TaxTMI Updates e-Newsletter
Apr 29,2016

Ad-hoc disallowance of sundry creditors - Verification of purchases by documentary evidence - Confirmation from creditors - Deletion of addition by appellate authority

Ad-hoc disallowance of sundry creditors - Verification of purchases by documentary evidence - Confirmation from creditors - Validity of disallowance of 5% of sundry creditors for paddy purchases on account of non-production of confirmation letters - HELD THAT: - The Assessing Officer made an adhoc disallowance of 5% of sundry creditors on the ground that the assessee had not produced confirmation letters from paddy farmers. The assessee, however, produced quantitative purchase details, statutory registers (B Register), VAT returns, waybills, payment vouchers, evidence of Cess paid to the Agricultural Market Committee and the subsequent repayments in the next year; sample documents were placed before the CIT(A) who sought and examined the original transaction documents on 26.07.2013. The CIT(A) found no discrepancy in the purchases or payments and recorded that an adhoc disallowance merely for want of confirmation letters was not legally tenable. The Tribunal, upon review of the material placed before the AO and the CIT(A), agreed that where purchases are otherwise verifiable from books, statutory records and corroborative documents and no positive adverse finding has been recorded about the genuineness of purchases or subsequent payment, an adhoc addition solely for absence of creditor confirmations is unjustified and liable to be deleted. [Paras 3, 6]

The adhoc disallowance of Rs. 33,65,147 (5% of sundry creditors) was deleted and the revenue's appeal was dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the adhoc disallowance because the assessee's purchases and subsequent payments were satisfactorily verifiable from books, statutory registers and corroborative documents despite non-production of confirmation letters; revenue's appeal dismissed and cross-objection by the assessee held infructuous.

Penalty for furnishing inaccurate particulars of income under section 271(1)(c) - Explanation to section 271(1)(c) - requirement to substantiate explanation and bona fides - treatment of depreciation claimed as per Companies Act versus Income-tax Rules for determination of taxable income and deductions - impact of incorrect computation on reserves and subsequent years as basis for penalty - effect of insertion of Explanation 4 by Finance Act, 2003 on applicability of pre-2003 precedents

Penalty for furnishing inaccurate particulars of income under section 271(1)(c) - Explanation to section 271(1)(c) - requirement to substantiate explanation and bona fides - treatment of depreciation claimed as per Companies Act versus Income-tax Rules for determination of taxable income and deductions - impact of incorrect computation on reserves and subsequent years as basis for penalty - effect of insertion of Explanation 4 by Finance Act, 2003 on applicability of pre-2003 precedents - Whether penalty under section 271(1)(c) is sustainable for the assessee's claim of depreciation as per Companies Act (resulting in excess deduction under section 80-IB) for Assessment Year 2008-09. - HELD THAT: - The Tribunal upheld the finding that the assessee furnished inaccurate particulars by claiming depreciation computed as per the Companies Act instead of as per Income-tax Rules, thereby producing an excessive deduction under section 80-IB. The CIT(A) and the Tribunal treated the incorrect claim as material to the computation of total income because it affected the reported Reserves & Surplus for the year and subsequent years, and could have further consequences if income were taxed under normal provisions in later years. The assessee's explanation that the matter was not material because the income was offered under section 115JB was found not to be bona fide or satisfactorily substantiated under the Explanation to section 271(1)(c). The Tribunal rejected reliance on the pre-2003 Delhi High Court decision in CIT v. Nalwa Sons Investments Ltd. on the basis that Explanation 4 was inserted into section 271(1)(c) by the Finance Act, 2003 with effect from 01.04.2003, and therefore that precedent was not applicable; the Tribunal instead found support in the jurisdictional High Court decision in M/s. Sri Gokulam Hotels India Pvt. Ltd. The Tribunal concluded that the Assessing Officer's scrutiny disclosed furnishing of inaccurate particulars and that penalty under section 271(1)(c) was justified and rightly confirmed by the CIT(A). [Paras 3, 5]

Penalty under section 271(1)(c) confirmed and the assessee's appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal for Assessment Year 2008-09, upholding the levy of penalty under section 271(1)(c) for furnishing inaccurate particulars by claiming depreciation as per Companies Act instead of Income-tax Rules; the assessee's explanation was held not to be bona fide and pre-2003 precedent relied on by the assessee was held inapplicable after insertion of Explanation 4.

Tax deduction at source - salary - profits in lieu of salary - employer-employee relationship - vested right - assessee in default - interest under Section 201(1A)

Tax deduction at source - salary - employer-employee relationship - vested right - Whether employers were liable to deduct tax at source under Section 192 on tips collected from customers and distributed to employees - HELD THAT: - The Court held that Section 192 applies only to a person "responsible for paying any income chargeable under the head 'Salaries'", which contemplates payment by an employer. Tips paid by customers are received by employees from a third person and, although taxable in the hands of employees, are properly characterised as income from other sources where they do not arise out of the employer-employee contract. There is no vested right in the employee to claim tips from the employer; the employer, when collecting and distributing tips received from customers (including via credit card), acts in a fiduciary or conduit capacity and does not 'pay' or 'allow' salary within the meaning of Sections 15 and 17. Accordingly, the employer is not the person "responsible for paying" such sums as salary and Section 192 is not attracted. The Court distinguished Karamchari Union (which concerned allowances arising from the employer-employee relationship) and found English and Australian authorities inapplicable because of different statutory schemes; it approved earlier domestic decisions treating tips as transfers collected for staff and not payments by the management. As a result, the assessees could not be treated as assessees-in-default under Section 201 for failure to deduct tax under Section 192. [Paras 16, 17, 23, 24, 26]

Employers were not liable under Section 192 to deduct tax at source on tips collected from customers and distributed to employees; such tips are outside Sections 15 and 17 and thus do not render the employer an assessee-in-default under Section 201.

Assessee in default - interest under Section 201(1A) - Whether interest under Section 201(1A) was payable by the employers for non-deduction of tax on tips - HELD THAT: - Because the Court held that the employers were outside the liability to deduct tax under Section 192, they could not be declared assessees-in-default under Section 201. Interest under Section 201(1A) can be levied only upon a declaration of assessee-in-default. Therefore, no interest under Section 201(1A) arises once Section 192 liability is negatived. [Paras 37]

No interest under Section 201(1A) is payable since the appellants are not assessee-in-default for non-deduction of tax on tips.

Final Conclusion: The appeals by the assessees are allowed; the judgment of the High Court is set aside and the Revenue's appeals are dismissed, with no order as to costs.

Apportionment of expenses - deduction under Section 80-O - proportionate allocation method - allocation by reference to historical profit margin - distortion of profits - reasonableness of accounting method - fixed, variable and semi-variable costs

Allocation by reference to historical profit margin - fixed, variable and semi-variable costs - distortion of profits - Acceptability of the Assessee's method of computing Foreign Income by allocating all fixed costs to domestic business using an average historical profit margin - HELD THAT: - The Court held that the Assessee's method-using an average profit margin of 11.5% for domestic receipts (computed from a ten year period prior to the new business) and allocating all fixed costs to domestic business-was flawed. The court explained that such a method effectively assigns all fixed costs to domestic receipts and attributes only incremental variable costs to foreign income, producing an unrealistically high profit margin for foreign business and thereby distorting the apportionment of net profits between domestic and foreign income. The court illustrated the fallacy with a hypothetical demonstrating how fixed establishment costs used for both existing and new business would be wrongly allocated entirely to the existing business under the Assessee's formula. The Court noted that the Assessee did not advance any persuasive explanation when queried during hearing and that the Assessee itself had not followed a consistent apportionment method across years. For these reasons the Assessee's formula was rejected as unacceptable in the facts of the case. [Paras 19, 20, 21, 23, 24]

The Assessee's historical profit margin method is unacceptable and results in a distorted apportionment; it is rejected.

Proportionate allocation method - apportionment of expenses - reasonableness of accounting method - deduction under Section 80-O - Validity of the AO's and ITAT's method of allocating expenses pro rata to determine Foreign Income for computing deduction under Section 80 O - HELD THAT: - The Court found no infirmity in the AO's approach of attributing expenses to foreign receipts on a proportionate basis of gross receipts as a reasonable and scientific method of apportionment where separate books are not maintained. The ITAT's concurrence with the AO was held to be justified, particularly because the Assessee's alternative method would produce unacceptable results and because the Assessee failed to demonstrate that the proportionate method was prima facie unfair or demonstrably flawed. The Court observed that earlier decisions relied upon by the Assessee were distinguishable on facts and that the ITAT should have articulated its reasons with more detail but remand was unnecessary since the Assessee's method is clearly unacceptable on the record. Consequently the apportionment adopted by the AO and affirmed by the ITAT was upheld for purposes of computing the Section 80 O deduction. [Paras 6, 11, 27, 28]

The proportionate allocation method adopted by the AO and affirmed by the ITAT is reasonable and is upheld for computation of the Section 80 O deduction.

Final Conclusion: The appeals are dismissed; the Tribunal's and Assessing Officer's apportionment of expenses for computing the deduction under Section 80 O is upheld and the parties shall bear their own costs.

Applicability of section 50C to transfer of leasehold rights - Deeming provision and its limited scope - Adoption of stamp valuation authority value as full value of consideration - Compute long term capital gains on actual sale consideration where section 50C is inapplicable

Applicability of section 50C to transfer of leasehold rights - Deeming provision and its limited scope - Section 50C does not apply to the transfer of leasehold rights in land. - HELD THAT: - The Tribunal held that section 50C is a deeming provision applicable expressly to a capital asset 'being land or building or both' and cannot be extended to cover distinct capital assets consisting of rights in land such as leasehold rights. The Bench examined consistent decisions of coordinate Benches of the Tribunal which applied the principle that the language and limited scope of the deeming fiction in section 50C preclude its invocation where what is transferred are leasehold rights and not ownership of land or building. Applying that settled view to the facts - transfer of a 16.66% share of leasehold rights in foreshore land originally granted for 99 years - the Tribunal concluded that the statutory fiction under section 50C could not be invoked in the present case. [Paras 5]

Section 50C cannot be invoked to compute capital gains on the assignment of the assessee's leasehold rights in the foreshore land.

Adoption of stamp valuation authority value as full value of consideration - Compute long term capital gains on actual sale consideration where section 50C is inapplicable - The value adopted by the stamp valuation authority cannot be taken as deemed full value of consideration under section 50C for the transfer of leasehold rights; the Assessing Officer must compute capital gains on the actual consideration offered by the assessee. - HELD THAT: - Having held that section 50C does not apply to leasehold rights, the Tribunal found no justification for the AO's adoption of the stamp duty valuation as the full value of consideration. In view of the settled precedents and the factual finding that the assessee transferred leasehold rights (not ownership), the Tribunal directed that the long term capital gains be computed by adopting the sale consideration declared by the assessee in the return/assessment proceedings. [Paras 5]

The AO is directed to compute the capital gains on transfer of the leasehold rights by adopting the consideration declared by the assessee.

