitation should be computed from the Supreme Court's order dated 9.5.2011. The Tribunal rejected this contention because the Division Bench of the Madras High Court had expressly directed that, if the applicant preferred an appeal, the time spent in the High Court proceedings should be excluded for computing limitation. That specific direction required the applicant to file within three months as adjusted by the High Court's order, which the applicant did not do. The Tribunal therefore refused to treat the Supreme Court order as merging and restarting the limitation period in the applicant's favour. [Paras 4]

Submission of merger with the Supreme Court order rejected; limitation must be computed in conformity with the High Court's direction and was not complied with by the applicant.

Final Conclusion: The application to condone delay is refused; consequently the appeal and the stay application are dismissed for being filed beyond the period of limitation prescribed by Section 129A, having regard to the High Court's direction about exclusion of time, and the contention of merger with the Supreme Court order is rejected.

Condonation of delay - sufficient cause for delay - limitation period - ex parte order - appearance before adjudicating authority - correspondence with department as evidentiary factor

Condonation of delay - sufficient cause for delay - appearance before adjudicating authority - correspondence with department as evidentiary factor - Whether the delay of 6 years and 278 days in filing the appeal should be condoned and the appeal admitted. - HELD THAT: - The application for condonation was rejected for want of any satisfactory or cogent explanation for the heavy delay. The affidavit relied on the ill-health and subsequent death of the managing director, but the submitted medical records did not demonstrate illness during the statutory limitation period and no medical certificate was produced covering that period. Material on record showed that the deponent (the son) was a director when the impugned order was passed, had appeared before the adjudicating authority at an earlier stage, and had corresponded with the department in 2009, establishing his involvement and opportunity to file the appeal within time. In those circumstances the Tribunal found that nothing prevented the director from prosecuting the appeal earlier and that the delay was not satisfactorily explained.

Condonation of delay dismissed and, consequently, the appeal (and stay application) dismissed.

Final Conclusion: The application for condonation of delay is dismissed as lacking merit for failure to show sufficient cause; consequently the belated appeal and the related stay application are dismissed.

Sanction of a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 - judicial supervisory jurisdiction of the Company Court in sanctioning schemes - requirements for meetings, majority approval and placement of requisite material before members and creditors - assessment of objections by shareholders, creditors and regulatory officers (RD/ROC/OL) - effect of compounding of statutory defaults on challenge to accounts and AGMs - objections based on alleged auditor misconduct and removal of statutory auditor - listing agreement requirement for stock exchange no-objection certificate not being mandatory where scheme was filed with exchange

Sanction of a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 - requirements for meetings, majority approval and placement of requisite material before members and creditors - judicial supervisory jurisdiction of the Company Court in sanctioning schemes - Sanction of the proposed Scheme of Amalgamation of Basti Sugar Mills Co. Ltd. with Phenil Sugars Pvt. Ltd. - HELD THAT: - The Court applied the established parameters for sanctioning schemes (as summarised from Miheer H. Mafatlal) and found that the requisite statutory procedure had been complied with: meetings were convened and the requisite majorities approved the Scheme; the material required to enable informed voting had been placed before the meetings; and no other shareholder or creditor (apart from the limited objections of Mr. H.K. Chadha) opposed the Scheme. The Court declined to substitute its commercial judgment for that of the consenting classes and satisfied itself that the Scheme was not violative of law or public policy. Consequent upon sanction, all properties, rights and powers of the transferor will vest in the transferee and the transferor will be dissolved without winding up, subject to statutory dues and permissions under other laws. [Paras 31, 32]

Scheme sanctioned; petitions allowed with directions for intimation to the ROC and deposit with OL's common pool fund; no order as to costs.

Assessment of objections by shareholders, creditors and regulatory officers (RD/ROC/OL) - effect of compounding of statutory defaults on challenge to accounts and AGMs - Validity of objections raised by Mr. H.K. Chadha concerning alleged irregularities in AGMs, accounts and prior inspection reports. - HELD THAT: - The RD and ROC inspection reports, including the inspection report dated 15th June 2007 and subsequent ROC/ROC reports, were considered. The ROC/ RD findings show that audited accounts for the years in question were placed and adopted in the 80th AGM (30.07.2007) and that the company had moved for compounding of defaults which was dealt with by the competent authority. The Court accepted the RD/ROC position that the earlier alleged irregularities were addressed and condoned to the extent indicated in the inspection and compounding records. No other shareholder or creditor supported Mr. Chadha's objections or produced material to substantiate that the accounts were not reliable. The Court therefore held those objections to be without merit and not a ground to refuse sanction. [Paras 18, 20, 21]

Objections based on alleged non-transacting of AGMs and improper accounts found to be without merit in light of ROC/RD findings and compounding; they do not preclude sanction.

Objections based on alleged auditor misconduct and removal of statutory auditor - assessment of objections by shareholders, creditors and regulatory officers (RD/ROC/OL) - Challenge that M/s Basant Ram & Sons remained statutory auditors and that their alleged misconduct invalidated the accounts. - HELD THAT: - The Court examined the chronology of proceedings and earlier judicial orders which record that a new auditor, M/s Vinod Kumar and Associates, was appointed at the AGM held on 30.12.2006 and that appellate proceedings had become infructuous. The RD/ROC reports and the company's affidavits showed that BRS was no longer the statutory auditor and that complaints and litigation by or on behalf of BRS had been repeatedly made but did not prevent the company from placing audited accounts thereafter. The Court observed that any challenge to the removal of the auditor or related writ proceedings would be decided in those fora; for the present scheme proceedings the Court proceeded on the basis that BRS/Mr. H.K. Chadha were not the statutory auditors and found no material to vitiate the sanction. [Paras 8, 12, 22]

Allegation of continued auditor status and resultant invalidity of accounts rejected for the purposes of the scheme; no impediment to sanction.

Listing agreement requirement for stock exchange no-objection certificate not being mandatory where scheme was filed with exchange - Whether lack of a No Objection Certificate from the Delhi Stock Exchange (DSE) prevents sanction of the Scheme. - HELD THAT: - Relying on precedent and the distinction between directory and mandatory obligations in the listing agreement, the Court accepted that all that Clause 24(f) required was that the transferee company file the scheme with the stock exchange at least one month before presenting it to the Court. Where the company complied by filing the scheme/petition with the exchange and the exchange did not respond, the absence of an express NOC from the exchange does not per se prevent the Court from sanctioning the scheme. Given that DSE had not responded despite reminders and that the filing requirement was met, the Court held the non-receipt of an NOC was not fatal. [Paras 28, 29, 30]

Non-receipt of DSE NOC is not a bar to sanction where the scheme was filed with the stock exchange as required by the listing agreement.

