TaxTMI Updates e-Newsletter
May 19,2018

Arm's Length Price - Transfer Pricing-TNMM (Transactional Net Margin Method) - Operating costs - Deferred revenue expenditure - Preoperative expenditure - Reimbursement and markup under inter-company agreement - Amendment to grounds of appeal

Deferred revenue expenditure - Operating costs - Reimbursement and markup under inter-company agreement - Transfer Pricing-TNMM (Transactional Net Margin Method) - Exclusion of deferred revenue expenditure written off (one-fifth amount per year) from operating costs for computation of Arm's Length Price under TNMM and whether additional questions raising this point require determination. - HELD THAT: - The Tribunal held that the deferred revenue expenditure (preoperative, non operating) written off over five years was not an operating cost recoverable under the terms of the Technology Research Agreement and therefore excluded it from operating costs while computing the operating margin under TNMM. The Tribunal noted that the expenditure was incurred prior to commencement of commercial operations, was not towards any specific research project, and was suo motu disallowed by the assessee when computing taxable income; accordingly it did not form part of costs on which the 5% markup was charged by the assessee to the associate enterprise. The High Court recorded that it is partly in agreement with the Tribunal's view and concluded that, on the materials and reasoning before the Tribunal, no substantial question of law arises out of the Revenue's proposed additional questions seeking to challenge that exclusion. Consequently those additional questions raising the correctness of excluding the deferred revenue expenditure from operating costs are not entertained for consideration by this Court. [Paras 5]

The Tribunal's exclusion of the deferred revenue expenditure from operating costs for TNMM was accepted in part and the additional questions on this point are not considered as no substantial question of law arises.

Final Conclusion: Draft amendment to add two additional questions permitted and the appeals admitted for consideration of the listed substantial questions of law; however, the Revenue's further proposed questions challenging the Tribunal's exclusion of deferred revenue expenditure from operating costs are not entertained because no substantial question of law arises on that point.

Exemption under section 10B - Deduction versus exemption distinction - Stage of deduction for eligible undertaking (computation of gross total income) - Set-off of carry forward unabsorbed depreciation - Application of precedent resolving sequencing of set-off and exemption

Exemption under section 10B - Set-off of carry forward unabsorbed depreciation - Stage of deduction for eligible undertaking (computation of gross total income) - Whether deduction/exemption under section 10B is to be allowed before setting off carry forward unabsorbed depreciation of earlier years. - HELD THAT: - The High Court held that the question is squarely covered by the Supreme Court's decision in the Yokogawa India Ltd. line of authorities. That precedent recognises that provisions like section 10A (and by parity section 10B) operate at the stage of computing the profits and gains of the eligible undertaking-i.e., while arriving at the gross total income of that undertaking-and not at the later stage of computing the total income of the assessee after application of Chapter VI provisions. Thus, the relief under section 10B is to be applied prior to undertaking set-off and carry forward adjustments such as unabsorbed depreciation, and not after Chapter VI set-offs. Applying that principle, the Tribunal was correct in allowing the section 10B benefit without first setting off carry forward unabsorbed depreciation. [Paras 4, 5, 6, 7]

Deduction/exemption under section 10B is to be applied prior to set-off of carry forward unabsorbed depreciation; the Tribunal's allowance is upheld.

Final Conclusion: Appeal dismissed; the Tribunal's allowance of section 10B exemption without first setting off carry forward unabsorbed depreciation is affirmed in view of binding precedent.

Disposal of appeals on merits - ex parte dismissal for appellant's default - restoration of ex parte orders - rectification of mistake apparent from record - exercise of writ jurisdiction where alternative remedy is uncertain - exceptions to alternative remedy - violation of natural justice, lack of jurisdiction, perversity

Disposal of appeals on merits - ex parte dismissal for appellant's default - restoration of ex parte orders - Whether the Income Tax Appellate Tribunal could dismiss the appeal for default of the appellant instead of deciding it on merits. - HELD THAT: - The Court held that the statutory scheme and the Tribunal Rules require disposal of an appeal on merits notwithstanding the appellant's non-appearance. Section 254(1) obliges the Appellate Tribunal to give both parties an opportunity of being heard and pass such orders as it thinks fit. Rules 24 and 25 of the Income Tax (Appellate Tribunal) Rules, 1963, impose an obligation on the Tribunal to dispose of the appeal on merits after hearing the respondent when the appellant does not appear, while the proviso to Rule 24 (as amended) permits restoration where the appellant later satisfies the Tribunal of sufficient cause for non-appearance. Thus, dismissal of the appeal for default, without adjudication on merits, was not sustainable; the Tribunal's power under the proviso is to set aside an ex parte order and restore the appeal where sufficient cause is shown. [Paras 2, 4, 5, 7]

The ITAT's dismissal of the appeal for default is unsustainable and cannot be sustained; the appeal must be considered on merits with power to restore in accordance with the proviso to Rule 24.

Exercise of writ jurisdiction where alternative remedy is uncertain - exceptions to alternative remedy - violation of natural justice, lack of jurisdiction, perversity - Whether the writ petition under Article 226 was maintainable despite the availability of an alternative remedy of appeal under Section 260A. - HELD THAT: - The Court observed that an appeal under Section 260A lies only on a substantial question of law and depends on the subjective satisfaction of the High Court; therefore the availability of that remedy is uncertain and not necessarily an equally efficacious alternative. Further, recognized exceptions permit entertaining a writ where the order is in violation of principles of natural justice, passed under a law which is ultra vires or without jurisdiction, or is perverse. The impugned order was found patently repugnant to Section 254 read with Rule 24, bringing the case within the exceptions that justify exercise of writ jurisdiction. [Paras 9, 10, 11]

The writ petition is maintainable; the High Court may exercise its jurisdiction under Article 226 in the circumstances of this case.

Rectification of mistake apparent from record - restoration of ex parte orders - Remand for fresh consideration by the Tribunal. - HELD THAT: - The Court set aside the ITAT order dismissing the appeal for default and directed the Tribunal to consider the matter afresh on merits in accordance with law. The Tribunal is required to take a fresh decision and, if appropriate under the Rules, consider restoration upon any acceptable showing of sufficient cause for non-appearance. The Court prescribed a preference that this be done within 45 days from communication of the order. [Paras 12]

The ITAT order is set aside and the matter is remanded to the Tribunal for fresh adjudication on merits in accordance with law within the directed timeframe.