Referral to Departmental Valuation Officer - A direction to refer the matter to the Departmental Valuation Officer is unnecessary once section 50C is held inapplicable. - HELD THAT: - The assessee sought a reference to the Valuation Officer; however, because the Tribunal concluded that section 50C could not be invoked and the capital gains are to be computed on the actual consideration offered, the question of making a reference to the DVO did not require adjudication or further direction. [Paras 6]

The prayer for direction to refer the matter to the DVO does not require adjudication and is not necessary.

Final Conclusion: The appeal is allowed for A.Y. 2010-11: section 50C is inapplicable to the transfer of the assessee's leasehold rights in the foreshore land and the Assessing Officer is directed to compute long term capital gains by adopting the consideration declared by the assessee.

Deemed full value of consideration under section 50C - Transfer of capital asset - Assignment or relinquishment of rights under an agreement as a capital asset - Distinction between transfer of land and transfer of contractual rights

Deemed full value of consideration under section 50C - Assignment or relinquishment of rights under an agreement as a capital asset - Distinction between transfer of land and transfer of contractual rights - Whether the value adopted by stamp valuation authorities under section 50C can be applied to a receipt on relinquishment/assignment of rights under an agreement (not a transfer of the land or building itself). - HELD THAT: - The Tribunal held that section 50C's deeming fiction, which substitutes the value adopted for stamp duty as the full value of consideration, applies only where the capital asset being transferred is land or building. Receipts on assignment or extinguishment of rights under an agreement to purchase land constitute transfer of a capital asset of a different kind (i.e., contractual rights) and are not equivalent to the transfer of the land or building itself. Reliance was placed on precedents of the High Courts which treated amounts received on assignment or relinquishment of contractual rights as capital gains assessable as such. Applying that principle, the amount received by the assessee was for relinquishment/assignment of rights under the purchase agreement and therefore not amenable to replacement by the stamp valuation of the underlying land under section 50C; consequently the addition based on the stamp valuation was not sustainable. [Paras 10, 11]

Section 50C does not apply to the amount received on relinquishment/assignment of rights under an agreement; the addition under section 50C is deleted.

Final Conclusion: The appeal is allowed: the addition based on stamp valuation under section 50C is not sustainable in respect of amount received for relinquishment/assignment of contractual rights, and the addition is deleted.

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment of income - estimation of income and its inadmissibility as sole basis for penalty - treatment of disputed business expenditure and difference of VAT as a mere claim not accepted - disallowance for late deposit of statutory contributions and unverifiable charity/donation not amounting to concealment

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment of income - estimation of income and its inadmissibility as sole basis for penalty - Deletion of penalty imposed for alleged understatement of scrap stock where income was assessed on estimation. - HELD THAT: - Tribunal found that the principal basis for the penalty was the Assessing Officer's estimate of the weight/value of scrap on survey vis-a -vis the books. Apart from the AO's estimation, there was no material to show that the assessee had in fact concealed income or furnished inaccurate particulars. It is a settled position that where income is determined by estimation, imposition of penalty under section 271(1)(c) is not sustainable. Applying that principle to the facts, the penalty premised on the AO's estimation of scrap could not be sustained and had to be deleted. [Paras 10, 11, 15]

Penalty on account of alleged understatement of scrap (estimation) deleted.

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment of income - treatment of disputed business expenditure and difference of VAT as a mere claim not accepted - Deletion of penalty insofar as it was levied on disallowance of VAT-related expenditure debited as rebate/discount. - HELD THAT: - The disallowance arose from the assessee debiting an outstanding VAT difference as rebate/discount; the Department did not contend that the expenditure was bogus or never incurred. At best the claim was not accepted (or not allowable under mercantile accounting), which does not equate to conscious concealment or furnishing of inaccurate particulars. Authorities cited support that a claim not accepted cannot be the basis for penalty under section 271(1)(c). Accordingly, the levy of penalty on this issue could not be sustained. [Paras 12, 13, 15]

Penalty on account of VAT difference / rebate-discount disallowance deleted.

Penalty under section 271(1)(c) for furnishing inaccurate particulars or concealment of income - disallowance for late deposit of statutory contributions and unverifiable charity/donation not amounting to concealment - Deletion of penalty insofar as it related to additions for late payment of PF & ESI and unverifiable charity/donation. - HELD THAT: - The additions for late deposit of PF & ESI and for unverifiable charity/donation did not, on the record, establish that the assessee had furnished inaccurate particulars or consciously concealed income. There was no finding that the expenditures were fabricated or that particulars were knowingly falsified. Therefore, these additions did not justify imposition of penalty under section 271(1)(c). [Paras 14, 15]

Penalty on account of late PF/ESI deposit and unverifiable charity/donation deleted.

Final Conclusion: The Tribunal deleted the entire penalty of Rs. 1,62,656 imposed under section 271(1)(c) for AY 2009-10 and allowed the assessee's appeal.

Capital gains vs business income - speculative business - Explanation to section 73 - Section 14A read with Rule 8D - investor versus dealer test - holding period - two-asset theory / proximate cause for disallowance

Capital gains vs business income - speculative business - Explanation to section 73 - investor versus dealer test - holding period - Loss on sale of shares held by the assessee treated as long term and short term capital loss and not as business/speculative loss. - HELD THAT: - The Tribunal accepted the assessee's classification of the share-holdings as investments (shown under investments in the balance sheet, valued at cost) and noted the assessee's status as a NBFC whose object included investment in shares. The authorities did not doubt genuineness of transactions or source of funds. The period of holding of the Oriental Bank of Commerce shares ranged between 556 days and 213 days (approximately 18 to 7 months), and dividend income was received on those holdings. The Tribunal applied the investor-versus-dealer test and relevant precedents to conclude that frequent divestment by an investor to prevent loss or to reallocate funds does not convert investment transactions into trading. Mere frequency or turnover in investment account, or the fact of sale within a relatively short span, is not conclusive; intention at time of acquisition, treatment in books (investment, not stock-in-trade), holding periods and the nature of the activity were determinative. On these facts the Tribunal held that the losses arose from sale of capital assets and were to be assessed as long term or short term capital loss depending on holding period, and invoked Explanation to section 73 was inapplicable. [Paras 6, 7, 8, 9, 10]

The addition treating the losses as business/speculative loss under Explanation to section 73 is deleted; the losses are long term and short term capital losses as declared by the assessee.

Section 14A read with Rule 8D - two-asset theory / proximate cause for disallowance - Disallowance under section 14A read with Rule 8D in respect of exempt dividend income restricted to actual expenditure debited, and the AO's larger computation under Rule 8D was not sustained. - HELD THAT: - The Tribunal examined the facts that the assessee earned dividend income and that its own funds (shareholders' funds and reserves) were sufficient to make the investments; there was no finding that borrowed funds were used for the investments. Relying on the principle that Section 14A requires a proximate causal link between expenditure and earning of exempt income (and the Supreme Court's guidance rejecting mechanical application of the two-asset theory where no such proximate cause exists), the Tribunal found no infirmity in the CIT(A)'s restriction of disallowance to the actual expenditure debited in the profit and loss account. Precedents establishing that disallowance under section 14A is a question of fact where no expenditure has been shown to have been incurred were relied upon to uphold deletion of the AO's higher disallowance under Rule 8D. [Paras 11, 14, 15, 16]

The CIT(A)'s deletion/restriction of disallowance under section 14A (as against the AO's higher computation under Rule 8D) is confirmed.

Final Conclusion: Revenue's appeal is dismissed: the Tribunal confirmed that the loss on sale of the specified shares is to be treated as long term and short term capital loss (not business/speculative loss) and upheld the CIT(A)'s restriction/deletion of disallowance under section 14A read with Rule 8D.

Business income vs capital gains - assessment of profits from real estate project as business income - completed contract method - invocation of section 50C - remand for verification

Business income vs capital gains - completed contract method - assessment of profits from real estate project as business income - Profit on sale of one flat and two plots to be assessed as business income and not as capital gains. - HELD THAT: - The Tribunal found on the materials that the assessee was engaged in construction and real estate promotion, that earlier years' returns and the Siliguri Municipal Corporation enlistment confirmed promoter/developer status, and that the assessee followed the completed contract method so that closing WIP in respect of flats/plots was nil as on 31.3.2005. Revenue had not controverted these findings before the Tribunal. The Tribunal held that revenue could not change its stance for the same project merely because closing stock was nil in the books or because there was no sale in the immediately preceding year. Consequently the profits from sale of the flats and plots must be treated as business income. The Tribunal also observed that the AO's estimation of fair market value was without basis and the CIT(A)'s reliance on that estimation was not sustained. [Paras 2]

Assessee's receipts from sale of the flat and plots are business income; therefore capital gains treatment is not applicable and the AO's estimated valuations are not confirmed.

Invocation of section 50C - Application of section 50C to determine sale consideration does not arise in the facts of this case. - HELD THAT: - The Tribunal held that the direction to apply stamp valuation under section 50C was not warranted because the properties were held as stock-in-trade of a developer and not as capital assets. The Tribunal noted that the amendment to section 43CA (and related application of stamp valuations to stock-in-trade) applies only from assessment year 2014-15 and is not relevant to the assessment year under appeal. The Tribunal relied on the Madras High Court decision in CIT v. Thiruvengadam Investments P Ltd (as indicated in the order) to support that properties treated as business assets preclude invocation of section 50C for the year under appeal. [Paras 2]

Section 50C valuation is not to be applied for determination of consideration in this assessment year; the AO shall not adopt stamp valuation under section 50C for these sales.

Remand for verification - Expenditure on purchase of construction materials (Rs. 4,60,858) set aside to AO for verification and decision on genuineness; to be allowed if found genuine. - HELD THAT: - The Tribunal, having accepted that the assessee is a real estate developer and that the claimed expenditure relates to the project, found it appropriate in the interest of justice to remit the issue to the AO. The AO is directed to verify the bills and vouchers submitted by the assessee and, if found genuine, to allow the expenditure as a deduction. The Tribunal therefore did not decide the disallowance on merits but remitted the matter for fresh verification. [Paras 3]

Issue remanded to the AO to verify vouchers and decide the allowability of the construction-materials expenditure; ground allowed for statistical purposes.

Remand for verification - Labour charges (Rs. 1,49,140) set aside to AO for verification of genuineness based on muster rolls and supporting evidences. - HELD THAT: - The Tribunal examined the muster rolls and ledger entries and rejected the CIT(A)'s conclusion that signatures indicated fabrication. Finding prima facie that labourers had affixed thumb impressions and that the documents warranted verification, the Tribunal remitted the issue to the AO to verify the genuineness of the labour payments and to decide the claim on the basis of evidence filed. The Tribunal therefore did not adjudicate the disallowance on merits but directed fresh inquiry. [Paras 4]

Issue remanded to the AO to verify the muster rolls and related evidence and decide on allowability of labour charges; ground allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed: the Tribunal holds that the sales of the flat and plots are business income (not capital gains) and that section 50C valuation is not to be applied for this assessment year; the AO's arbitrary estimations are not confirmed. Claims for construction materials and labour charges are remitted to the AO for verification and decision; the appeal is disposed of partly in favour of the assessee and partly remitted for factual verification.