Assessment of objections by shareholders, creditors and regulatory officers (RD/ROC/OL) - Allegations of fraudulent transfers of shares and improper sale of company property raised by objector. - HELD THAT: - The Court noted absence of supporting material from the objector and the absence of complaints from the alleged aggrieved shareholders or creditors. The company's records, annual returns and the responses of ROC/RD showed that majority ownership claims by PSPL were reflected in filings and that prior similar complaints had been examined and found without basis. The Court therefore found these allegations unsubstantiated and not sufficient to withhold sanction. [Paras 24, 25, 26]

Allegations of fraudulent share transfers and undervalued property sale not substantiated and do not impede sanction.

Final Conclusion: The High Court, applying the established supervisory principles for sanctioning schemes under Sections 391 and 394, found the statutory formalities satisfied, rejected the objections raised by a minority shareholder as without merit in light of RD/ROC findings and compounding of earlier defaults, held that absence of a DSE NOC was not fatal where the scheme had been filed with the exchange, and accordingly sanctioned the amalgamation; petitions allowed, with incidental directions and no order as to costs.

Entitlement to recover compensation versus quantification of compensation - party cannot be judge in its own cause - time once set at large is not of the essence of the contract - unilateral grant of extension of time and inoperability of liquidated damages clause - arbitrator's jurisdiction to decide entitlement to compensation - award of interest as part of arbitral relief - award of costs by arbitrator

Unilateral grant of extension of time and inoperability of liquidated damages clause - entitlement to recover compensation versus quantification of compensation - arbitrator's jurisdiction to decide entitlement to compensation - party cannot be judge in its own cause - Validity of levy of compensation by the Superintending Engineer (claim No.7) and whether clause 2 could be invoked after extensions - HELD THAT: - The Court upheld the arbitrator's finding that the delays were attributable to the petitioner and that the Engineer-in-Charge had granted unilateral extensions setting time at large, rendering time not the essence of the contract and making clause 2 inoperative for the disputed period. The Court applied the settled distinction between fixing liability and quantification of damages, holding that entitlement (whether compensation is payable) is for the arbitrator to determine, while the authority to quantify (where agreed) is an excepted matter; where the arbitrator finds no liability, any levy by the contracting authority is unjustified. The Court relied on precedents rejecting the competence of a contracting party to adjudicate disputed breaches against an external adjudicator role, and concluded the arbitrator correctly held the levy to be inequitable and redundant for the period in question. [Paras 10, 11, 12, 13, 14]

Objection to the award on the ground of levy of compensation is dismissed; the arbitrator's finding that levy under clause 2 was not justified is upheld.

Entitlement to recover compensation versus quantification of compensation - unilateral grant of extension of time and inoperability of liquidated damages clause - Allowability of claim under clause 10(cc) for amounts executed during the last four months (claim No.8) which depended on the finding on claim No.7 - HELD THAT: - Because the arbitrator found that compensation under clause 2 was not due for the period 24th November, 1999 to 28th March, 2000, the allowance under clause 10(cc) for amounts executed during that period was sustained. The Court held that the arbitrator addressed the related factual and legal material and correctly allowed the claim in accordance with his finding on entitlement to compensation. [Paras 5, 9, 14]

Objection to the allowance under clause 10(cc) is dismissed; the arbitrator's grant of claim No.8 is upheld.

Arbitrator's jurisdiction to decide entitlement to compensation - party cannot be judge in its own cause - Award of damages under claim No.10 (partial allowance) and related rejection of petitioner's objection - HELD THAT: - The arbitrator considered the evidence and awarded damages in part, rejecting the petitioner's contentions including that an undertaking was given under coercion. The Court found no reason to interfere with the arbitrator's evaluation of the evidence and legal application, noting the arbitrator provided reasons for his conclusion and that the dispute fell squarely within the arbitrator's purview. [Paras 5, 9, 14]

Objection to the partial award on claim No.10 is dismissed; the arbitrator's award of damages is upheld.

Award of interest as part of arbitral relief - public policy of India and interest rates - Validity of arbitrator's award of interest at 12% per annum from 3rd May, 2002 to date of award - HELD THAT: - The Court reviewed the arbitrator's exercise of discretion to award interest at 12% and observed that the arbitrator had given reasons and that market/commercial lending rates charged by banks exceeded 12% at relevant times, rendering the rate not contrary to public policy. The Court rejected the petitioner's submission that statutory or precedent reductions mandated a lower rate, holding the arbitrator's interest award was sustainable. [Paras 8, 13, 14]

Objection to the rate and award of interest is dismissed; the arbitrator's award of interest at 12% is upheld.

Award of costs by arbitrator - arbitrator's reasons for awarding costs - Validity of award of costs of arbitration in favour of the respondent (claim No.16, part) - HELD THAT: - The arbitrator awarded Rs.50,000 as costs and provided reasons; the Court found no perversity or illegality in that exercise of discretion and observed the arbitrator's decision on costs flows from his findings on the merits. The petitioner's challenge that reasons were inadequate was rejected. [Paras 1, 5, 13, 14]

Objection to the award of costs is dismissed; the arbitrator's award of costs in favour of the respondent is upheld.

Final Conclusion: The objections under Section 34 are dismissed in respect of the challenged claims, the arbitrator's awards on entitlement, damages, interest and costs are sustained, and the arbitral award requires no interference. No costs.

Registered trade mark proprietorship - Protection of unregistered trade mark by passing off despite Section 27 - Trade mark infringement requires registration - Trans border reputation and burden of proof - Grant of permanent injunction and rendition of accounts

Registered trade mark proprietorship - The plaintiffs are the registered proprietors and owners of the trade mark KIDO; the plaintiffs' application for registration of KIDCO was pending (advertised before acceptance) and hence KIDCO was not a registered trade mark. - HELD THAT: - The originals of two registration certificates were placed on record showing registration of the mark KIDO under class 30 (registration nos. 1038080 and 967051) and accordingly the plaintiffs are the registered proprietors of KIDO. The plaintiffs' mark KIDCO was shown in the search report with status "Advertised bef acc", meaning advertisement before acceptance under Section 20(1) of the Trade Marks Act, 1999; consequently KIDCO was not yet registered and statutory trade mark rights under the Act did not attach to KIDCO. The plaintiffs therefore could not claim statutory protection for KIDCO but could claim proprietary rights at common law by proving reputation and goodwill arising from use. [Paras 11, 12, 13]

KIDO: registered in favour of the plaintiffs; KIDCO: not registered and only common law rights could be claimed.