Final Conclusion: Writ petition allowed; the ITAT order dated 20.6.2017 dismissing the appeal for default is set aside and the matter remanded to the Tribunal to be decided on merits in accordance with law, with the Tribunal to act on restoration principles where applicable and to prefer determination within the timeframe indicated by the Court.

Capital gains versus business income - classification of income from sale of land - development agreement and absence of developer's risk - value addition by seller - evidentiary burden to prove trading/development activity

Capital gains versus business income - classification of income from sale of land - Assessee's receipts from sale of six plots in the assessment year were long term capital gains and not business income. - HELD THAT: - The Tribunal and CIT(A) found on the material that the assessee, a cooperative housing society which had acquired agricultural land earlier, entered into successive development agreements that were subsequently cancelled. There was no evidence that the assessee had undertaken developer type risk or responsibility, nor any evidence of value addition to the plots before sale. Prior transfers in earlier years had not been treated as business income. The books were audited and there were no resolutions or records indicating that the society undertook development activities itself. In the absence of cogent evidence that the assessee acted as a developer or carried on trading in land, the classification by the Assessing Officer as business income was held to be incorrect and the receipts were rightly treated as capital gains.

Revenue's appeal dismissed; receipts from the six plot sales treated as capital gains, not business income.

Final Conclusion: Tax Appeals dismissed; the Tribunal's and CIT(A)'s conclusion that the sale proceeds in AY 2010 2011 represent capital gains and not business income is upheld.

Remand for fresh adjudication in light of binding precedent - provision for doubtful debts and doubtful advances - depreciation on goodwill as a depreciable asset - Explanation 3 to subsection (1) of section 32 - inclusion of goodwill within the definition of asset and block of asset - revised return requirement for raising additional claims during assessment proceedings

Remand for fresh adjudication in light of binding precedent - provision for doubtful debts and doubtful advances - Validity of the Tribunal's remand of the claim for provision for doubtful debts and doubtful advances to the Assessing Officer for fresh adjudication in light of a subsequent Full Bench decision. - HELD THAT: - The Tribunal set aside the earlier adjudications and remitted the matter to the Assessing Officer to decide afresh having regard to the Full Bench judgment of this Court in Commissioner of Income-Tax v. Vodafone Essar Gujarat Ltd., which was not available when the Assessing Officer and the Commissioner (Appeals) decided the claim. The High Court found no error in the Tribunal's approach in directing a fresh decision in the light of that later binding authority, noting that the Full Bench judgment post-dated the earlier decisions and that Revenue had not objected below to the remedy adopted by the Tribunal.

Tribunal's remand upheld; no question of law arises in respect of the remand.

Depreciation on goodwill as a depreciable asset - Explanation 3 to subsection (1) of section 32 - inclusion of goodwill within the definition of asset and block of asset - revised return requirement for raising additional claims during assessment proceedings - Whether the assessee was entitled to claim depreciation on the excess consideration paid attributable to goodwill. - HELD THAT: - The assessee, after filing the return, asserted during assessment proceedings that excess consideration paid on acquisition related to goodwill and sought depreciation. The Assessing Officer denied the claim on the ground that no revised return had been filed; the CIT(A) rejected the claim on merits. The Tribunal accepted the claim by applying the Tribunal's earlier reasoning for a prior year and by construing Explanation 3 to subsection (1) of section 32 to include goodwill within the meaning of 'asset' and 'block of asset', and relied on the Supreme Court decision in CIT v. Smifs Securities Ltd. to treat goodwill as a depreciable asset. The High Court agreed with the Tribunal's conclusion that the excess payment constituted goodwill and that goodwill is a depreciable asset, and found no tenable question of law for interference.

Tribunal's allowance of depreciation on the excess payment as goodwill upheld; no question of law arises.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal's remand regarding provisions for doubtful debts and advances is sustained and the Tribunal's allowance of depreciation on the excess consideration treated as goodwill is upheld.

Taxability of assignment of call options as capital gains - application of transfer pricing provisions to intra-group transactions - effect of amendments to definition of capital asset and transfer in taxing rights/management interests - stay of coercive recovery on condition of interim deposit - continuation of corporate guarantee

Admission of tax appeal - framing of substantial questions of law - Admission of the Tax Appeal and framing of several questions for adjudication. - HELD THAT: - The Court admitted the Tax Appeal arising out of the Tribunal's judgment that applied transfer pricing provisions to tax alleged capital gains arising from transactions said to involve assignment of call options and related corporate reorganisations. The order records that several substantial questions, including whether a taxing event occurred, whether transfer pricing provisions apply, and the applicability of subsequent statutory amendments to definitions of capital asset and transfer, have been framed for consideration in the appeal.

Tax Appeal admitted and several questions framed for determination.

Stay of coercive recovery on condition of interim deposit - interim deposit to secure tax demand - Grant of interim stay of further coercive recovery subject to specified interim deposit. - HELD THAT: - Having considered submissions and the background including the quantum of the tax liability and amounts already deposited, the Court directed that further coercive recovery arising from the Tribunal's judgment shall be stayed provided the assessee deposits an additional sum with the Department by a stated date. The order records the total deposit to be achieved and describes it as approximately twenty per cent of the outstanding demand. The stay is expressly conditioned upon the stated payment being made by the deadline.

Further coercive recovery stayed on condition that the assessee makes the additional interim deposit by the specified date, reaching the prescribed total deposit.

Continuation of corporate guarantee - Continuation of the corporate guarantee provided by the parent company to cover the unpaid amount. - HELD THAT: - The Court ordered that the corporate guarantee furnished by the parent company in respect of the unpaid tax demand shall continue to remain in force, without alteration, in conjunction with the interim deposit and stay directions. No alteration to the guarantee was directed.

The corporate guarantee shall continue to cover the unpaid amount.

Final Conclusion: Tax Appeal admitted and interim relief granted: further coercive recovery stayed on the assessee making the specified additional deposit by the deadline (bringing total deposits to the stated amount), and the existing corporate guarantee to remain in force; substantive questions on taxability and applicability of transfer pricing and amended definitions reserved for adjudication on the appeal.