Liability to deduct tax at source under section 192 arises only on actual payment - Assessee in default under section 201(1) & 201(1A) - Rectification of patent mistake under section 154 - Obligation to deposit sums under Rule 30(2) contingent on liability to deduct under Chapter XVII-B

Liability to deduct tax at source under section 192 arises only on actual payment - Assessee in default under section 201(1) & 201(1A) - Whether unpaid salary outstanding at the end of the year is exigible to deduction under section 192 and can be the basis for holding the assessee as assessee in default under section 201(1) & 201(1A). - HELD THAT: - The Tribunal found that section 192, by its plain language, casts the obligation to deduct tax on the employer at the time of actual payment of salary and not upon mere recognition of unpaid salary by way of book entries. The assessee demonstrated from its balance sheet and annexures that a specified sum remained outstanding as unpaid salary at year end. In view of the settled interpretation applied by the Tribunal and the precedents relied upon by the assessee, mere provision in the books for unpaid salary (and corresponding provision for TDS) does not create a statutory obligation to deduct or deposit tax under Chapter XVII-B. Consequently the Assessing Officer was not justified in treating the unpaid salary as attracting liability under section 192 and in holding the assessee as assessee in default under section 201(1) & 201(1A) to that extent. [Paras 9]

Unpaid salary outstanding at the end of the year is not exigible to deduction under section 192 and cannot form the basis for holding the assessee as assessee in default under section 201(1) & 201(1A); the AO's imposition of liability in respect of unpaid salary is without authority of law.

Rectification of patent mistake under section 154 - Obligation to deposit sums under Rule 30(2) contingent on liability to deduct under Chapter XVII-B - Whether the Assessing Officer's order under section 201(1) & 201(1A) contained a patent mistake rectifiable under section 154 and what further action the AO should take. - HELD THAT: - The Tribunal held that a patent mistake was committed by the AO in applying the statutory provisions of section 192 to facts where salary remained unpaid at year end, and that such mistake is rectifiable under section 154. The Tribunal directed that the AO should not treat the assessee as in default in respect of TDS attributable to unpaid salary. However, the Tribunal left open the limited question of arithmetic correctness of the quantum of outstanding salary disclosed in the books, permitting the Assessing Officer to verify the arithmetical correctness of the claimed outstanding salary vis-a -vis total salary expenditure for the year and to compute revised liability accordingly. This direction amounts to remand for verification and computation only, the legal conclusion on non-liability having been pronounced. [Paras 9]

The AO's order is rectified under section 154 insofar as it treats unpaid salary as attracting TDS liability; the AO is directed to exclude unpaid salary from default liability but may verify and compute the arithmetical correctness of the outstanding salary figure and give relief accordingly.

Final Conclusion: The appeal is allowed: the Tribunal holds that TDS liability under section 192 arises only on actual payment of salary and therefore the assessee cannot be treated as in default under section 201(1) & 201(1A) in respect of unpaid salary reflected in the books; the AO's order is rectified under section 154, subject only to a limited verification of the arithmetic correctness of the outstanding salary figure by the Assessing Officer.

Disallowance of payment to related party under section 40A(2) - expenditure wholly and exclusively for business - genuineness of commercial arrangement as indicator of taxability - reliance on preceding assessment-year order in same assessee

Disallowance of payment to related party under section 40A(2) - genuineness of commercial arrangement as indicator of taxability - expenditure wholly and exclusively for business - reliance on preceding assessment-year order in same assessee - Deletion of the addition disallowing royalty payments amounting to Rs. 1,81,91,663 made by the Assessing Officer under section 40A(2) was upheld. - HELD THAT: - The Tribunal examined the findings of the Learned CIT(A), who had followed his earlier decision in the assessee's own case for A.Y. 2007-08 (paras 6.2-6.6 of the impugned order). The CIT(A) accepted the assessee's explanation that the reduction in royalty rate from 5% to 2.5% reflected routine technical and supervisory services and continued commercial patronage by the customer, and constituted evidence of a genuine commercial arrangement rather than a device to divert profits. The CIT(A) also noted that both payer and recipient were large taxpayers assessed in the same tax bracket, undermining the AO's contention of profit shifting under section 40A(2)(b). The Department produced no fresh material to distinguish the facts of A.Y. 2008-09 from those considered for A.Y. 2007-08, and no change in the factual matrix was shown. Absent contrary material and in view of the CIT(A)'s reasoning, the Tribunal found no infirmity in deleting the disallowance and declined to interfere. [Paras 11, 12]

The deletion of the royalty disallowance by the CIT(A) is upheld and the department's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the deletion of the disallowance of royalty payments for A.Y. 2008-09, applying the reasoning of the CIT(A) (which followed the earlier assessment-year decision) and noting absence of fresh material or change in facts.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - presumption and onus - Explanation 4 to section 271(1)(c) - amount of tax sought to be evaded - rebuttal of presumption by cogent, reliable and relevant materials - bonafide disclosure of material facts - wrong claim of tax deducted at source (TDS) credit

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - presumption and onus - Explanation 4 to section 271(1)(c) - amount of tax sought to be evaded - rebuttal of presumption by cogent, reliable and relevant materials - wrong claim of tax deducted at source (TDS) credit - Imposability of penalty under section 271(1)(c) for wrong claim of TDS credit - HELD THAT: - The Tribunal applied the settled law that Explanation 1 to section 271(1)(c) raises a rebuttable presumption and casts the onus on the assessee to produce cogent, reliable and relevant materials to rebut it. Explanation 1 operates only where the assessee fails to offer or substantiate an explanation material to computation of total income. Explanation 4 defines 'amount of tax sought to be evaded' and excludes mere withdrawal of TDS credit which does not represent tax sought to be evaded. In the present case there was no difference between returned and assessed income; the claim arose from TDS certificates issued in the assessee's name by mistake due to similarity of names and common persons. The Tribunal found that the assessee had disclosed all facts material to computation of income and had furnished a bona fide explanation, thereby rebutting the statutory presumption. Consequently, the conditions for invoking penalty under section 271(1)(c) were not satisfied and the CIT(A)'s deletion of penalty was upheld. [Paras 8]

Penalty under section 271(1)(c) could not be sustained; the assessee rebutted the presumption and the CIT(A) order deleting the penalty is upheld.

Final Conclusion: Departmental appeal dismissed; order of the CIT(A) deleting the penalty is upheld.

Unexplained investment u/s 69 - unexplained expenditure u/s 69C - genuineness of sundry creditors / cash credits - advance on sale - genuineness and continuance of transaction - past rental income and household savings as source of investment - salary savings - burden of proof and quantification - availability of provident fund (GPF) for the relevant assessment year

Genuineness of sundry creditors / cash credits - unexplained investment u/s 69 - Deletion of addition made in respect of sundry creditors held to be justified - HELD THAT: - The assessee produced confirmations from 38 small creditors (small-time agents/farmers) and evidence showed settlement of a substantial portion of the creditors in the subsequent year. The Tribunal analysed the assessee's later rental income, surplus after interest liability, and additional bank loan in FY 2003-04 which together enabled repayment of a large part of the sundry creditors. Given the village context and cash settlements customary among small farmers, and absence of bank involvement in those transactions, the Tribunal held that the assessee established the genuineness of the creditors and the related transactions were acceptable. The addition on this count was therefore deleted. (paras 10, 10.1, 26) [Paras 10, 26]

Addition in respect of sundry creditors deleted

Advance on sale - genuineness and continuance of transaction - unexplained investment u/s 69 - Claim of advance on sale of plot of Rs. 6.5 lakhs rejected - HELD THAT: - The assessee produced an agreement for sale but continued to hold the land and there was no evidence of transfer, refund, cancellation or termination of the agreement. The sale agreement permitted the purchaser three years to pay the balance and provided for retention of a small sum on termination; there was no proof that the advance remained or was adjusted. On these facts the Tribunal was not able to accept the genuineness of the advance as a source of investment and rejected the claim. (para 10.2) [Paras 10]

Advance on sale of plot not accepted as a source; addition sustained

Past rental income and household savings as source of investment - unexplained investment u/s 69 - Entire claim of past rental income and household savings (Rs. 6.2 lakhs) accepted and addition deleted - HELD THAT: - The assessee had been in possession of a residential property since 1983 with five portions ordinarily let out. The CIT(A) had allowed part of the claim (Rs. 3 lakhs); the Tribunal found that, given the long period of possession and average rentals over 19 years, the assessee could reasonably have accumulated savings to the claimed extent. Consequently the Tribunal deleted the balance addition and allowed the entire claimed amount as a legitimate source. (para 10.3) [Paras 10]

Addition relating to past rental income and household savings deleted in full

Unexplained expenditure u/s 69C - salary savings - burden of proof and quantification - Additions made under s.69C in respect of interest payments confirmed for both assessees for lack of evidence of additional income to cover interest - HELD THAT: - Both assessees failed to produce evidence of additional income to meet the expenditure on interest payments claimed as explained. In the first appeal the assessee produced no material to show additional income to cover bank interest and the Tribunal confirmed the CIT(A)'s sustaining of the addition. In the second appeal the assessee also did not bring cogent material to prove salary savings to the extent claimed; the CIT(A)'s quantification (30% of net salary over the period) was accepted by the Tribunal as reasonable and the addition under s.69C was accordingly sustained. (paras 11, 21, 27) [Paras 11, 21, 27]

Additions under s.69C in respect of unexplained expenditure (interest) confirmed

Salary savings - burden of proof and quantification - Claim of past salary savings partly accepted as quantified by CIT(A) and sustained by the Tribunal - HELD THAT: - The assessee claimed substantial salary savings but did not maintain bank accounts or produce cogent material to substantiate savings of the claimed amount. The CIT(A) applied a reasoned approach and allowed 30% of net salary received over the relevant period as realistic savings (Rs. 4.30 lakhs). The Tribunal found no material to displace that conclusion and sustained the CIT(A)'s computation. (paras 17-19, 21) [Paras 17, 18, 21]

Past salary savings accepted only to the extent quantified by CIT(A); balance disallowed

Availability of provident fund (GPF) for the relevant assessment year - GPF amount held not available for AY 2003-04 and claim rejected - HELD THAT: - The assessee's claim that GPF amounts were utilized for construction was examined. The CIT(A) found the GPF amount was received on 05/05/2003, which pertains to AY 2004-05 and thus was not available for AY 2003-04. The Tribunal accepted the CIT(A)'s finding and rejected the assessee's contention. (paras 22-25) [Paras 22, 25]

GPF amount not available for AY 2003-04; claim rejected

Final Conclusion: Both appeals are partly allowed: additions in respect of sundry creditors and past rental/household savings were deleted, additions relating to the advance on sale and GPF claim were rejected, salary savings were accepted only to the extent quantified by the CIT(A), and additions under s.69C in respect of unexplained interest payments were confirmed.