Trans border reputation and burden of proof - The defendants' plea that they had been using KIDCO since 1993 and had a trans border reputation was not accepted for want of proof. - HELD THAT: - Although defendants asserted prior use and Pakistani registration, they failed to adduce evidence to establish continuous use in India or trans border reputation. The Court therefore rejected the defendants' claim that the plaintiffs were infringing the defendants' earlier mark. [Paras 14]

The claim of trans border reputation and prior use by the defendants is not proved and stands decided against the defendants.

Protection of unregistered trade mark by passing off despite Section 27 - Trade mark infringement requires registration - The defendants' use of the mark KIDCO in relation to confectionery constitutes passing off; it does not constitute statutory infringement of KIDCO (unregistered). The defendants' mark was not deceptively similar to the registered mark KIDO, so there was no infringement of KIDO. - HELD THAT: - Evidence including the Local Commissioner's inventory and photographs showed the defendants using KIDCO in substantially similar form (including a child figure replacing the letter 'I') on the same class of goods (confectionery) targeted at largely the same class of consumers (children), creating likelihood of confusion. The plaintiffs established reputation and goodwill in respect of KIDCO sufficient for a passing off action. Section 27 of the Trade Marks Act was applied to clarify that infringement actions arise only for registered marks, but rights in an unregistered mark may be protected by way of passing off. The defendants' mark was held not deceptively similar to the registered KIDO; hence no infringement of KIDO was found. [Paras 15, 16]

Defendants' use of KIDCO amounts to passing off; no statutory infringement of KIDCO (unregistered) and no infringement of registered mark KIDO.

Grant of permanent injunction and rendition of accounts - The plaintiffs were partly successful and entitled to a permanent injunction restraining defendants from importing, manufacturing or selling products under the mark KIDCO in India; rendition of accounts by defendant No.1 up to the date of the earlier interim injunction was ordered; claim for damages was dismissed. - HELD THAT: - Given the finding of passing off and the apparent absence of import or sale after the interim injunction dated 16.04.2007, the Court granted a permanent injunction against importation, manufacture and sale in India under the mark KIDCO. Rendition of accounts was ordered only up to the date of the injunction since there was no material showing post injunction infringement or sales. The plaintiffs' claim for damages was dismissed because the interim injunction prevented sales and there was no evidence of loss suffered. [Paras 17]

Suit decreed in part: permanent injunction against use/import/sale of KIDCO in India; rendition of accounts up to the date of the injunction; damages dismissed.

Final Conclusion: The suit is partly decreed: the plaintiffs hold registered title in KIDO while KIDCO was unregistered and protected through a passing off action; the defendants' trans border reputation claim failed; a permanent injunction restraining use/import/sale of KIDCO in India and rendition of accounts up to the interim injunction date is granted, but the claim for damages is refused.

Exemption Notification No. 12/2003-ST dated 20.06.2003 - gross value of taxable service - inclusion of value of goods or course material in taxable service - Commercial Training and Coaching as taxable service - power to grant exemption under Section 93 - CBEC circular attempting to restrict statutory exemption (ultra vires) - documentary proof indicating separate value of goods

CBEC circular attempting to restrict statutory exemption (ultra vires) - power to grant exemption under Section 93 - Validity of the Board/CBEC Circular dated 20.06.2003 insofar as it restricts the scope of the exemption granted by Notification No. 12/2003 ST - HELD THAT: - The Tribunal held that the Central Government alone, exercising power under Section 93, is competent to grant exemptions; the CBEC has no authority to impose additional restrictions on the general exemption so granted. The clarification in the Board Circular which conditions the exemption to apply only where course material answers the description of priced standard textbooks transgresses the statutory domain of the Central Government and is therefore illegal and of no effect. No adjudicatory authority can take cognisance of or act upon such an unauthorised restriction. [Paras 6]

The CBEC clarification to narrow the Notification is illegal, unauthorised and of no legal effect.

Exemption Notification No. 12/2003-ST dated 20.06.2003 - gross value of taxable service - inclusion of value of goods or course material in taxable service - documentary proof indicating separate value of goods - Commercial Training and Coaching as taxable service - Whether the assessee is entitled to exemption under Notification No. 12/2003 ST for the value of course material/books sold separately to students where documentary proof of separate value exists - HELD THAT: - The Court accepted that the assessee provided the taxable service of Commercial Training and Coaching and that Section 67 requires inclusion of amounts charged in the gross value of service. However, Notification No. 12/2003 ST exempts from service tax so much of the value of taxable services as is equal to the value of goods and material sold by the service provider, subject to documentary proof and the conditions in the notification. The assessee furnished documentary evidence of separate billing and value for the course material; the notification contains no additional restrictive condition beyond those it specifies. Prior Tribunal decisions cited by the appellant support the entitlement. Decisions relied upon by Revenue concerning distinct factual matrices (e.g., works contract/deemed sale) are inapposite. Consequently, with the invalidation of the CBEC circularal restriction, the assessee is entitled to the exemption for the separately billed course material. [Paras 4, 8, 10, 11]

The assessee is entitled to exemption under Notification No. 12/2003 ST for the value of separately billed course material/books upon production of documentary proof; the assessment and confirming orders are quashed.

Final Conclusion: The appeal is allowed; the CBEC circularary restriction is held ultra vires and of no effect, and the assessee is entitled to the benefit of Notification No. 12/2003 ST for separately billed course material for the period 01 December 2004 to 30 June 2006; the impugned adjudication and confirming appellate order are quashed; no order as to costs.