Treatment of income as capital gain or business income - application of CBDT circular No. 6 of 2016 - binding effect of assessee's declared intention in respect of listed shares - exclusion for transactions where genuineness is questionable (sham transactions) - consistency of stand across assessment years

Treatment of income as capital gain or business income - application of CBDT circular No. 6 of 2016 - binding effect of assessee's declared intention in respect of listed shares - consistency of stand across assessment years - Income from sale of the listed shares of VEOL is to be treated as capital gain as held by the Tribunal. - HELD THAT: - The Tribunal, after placing reliance on the CBDT circular No. 6 of 2016, accepted the assessee's declaration regarding the nature of shares and treated the income as capital gain. The circular directs that where an assessee holding listed shares for more than 12 months opts to treat the income as capital gain, the Assessing Officer shall not dispute that stand, and such stand must remain consistent in subsequent assessment years. The Assessing Officer and the CIT(A) had classified the receipts as business income on the basis of observations suggestive of possible price-rigging, but those findings amount at best to suspicion. The court found that the Revenue did not establish that the transactions were sham or that the genuineness of the transactions was questionable so as to displace the protective directive in the circular. Accordingly, the Tribunal's acceptance of the assessee's treatment as capital gain, in the absence of proof of sham or bogus claims, was upheld. [Paras 3, 6, 8]

Tribunal was right in treating the income as capital gain and the Revenue's appeal is dismissed.

Exclusion for transactions where genuineness is questionable (sham transactions) - application of CBDT circular No. 6 of 2016 - The exclusion in paragraph 4 of the CBDT circular (non-application where genuineness is questionable) does not apply to the transactions in question. - HELD THAT: - Paragraph 4 of the circular excludes its application to transactions where the genuineness is questionable, such as bogus claims or sham transactions. The court examined whether the Revenue had shown that the transactions were such as to attract the exclusion. The findings of the Assessing Officer and CIT(A) were held to be suspicions about possible rigging and did not establish that the transactions were bogus or sham. In absence of such a finding, the protective mandate of the circular remains applicable and the exclusion cannot be invoked. [Paras 7, 8]

Exclusion clause not attracted; circular applies and does not permit recharacterisation as business income on the present record.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal correctly applied CBDT circular No. 6 of 2016 in treating the receipt on sale of listed shares as capital gain; the exclusion for sham or bogus transactions was not attracted on the material before the authorities.

Assessment of undisclosed income - estimation of profit on unaccounted sales - appellate correction of assessment ratio - tribunal confirmation and clerical error correction

Estimation of profit on unaccounted sales - assessment of undisclosed income - Whether the additional income from unaccounted sales should be assessed at the rate adopted by the Assessing Officer, the Commissioner (Appeals), or otherwise, and whether the Tribunal's inadvertent reference to 'gross profit' affects the substantive outcome. - HELD THAT: - The Assessing Officer assessed profit on unaccounted sales at 30%. The assessee offered to treat 20% of unaccounted sales as additional income. The Commissioner (Appeals) examined the offer and, as a compromise between the contentions, estimated the additional income at 25% of the unaccounted sales, thereby reducing the Assessing Officer's estimate. The Tribunal upheld the Commissioner (Appeals)'s conclusion, giving reasons supporting the 25% estimate, but in the concluding portion of its order mistakenly referred to 25% of 'gross profit' instead of 25% of 'unaccounted sales'. The High Court examined the record, noted the assessee's offer and the Commissioner (Appeals)'s proper prospective assessment at 25% of unaccounted sales, and held that the Tribunal's inadvertent wording was a clerical error which did not alter the substantive confirmation of the Commissioner (Appeals)'s decision. The Tribunal's order is therefore to be read as confirming a 25% rate on unaccounted sales. [Paras 3, 4]

Tribunal's confirmation of Commissioner (Appeals)'s estimate is upheld and construed as assessment of additional income at 25% of the unaccounted sales; the Tribunal's inadvertent reference to 'gross profit' is ignored.

Final Conclusion: All Tax Appeals are disposed of by confirming the Commissioner (Appeals)'s estimation of additional income at 25% of the unaccounted sales for the assessment years 2005-06 to 2011-12; the Tribunal's inadvertent reference to 'gross profit' is treated as a clerical error and does not affect the outcome.

Collection of tax at source - declaration under sub-section (1A) of Section 206C - Rule 37C - form 27C, verification and delivery to Commissioner - sub-section (7) of Section 206C - levy of tax and interest for non-collection - substantial compliance - genuineness and co-relation of declarations

Collection of tax at source - declaration under sub-section (1A) of Section 206C - Rule 37C - form 27C, verification and delivery to Commissioner - sub-section (7) of Section 206C - levy of tax and interest for non-collection - substantial compliance - genuineness and co-relation of declarations - Validity of deleting the addition and interest under Section 206C(1) and levy under Section 206C(7) where declarations under Section 206C(1A) were produced belatedly but found genuine and co-related - HELD THAT: - Section 206C(1) imposes a substantive obligation on the seller to collect tax at source, while Section 206C(1A) provides a statutory exception where the buyer furnishes a prescribed declaration. Rule 37C prescribes form 27C, verification, furnishing in duplicate to the seller and delivery of a copy to the Commissioner within a specified time. The Court held that the time-limit and delivery requirements in Rule 37C are procedural prescriptions and are not made substantive conditions in Section 206C(1A). Where there is no dispute as to the genuineness of the declarations and there is co-relation between sales and the declarations, a belated filing constitutes substantial compliance and will not defeat the benefit of Section 206C(1A). Although delay may, in other circumstances, impede Revenue's ability to verify and could justify refusal of relief, no such prejudice or adverse material was shown in this case. The Tribunal's factual finding as to genuineness and co-relation was accepted and, on that basis, the addition and interest levied under Section 206C(7) were correctly deleted.

Tribunal's deletion of the addition and interest under Section 206C(7) upheld as the declarations, though belated, were genuine and substantially complied with Section 206C(1A) and Rule 37C's procedural defaults did not defeat the exemption.