Penalty under section 271C - Reasonable cause under section 273B - TDS obligation under section 194H - Willful default - Survey under section 133A

Penalty under section 271C - Reasonable cause under section 273B - TDS obligation under section 194H - Validity of deletion of penalty imposed under section 271C for failure to deduct TDS on commission/agency payments - HELD THAT: - On survey under section 133A the AO found that commission expenditure of Rs. 9.30 crores was booked but TDS under section 194H was shown only on a small portion, leading to a computed shortfall and interest and initiation of penalty under section 271C. The assessee paid the demand of tax and interest and explained that commissions credited were subsequently written back because the underlying sales did not materialize. The first appellate authority accepted that the commissions were reversed, that TDS and interest were paid, and that the resultant TDS certificates had conferred an undue benefit to the payees which was adjusted in the accounts. Applying section 273B, the CIT(A) found that the assessee had reasonable causes for the omission (bonafide belief about timing of deduction in the first year of the provision and commercial prudence given risk of bad debts) and that imposition of penalty would penalize the assessee for an omission which did not cause revenue loss. The Tribunal, after reviewing the facts and the appellate finding, held that the AO had no valid reason to impose penalty on amounts that were written back and where tax and interest were paid, and accordingly upheld the deletion of penalty. [Paras 6, 7]

Penalty under section 271C deleted by CIT(A) was upheld; revenue's appeal dismissed.

Final Conclusion: The Tribunal affirms the CIT(A)'s deletion of the penalty under section 271C for AY 2001-02, holding that the assessee had reasonable cause under section 273B and that imposition of penalty would penalize an omission which did not cause revenue loss; the revenue's appeal is dismissed.

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Deduction under section 80-IA supported by audit report in Form 10CCB - Bona fide belief based on professional/advisor's opinion - Relief from penalty where claim is made in good faith and supported by contemporaneous professional certification

Penalty under section 271(1)(c) for furnishing inaccurate particulars of income - Deduction under section 80-IA supported by audit report in Form 10CCB - Bona fide belief based on professional/advisor's opinion - Cancellation of penalty levied under section 271(1)(c) where assessee claimed deduction under section 80-IA having filed Form 10CCB and acted on professional advice - HELD THAT: - The assessee claimed deduction under section 80-IA and filed the prescribed auditor's report in Form 10CCB along with the return. The claim was made on the advice of the assessee's chartered accountant and was supported by the auditor's certification; the assessee also produced STPI-related material indicating its application/registration context. The Tribunal found that the claim was a conscious claim made in bona fide belief of entitlement and that the complexities of the statutory provisions make it reasonable for a taxpayer to rely on professional opinion. Applying precedents which hold that a bona fide claim based on professional advice does not amount to concealment or furnishing of inaccurate particulars, the Tribunal concluded that the ingredients for attracting penalty under section 271(1)(c) were not satisfied. Consequently, the penalty was cancelled and the appeal was allowed. [Paras 6, 7]

Penalty under section 271(1)(c) cancelled; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2004-05 and set aside the penalty under section 271(1)(c), holding that the claim under section 80-IA was made bona fide on professional advice and supported by the auditor's report.

Ultra vires - scope of Section 151A of the Customs Act - provisional assessment - bank guarantee for duty differential - preferential tariff treatment under the AIFTA / Customs Tariff Origin Rules - Certificate of Origin (COO) - Operational Certification Procedures - retroactive check and verification visits - whittling down an exemption by administrative circular

Ultra vires - scope of Section 151A of the Customs Act - whittling down an exemption by administrative circular - preferential tariff treatment under the AIFTA / Customs Tariff Origin Rules - Certificate of Origin (COO) - Validity of CBEC Circular dated 6th October 2015 directing denial of preferential duty benefit and prescribing procedures for assessment of gold jewellery imports from Indonesia. - HELD THAT: - The Court held that the impugned Circular goes beyond permissible administrative guidance and effectively narrows the scope of the exemption granted by the Exemption Notification and the Origin Rules. Although CBEC may issue instructions to ensure uniformity in classification and assessment, it cannot, by circular, impose new conditions or dictate the manner in which a quasi judicial officer must decide a particular case. The Circular required customs officers to withhold provisional assessments, forward original COOs and "appealable orders" to CBEC and to demand additional facts from importers - steps not contemplated by the Origin Rules or the exemption notification. The Origin Rules and their Operational Certification Procedures (including provisions for retroactive checks and verification visits) provide the mechanism for resolving doubts as to origin; the Department failed to follow those procedures and instead issued a circular that curtailed the discretion of the adjudicating officer and imposed onerous conditions on importers. For these reasons the Circular was held ultra vires Section 151A and unsustainable in law. [Paras 54, 60]

The Circular dated 6th October 2015 is ultra vires Section 151A of the Customs Act and is quashed.

Provisional assessment - bank guarantee for duty differential - scope of Section 151A of the Customs Act - provisional assessment under CPDA Regulations - Validity of CBEC Circular dated 20th January 2016 directing provisional assessments subject to a 100% bank guarantee of the duty differential and its consistency with the CPDA Regulations. - HELD THAT: - The Court examined the CPDA Regulations and the impugned instruction. Regulation 2(2) of the CPDA Regulations contemplates a maximum payment of 20% of the duty differential in provisional assessment; the Circular mandating 100% bank guarantees for provisional assessments (including for Bills of Entry already provisionally assessed) removes the discretionary domain of the customs officer and conflicts with the statutory scheme. The Circular does not merely suggest revenue security measures but prescribes a uniform requirement that fetters quasi judicial discretion, contrary to proviso (a) to Section 151A. Consequently the instruction demanding 100% bank guarantees and directing temporary withholding of provisional assessment is invalid. [Paras 55, 61]

The Circular dated 20th January 2016 and the related requirement of a 100% bank guarantee are ultra vires and are set aside.

Certificate of Origin (COO) - Operational Certification Procedures - retroactive check and verification visits - ultra vires - provisional assessment - Validity of the show cause notice dated 26th November 2015 issued to M/s J.B. Overseas which replicates the impugned Circular. - HELD THAT: - The SCN is a virtual reproduction of the impugned Circular and therefore reflects no independent application of mind by the issuing authority. The SCN also ignored the COO and the clarifications/retroactive check responses furnished by the Indonesian issuing authority. Given that the foundational instruction (the Circular) was held ultra vires and that the SCN followed that invalid instruction without independent adjudicatory reasoning, the SCN and consequent proceedings were held invalid. The Court further observed that relegating the petitioner to adjudication and appeal would be futile where the SCN itself is tainted by the invalid circular. [Paras 56, 57, 58, 59, 62]

The show cause notice dated 26th November 2015 issued to M/s J.B. Overseas and the proceedings consequent thereto are invalid and are set aside.

Final Conclusion: The CBEC Circulars dated 6th October 2015 and 20th January 2016 are quashed as ultra vires Section 151A of the Customs Act; the directions requiring 100% bank guarantees and related instructions are set aside; the show cause notice to M/s J.B. Overseas and proceedings founded on those circulars are invalid; future claims for preferential treatment and provisional release applications by the petitioners and similarly placed importers shall be decided by customs officers in accordance with law and uninfluenced by the quashed circulars or instructions.

Recovery of narcotic substances and credibility of seizure evidence - chain of circumstances - compliance with Section 50 of the NDPS Act - admissibility of FSL report - acquittal on related charges affecting reliance on recovery

Recovery of narcotic substances and credibility of seizure evidence - chain of circumstances - acquittal on related charges affecting reliance on recovery - Whether the High Court was justified in acquitting the respondent by holding that the circumstances of recovery were doubtful and that the prosecution case was unreliable. - HELD THAT: - The High Court found the prosecution's version to be wholly unnatural and replete with contradictions: inconsistent testimony as to place and time of arrest and as to who effected the arrest; the accused allegedly ran a considerable distance at night (PW6 admitted running 1000-1500 yards) yet purportedly continued to carry the bag containing the contraband without discarding it; simultaneous recovery of a double-barrel rifle was undermined by the accused's acquittal in the rifle case; the seizure memo bore indicia suggesting it was prepared subsequently. On this factual matrix the High Court concluded that the chain of circumstances necessary to rely upon the recovery was incomplete and that the prosecution evidence, therefore, did not inspire confidence. The Supreme Court observed that, although issues concerning admissibility of the FSL report and compliance with Section 50 of the NDPS Act might present arguable points for the appellant, those contentions did not dislodge the High Court's core finding that the recovery itself was doubtful. In view of the unblemished and thorough analysis by the High Court on the credibility and naturalness of the prosecution case, the appellate court found no reason to interfere with the acquittal.

The acquittal by the High Court was upheld as the circumstances of recovery were found to be doubtful and the prosecution case unreliable.

Final Conclusion: The appeal is dismissed; the High Court's judgment acquitting the respondent is affirmed.

Remand for fresh consideration - adjudicatory reconsideration on production of external document - importance of EODC Certificate in customs adjudication - setting aside impugned and original orders - notice and opportunity of hearing

Remand for fresh consideration - adjudicatory reconsideration on production of external document - importance of EODC Certificate in customs adjudication - notice and opportunity of hearing - Matter remitted to the original Adjudicating Authority for fresh examination in light of the EODC Certificate now obtained by the petitioner. - HELD THAT: - The Court found that the Commissioner of Customs (Appeals) upheld the Order-in-Original because the petitioner had not placed the EODC Certificate before him at the time of hearing since it had not been received from the DGFT. Having now received the EODC Certificate, the petitioner sought re-examination. In the special circumstances, the Court set aside both the impugned Order-in-Appeal and the Order-in-Original and remitted the matter to the original Adjudicating Authority to consider the case afresh after taking the EODC Certificate into account. The Court directed that the Adjudicating Officer shall issue notice to the petitioner specifying the date for hearing and the date by which the petitioner must file the EODC Certificate, thus ensuring the petitioner is afforded an opportunity of hearing with the newly available document considered.

Impugned order and Order-in-Original set aside; matter remitted to original Adjudicating Authority for fresh adjudication after consideration of the EODC Certificate, with notice to the petitioner specifying hearing date and filing deadline for the certificate.

Final Conclusion: Writ petition disposed of by setting aside the impugned appellate and original orders and remitting the matter to the original Adjudicating Authority for reconsideration after the petitioner files the EODC Certificate; directions given for issuance of notice and fixation of hearing and filing dates.

Jurisdiction to entertain writ against appellate order under the Customs Act - forum for challenge determined by jurisdiction of the original adjudicating authority - non availment of CENVAT credit as precondition for refund under the Customs Act - availability of alternative remedy before the Customs, Excise and Service Tax Appellate Tribunal under Section 129E of the Customs Act

Jurisdiction to entertain writ against appellate order under the Customs Act - forum for challenge determined by jurisdiction of the original adjudicating authority - availability of alternative remedy before the Customs, Excise and Service Tax Appellate Tribunal under Section 129E of the Customs Act - Whether the Kerala High Court has jurisdiction to entertain the writ petition challenging the appellate order (Ext.P7) passed under the Customs Act and whether the petitioner has an alternative remedy. - HELD THAT: - The appellate order impugned (Ext.P7) was passed by the appellate authority under the Customs Act and the original adjudicating authority as well as the appellate authority are both situated in Chennai. Applying the principle in Ambica Industries v. Commissioner of Central Excise, the competent High Court to entertain a writ against an appellate order under the Customs Act is the High Court having jurisdiction over the original authority which passed the first adjudication order; accordingly the Madras High Court, not the Kerala High Court, is the appropriate forum. Further, the petitioner has an effective alternative remedy by way of appeal to the Customs, Excise and Service Tax Appellate Tribunal under Section 129E of the Customs Act. In view of these factors, there is no occasion for this Court to entertain the writ petition challenging Ext.P7, and the petition must be dismissed. [Paras 2]

The writ petition is dismissed for want of jurisdiction of this Court to entertain the challenge to Ext.P7 and having regard to the availability of an alternative remedy under Section 129E.