Refund of CENVAT credit on inputs/input services used in exported final products - Meaning of 'export' for purposes of the CENVAT Credit Rules - Supply to SEZ units is not physical export under Rule 5 of the CENVAT Credit Rules - Ineligibility to avail CENVAT credit where final products are exempt - Applicability of Rule 6(1) of the CENVAT Credit Rules to exempted final products

Refund of CENVAT credit on inputs/input services used in exported final products - Meaning of 'export' for purposes of the CENVAT Credit Rules - Supply to SEZ units is not physical export under Rule 5 of the CENVAT Credit Rules - Entitlement to refund under Rule 5 of the CENVAT Credit Rules in respect of inputs/input services used in manufacture of final products supplied to SEZ units - HELD THAT: - The Tribunal examined whether supplies made to SEZ units qualify as 'export' for the purpose of refund under Rule 5 of the CENVAT Credit Rules, 2004. Rule 5 permits refund where inputs or input services are used in manufacture of final products cleared for export under bond or letter of undertaking, and adjustment against duty or service tax is not possible. Relying on precedents, the Tribunal held that the term 'export' for the CENVAT Credit Rules must be understood as physical export out of the country as envisaged under the Customs Act, and that the SEZ Act's fictionalized definition that makes an SEZ unit an 'exporter' cannot be adopted for permitting CENVAT refund to suppliers other than the SEZ unit. Applying that principle, supplies to SEZ units do not amount to export within the meaning of Rule 5, and therefore the appellant cannot claim refund of accumulated CENVAT credit under Rule 5 for inputs/input services used in goods supplied to SEZ units. The Tribunal also noted that where final products are exempt, Rule 6(1) precludes availing CENVAT credit, and if credit is not admissible, refund under Rule 5 does not arise. [Paras 5]

Refund claim under Rule 5 in respect of inputs/input services used in goods supplied to SEZ units is not admissible; appeal rejected.

Final Conclusion: The Tribunal rejected the appellant's refund claim: supplies to SEZ units do not constitute 'export' for the purposes of Rule 5 of the CENVAT Credit Rules, and accordingly refund of CENVAT credit claimed in respect of inputs/input services used in such supplies is not allowable.

Discretion under the second proviso to section 78 - penalty liability under Section 78 of the Finance Act, 1994 - statutory mandate versus discretionary relief - precedential treatment of K.P. Pouches and Castrol India

Discretion under the second proviso to section 78 - penalty liability under Section 78 of the Finance Act, 1994 - precedential treatment of K.P. Pouches and Castrol India - Whether the adjudicating and appellate authorities erred in not exercising discretion under the second proviso to section 78 to mitigate the penalty confirmed for alleged non remittance of service tax on GTA services. - HELD THAT: - The appellant did not contest the merits of liability and furnished no substantiating material to show that the under disclosure related to non taxable transactions. The sole contention was that authorities should have exercised the discretion available under the second proviso to section 78 in the light of K.P. Pouches and decisions of certain Benches of the Tribunal. The Tribunal, however, took into account the subsequent decision of the Bombay High Court in CCE, Mumbai v. Castrol India Ltd., which distinguished K.P. Pouches by relying on the Supreme Court's decision in Union of India v. Dharmendra Textile Processors, and held that where the conditions specified in the relevant statutory provision are satisfied the liability to remit the full penalty is mandated by the statute and no discretion exists to reduce or avoid the prescribed quantum. Applying that authority, the Tribunal concluded that the authorities were not in error in refusing to exercise any discretion to mitigate the penalty and that the appellate order confirming the adjudication required no interference. [Paras 4, 5]

The claim of failure to exercise discretion under the second proviso to section 78 is rejected and the appellate order confirming the penalty is upheld.

Final Conclusion: Appeal dismissed; appellate order confirming the adjudication and penalty under Section 78 is maintained in view of the Bombay High Court's decision in Castrol India Ltd., and no costs are awarded.

Service tax liability on receipt - evidentiary value of ST-3 returns - reliance on balance sheet and Chartered Accountant's certificate - remand for fresh consideration - right to personal hearing

Service tax liability on receipt - evidentiary value of ST-3 returns - reliance on balance sheet and Chartered Accountant's certificate - right to personal hearing - remand for fresh consideration - Whether the Commissioner (Appeal) correctly concluded that there was no short payment of service tax for the financial year 2007-2008 without considering figures shown in ST-3 Returns and whether the matter required fresh adjudication. - HELD THAT: - The Tribunal found it to be an undisputed fact that the ST-3 return for 2007-2008 showed receipt of Rs. 3,79,04,175. The Commissioner (Appeal) allowed the respondent's appeal relying on the balance sheet, Chartered Accountant's certificate, Income Tax provisions and accounting principles, but did not address or reconcile the ST-3 return figure. Because the ST-3 return figure was material to the determination of whether service tax was short paid in 2007-2008, the Tribunal held that the impugned order could not stand without consideration of that return. In view of this omission and in order to secure a just adjudication, the Tribunal set aside the impugned order and remanded the matter to the Commissioner (Appeal) with directions to consider the figures shown in the ST-3 Returns for 2007-2008 and to afford both parties an opportunity of hearing before deciding afresh. [Paras 5, 6]

Impugned order set aside and matter remanded to Commissioner (Appeal) for fresh decision after considering ST-3 return figures for 2007-2008 and giving both parties opportunity of hearing.

Final Conclusion: Appeal allowed by way of remand; the case is sent back to the Commissioner (Appeal) to decide afresh on the question of service tax liability for 2007-2008 after considering the ST-3 return figures and after hearing both parties.

Refund claim under specified services notification - Courier Agency service conditional exemption requiring import-export number on receipt - strict compliance with documentary conditions for exemption

Courier Agency service conditional exemption requiring import-export number on receipt - strict compliance with documentary conditions for exemption - Whether the refund claim in respect of Courier Agency service is admissible where the courier receipt does not specify the import-export (IEC) number - HELD THAT: - The appellant claimed refund for specified services under Notification No. 17/09-ST dated 07.07.2009 for the quarter April 2010 to June 2010. Courier Agency service is listed at Sl. No. 10 of the Notification and the exemption is expressly made subject to the condition that the receipt issued by the Courier Agency shall specify the import-export number of the exporter. The courier receipt in the present case did not state the IEC number, although the I.E.C. code appears on the Shipping Bill submitted with the refund claim. The Tribunal found that the condition in the Notification requires the specific documentary requirement to be met on the courier receipt itself, and the absence of the IEC on that receipt means the condition is not fulfilled. Consequently the appellate authority's rejection of the refund claim in respect of Courier Agency service was upheld. [Paras 5]

Refund claim in respect of Courier Agency service is not admissible because the courier receipt did not specify the import-export number, and the appeal is rejected.