Final Conclusion: Tax appeal dismissed; deletion of tax and interest sustained as declarations were genuine and substantial compliance with Section 206C(1A) justified relief despite procedural delay under Rule 37C.

Disallowance of interest expenditure - genuineness of loan transactions - relevance of material found during search - separability of assessments under section 153A and scrutiny assessment under section 143(3) - burden under section 68 of the Act - reliance on findings in other assessment years

Disallowance of interest expenditure - genuineness of loan transactions - separability of assessments under section 153A and scrutiny assessment under section 143(3) - reliance on findings in other assessment years - burden under section 68 of the Act - Deletion by the Tribunal of the disallowance of interest for assessment year 2010-2011 on the ground that earlier years' additions were not based on material found during search was incorrect. - HELD THAT: - For AY 2010-2011 the Assessing Officer after scrutiny under section 143(3) formed a definite finding that the loan transaction was not genuine and disallowed the interest expenditure; the Commissioner (Appeals) called for a remand report, reexamined the matter and affirmed that finding. The Tribunal deleted the addition by referring to its conclusions in appeals arising from assessments under section 153A for other years - namely that additions in those years were not relatable to material found during the search. The Court held that assessments under section 153A for the earlier years have a different purport and are independent and severable from a scrutiny assessment under section 143(3) for AY 2010-2011. Because the Assessing Officer and the CIT(A) for the relevant year had independently examined and concluded on the genuineness of the loan transaction (thereby affecting recognition of interest), the Tribunal was not justified in granting relief in AY 2010-2011 merely by relying on its findings in other assessment years without disturbing the specific findings recorded for the year under consideration. The Court therefore reversed the Tribunal's deletion insofar as it affected the disallowance of interest for AY 2010-2011.

Tribunal's deletion of the disallowance of interest for AY 2010-2011 was set aside and the Revenue's appeal allowed.

Final Conclusion: The High Court answered the question against the assessee and in favour of the Revenue, reversing the Tribunal's deletion of the disallowance of interest for assessment year 2010-2011 and allowing the tax appeal.

Commencement of business - allowability of pre commencement expenditure - evidence of business activity (market survey, correspondence) - distinguishing precedents

Commencement of business - allowability of pre commencement expenditure - evidence of business activity (market survey, correspondence) - Whether the Tribunal was right in law in disallowing the claimed business expenditure of Rs. 19.26 lakhs on the ground that the assessee had not carried on any business in the relevant year. - HELD THAT: - The Court upheld the concurrent conclusion of the Assessing Officer, the CIT(A), and the Tribunal that the assessee had not commenced business in the year relevant to the assessment. The authorities examined the materials relied upon by the assessee - market surveys and letters to prospective buyers and re rolling mills - and found them to be preliminary inquiries rather than evidence of active solicitation or concluded negotiations. The correspondence showed significant time gaps (often over one year, sometimes over two years) between the letters and any eventual sale or purchase, and there was no contemporaneous evidence of registration as a trading concern or procurement of statutory licences. In the absence of income generation or demonstrable advanced commercial negotiations, the payment of salaries, bonuses and directors' remuneration was not attributable to a carrying on of business in that year. The Court agreed that such pre operative activities, as presented on the record, did not establish commencement sufficient to allow the claimed expenditure.

Claimed expenditure disallowed; Tribunal's conclusion that business had not commenced affirmed.

Distinguishing precedents - commencement of business - Whether the Tribunal rightly distinguished the Delhi High Court decisions relied upon by the assessee. - HELD THAT: - The Court found no error in the Tribunal's approach to precedent. The Delhi High Court decisions invoked by the assessee were based on materially different facts that showed active groundwork and more concrete commercial activity. Given the factual differences - notably the absence here of active solicitation, registration as a trading concern, statutory licences, and proximate commercial negotiations - the Tribunal was justified in distinguishing those authorities and not applying them to permit the expenditure.

Tribunal's distinction of the cited Delhi High Court decisions upheld.

Final Conclusion: The tax appeal is dismissed: the Tribunal's factual conclusion that business had not commenced in Asst. Year 2011-12 (F.Y. 2010-11) is affirmed and the claimed pre commencement expenditure is disallowed; the Tribunal was correct to distinguish the Delhi High Court precedents on their differing facts.

Charitable purpose as per proviso to section 2(15) including advancement of sports as an object of general public utility - exemption under section 11 - doctrine of mutuality - application of funds under section 11 - precedential effect of earlier judicial decisions in assessee's own case

Charitable purpose as per proviso to section 2(15) including advancement of sports as an object of general public utility - exemption under section 11 - doctrine of mutuality - precedential effect of earlier judicial decisions in assessee's own case - Assessee entitled to exemption under section 11 for assessment year 2012-13 on the ground that its activities fall within the proviso to section 2(15) as an object of general public utility - HELD THAT: - The Tribunal found no change in facts for the year under consideration and followed the consistent view taken in the assessee's earlier proceedings, including the decision of the Bombay High Court in the assessee's own case and earlier orders of the Tribunal in favour of the assessee. The Revenue's contention that the club's activities are akin to a mutual association was rejected: the provision of sports facilities open to the general public without restrictive membership falls within the proviso to section 2(15) as an object of general public utility. Relying on the earlier judicial determinations in the assessee's own case, the Tribunal directed the Assessing Officer to allow the benefit of exemption under section 11 and to compute income in accordance with sections 11 to 13 where applicable. The Tribunal therefore dismissed the Revenue's appeal and upheld the CIT(A)'s order allowing exemption.

Revenue's appeal dismissed; assessee entitled to exemption under section 11 for AY 2012-13 and AO directed to allow exemption and compute income in accordance with sections 11 to 13.

Final Conclusion: The appeal by the Revenue is dismissed; the assessee, being held a charitable institution under the proviso to section 2(15), is entitled to exemption under section 11 for assessment year 2012-13 and the Assessing Officer is directed to give effect to that entitlement and compute income in terms of sections 11 to 13.