Non availment of CENVAT credit as precondition for refund under the Customs Act - Whether the appellate authority erred in rejecting the appeal on the ground that the petitioner had not established non availment of CENVAT credit. - HELD THAT: - The appellate authority rejected the appeal on the stated ground that the petitioner had not established non availment of CENVAT credit, which the authority treated as a precondition to entitlement to refund under the Customs Act. The High Court did not proceed to examine the merits of this factual and adjudicatory contention because the petition was dismissed on the jurisdictional ground and in view of the availability of the statutory appellate remedy. Consequently, the correctness of the appellate authority's factual finding regarding non availment of CENVAT credit was not decided on merits by this Court.

The contention concerning non availment of CENVAT credit was not adjudicated on merits and remains open to be raised before the appropriate forum.

Final Conclusion: The petition challenging the appellate order (Ext.P7) is dismissed by the Kerala High Court for lack of jurisdiction, the appropriate forum being the Madras High Court in view of the location of the original authority; the petitioner retains the alternative statutory remedy of appeal to the Customs, Excise and Service Tax Appellate Tribunal under Section 129E, and the merits of the non availment of CENVAT credit were not decided and remain open for adjudication by the proper forum.

Time limits under CHALR/CBLR - jurisdictional effect of delay in disciplinary proceedings - suspension and cancellation of Customs House Agent licence - issue of show cause notice after statutory period - submission of inquiry report within prescribed period

Time limits under CHALR/CBLR - issue of show cause notice after statutory period - jurisdictional effect of delay in disciplinary proceedings - Impugned cancellation order is invalid for failure to comply with the time limits prescribed by the CHALR 2004 / CBLR 2013, rendering the proceedings without jurisdiction. - HELD THAT: - The Tribunal examined the sequence of events and found that the licensing authority was informed of the offence on 31.05.2011, the licence was suspended on 17.06.2011 and suspension confirmed on 26.07.2011, yet the show cause notice was issued only on 11.10.2012 - more than sixteen months after the offence report and only after the Tribunal's intervention. Further, the inquiry report was not submitted within the 90 days prescribed by Regulation 22(5) of CHALR 2004 (Regulation 20(5) of CBLR 2013), and the final order dated 27.06.2013 reached the appellant after the stipulated period. The Tribunal relied on precedents holding that the statutory time limits in CHALR/CBLR must be strictly adhered to and that delay at any stage affects the legality and jurisdiction of proceedings (decisions cited in the judgment include Sanco Trans Ltd., Eltece Associates and S.K. Logistics). Applying that principle, the Tribunal concluded that issuance of the show cause notice and continuation of proceedings beyond the prescribed time deprived the authority of jurisdiction to cancel the licence. Consequently, the cancellation order could not be sustained and was set aside. [Paras 5, 6]

Impugned order cancelling the appellant's Customs House Agent licence is set aside for non compliance with the time limits under CHALR/CBLR; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the licence cancellation order dated 27.06.2013 for failure to comply with the statutory time limits under CHALR/CBLR, and disposed of the miscellaneous petition.

Scheme of Arrangement - Amalgamation - Sanction of Scheme - Amendment of Appointed Date - Liabilities of Transferor to vest in Transferee - Preservation of books and records - Directions for stamping and filing with Registrar - Costs awarded

Scheme of Arrangement - Amalgamation - Sanction of Scheme - Sanction of the proposed scheme of amalgamation between Transglobe Industries Private Limited (Transferor) and Ishverkrupa Estate Consultants Private Limited (Transferee). - HELD THAT: - Having considered the petitions, the affidavits (including confirmations that shareholders' meetings were dispensed with by earlier orders), the report of the Official Liquidator, the affidavit of the Regional Director, and oral submissions, the Court found that objections, if any, have been addressed and that the Scheme is in the interest of shareholders, creditors and the public. Publication requirements were satisfied and no objections were received. The Court therefore sanctioned the Modified Scheme placed on record. [Paras 8, 9, 10, 11, 12]

The Modified Scheme of Arrangement is sanctioned and the prayers in the Company Petitions are granted.

Amendment of Appointed Date - Grant of amendment to the Scheme to change the Appointed Date from 16th March 2016 to 1st April 2016. - HELD THAT: - The Official Liquidator's report noted the originally proposed Appointed Date appeared illogical. The petitioners' boards, authorized under the Scheme, passed resolutions to amend clause 1.2 to 1st April 2016 and placed authenticated copies on record. The Court, after noting the amendment and supporting affidavits, allowed the limited modification to the Scheme. [Paras 7, 10]

Amendment of the Scheme to substitute the Appointed Date as 1st April 2016 is granted.

Liabilities of Transferor to vest in Transferee - Preservation of books and records - Direction that liabilities of the Transferor shall remain enforceable and requirement to preserve books and records of the Transferor for eight years. - HELD THAT: - The Official Liquidator's report recorded no mismanagement prejudicial to members or public interest but noted outstanding service tax dues. Petitioners represented that all liabilities would be assumed by the Transferee and that the outstanding service tax would be paid as per law. The Court directed that the Transferee preserve the Transferor's books and records for eight years from sanction and not dispose of them without prior Central Government permission, and reiterated that the Transferor shall comply with statutory liabilities even after sanction. [Paras 5, 6]

Transferee to preserve Transferor's books and records for eight years and Transferor's statutory liabilities are not extinguished by sanction of the Scheme.

Directions for stamping and filing with Registrar - Directions to lodge authenticated order and schedule of immovable assets for stamp adjudication and to file the order and Scheme with the Registrar of Companies. - HELD THAT: - The Court directed the petitioner companies to lodge a copy of the order, the detailed schedule of immovable assets of the Transferor and the Scheme authenticated by the High Court Registrar with the Superintendent of Stamps for adjudication within 60 days. The petitioners were also directed to file the order and Scheme with the Registrar of Companies electronically (with INC28) and in physical form as required by law. [Paras 13, 14]

Petitioners to lodge authenticated order and schedule for stamp adjudication and to file the order and Scheme with the Registrar of Companies as directed.

Costs awarded - Quantification and imposition of costs to be paid to Central Government counsel and to the Official Liquidator. - HELD THAT: - The Court quantified costs payable to the Central Government Standing Counsel at Rs. 7,500 per petition to be paid to the Assistant Solicitor General and directed the Transferor Company to pay Rs. 7,500 to the Office of the Official Liquidator. [Paras 12]

Costs quantified and directed to be paid as ordered.

Final Conclusion: The High Court sanctioned the Modified Scheme of Amalgamation (with the Appointed Date amended to 1st April 2016), directed preservation of the Transferor's records and continued enforceability of its statutory liabilities, ordered compliance with stamping and filing formalities, and awarded specified costs to the Central Government counsel and the Official Liquidator.

Scheme of Amalgamation sanction - Accounting Standard 14 - Amalgamation Reserve - Goodwill - Compliance with tax law - Authentication and filing of order - Conditional sanction subject to parallel proceedings - Costs / payment to government counsel

Scheme of Amalgamation sanction - Conditional sanction subject to parallel proceedings - Sanction of the Scheme of Arrangement in the nature of amalgamation as set out at Exhibit C to the petition. - HELD THAT: - Petition for sanction of the Scheme of Amalgamation was admitted, notices issued and objections (if any) considered. The Regional Director filed observations which were addressed by the petitioner through specific undertakings. Having received those undertakings and having found the queries of the Regional Director met, the Court exercised its power to sanction the Scheme. The sanction is expressly made subject to any order that may be passed by the High Court of Kolkata in proceedings concerning the Transferor Company. [Paras 9]

The Scheme at Exhibit C is sanctioned and the prayers in paragraph 12(a) of the petition are granted, subject to any order by the High Court of Kolkata.

Accounting Standard 14 - Amalgamation Reserve - Goodwill - Compliance with Accounting Standard 14 in the treatment of excess of assets over liabilities and any shortfall on amalgamation. - HELD THAT: - The Regional Director observed that clause 10(g) of the Scheme did not conform to the requirements of Accounting Standard 14, which mandates that excess of assets over liabilities on amalgamation be credited to the Amalgamation Reserve Account and any shortfall be debited to Goodwill. The petitioner filed an affidavit undertaking to comply strictly with AS-14 and specifically undertook that any excess of net assets will be credited to the Amalgamation Reserve Account (and not to General Reserve) and any shortfall will be debited to the Goodwill account. The Court found this undertaking satisfactory and treated the observation as met. [Paras 5, 7, 8]

Petitioner must comply with Accounting Standard 14: excess of assets over liabilities to be credited to Amalgamation Reserve and any shortfall to be debited to Goodwill; the Court accepts petitioner's undertaking.

Compliance with tax law - Obligation to comply with the Income Tax Act and rules in relation to the amalgamation. - HELD THAT: - The Regional Director recommended a direction that the petitioner undertake compliance with the Income Tax Act and rules. The petitioner gave an undertaking to comply with the Income Tax Act and applicable rules. The Court recorded that the petitioner's undertaking addressed the Regional Director's concern and accepted it as part of the sanction process. [Paras 6, 7, 9]

Petitioner to comply with the Income Tax Act and rules; undertaking accepted by the Court.

Authentication and filing of order - Directions regarding authentication, issuance and lodging of the sanctioned Scheme and order. - HELD THAT: - The Court dispensed with drawn-up orders and directed that all concerned authorities act on the order together with the Scheme as authenticated by the Registrar, High Court of Gujarat. The petitioner was directed to lodge the authenticated copy of the order and Scheme immediately, and the Registrar was directed to issue the authenticated copy within seven days. [Paras 11]

Registrar to authenticate and issue the copy of the order and Scheme within seven days; petitioner to lodge the authenticated copy as directed.

Costs / payment to government counsel - Payment of fees to the Government advocate assisting the Court. - HELD THAT: - The Court directed the petitioner to pay fees to the Assistant Solicitor General of India as part of the order. [Paras 10]

Petitioner directed to pay the fees as ordered to the Assistant Solicitor General of India.

Final Conclusion: The High Court sanctioned the Scheme of Amalgamation (Exhibit C) subject to any order by the High Court of Kolkata, accepted the petitioner's undertakings to comply with Accounting Standard 14 and the Income Tax Act, directed authentication and lodging of the sanctioned Scheme and order by the Registrar within seven days, and ordered payment of fees to the Assistant Solicitor General of India.