Final Conclusion: The Tribunal upheld the Commissioner (Appeal)'s rejection of the refund claim in respect of Courier Agency service for the quarter April 2010 to June 2010 on the ground that the courier receipt did not specify the import-export number as required by the Notification; appeal dismissed.

Valuation under Section 4A vis-a -vis Section 4 - Multi-piece package vs Wholesale package - Exemption under Rule 34 of the Packaged Commodities Rules - Requirement to declare Maximum Retail Price (MRP) on packages - Extended period of limitation and penalties for suppression

Multi-piece package vs Wholesale package - Exemption under Rule 34 of the Packaged Commodities Rules - Mono-cartons and shipper bags containing sachets are not multi-piece packages intended for retail sale but are wholesale packages; therefore the exemption under Rule 34(1)(b) applies to the individual sachets. - HELD THAT: - The Tribunal found that individual sachets each contain less than 10 ml and the manufacturer claimed, and the revenue did not rebut, that sachets were the retail unit intended to be sold by weight/volume to ultimate consumers while mono-cartons and shipper bags were intended for wholesale supply to Amway and its distributors. No evidence was produced by the department to show that mono-cartons containing 20/30 sachets or shipper bags containing 540/900 sachets were being sold in retail to ultimate consumers, nor was any opinion from the Metrology Department procured to classify those outers as multi-piece retail packages. Given that each sachet contains a predetermined weight/volume below the prescribed limit, the manufacturer is exempt from printing MRP on those sachets under Rule 34, and the outer cartons remain wholesale packages rather than multi-piece retail packages. [Paras 8, 10]

Mono-cartons and shipper bags are wholesale packages; the individual sachets qualify for exemption under Rule 34(1)(b).

Valuation under Section 4A vis-a -vis Section 4 - Requirement to declare Maximum Retail Price (MRP) on packages - Assessment of the goods is to be made under Section 4 and not under Section 4A; there was no statutory requirement to declare MRP on the packages cleared by the manufacturer. - HELD THAT: - The Tribunal applied established precedents and principles: mere notification of goods under Section 4A does not automatically mandate valuation under Section 4A if there is no statutory requirement to declare retail sale price on the particular packages cleared by the manufacturer. Since the sachets contained less than the threshold quantity and Rule 34 exemption applied, and because the manufacturer was supplying to an intermediary (Amway) for wholesale distribution rather than selling the outers at retail, the valuation could not be based on declared MRP under Section 4A. Consequently the correct mode of valuation is under Section 4 of the Central Excise Act. [Paras 7, 8, 10, 11]

Assessment under Section 4 is in order; Section 4A valuation does not apply.

Extended period of limitation and penalties for suppression - Invocation of the extended period of limitation and imposition of penalties is not justified. - HELD THAT: - Having decided that the packages were wholesale and that Rule 34 exemption applied (and noting that Tribunal and Supreme Court precedents favour the assessee on identical facts), the Tribunal held there was no suppression of facts that would justify invoking the extended period or levying penalties. The department failed to establish concealment or deliberate misdeclaration warranting extended limitation or penalties. [Paras 9, 10]

Extended period and penalties set aside; imposition of penalties is not sustainable.

Final Conclusion: The impugned order is set aside; the goods are to be assessed under Section 4 (not Section 4A), the individual sachets qualify for exemption under Rule 34(1)(b), mono-cartons and shipper bags are wholesale packages, and the demands, extended period invocation and penalties are unwarranted; all appeals are allowed with consequential relief as per law.

Classification of rubberized tyre cord fabric - Tariff Heading 59.06 - Tariff Heading 59.02 - HSN note: scope of tyre cord fabric - Processes subsequent to manufacture not constituent of tyre cord fabric - Binding effect of Supreme Court precedent on classification

Classification of rubberized tyre cord fabric - Tariff Heading 59.06 - Tariff Heading 59.02 - HSN note: scope of tyre cord fabric - Processes subsequent to manufacture not constituent of tyre cord fabric - Binding effect of Supreme Court precedent on classification - Rubberized tyre cord fabric manufactured by the respondent is classifiable under Heading 59.06 of the Tariff and not under Heading 59.02. - HELD THAT: - The Tribunal concluded that Heading 59.02 is specific to tyre cord fabric as explained by the HSN note, which covers tyre cord fabric whether or not dipped or impregnated with rubber or plastics, and that additional operations such as rubber coating and calendaring are processes carried out subsequent to the manufacture of tyre cord fabric and form part of tyre-building operations rather than the manufacture of tyre cord fabric itself. The Larger Bench decision in CCE, Bangalore v. Vikrant Tyres Ltd. was followed in support of this interpretation. Further, the Supreme Court in CCE, Goa and Chennai v. MRF Ltd. has expressly held that rubberized tyre cord fabric is classifiable under Chapter Heading 59.06; that binding precedent was applied to affirm the impugned order. [Paras 2, 3, 4]

Appeal dismissed; product held classifiable under Heading 59.06.

Final Conclusion: The Tribunal upheld the classification of the rubberized tyre cord fabric under Heading 59.06, following the Larger Bench and Supreme Court precedents, and dismissed the Revenue's appeal.

Pre-deposit requirement - waiver of pre-deposit - Cenvat Credit-common input services - Rule 6(3) of the Cenvat Credit Rules, 2004 - definition of "exempted goods" in Rule 2(d) of the Cenvat Credit Rules, 2004 - proportionate credit in view of retrospective amendment by Section 73 - extended limitation period under proviso to Section 11A(C) of the Central Excise Act, 1944

Pre-deposit requirement - waiver of pre-deposit - Cenvat Credit-common input services - Rule 6(3) of the Cenvat Credit Rules, 2004 - proportionate credit in view of retrospective amendment by Section 73 - Application for waiver of pre-deposit and stay of recovery in respect of demand confirmed under Rule 6(3) of the Cenvat Credit Rules, 2004. - HELD THAT: - The Tribunal considered the departmental case that iron ore fines are exempted goods and that Rule 6(3) would apply because common input services (GTA and C&F services) for which Cenvat credit was availed were used for both dutiable and exempted products. The Tribunal, without finally adjudicating the correctness of the departmental view, observed that a retrospective amendment (Section 73) prescribing a formula for proportionate credit would affect the quantification of reversal. The appellant's counsel submitted that the total common-input Cenvat credit was around Rs. 3 lakhs and that reversal could not exceed that amount. In light of these contentions and the retrospective formula for proportionate credit, the Tribunal directed that the appellant deposit Rs. 3 lakhs within four weeks; on such deposit the Tribunal waived the requirement of pre-deposit of the balance of the demand and stayed recovery of the balance amount, interest and penalty pending disposal of the appeal. [Paras 7]

Deposit of Rs. 3 lakhs to be made within four weeks; on such deposit pre-deposit of remaining demand, interest and penalty waived and recovery of the balance stayed until disposal of the appeal.