Section 50C(2) and referral to Valuation Officer for determining fair market value - Distress sale and acceptance of transaction value as fair market value - Reopening of assessment under section 147 and requirement of valid reasons - Attribution of capital gains - taxability in hands of transferor versus transferee

Section 50C(2) and referral to Valuation Officer for determining fair market value - Distress sale and acceptance of transaction value as fair market value - Reopening of assessment under section 147 and requirement of valid reasons - Validity of reopening assessment to re-value sale consideration and the correctness of addition of Rs. 3,92,869/- made by AO by reworking sale consideration and cost of acquisition - HELD THAT: - The Tribunal held that the question of adopting valuation of the property sold by the assessee had been finally crystallised in the earlier proceedings where the Commissioner (Appeals) accepted the assessee's case of a distress sale and that the transaction value could be accepted as the fair market value, observing that the AO had failed to refer the property to the Valuation Cell as mandated by section 50C(2). Given that the matter had attained finality in the earlier round, the AO was precluded from re-valuing the sale consideration and from re-working the cost of acquisition in the reopening proceedings. The Tribunal also noted the unexplained and belated reopening under section 147 after completion of scrutiny assessment and found no basis to sustain the addition. Consequently the addition of Rs. 3,92,869/- was held to be incorrect and deleted. [Paras 7]

Addition of Rs. 3,92,869/- deleted; assessee's ground on this issue allowed.

Attribution of capital gains - taxability in hands of transferor versus transferee - Reopening of assessment under section 147 and requirement of valid reasons - Whether capital gains arising on sale of properties in the hands of the assessee's mother could be assessed in the hands of the assessee in the reopened assessment - HELD THAT: - The Tribunal found that the properties had been gifted to the assessee's mother by registered deed on 27-07-2006 and thus were not assets in the hands of the assessee. The Tribunal observed that only one sale relevant to AY. 2007-08 pertained to the impugned assessment year while two other sales fell in AY. 2008-09, and that the AO did not explain how gains of the mother for different assessment years could be taxed in the assessee's hands. The record indicated the mother had filed return and paid tax for her gains and the AO's reliance on an alleged subsequent gift of sale proceeds to the assessee was not supported by adequate material. In these circumstances the Tribunal held that prosecuting capital gains in the assessee's hands was unsustainable and that initiation of proceedings under section 147 was bad in law insofar as it sought to bring those gains to tax in the assessee's hands. [Paras 7]

Addition relating to capital gains of the mother as assessed in the hands of the assessee deleted; proceedings under section 147 in this respect held bad in law.

Final Conclusion: The appeal is allowed: the addition of Rs. 3,92,869/- made by the AO by revaluing the sale consideration is deleted, and the assessment raising capital gains of the assessee on account of sales in the hands of his mother is quashed; the reopened proceedings under section 147 are found unsustainable insofar as they seek to tax those amounts in the assessee's hands.

Valuation of unlisted shares by Discounted Cash Flow (DCF) method - determination of fair market value for section 56(2)(viib) - reliance on merchant banker valuation and its disclaimer - obligation to refer to Departmental Valuation Officer - use of Net Asset Value (NAV) / book value where projections are unverifiable - best judgment assessment in absence of substantiating material

Valuation of unlisted shares by Discounted Cash Flow (DCF) method - determination of fair market value for section 56(2)(viib) - reliance on merchant banker valuation and its disclaimer - use of Net Asset Value (NAV) / book value where projections are unverifiable - Whether the Assessing Officer was justified in rejecting the assessee's DCF-based valuation and determining the fair market value by adopting NAV/best judgment under section 56(2)(viib). - HELD THAT: - The Tribunal held that the DCF valuation could not be accepted because the assessee failed to produce evidence to substantiate the projections and the inputs given to the merchant banker. The valuation report carried a broad disclaimer that the valuer had relied upon information provided by the assessee without independent verification, and no material was furnished to enable verification of the reasonableness of cash-flow projections, discount rate components (risk-free rate, market return, beta, company-specific risk) or other assumptions. In those circumstances the correctness of the DCF result could not be tested even by a Departmental Valuation Officer. Given the absence of material and the possibility of reverse engineering of figures, the authorities were justified in rejecting the unverifiable DCF result and applying the NAV/book value approach and best judgment to determine the share value for the purposes of section 56(2)(viib). [Paras 15, 16]

DCF valuation rejected and the NAV / best judgment determination of fair market value confirmed.

Obligation to refer to Departmental Valuation Officer - best judgment assessment in absence of substantiating material - Whether the Assessing Officer was obliged to refer the valuation to the Departmental Valuation Officer instead of adopting an alternative method. - HELD THAT: - The Tribunal found no such obligation where the assessee failed to produce the underlying material enabling verification of the DCF inputs. The court observed that a reference to the Departmental Valuation Officer would be futile if the foundational data supplied to the merchant banker could not be examined, particularly given the valuer's disclaimer that no independent verification had been carried out. In those circumstances the AO was entitled to proceed by best judgment and adopt NAV/book value to determine the fair market value. [Paras 15]

No mandatory duty to refer to Departmental Valuation Officer; AO entitled to adopt NAV / best judgment in absence of verifiable material.

Final Conclusion: The Tribunal dismissed the appeal, upholding the addition made under section 56(2)(viib) by rejecting the unsubstantiated DCF valuation and confirming the AO's NAV / best-judgment determination of fair market value for AY 2014-15.

Transfer within the meaning of section 2(47) of the Income Tax Act - family settlement - gift between relatives - relinquishment of rights in property - long term capital gain

Family settlement - gift between relatives - transfer within the meaning of section 2(47) of the Income Tax Act - long term capital gain - Whether the assessee's relinquishment by gift of her 50% share in the family flat in favour of her brother in law, coupled with receipt of a cash gift from him, amounted to a 'transfer' attracting capital gains tax under the definition of transfer in section 2(47). - HELD THAT: - The Tribunal examined the factual matrix: the flat was a family property held jointly by the assessee and her brother in law; the family had agreed to acquire separate flats for members and, pursuant to that family arrangement, the assessee executed a gift deed relinquishing her 50% share in favour of her brother in law. Although the assessee also received a cash gift from the brother in law in the same year, the Tribunal accepted the case that both transactions formed part of the internal family arrangement to allocate property and preserve family harmony. Applying the legal distinction between transfers attracting capital gains and genuine family settlements/gifts between relatives, the Tribunal concluded that the relinquishment was not a taxable transfer under the definition of transfer in section 2(47) and therefore did not give rise to long term capital gain. The Tribunal found that the Assessing Officer and the Commissioner (Appeals) had erred in treating the transactions as a transfer for the purpose of computing capital gains and thus reversed their findings. [Paras 6, 7]

The relinquishment by gift of the 50% share pursuant to the family arrangement is not a transfer under section 2(47) and the addition/ computation of long term capital gain is deleted.