Leviability of Service Tax on rent-a-cab operator service where charges are recovered on per kilometre basis - Gross amount charged as taxable value (application of Section 67 principle) - Extended period of limitation where assessee suppressed facts - Penalty mitigation under Section 78 of the Finance Act, 1994

Leviability of Service Tax on rent-a-cab operator service where charges are recovered on per kilometre basis - Gross amount charged as taxable value (application of Section 67 principle) - Service Tax was leviable on the appellant's rent a cab operations and the taxable value is the gross amount charged as reflected in the balance sheets. - HELD THAT: - The Tribunal agreed with the jurisdictional High Court precedent that rent a cab charges collected on a per kilometre basis are liable to Service Tax. The adjudicating and appellate authorities found, on evidence including balance sheets and admissions in statements, that the only income of the firm arose from rent a cab services and that the higher amounts shown in the balance sheets represented gross receipts chargeable to Service Tax. Applying the principle that taxable value is the gross amount charged by the service provider, the Tribunal upheld the demand for Service Tax computed on the higher income shown in the balance sheets for the relevant years. [Paras 7, 8]

Leviability of Service Tax sustained and Service Tax payable on gross amounts as per the balance sheets.

Extended period of limitation where assessee suppressed facts - Penalty mitigation under Section 78 of the Finance Act, 1994 - Extended period of limitation was rightly invoked on finding of suppression of taxable receipts; penalty was confirmed but reduced to 25% on compliance with Section 78 conditions. - HELD THAT: - The Tribunal accepted the Revenue's case that the appellant had not disclosed the gross taxable receipts in ST 3 returns and had made inconsistent explanations; statements of the manager and proprietor corroborated that the balance sheet figures related to rent a cab receipts. On that basis the invocation of the extended limitation period was upheld. The Tribunal also noted that although penalty was imposable for suppression, the appellant was entitled to the benefit of payment of 25% of the penalty on fulfillment of the condition prescribed under Section 78 of the Finance Act, 1994, following the ratio in the cited decision, and accordingly modified the impugned order to grant that relief. [Paras 8, 9, 11]

Extended limitation period sustained for suppression; penalty confirmed but appellant granted benefit to discharge 25% of the penalty on compliance with Section 78.

Final Conclusion: The appeal is partly allowed: the demand for Service Tax on gross receipts as reflected in the balance sheets for 2002-03 to 2006-07 (upto Sept. 2006) is upheld and the invocation of extended limitation is sustained, but the penalty is modified to permit payment of 25% on satisfaction of the conditions of Section 78 of the Finance Act, 1994.

Locus standi to challenge a tax circular - service tax liability of the service provider and contractual pass on to the recipient - definition of "service" under Section 65B(44) - agreement for development as construction service versus transfer of immovable property - challenge to CBEC circular on vires grounds

Locus standi to challenge a tax circular - service tax liability of the service provider and contractual pass on to the recipient - Maintainability of the writ petition by the petitioner who is the recipient of services and has contractually agreed to bear the tax burden. - HELD THAT: - The Court held that the law makes the service provider primarily liable to pay service tax and it is open to the service provider to pass on that burden to the recipient. Having contractually agreed under Clause 23 to bear the tax to the extent stipulated, the petitioner cannot challenge the circulars imposing liability on service providers. Permitting any recipient who has been contractually saddled with the burden to challenge the liability would lead to unmanageable litigation because consumers generally could challenge levies on the ground that the burden may be passed on. Authorities cited by the petitioner were distinguished as involving private disputes on assessment or situations where the litigant had an independent right to guard against taxation under a private arrangement; they do not support widening locus standi to challenge a general circular questioning liability. Consequently the petition is not maintainable on locus standi grounds. [Paras 12, 13, 14, 26, 27]

Petitioner has no locus standi to challenge the circulars; the writ petition is not maintainable on that ground.

Definition of "service" under Section 65B(44) - agreement for development as construction service versus transfer of immovable property - Characterisation of the developer's activity under the agreement-whether it falls within the excluded category (mere transfer of immovable property) or constitutes a taxable construction service. - HELD THAT: - The Court observed that the agreement is for the construction of specified super built up area and, although exchange of constructed area for undivided share of land may occur, the transaction can legitimately be viewed as the owner engaging a contractor to perform construction services and paying by transfer of land share. Viewed thus, the developer's activities amount to provision of construction services and are not necessarily a mere transfer of immovable property excluded under Sub clause (i) of clause (a) of Section 65B(44). The Court noted that the Gauhati decision relied upon involved disputes between flat purchasers and promoter and does not cover the present factual matrix where rights created by the agreement constitute a bouquet of service relationships; the petitioner stands on the same footing as other recipients of the developer's services. On this basis, apart from locus standi, the challenge to the circular does not merit acceptance. [Paras 19, 22, 23, 24, 26]

The agreement for development can be characterised as giving rise to construction services and not merely an excluded transfer of immovable property; the challenge to the circular on this merit is not accepted.

Final Conclusion: The writ petition challenging the CBEC circular and related recommendations is dismissed: the petitioner lacks locus standi to impugn the circulars after contractually agreeing to bear the tax, and, on the merits, the development agreement can be characterised as involving taxable construction services rather than a mere transfer of immovable property.

Inclusion of cost of free supply of goods and materials in service valuation - taxable value - gross amount charged - interpretation of Section 67 of the Finance Act, 1994 - scope of Notification No. 1/2006-ST - Commercial or Industrial Construction Services

Inclusion of cost of free supply of goods and materials in service valuation - taxable value - gross amount charged - interpretation of Section 67 of the Finance Act, 1994 - scope of Notification No. 1/2006-ST - Whether the value of goods and materials supplied free of cost by the service recipient is includible in the taxable value/gross amount charged for commercial or industrial construction services for the purpose of service tax. - HELD THAT: - The Tribunal examined the submissions of the parties and compared them with the Larger Bench decision in Bhayana Builders (P) Ltd., which construed the pre- and post-amendment scope of Section 67 of the Finance Act, 1994 and considered Notification No. 1/2006-ST. The Larger Bench held that the value of goods and materials supplied free of cost by the service recipient does not amount to monetary or non-monetary consideration paid by or flowing from the service recipient accruing to the benefit of the service provider, and therefore falls outside the taxable value or the expression "gross amount charged" under Section 67. It also held that such free supplies do not form part of the gross amount charged under Notification No. 15/2004-ST (as amended). The Tribunal found the departmental contentions and the first appellate authority's reliance on the amended provision and notification to be inconsistent with that binding judicial pronouncement and therefore concluded that the value of free supplies should not be included while arriving at the gross value for charging service tax on taxable construction services. [Paras 6, 7]

The impugned order is set aside and the appeal is allowed; the value of free-supplied materials is not includible in the taxable value/gross amount charged for the construction service.

Final Conclusion: Appeal allowed; following the Larger Bench in Bhayana Builders (P) Ltd., the Tribunal holds that the cost of materials supplied free by the service recipient is not includible in the taxable value/gross amount charged for commercial or industrial construction services, and the impugned order is set aside.

Service tax liability of recipient for cross-border services - Taxability of services received from foreign service providers - Non-applicability of Section 66A to services received before its enactment - Precedent of Indian National Ship Owners Association - Binding effect of Board instructions

Service tax liability of recipient for cross-border services - Non-applicability of Section 66A to services received before its enactment - Precedent of Indian National Ship Owners Association - Binding effect of Board instructions - Whether the appellant was liable to discharge service tax as recipient for services received from overseas service providers during 12/7/2001 to 23/12/2003. - HELD THAT: - Both parties accepted that the services in question were received and the amounts concerned were paid prior to 18/4/2006, the date of enactment of Section 66A of the Finance Act, 1994. The Tribunal applied the decision in Indian National Ship Owners Association which held that recipient liability for such cross-border services could not be sustained for services received before the statutory amendment. The Department's challenge to that decision was dismissed and the Board subsequently issued an instruction dated 26/9/2011 acknowledging the principle. In view of that binding precedent and the Board's instruction, the impugned demand, appropriation, interest and penalty recorded by the Commissioner could not be sustained for the period under consideration.

Impugned order set aside; appeal allowed and consequential relief granted.

Final Conclusion: The Tribunal allowed the appeal, setting aside the demand, appropriation, interest and penalty insofar as they related to services received during 12/7/2001 to 23/12/2003, applying the Bombay High Court precedent and the Board's instruction that Section 66A does not operate retrospectively to those periods.

Rebate/refund of service tax under Notification No.41/2012-ST - place of removal for export - limitation for refund claims - no discretion to condone delay under notification

Limitation for refund claims - no discretion to condone delay under notification - Claims for refund were barred by the one year limitation in Paragraph 3(g) of Notification No.41/2012 ST and the authority had no power to condone the delay. - HELD THAT: - The notification expressly requires that a claim for rebate of service tax paid on specified services used for export be filed within one year from the date of export. That limitation is mandatory and the notification does not confer any discretionary power on the adjudicating authority to condone delayed filing. The Tribunal therefore upheld the authority's finding that claims filed beyond the stipulated period were time barred and held that the contention that the delay should be condoned could not be accepted. [Paras 4, 5]

Claims filed beyond the one year period specified in the notification are barred and cannot be condoned by the authority.

Rebate/refund of service tax under Notification No.41/2012-ST - place of removal for export - The place of removal of the exported goods was the port and not the factory gate; services utilized at the port were not eligible for refund to the appellant on the basis asserted. - HELD THAT: - The appellant's case rested on the assertion that the place of removal was the factory gate and that certain input services used at the port should be treated as used beyond the place of removal and thus eligible for rebate. The Tribunal accepted the authority's finding that, on facts, the place of removal for export was the port. As the impugned services were utilized at the port and the appellant did not establish that they were used beyond the place of removal as claimed, the entitlement to refund under the notification failed. [Paras 4, 6]

Place of removal is the port; services used at the port do not support the appellant's claim to rebate under the notification as argued.

Final Conclusion: The Tribunal dismissed the appeals, holding that the refund claims were unsustainable both because they were time barred under the one year limit in the notification (with no power to condone delay) and because the place of removal was the port, not the factory gate, so the asserted entitlement to rebate for services at the port failed.

Cenvat credit on welding electrodes - Definition of "input" after substitution w.e.f. 01/04/2011 - Consumables used in repair and maintenance - Goods integrally related to manufacture

Cenvat credit on welding electrodes - Definition of "input" after substitution w.e.f. 01/04/2011 - Consumables used in repair and maintenance - Goods integrally related to manufacture - Cenvat credit on welding electrodes used in the factory for the period October, 2011 to March 2012 is allowable. - HELD THAT: - The Tribunal examined the substituted definition of "input" which came into effect from 1/4/11 and provides that "input" means all goods used in the factory by the manufacturer of the final product. Applying this amended definition, welding electrodes admittedly used by the appellant in the factory qualify as inputs and entitle the manufacturer to Cenvat credit. Earlier decisions relied upon by Revenue pertain to the period prior to 1/4/11 or address different legal issues (for example, whether welding electrodes are capital goods under the erstwhile Rule 57Q), and are therefore not applicable. The Tribunal also noted precedents where goods integrally related to manufacture were treated as inputs and accepted the view in favour of allowability under the post 1/4/11 definition; the impugned findings to the contrary were set aside and consequential benefits granted. [Paras 3, 5, 6]

The appellant is entitled to take Cenvat credit on welding electrodes for the stated period; the impugned order is set aside and the appeal is allowed with consequential benefits.