Final Conclusion: Stay application allowed in part: appellant directed to deposit Rs. 3 lakhs within four weeks; upon such deposit the balance pre-deposit requirement is waived and recovery of the balance demand, interest and penalty is stayed pending final adjudication of the appeal.

Refund of unutilised deemed modvat credit - utilisation versus availment of deemed credit - export under bond - deemed credit register as evidence of utilisation - rejection of refund claims for want of balance in deemed credit register

Refund of unutilised deemed modvat credit - export under bond - deemed credit register as evidence of utilisation - Assessee's entitlement to refund of deemed credit under Notification No.29/96-C.E.(N.T.) where goods were exported under bond but entries indicate part utilisation of deemed credit. - HELD THAT: - The Tribunal examined Notification No.29/96 and found that it grants refund of deemed credit unutilised by a manufacturer where goods are exported under bond (paras 7). The first appellate authority had allowed refund claims, treating availment and utilisation as distinct and emphasizing entitlement to refund of unutilised credit (para 8 reproduced findings). On scrutiny of the AR-4 and the deemed credit register, the Tribunal observed that the AR-4s recorded a debit against the bond for 50% of basic duty and the deemed credit register showed utilisation of the other 50% (paras 9-11). This demonstrated that the assessee had in fact utilised part of the deemed credit for discharge of duty, and therefore the refunds claimed were not of wholly unutilised credit (paras 11-13). The Tribunal concluded that where the record shows utilisation from the deemed credit register, the refund claims were rightly rejected by the original authority and the first appellate authority's allowance was erroneous (paras 12-14). [Paras 9, 11, 12, 13, 14]

Refund claims were not allowable in view of recorded utilisation of deemed credit; orders in original rejecting refund claims are upheld and the first appellate authority's orders allowing refunds are set aside.

Rejection of refund claims for want of balance in deemed credit register - utilisation versus availment of deemed credit - deemed credit register as evidence of utilisation - Validity of show cause notices and confirmation of demand/recovery of refunds granted earlier where Tribunal finds refunds were not payable. - HELD THAT: - The assessee had challenged show cause notices and confirmation of demand issued to recover refunds earlier granted. Having held that the refund claims were not sustainable because deemed credit had been utilised as per bond entries and the deemed credit register, the Tribunal found no merit in the assessee's appeal against confirmation of demand or recovery (paras 11-15). The finding that credit was utilised justified the original rejection and supported the recovery action reflected in the departmental appeals (paras 13-15). [Paras 11, 13, 15]

Assessee's appeal against confirmation of demand and recovery is rejected; demand and recovery sustained.

Final Conclusion: The Revenue appeals are allowed and the first appellate authority's orders granting refunds are set aside; the assessee's appeal against confirmation of demand and recovery is dismissed, on the basis that records (AR-4 and deemed credit register) establish utilisation of the deemed credit and therefore no refund was due.

Deemed export - Import Export Policy supplies under International Competitive Bidding - pre-deposit waiver for adjudicatory/appeal proceedings - bank guarantee to be kept alive during pendency of appeal - benefits under EXIM Policy (para 122) versus treatment under para 103/121

Deemed export - Import Export Policy supplies under International Competitive Bidding - benefits under EXIM Policy (para 122) versus treatment under para 103/121 - Clearances to DTA effected against International Competitive Bidding financed by an international agency are prima facie to be treated as deemed export under the Import Export Policy. - HELD THAT: - The Tribunal noted that the appellant is a 100% EOU which made clearances of PVC pipes and fittings to a project awarded under International Competitive Bidding and financed by the International Development Association. The Import Export Policy (Chapter X, para 121) treats supplies to projects under International Competitive Bidding or similar procedures as deemed export. The appellant had obtained permissions from the Development Commissioner and clarifications from the Ministry of Commerce authorising such clearances and indicating no duty liability. Revenue's contention that the appellant is limited to benefits under para 122 of the EXIM Policy and that the Supreme Court decision in Virlon Textile Mills Ltd. is distinguishable was recorded, but on the material before it the Tribunal found prima facie that the clearances fall within the deemed export concept under the Policy. The finding was expressed as prima facie for the purpose of interim relief, not as a final adjudication on merits.

Prima facie treatment of the disputed clearances as deemed exports under the Import Export Policy was accepted for the purposes of interim relief.

Pre-deposit waiver for adjudicatory/appeal proceedings - bank guarantee to be kept alive during pendency of appeal - Whether the remaining pre-deposit and interest should be waived for admission/hearing of the appeal and what interim security conditions should be imposed. - HELD THAT: - Having found prima facie that the clearances were to be treated as deemed export and noting that the appellant had already deposited a substantial sum and furnished a live bank guarantee of Rs. 1 crore pursuant to earlier court directions, the Tribunal exercised its discretion to waive the balance pre-deposit and interest for the purposes of hearing the appeal. The Tribunal considered the amount already deposited as sufficient for interim protection of revenue interest while allowing the appeal to be heard on merits. The Tribunal directed that the existing bank guarantee remain alive throughout the pendency of the appeal as a condition of the waiver.

Pre-deposit of the remaining duty and interest waived for hearing; the bank guarantee of Rs. 1 crore to be kept alive during pendency of the appeal; interim stay granted accordingly.

Final Conclusion: On prima facie consideration the Tribunal treated the clearances made under International Competitive Bidding as deemed exports under the Import Export Policy and, in view of the deposit already made and existing bank guarantee, waived the balance pre-deposit and interest for admission/hearing of the appeal while directing that the bank guarantee remain alive during the appeal.