Final Conclusion: The appeal is allowed: the Tribunal held that the gift of 50% interest in the family flat pursuant to a family arrangement, notwithstanding a contemporaneous cash gift between the parties, does not constitute a 'transfer' under section 2(47) and directed deletion of the long term capital gain addition.

Pre-deposit requirement for appellate jurisdiction - status quo on recovery and refund - revival of dismissed appeals pending higher court decision - classification of bituminous coal and steam coal

Pre-deposit requirement for appellate jurisdiction - status quo on recovery and refund - Validity of the Tribunal's dismissal of appeals for failure to fulfill the pre-deposit condition in light of a pending Supreme Court determination on classification, and the maintenance of status quo on recovery and refund. - HELD THAT: - The Tribunal had earlier declined to permit recovery or refunds and had stayed further enforcement of demands in a large group of appeals because the determinative question of classification of steam coal and bituminous coal was pending before the Supreme Court. The High Court applied the same formula to the present appeals and held that the impugned orders of the Tribunal dismissing the appeals on the ground of non-compliance with the pre-deposit requirement cannot survive. The Court recorded that, in the interest of justice and consistency with the Tribunal's approach in the group order, neither recovery by the department nor claims for refund by the assessees should be processed while the Supreme Court's decision on the classification issue is awaited.

The Tribunal's dismissal of the appeals for non-fulfilment of the pre-deposit condition is set aside and the status quo as to recovery and refund is to be maintained until the Supreme Court delivers its judgment on the classification issue.

Revival of dismissed appeals pending higher court decision - classification of bituminous coal and steam coal - Procedure for revival and further adjudication of the appeals after the Supreme Court renders its decision on the classification issue. - HELD THAT: - The Court held that once the Supreme Court's judgment on the classification of steam coal and bituminous coal is available, the appellants are at liberty to approach the Tribunal for revival of their appeals. Such revival would place the appeals back at the stage of meeting the pre-deposit requirement, and the Tribunal is to consider the question of pre-deposit and any ancillary issues afresh in the light of the Supreme Court's decision. The High Court did not decide the merits of the classification question itself; it limited its direction to the manner of procedural revival and fresh consideration post the higher court's ruling.

Appeals may be revived before the Tribunal after the Supreme Court's judgment; the Tribunal shall consider the pre-deposit requirement and any ancillary issues afresh in light of that outcome.

Final Conclusion: The impugned Tribunal orders dismissing the appeals for non-compliance with the pre-deposit condition are set aside; status quo as to recovery and refunds is to be maintained pending the Supreme Court's decision on classification of bituminous and steam coal, and the appellants may seek revival of their appeals for fresh consideration thereafter.

Identity of goods after processing - subsequent sale condition of exemption notification - processing/conversion not producing a new product - application of precedent to identical controversy - double taxation in successive sales

Subsequent sale condition of exemption notification - identity of goods after processing - Transformation of imported rough logs into sawn timber before sale does not vitiate the condition of subsequent sale in exemption Notification No. 102/2007-Customs. - HELD THAT: - The Court held that where imported raw logs or timber are cut into smaller pieces by sawing prior to sale, no new product comes into existence and the identity of the article does not undergo a fundamental change. The sawing and sizing carried out (including reduction of length to comply with transport regulations) were incidental to sale and did not amount to manufacture or conversion that would defeat the exemption condition. Reliance was placed on the reasoning in the Division Bench decision in Commissioner of Customs v. M/s. Variety Lumbers Pvt. Ltd., which construed 'timber' and held that dressed or sized logs remain timber for the purposes of sales tax/exemption analysis. [Paras 2]

Claim for exemption under Notification No. 102/2007-Customs was not vitiated by cutting imported logs into smaller pieces before sale.

Identity of goods after processing - processing/conversion not producing a new product - The goods sold in the domestic market after sawing were not different goods falling under a different tariff heading such as to disentitle the importer from the benefit claimed. - HELD THAT: - Applying the reasoning that planks, rafters and sawn pieces remain timber and that ordinary sawing/reshaping does not create a fundamentally different commodity, the Court found no basis to conclude that the imported item differed in identity from the item sold. Consequently, the department's contention that the goods became different for tariff/notification purposes was rejected. [Paras 2]

The sale of sawn and sized timber pieces was of the same article imported, and the benefit of the notification could not be denied on the ground that different goods were sold.

Application of precedent to identical controversy - The Tribunal and Commissioner (Appeals) were correct to follow the Division Bench judgment in Variety Lumbers and the consequent line of reasoning. - HELD THAT: - The High Court observed that the present controversy is covered by the Division Bench decision in Commissioner of Customs v. M/s. Variety Lumbers Pvt. Ltd., where identical factual and legal questions were considered and decided in favour of the importer. Given the identity of issues, following that precedent was appropriate and no substantial error of law was found in the Tribunal's or Commissioner (Appeals)'s reliance on that decision, notwithstanding the department's pending proceedings in higher forums. [Paras 2]

No substantial error in upholding the orders that followed the earlier Division Bench judgment; reliance on that precedent was justified.

Application of precedent to identical controversy - substantive consideration of departmental grounds - The Tribunal did not commit substantial error by purportedly not considering the department's grounds of appeal. - HELD THAT: - Having determined that the legal question was covered by the Division Bench decision and that the processing did not change the identity of goods, the Court found no merit in the contention that the Tribunal failed to consider the department's grounds. The determinative legal reasoning addressed the department's contentions and led to dismissal of the departmental appeal. [Paras 2]

The Tribunal's consideration and conclusion were adequate; no error warranting interference was shown.

Final Conclusion: The departmental Tax Appeal is dismissed; the Tribunal's and Commissioner (Appeals)'s orders upholding the exemption claim were affirmed in view of the Division Bench precedent and the finding that sawing/sizing did not alter the identity of the imported timber.