Final Conclusion: Appeal allowed; disallowance of Cenvat credit on welding electrodes for October, 2011 to March 2012 set aside and appellant entitled to consequential relief in accordance with law.

Joinder of party - right to audience - service of process - impleadment as party respondent - statutory claim under the Central Excise Act, 1944

Joinder of party - impleadment as party respondent - Applicant permitted to join the proceedings of Special Civil Application No.2194 of 2005 as party respondent No.8 - HELD THAT: - The applicant sought permission to be joined as a party respondent on the ground that it is an interested party with claims arising from statutory obligations under the Central Excise Act, 1944. The Court observed that questions as to the justiciability or maintainability of the applicant's claim are to be considered when the petition is decided on merits and that other parties will have the opportunity to raise objections at that stage. No effective denial of the applicant's right to be heard was shown. Having regard to the applicant's entitlement to place its claim on record for consideration, the Court held that the right of audience cannot be denied and that impleadment is appropriate so the claim may be adjudicated in the main proceedings. [Paras 6, 8, 9]

Application allowed; applicant to be impleaded as party respondent No.8 and shall join the proceedings at its cost, with amendment to be carried out by 11.3.2016.

Service of process - right to audience - Service upon opponents held to be effected and did not bar granting of joinder - HELD THAT: - The applicant filed an affidavit of service stating that the application copy was forwarded to opponent No.2 by registered post and that an advance copy was provided to the Assistant Solicitor General of India; direct service was effected upon opponent No.8 through the union's representative. On these submissions and the affidavit, the Court was satisfied that the opponents were duly served. One opponent had expressed reservations but other respondents did not object to the joinder. In these circumstances, the Court found no impediment arising from service to permitting the applicant to be heard and impleaded. [Paras 3, 4, 7]

Affidavit of service accepted; service held sufficient for purposes of permitting joinder and hearing.

Final Conclusion: The application is allowed: the applicant is impleaded as party respondent No.8 in Special Civil Application No.2194 of 2005, to be joined at its cost and with the petition amended on or before 11.3.2016; the Rule is made absolute to that extent.

Condonation of delay - absence of mala fides and governmental delay - gross negligence - maintainability of revision application - quashing of impugned order - registration and disposal of revision application

Condonation of delay - absence of mala fides and governmental delay - gross negligence - Whether the delay of about ten months in filing the revision application should be condoned. - HELD THAT: - The Court found that although the petitioner did not specify precise dates of efforts to file the revision, the overall material before the Court did not disclose mala fides. The petitioner being a Government Department warranted consideration of ordinary delays inherent in governmental functioning. The test applied was whether there was gross negligence or deliberate delay by the officer and whether prejudice would be caused to the respondents. The Court concluded that no gross negligence or deliberate inaction was shown and no injustice to respondents was apparent, permitting exercise of discretion in favour of condonation of delay. [Paras 2]

Delay condoned and petitioner permitted to proceed with the revision application.

Quashing of impugned order - registration and disposal of revision application - maintainability of revision application - Relief to be granted following condonation of delay and treatment of preliminary objections on maintainability. - HELD THAT: - Having condoned the delay, the Court quashed and set aside the impugned order and directed that the revision application be registered and disposed of in accordance with law. Objections raised by respondent nos. 1 and 2 relating to maintainability and the merits (including the petitioner's contention that respondents delayed trial court proceedings) were not decided; those contentions concern the substantive maintainability and merits of the revision and were left open for determination at the appropriate stage. [Paras 3]

Impugned order quashed; revision application to be registered and disposed of in accordance with law; objections on maintainability and merits kept open for decision on their own merits.

Final Conclusion: Writ petition allowed; delay in filing the revision application condoned, the impugned order quashed and set aside, and the revision application directed to be registered and disposed of in accordance with law; preliminary objections on maintainability and merits are left open for adjudication.

Interpretation of Rule 5(1)(a) of the Kerala Abkari Shops Disposal Rules - valid registration of a crime - effect of subsequent exoneration/discharge on statutory preference - provisional allottee's vested/indefeasible right - applicability of B-sample/second analysis report to entitlement

Interpretation of Rule 5(1)(a) of the Kerala Abkari Shops Disposal Rules - valid registration of a crime - Scope and intend of Rule 5(1)(a) and the significance of registration of a crime for disqualification from preference - HELD THAT: - Rule 5(1)(a) gives preference to incumbent licencees who have conducted shops in the preceding three consecutive years provided no Abkari case is registered against them other than under Section 56. The provision contemplates that mere registration of a case will generally disfavour the incumbent, but the registered crime must be one that can properly attract disqualification. The Court held that the phraseology contemplates a requirement of a validly registered crime: where the registered offence is of the kind disqualifying an incumbent (for example under Section 57), the pre-condition of Rule 5(1)(a) is prima facie satisfied; however, if the registration is vitiated or rendered untenable by subsequent exonerating material (for example a negative B-sample or judicial discharge), the disqualification cannot be sustained as against the incumbent. The Court accepted the binding or persuasive effect of earlier Division Bench rulings holding that a case must be validly registered and that a negative second analysis report removes the basis for denying preference. [Paras 41, 50, 51, 52, 53]

Rule 5(1)(a) requires that an incumbent be free of a validly registered disqualifying offence; a mere registration will not sustain disqualification where subsequent valid exoneration (including negative B-sample reports and judicial discharge) removes the basis for the registered crime.

Effect of subsequent exoneration/discharge on statutory preference - applicability of B-sample/second analysis report to entitlement - Whether discharge or a negative second analysis report obtained after registration but before confirmation of allotment restores the incumbent's entitlement to preference - HELD THAT: - The Court held that where the incumbent licencee is subsequently exonerated-either by a negative B-sample/second analysis report or by judicial discharge-his claim to preference is revived. The Court relied on earlier Division Bench decisions which held that a negative second analysis report renders a pending criminal case untenable and that pendency of such a case cannot be used to deny preference. The court further observed that an acquittal or discharge relates back to the date of the crime and may, therefore, restore the incumbent's right so long as the new allotment had not been finally confirmed in the interim. The Court, bound or persuaded by those precedents, held that the fifth respondent's exoneration entitled him to preference. [Paras 52, 53, 63, 64, 66]

Subsequent exoneration or a negative second analysis report obtained before confirmation restores the incumbent's entitlement to preference and prevents denial of preference on the basis of the earlier registration.

Provisional allottee's vested/indefeasible right - Whether a provisional licencee/allottee acquires an indefeasible vested right to continue the licence even if the incumbent is later exonerated - HELD THAT: - The Court recognised that a provisional allottee may enjoy the licence once confirmation has been made and no final adjudication has restored the incumbent's right. However, the Court rejected the submission that such entitlement is indefeasible in all circumstances: where the policy grants statutory preference to the incumbent, that preference remains operative and, if the incumbent is later exonerated (even after confirmation to the new allottee), the incumbent's right is restored prospectively in subsequent years and, within limits explained by the Court, may affect entitlement if confirmation had not attained finality when exoneration occurred. The Court cautioned that confirmation is not a perpetual shield: while a confirmed licence may be enjoyed if criminal proceedings remain unresolved, an incumbent's successful exoneration can revive his preferential claim as contemplated by the Rules. [Paras 69, 70, 71, 72, 73]

A provisional or confirmed allottee does not acquire an absolute, indefeasible right that cannot be displaced by the incumbent's subsequent exoneration; the statutory preference for the incumbent persists and can be restored upon valid exoneration, subject to the limits explained.

Final Conclusion: The writ petition is dismissed and Exhibit P10 order of the first respondent is affirmed; the Court held that Rule 5(1)(a) requires a validly registered disqualifying crime to deny preference, that subsequent exoneration or a negative second analysis report obtained before confirmation restores the incumbent's preference, and that a provisional/confirmed allottee's right is not absolutely indefeasible where the incumbent is validly exonerated.

Territorial jurisdiction - extra-territorial writ jurisdiction under Article 226(2) - alternative remedy before CESTAT - jurisdiction of Central Excise authorities versus SEZ authorities

Territorial jurisdiction - extra-territorial writ jurisdiction under Article 226(2) - alternative remedy before CESTAT - jurisdiction of Central Excise authorities versus SEZ authorities - Maintainability of the petition under Article 226 before the Gujarat High Court against orders passed by Central Excise authorities situated in Orissa. - HELD THAT: - The Court held that both the adjudicating authority and the appellate Central Excise authorities whose orders are challenged are situated in Orissa and that further remedy against the appellate order lies before the jurisdictional CESTAT. The existence of a prior decision of this Court on interpretation of statutory provisions applicable to SEZ units does not confer territorial jurisdiction on this Court to entertain challenges to orders passed by authorities located in another State. The fact that some elements of the cause of action arose at Mundra SEZ and that the petitioner claims non-excisability of coal consumed there is insufficient to override the territorial locus of the authorities who passed the impugned orders. In these circumstances, and having regard to the availability of an alternative statutory appellate forum, the writ petition is not maintainable in the Gujarat High Court and must be declined. [Paras 5]

Writ petition dismissed for want of territorial jurisdiction; remedy available before the jurisdictional CESTAT and the High Court at Orissa.

Final Conclusion: The Gujarat High Court declined to entertain the petition challenging orders of Central Excise authorities located in Orissa and dismissed the petition on territorial jurisdiction grounds, observing that the appropriate forum for challenge is the jurisdictional CESTAT and, thereafter, the High Court at Orissa.

Summary order. Appeal dismissed as the tax effect is negligible.

Territorial jurisdiction - exercise of jurisdiction under Section 482 CrPC - anticipatory bail conditions - custody of passport as bail condition - launching of prosecution and sanction

Territorial jurisdiction - exercise of jurisdiction under Section 482 CrPC - launching of prosecution and sanction - Maintainability of the petition under Section 482 CrPC seeking release/renewal of passport and permission to travel abroad in view of prosecution filed before the Chief Judicial Magistrate, Meerut. - HELD THAT: - The Court examined the antecedent orders and the record placed by the respondent showing that anticipatory bail had been granted earlier subject to conditions including surrender and custody of the passport (recorded in the earlier order) and that a prosecution had subsequently been sanctioned and a complaint filed in the Court of the Chief Judicial Magistrate, Meerut. Given that the complaint/case has been instituted before the Court at Meerut, the High Court concluded that it does not have territorial jurisdiction to entertain the present petition under Section 482 CrPC challenging the continued custody of the passport or seeking permission to travel abroad. The determination rests on the locus of the trial court before which prosecution is pending; where the complaint is filed in another territorial jurisdiction, the present High Court cannot exercise supervisory jurisdiction to grant the reliefs sought. [Paras 5, 7, 8, 9]

The petition is not maintainable in this Court for want of territorial jurisdiction; petition disposed with liberty to approach the court where the prosecution is pending.