Adjustment of demand against duty paid - Pre-deposit requirement for stay of recovery - Prima facie case for grant of stay - Applicability of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 - Definition of 'exempted goods' under Rule 2(d) of the Cenvat Credit Rules, 2004 - Explanation (1A) to Section 5A of the Central Excise Act, 1944

Pre-deposit requirement for stay of recovery - Prima facie case for grant of stay - Whether the requirement of pre-deposit of the amount demanded under Rule 6(3)(i), interest and penalty should be waived and recovery stayed pending disposal of the appeal. - HELD THAT: - Having considered the submissions and the record, the Tribunal found that the appellant has a strong prima facie case. The Tribunal noted that even if the department's contention that the reprocessed granules are unconditionally exempt and thus 'exempted goods' is accepted, the amount claimed under Rule 6(3)(i) would be adjustable against the larger amount already paid as duty on the reprocessed granules. Reliance was placed on the Tribunal's prior decision in CCE v. Yamuna Gases & Chemicals Ltd. to the effect that such adjustment is permissible. In view of this prima facie position and the revenue-neutral character of the dispute, the Tribunal concluded that the pre-deposit requirement could be waived and that recovery should be stayed until disposal of the appeal.

Pre-deposit requirement of the amount demanded under Rule 6(3)(i), interest and penalty waived; recovery stayed until disposal of the appeal.

Adjustment of demand against duty paid - Applicability of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 - Definition of 'exempted goods' under Rule 2(d) of the Cenvat Credit Rules, 2004 - Explanation (1A) to Section 5A of the Central Excise Act, 1944 - Whether, on the department's case that reprocessed granules are exempted goods, the liability under Rule 6(3)(i) would nevertheless be susceptible to adjustment against duty already paid by the appellant. - HELD THAT: - The Tribunal observed that even accepting the Revenue's contention that the reprocessed granules fall within the exemption and thus are 'exempted goods' for purposes of Rule 6(3)(i), the sum exigible under Rule 6(3)(i) (10% of value) would be liable to be adjusted against the higher amount already paid as duty on clearances of reprocessed granules. The Tribunal treated this as a determinative factor in finding a prima facie case for the appellant and referred to the Tribunal's earlier decision in CCE v. Yamuna Gases & Chemicals Ltd. as authority for permitting such adjustment.

Even if the goods are treated as exempted, the amount payable under Rule 6(3)(i) is prima facie adjustable against duty already paid; this supports grant of stay.

Final Conclusion: The Tribunal found that the appellant has a prima facie case because any liability under Rule 6(3)(i) is capable of adjustment against the larger duty already paid; accordingly the requirement of pre-deposit of the demanded amount, interest and penalty is waived and recovery is stayed pending disposal of the appeal.

Classification of goods as electrical goods or electronic components - power supply devices - remand for fact-finding to the Assessing Officer - availability of alternative statutory remedy not an absolute bar to writ adjudication

Classification of goods as electrical goods or electronic components - power supply devices - remand for fact-finding to the Assessing Officer - Whether Inverters and UPSSs are to be classified as electrical goods or as electronic components and which entry of the Government Order applies - HELD THAT: - The Court held that the question whether Inverters and UPSSs fall under Entry 3 (electrical goods) or Entry 75(iii) (electronic components / power supply devices) involves intricate questions of fact requiring detailed inquiry. The entries identify overlapping technical characteristics and the goods operate with electrical energy; determination requires consideration of expert evidence (report of the Electronic Commission) and how the goods are regarded in common parlance. Earlier circulars and appellate or tribunal orders did not resolve the factual inquiry conclusively for the present assessment year, and earlier High Court dismissals in revision were refusals to interfere rather than authoritative ratios. In view of these considerations and following earlier remands in analogous matters, the Court directed that the controversy be examined afresh by the fact-finding authority. [Paras 10, 11, 12]

Matter remanded to the Assessing Officer to decide afresh whether Inverters and UPSSs are electrical goods or electronic components, having regard to expert report and other factual materials; the assessment so far as it relates to goods other than Inverters and UPSSs is confirmed; petitioner shall not raise limitation objections on re-framing.

Availability of alternative statutory remedy not an absolute bar to writ adjudication - Whether the writ petition was maintainable despite existence of statutory appeal - HELD THAT: - The Court considered the preliminary objection based on existence of a statutory appeal remedy. Noting that the writ petition had been admitted, pleadings exchanged and an interim order granted, the Court observed that alternative remedy is not an absolute bar to entertaining writ jurisdiction where the matter can be disposed on merits. Reliance was placed on precedents permitting adjudication notwithstanding availability of alternate remedy where appropriate procedural posture exists. [Paras 5]

Writ petition entertained and proceeded with on merits despite availability of statutory appeal.

Final Conclusion: Writ petition disposed: assessment dated 23.03.2007 confirmed insofar as it concerns goods other than Inverters and UPSSs; the question whether Inverters and UPSSs are electrical goods or electronic components is remanded to the Assessing Officer for fresh adjudication with liberty to consider expert report and factual material; the petition was heard on merits notwithstanding the existence of a statutory appeal.

Consignment sale vs inter-State sale - requirement to examine individual transactions - direct nexus between sale and movement of goods - burden of proof on dealer under Section 6-A - maintenance of records under Rule 4(3-A) - legal fiction created by declaration under Section 6-A

Consignment sale vs inter-State sale - requirement to examine individual transactions - maintenance of records under Rule 4(3-A) - burden of proof on dealer under Section 6-A - Validity of treating entire consignments as inter State sales without individual transaction-wise enquiry and without required records - HELD THAT: - The Court held that a sale is in the course of inter State trade only if there is a direct nexus between the sale and movement of goods and that each transaction must be examined to determine whether a completed contract of sale existed. The Assessing Authority inferred inter State sales from a few instances and the fact that consignments were sold in one lot, without conducting transaction wise enquiries or producing originals of written contracts and the registers required by Rule 4(3 A). Reliance on the principles in Tata Engineering (1970) and the legal analysis in Ashok Leyland (2004) establishes that the initial burden to substantiate consignment treatment lies on the dealer and, where a declaration is filed, an enquiry into particulars must be held; absent such enquiry and required records the deeming/fiction under Section 6 A operates against the dealer. The Tribunal failed to apply these Supreme Court principles to the factual findings and, being the final fact finding forum, ought to have considered the Assessing Authority's findings and the Appellate Authority's contrary view before restoring the assessment. Applying these precedents, the assessment order disallowing the consignment claim cannot be sustained and requires fresh transaction wise consideration by the Assessing Authority. [Paras 20, 21]

Assessment order treating entire consignments as inter State sales is unsustainable; matter remitted to Assessing Authority for fresh, transaction wise enquiry and consideration in light of Ashok Leyland and related Supreme Court decisions, after affording opportunity to the assessee.