Directory nature of procedural time limits under CBLR 2013 - vitiation of disciplinary proceedings for non-observance of prescribed timelines - liability of a Customs House Agent for exporter s mis-declaration - duty to verify antecedents of the exporter - imposition of penalty under CBLR 2013

Directory nature of procedural time limits under CBLR 2013 - vitiation of disciplinary proceedings for non-observance of prescribed timelines - Whether proceedings under CBLR 2013 are vitiated by non-compliance with the time limits specified in Regulation 20(1) and Regulation 20(7). - HELD THAT: - The Tribunal examined the record and found that the time limits in Regulation 20(1) and 20(7) were not complied with. It then considered whether such non-observance would invalidate the proceedings. Reliance was placed on the reasoning in the cited High Court decision which held that where a regulation prescribes a time frame but does not specify a consequent benefit or forfeiture upon non-compliance, the time limit is to be construed as directory rather than mandatory. Applying that principle, the Bench concluded that the absence of any statutory consequence in Regulation 20 for delay weighed against treating the timelines as mandatory and therefore non-observance alone did not vitiate the disciplinary proceedings under CBLR 2013. [Paras 6, 7, 8]

Time limits in Regulation 20(1) and 20(7) are directory and failure to strictly observe them does not per se vitiate the proceedings.

Liability of a Customs House Agent for exporter s mis-declaration - duty to verify antecedents of the exporter - imposition of penalty under CBLR 2013 - Whether the appellant (CHA) was liable for the alleged over-valuation in the shipping bills and whether imposition of penalty under CBLR 2013 was justified on the merits. - HELD THAT: - The disciplinary proceedings arose from twelve shipping bills submitted by the appellant on behalf of an exporter, which the Customs found to be over-valued. The inquiry officer s report, following consideration of evidence and cross-examination, exonerated the appellant of contravening the Regulations. Although the Licensing Authority disagreed, the Tribunal noted on the record that the shipping bills had been filed by the CHA based on documents provided by the exporter and there was nothing to show the appellant was aware of any mis-declaration or over-valuation. In these circumstances the Tribunal found no material to hold the appellant liable or to justify the penalty. The Tribunal thus accepted the exonerative finding and rejected the Licensing Authority s conclusion. [Paras 9, 10, 11, 12]

Appellant/CHA was not shown to be aware of mis-declaration; penalty under CBLR 2013 set aside.

Final Conclusion: The application for restoration was allowed, the appeal was heard on merits, the Tribunal held that non-observance of the CBLR 2013 time limits did not vitiate the proceedings and that on merits the CHA was not liable; the impugned order imposing penalty is set aside and the appeal is allowed.

Confiscation of prohibited goods - Misdeclaration of imported goods - Applicability of Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2008 to CRT/Data Graphic Picture Tubes - Import without Ministry of Environment and Forests permission treated as illegal and liable for re-export - CBEC Circular No. 27/2011-Customs - obligation to examine old and used second hand goods - Reduction and confirmation of penalty under Section 112/112A of the Customs Act

Applicability of Hazardous Waste (Management, Handling and Trans-boundary Movement) Rules, 2008 to CRT/Data Graphic Picture Tubes - Confiscation of prohibited goods - CBEC Circular No. 27/2011-Customs - obligation to examine old and used second hand goods - Import without Ministry of Environment and Forests permission treated as illegal and liable for re-export - Whether the imported colour picture tubes were correctly held to be old/used hazardous e-waste and therefore liable to confiscation and re-export for import without MoEF permission. - HELD THAT: - The Tribunal accepted the chartered engineer's report and the Ministry of Environment and Forests' communication that CRT/data graphic picture tubes, if old and used, fall within the Hazardous Waste Rules and cannot be imported without MoEF permission. Reliance on CBEC Circular No. 27/2011-Customs to examine second-hand/old electronic assemblies was held appropriate. The appellant's single letter from the supplier, purportedly explaining inadvertent loading, was treated as an insufficient rebuttal and a contrived attempt to cover misdeclaration. In absence of any permission, licence, or credible proof of lawful import for reuse, the imported picture tubes were lawfully characterized as prohibited/illegal imports under the Rules and Customs law and liable to confiscation and the prescribed direction for re-export was properly imposed. [Paras 11]

Findings that the goods were old/used hazardous e-waste and that import without MoEF permission rendered them prohibited were upheld; confiscation and direction for re-export were sustained.

Misdeclaration of imported goods - Reduction and confirmation of penalty under Section 112/112A of the Customs Act - Whether imposition and quantum of penalty on the appellant were justified and sustainable. - HELD THAT: - The Tribunal observed that concealment of the true nature of the goods amounted to misdeclaration and supported imposition of penalty. Noting no aberration, arbitrariness or illegality in the disciplinary exercise by the authorities, and that the Commissioner (Appeals) had already moderated the penalty, the Tribunal found no reason to interfere. Precedent and administrative discretion to reduce penalty were recognised, and the appellate authority's mitigation was accepted as within statutory competence. [Paras 11, 12]

Penalty as reduced by the Commissioner (Appeals) was upheld and no interference warranted.

Final Conclusion: The order of the Commissioner of Customs (Appeals) dated 17.06.2013 upholding confiscation of the imported picture tubes as old/used hazardous e-waste, directing re-export within the stipulated period, and confirming the reduced penalty, is upheld; the appellant is directed to comply with the directions and warned against importing e-waste without requisite permissions.

Liability for penalty under Section 112(a) of the Customs Act, 1962 for wrongful declarations - liability for penalty under Section 117 of the Customs Act, 1962 for contravention of Customs Act - due diligence obligations under Courier Imports and Exports (Clearance) Regulations, 1998 - distinction between regulatory non-compliance and penal culpability

Liability for penalty under Section 112(a) of the Customs Act, 1962 for wrongful declarations - due diligence obligations under Courier Imports and Exports (Clearance) Regulations, 1998 - distinction between regulatory non-compliance and penal culpability - Penalty under Section 112(a) of the Customs Act, 1962 imposed on the courier-appellant for alleged wrongful declarations in courier bills of entry. - HELD THAT: - The adjudicating authority's findings do not indicate that the appellant wilfully or knowingly made wrong declarations in the courier bills of entry. The violation found by the authority was limited to the appellant's omission to independently cross-check declared value, importer's name, IEC and identity of the person submitting documents. Such omissions amount to failure in fulfilling regulatory due diligence under the Courier Imports and Exports (Clearance) Regulations, 1998 rather than deliberate mis-declaration attracting penal liability under Section 112(a). The Court accordingly distinguishes regulatory non-compliance from the requisite culpability for imposition of penalty under Section 112(a) and holds that the facts found do not sustain that penal provision.