Final Conclusion: Petition under Section 482 CrPC dismissed for lack of territorial jurisdiction; petitioner may seek appropriate relief before the Court in which the prosecution has been instituted.

Natural justice - non-speaking order - valuation under Rule 11 of the Valuation Rules, 2000 - reliance on expert report - remand for de novo adjudication

Natural justice - reliance on expert report - Assessment set aside for failure to furnish AD (Cost) report to the appellant resulting in breach of principles of natural justice. - HELD THAT: - The Tribunal found that the copy of the enquiry report prepared by the AD (Cost) was not supplied to the appellant before finalisation of the assessment. Although revenue had solicited cost data from the appellant and awaited replies, the absence of the AD (Cost) report being placed before the appellant caused a miscarriage of justice. Reliance upon the AD (Cost) report without providing it to the appellant amounted to a denial of opportunity to meet the material on which the adjudicating authority acted. Consequently the impugned order was held to be non-speaking in this respect and unsustainable.

Order set aside on grounds of breach of natural justice; matter remanded for fresh adjudication after providing the AD (Cost) report to the appellant.

Non-speaking order - valuation under Rule 11 of the Valuation Rules, 2000 - Use of the multiplier '110-115% of the highest market price' to determine assessable value was not adequately reasoned and therefore could not be sustained. - HELD THAT: - The Tribunal noted that the assessing authority finalised value under Rule 11 of the Valuation Rules, 2000, adopting the AD (Cost) suggestion of valuing at '110-115% of the highest market price.' The order did not record any independent reasons for selecting this percentage nor explain the basis for rejecting the offers and market material relied upon by the appellant (which were discounted as mere offers). In absence of stated reasons for the choice of multiplier and given that the AD (Cost) report was not provided to the appellant, the valuation conclusion was treated as non-speaking and requiring reconsideration.

Valuation sustained neither on record nor reason; remand directed for de novo determination of assessable value with reasons.

Final Conclusion: Impugned assessment order set aside as non-speaking and violative of natural justice; matter remanded to the original authority for de novo adjudication on valuation under Rule 11 after supplying the AD (Cost) report to the appellant and recording reasons for any adopted valuation methodology.

Non-statutory circular - refund under Section 18 subject to restrictions under Section 19 - assessment officer's fact-finding duty to ascertain quantum of manufacturing/invisible loss - uniform percentage for invisible loss unjustified

Non-statutory circular - Validity of the impugned circular (Circular No.22/2011) and challenge thereto - HELD THAT: - The Court held that the impugned circular is a non statutory circular and functions only as a guideline; the prayer to quash the circular was rejected as unnecessary. The earlier decision in the Interfit Techno Products Ltd. batch was relied upon to treat the circular as non statutory and not independently determinative of entitlement to refund or reversal of input tax credit. [Paras 63]

Challenge to the circular rejected; circular characterised as non statutory guideline

Refund under Section 18 subject to restrictions under Section 19 - assessment officer's fact-finding duty to ascertain quantum of manufacturing/invisible loss - Scope and application of Section 18 in relation to Section 19 and the duty of the Assessing Authority when refund claims arise from manufacturing losses - HELD THAT: - The Court held that Section 18 is not an independent, standalone provision and is subject to other provisions of the TNVAT Act, including the restrictions and conditions in Section 19. Accordingly, a dealer claiming refund under Section 18(2) must not only show payment of input tax and use in manufacture but must satisfy the Assessing Authority that the claim is not barred by any restriction in Section 19. The Assessing Authority is required to undertake a fact finding exercise to ascertain the actual quantum of loss of purchased goods vis a vis goods produced and to examine applicability of restrictions, particularly Section 19(9), before allowing refund or directing reversal of input tax credit. [Paras 63]

Section 18 claims must be examined under the restrictions of Section 19; Assessing Officer must verify and quantify the manufacturing/invisible loss before acting on refund or reversal

Uniform percentage for invisible loss unjustified - Lawfulness of adopting a uniform percentage (adhoc 4% or 5%) as 'invisible loss' and consequent reversal of input tax credit - HELD THAT: - The Court held that Assessing Authorities are not justified in adopting a uniform percentage as invisible loss and directing reversal of Input Tax Credit on that basis without individualised examination. Consequently, notices and consequential orders that adopted such uniform adhoc percentages were set aside. However, the Assessing Officer was granted liberty to issue appropriate show cause notices specifying the grounds on which reversal or revision is proposed and, after inviting and considering objections, proceed in accordance with law - thereby remanding the matter for fresh fact finding and lawful exercise of authority. [Paras 4, 63]

Adoption of uniform adhoc percentage for invisible loss set aside; Assessing Officer permitted to issue proper show cause notices and reassess after fact finding

Final Conclusion: Writ petition disposed following the earlier Interfit Techno Products Ltd. line of decisions: the circular treated as non statutory, Section 18 claims must be examined in light of Section 19 with factual quantification of loss by the Assessing Officer, uniform adhoc percentages for invisible loss are impermissible, and Assessing Officers may issue fresh show cause notices and proceed after proper verification.

Deduction of tax at source - compliance with Section 41 of the Bihar VAT Act read with Rule 29 of the Bihar VAT Rules, 2005 - prohibition on deduction from gross bills contrary to prescribed heads - requirement (or absence) of certificate for non-deduction of TDS where payment does not relate to transfer of property - refund of excess tax deducted - intra vires validity of Section 41 and Rule 29

Deduction of tax at source - compliance with Section 41 of the Bihar VAT Act read with Rule 29 of the Bihar VAT Rules, 2005 - prohibition on deduction from gross bills contrary to prescribed heads - Whether the deducting authorities were required to make tax deduction strictly in accordance with Section 41 of the Bihar VAT Act read with Rule 29 of the Bihar VAT Rules, 2005, and not to deduct from the gross running account bills contrary to the provisions and the Court's earlier directions. - HELD THAT: - The Court held that the matter is governed by its earlier order in M/s. Debashree Constructions (India) Pvt. Ltd. , which directed deducting authorities to comply with Section 41 and Rule 29 and to refrain from making deductions in respect of heads which the Act and Rules exclude. The Court noted that doing otherwise would amount to overriding its directions. Reliance was also placed on the earlier Division Bench decision in Abdul Majeed Khan vs. The State of Bihar & Ors. , but this Court observed that that decision does not mandate deduction from the gross value of bills. The judgment emphasises that where part of a payment does not relate to transfer of property in goods (for example service or labour components enumerated in Rule 29), no deduction is permissible in respect of that part, and no certificate is required to avoid deduction in such cases. Accordingly, the authorities cannot, by following an office circular or directions of the Accountant General, make deductions from the gross bill contrary to the statutory scheme and this Court's directions.

Authorities must make TDS strictly in accordance with Section 41 and Rule 29 and shall not deduct from the gross bills contrary to those provisions and this Court's directions.

Requirement (or absence) of certificate for non-deduction of TDS where payment does not relate to transfer of property - intra vires validity of Section 41 and Rule 29 - Whether a certificate from the Commercial Taxes authorities is required to avoid deduction where the payment does not relate to transfer of property in goods involved in execution of a works contract. - HELD THAT: - The Court explained that while certificates from the Deputy Commissioner/Assistant Commissioner/Commercial Taxes Officer are required in cases where the transaction is covered by Section 15 of the Central Sales Tax Act or Section 6 of the Bihar VAT Act, no such certificate is necessary where the payment does not relate to transfer of property in goods. The provisions of Section 41 and Rule 29 explicitly identify parts of payment which are not subject to deduction (such as labour and service components), and the deducting authority is obliged not to deduct in respect of those parts. The Court reaffirmed the intra vires validity of Section 41 and Rule 29 and their mechanism to prevent unauthorized deductions.

No certificate is required for non-deduction where payment does not involve transfer of property; deducting authorities must apply Section 41 and Rule 29 to exclude such parts from TDS.

Refund of excess tax deducted - Whether the petitioner is entitled to refund of the excess amount deducted in the running account bills and the appropriate relief. - HELD THAT: - Having found that deductions made from the gross bills contrary to Section 41 and Rule 29 (and this Court's directions) were impermissible, the Court quashed the impugned letter of the Accountant General (Audit), Bihar, insofar as it directed deduction from the gross amount. The Court directed that any excess amount deducted shall be refunded to the petitioner. The refund is to be made within four weeks from the date of receipt or production of a copy of the order, thereby providing a specific timeline for restitution while leaving the quantum to be determined by application of the statutory scheme.

Impugned direction to deduct from gross bills quashed; respondents directed to refund any excess deducted within four weeks on production/receipt of the order.

Final Conclusion: Writ petition allowed; the Accountant General's letter directing deduction from gross bills quashed insofar as inconsistent with Section 41 and Rule 29 as explained by this Court, respondents directed to comply with those provisions and refund any excess tax deducted within four weeks.

Exemption under Section 8(1)(h) of the RTI Act - absence of pending inquiry as negating exemption - misleading or incorrect information furnished by CPIO - malafide intent - caution and direction to public authority to ensure RTI compliance

Exemption under Section 8(1)(h) of the RTI Act - absence of pending inquiry as negating exemption - Claim of exemption under Section 8(1)(h) held unjustified because no inquiry was pending at the relevant time. - HELD THAT: - The CPIO denied the requested information by invoking exemption under Section 8(1)(h) on the ground that an investigation/enquiry was pending. The Commission found that no inquiry was pending in 2012 and that disciplinary proceedings were ordered only on 13.03.2013, so the factual predicate for the exemption did not exist. Consequently the exemption could not lawfully be claimed and the CPIO's reply of 04.10.2012 was incorrect. The First Appellate Authority had already recorded the error and directed greater care in future. [Paras 6]

The claim of exemption under Section 8(1)(h) was wrongly made and is not sustained.

Misleading or incorrect information furnished by CPIO - malafide intent - caution and direction to public authority to ensure RTI compliance - Although the CPIO furnished misleading and incorrect information, there was no finding of malafide intent; CPIO is cautioned and directed to be careful and ensure RTI Act compliance. - HELD THAT: - The Commission accepted that the CPIO's response was misleading and factually incorrect. However, on the evidence and explanations placed before it, the Commission did not infer any malafide motive on the part of the CPIO, characterising the error as one of judgment. In view of the lapse the CPIO was formally cautioned and directed to ensure that future responses conform to the requirements of the RTI Act and are provided in letter and spirit. [Paras 6]

No malafide intent found; CPIO cautioned and directed to be more careful and to ensure compliance with the RTI Act.

Final Conclusion: The appeal is disposed of: the CPIO's claim of exemption under Section 8(1)(h) was unsustainable because no inquiry was pending at the relevant time; the CPIO furnished incorrect information but acted without malafide intent, and is cautioned and directed to ensure strict compliance with the RTI Act; copies of the decision to be supplied free of cost.