Final Conclusion: Tax Case Revision allowed; CTSA order of 19.5.2009 set aside and matter remitted to the Assessing Authority for fresh consideration of each transaction on the consignment vs inter State issue, in accordance with the Supreme Court precedents cited; no costs.

Revision of assessment - opportunity of being heard - maintainability of writ challenging notice prior to filing objections - adoption of Enforcement Wing/D-3 proposal without application of mind - role of Enforcement Wing Officer in assessment process - assessment on sale value not book/deleted value - SEZ exemption from levy of tax

Maintainability of writ challenging notice prior to filing objections - opportunity of being heard - Petitioner's challenge to revision notices is premature where objections were invited and not filed; petitioner must first avail the statutory opportunity to file objections before approaching the Court - HELD THAT: - The Court reiterates the settled principle that where a notice calls upon a person/dealer to file objections within a stipulated time, the aggrieved party must avail the opportunity and file objections; only thereafter will the authority consider the proposal contained in the notice. Interference by the Court under Article 226 is warranted only in exceptional situations involving violation of fundamental rights, breach of principles of natural justice, ultra vires action, grave error or miscarriage of justice. In the present case there is no such extreme circumstance; the respondent afforded an opportunity to be heard and the petitioner's recourse to writ jurisdiction at the notice stage without filing objections is therefore not sustainable. [Paras 11, 12, 13, 16]

Writ petitions are premature and disposed directing the petitioner to file objections; petitioner to file objections within two weeks and respondent to consider and decide them on merits within four weeks.

Adoption of Enforcement Wing/D-3 proposal without application of mind - role of Enforcement Wing Officer in assessment process - Report/proposal of the Enforcement Wing (D-3) cannot be blindly adopted without application of mind by the assessing authority; objections filed by the petitioner are to be considered uninfluenced by the Enforcement Wing report - HELD THAT: - While the Court did not adjudicate the merits of the Enforcement Wing's findings, it recorded that the Enforcement Wing Officer is not entitled to act as the Assessing Officer and that the assessing authority must apply its own mind before forming an opinion. The petitioner's contention that the Enforcement Wing's report cannot be the sole basis for revision is a matter to be considered by the respondent when objections are filed. The Court directed the respondent to afford an opportunity of hearing, bear in mind the law, and take a decision uninfluenced by the Enforcement Wing report. [Paras 10, 15, 16]

Matter remitted to the respondent for fresh consideration of objections; respondent to decide on merits without being influenced by the Enforcement Wing report.

Assessment on sale value not book/deleted value - SEZ exemption from levy of tax - Contentions relating to valuation (sale value versus deleted/book value) and claim of SEZ exemption were not finally adjudicated and are left open for the assessing authority to consider on receipt of objections - HELD THAT: - The petitioner contended that assessment must be on sale value and that deleted/book value cannot be equated to sale value; further, the petitioner relied on SEZ-related exemption. The Court did not decide these substantive contentions. Instead, it directed that such grievances be raised by filing objections and be considered and decided by the respondent on merits in accordance with law. [Paras 4, 8, 15, 16]

Substantive issues of valuation and SEZ exemption are remitted to the respondent for fresh adjudication on the objections to be filed by the petitioner.

Final Conclusion: Writ petitions disposed as premature; petitioner directed to file objections to the revision notices within two weeks and respondent directed to consider objections, afford hearing, and pass a reasoned decision on merits within four weeks, uninfluenced by the Enforcement Wing report.

Scrutiny guidelines - Exemption under Section 8(1)(a) of the RTI Act (economic interest of the country) - Public domain doctrine for disclosure of information - Computer Assisted Selection Scheme (CASS) and manual selection

Scrutiny guidelines - Exemption under Section 8(1)(a) of the RTI Act (economic interest of the country) - Public domain doctrine for disclosure of information - Whether scrutiny guidelines for financial year 2009-10 are exempt from disclosure under Section 8(1)(a) of the RTI Act on the ground that their disclosure would impact the economic interest of the country. - HELD THAT: - The Court examined the nature and purpose of scrutiny guidelines and the meaning of 'economic interest' in the RTI Act. The instructions governing selection for scrutiny have historically been issued and have been in the public domain; many were issued mid-year and apply to pending as well as future returns. The notion of 'economic interest' contemplates matters operating at a macro level of the country's economy, not paperwork or procedural guidelines used by Assessing Officers. Disclosure of scrutiny guidelines, which are intended to prevent harassment and ensure fairness in selection, cannot reasonably be said to affect the economic interest of the country or enable manipulation in a manner that would impinge on macroeconomic wealth or resources. Consequently, the Court held that Section 8(1)(a) does not apply to withhold the scrutiny guidelines sought for the financial year 2009-10. [Paras 7]

Scrutiny guidelines for financial year 2009-10 are not exempt under Section 8(1)(a) and must be disclosed.

Computer Assisted Selection Scheme (CASS) and manual selection - Exemption under Section 8(1)(a) of the RTI Act (economic interest of the country) - Whether the Central Information Commission's operative finding recorded that disclosure would affect the economic interest of the country, thereby justifying non-disclosure. - HELD THAT: - The Court reviewed the impugned order and found the operative part does not explicitly record that the CIC concluded disclosure would affect the country's economic interest. The respondents' contention that disclosure would enable manipulation was considered, but the Court found no factual or legal basis in the CIC's operative reasoning to sustain withholding on that ground. Given the absence of such a recorded conclusion and the footing that guidelines have been publicly available, the CIC's order could not stand to refuse disclosure under the asserted economic interest exemption. [Paras 8]

The CIC's operative order does not demonstrate a conclusion that disclosure would affect the economic interest of the country and cannot justify refusal of information.

Public domain doctrine for disclosure of information - Remedy - disclosure and proactive uploading - Relief to be granted following the findings on nondisclosure. - HELD THAT: - Having held that the scrutiny guidelines are not exempt, the Court directed respondents to supply the relevant guidelines to the petitioner for financial year 2009-10. In addition, to promote transparency and avoid future disputes, the Court directed that respondents shall upload scrutiny guidelines on their website going forward. [Paras 9]

Respondents to supply the scrutiny guidelines for financial year 2009-10 to the petitioner and to upload scrutiny guidelines on their website.

Final Conclusion: The impugned order of the Central Information Commission is set aside; the respondents are directed to supply the scrutiny guidelines for financial year 2009-10 to the petitioner and to upload such guidelines on their website.