Penalty under Section 112(a) set aside.

Liability for penalty under Section 117 of the Customs Act, 1962 for contravention of Customs Act - distinction between regulatory non-compliance and penal culpability - Validity and quantum of penalty under Section 117 of the Customs Act, 1962 imposed on the appellant for contravention of the Customs Act. - HELD THAT: - The Court finds that the appellant's conduct amounted to contravention of the Customs Act and that invocation of Section 117 was valid. However, while liability under Section 117 is sustained, the adjudicating authority's imposition of penalty is excessive. In the interests of justice the Court exercises its power to moderate the penalty, reducing it to a proportionate amount to reflect the nature of the contravention and the appellant's role as a courier service rather than a deliberate wrongdoer.

Penalty under Section 117 upheld but reduced to Rs. 75,000.

Final Conclusion: The appeal is allowed in part: penalty under Section 112(a) is quashed; penalty under Section 117 is sustained but moderated to Rs. 75,000 and the appeal is disposed accordingly.

Penalty under Customs Brokers Licensing Regulations - knowledge of concealment / mens rea for imposition of penalty - evidence required to sustain disciplinary action against a customs broker - revocation of customs broker licence versus imposition of penalty

Penalty under Customs Brokers Licensing Regulations - knowledge of concealment / mens rea for imposition of penalty - evidence required to sustain disciplinary action against a customs broker - Whether the penalty imposed on the customs broker under the Customs Brokers Licensing Regulations, 2013 was justified in the absence of evidence showing the broker's knowledge of concealment or active involvement. - HELD THAT: - The adjudicating authority imposed a monetary penalty on the appellant-broker after an enquiry arising from detection of a controlled substance concealed in export consignments. The appellate record records that the enquiry and investigation did not produce "clinching evidence" that the broker was aware of the concealment or abetted the exporter. The adjudicating authority itself had found the offence not grave enough to warrant revocation of the customs broker licence and limited the sanction to a penalty. Given the absence of evidence establishing the broker's knowledge or active involvement, the imputations necessary to sustain disciplinary punishment under the Regulations were not made out. The Tribunal therefore concludes that, in law, a penalty cannot be sustained where the requisite evidentiary foundation of awareness or complicity is lacking, and the penalty imposed is unwarranted. [Paras 3, 4, 5]

Penalty set aside and appeal allowed.

Final Conclusion: The Tribunal held that, in absence of evidence showing the customs broker's awareness of the concealment or active involvement, the penalty imposed under the Customs Brokers Licensing Regulations, 2013 was unwarranted; the penalty is set aside and the appeal allowed.

Information under section 2(f) of the Right to Information Act, 2005 - opinion or advice not mandatorily disclosable under RTI - public authority not obliged to create records or provide advisory interpretation - availability of information in public domain excludes it from RTI

Information under section 2(f) of the Right to Information Act, 2005 - opinion or advice not mandatorily disclosable under RTI - public authority not obliged to create records or provide advisory interpretation - Whether the appellant's query seeking clarification that 'ten years of experience' includes mere long-standing membership of a professional body without certificate of practice or employment is information within the meaning of section 2(f) of the RTI Act and therefore disclosable. - HELD THAT: - The appellate authority examined the RTI request in light of the Supreme Court's holding in Central Board of Secondary Education & Anr. vs. Aditya Bandopadhyay & Ors. that a public authority is not required to provide 'advice' or 'opinion' and that 'opinion' in section 2(f) refers only to material available in records. The authority further relied on CIC precedents reproduced in the order which establish that appellants cannot seek answers phrased as 'why/what/whether' that would compel the public authority to furnish an advisory interpretation, and that the CPIO is not obliged to create new records to answer queries. It was noted that the Insolvency and Bankruptcy Code and the subordinate Rules and Regulations are available on the Board's website and once information is voluntarily placed in the public domain it is not 'held' or 'under the control of' the authority for purposes of RTI as held by the CIC in earlier orders. Applying these principles, the FAA concluded that the appellant's request amounted to a call for interpretation/advice on the meaning of 'ten years of experience' rather than an application for existing recorded information; accordingly it did not fall within section 2(f) and was not mandatorily disclosable under the RTI Act. [Paras 6, 7, 8, 9, 10]

The information sought is advisory/opinion in nature and not an 'information' under section 2(f) of the RTI Act; the appeal is disposed of.

Final Conclusion: The FAA upheld the CPIO's response: the appellant's request sought an advisory interpretation of the regulatory phrase 'ten years of experience' and therefore did not attract disclosure under the RTI Act; appeal disposed.

Information held and under the control of public authorities - public authority not required to create new records - opinion or advice not constituting "information" under section 2(f)

Information held and under the control of public authorities - public authority not required to create new records - The information sought in points (1) to (4) of the RTI application is not held by, nor under the control of, the Insolvency and Bankruptcy Board of India. - HELD THAT: - The FAA applied the principle that the right to information extends only to records that are held and under the control of a public authority. Relying on the Supreme Court's interpretation of section 2(f) in Thalappalam Ser. Coop. Bank Ltd. and on the CIC's statement in Sh. Alok Shukla v. CPIO, SEBI, the FAA held that where a public authority does not possess or exercise control over the requested material, it is not obliged to furnish it. The FAA also noted that a CPIO is not required to create new records or obtain information from third parties in order to answer specific queries of an applicant; the obligation is limited to providing existing records in the custody or control of the public authority. Applying these principles to the appellant's queries concerning admission of amounts, admitted amount details, claim amount breakdowns and GDLI disbursement, the FAA found that such information is not available with the Board and not within its control. [Paras 7, 9, 10]

Information sought under points (1) to (4) is not held by and not under the control of the Insolvency and Bankruptcy Board of India; no disclosure obligation arises.

Opinion or advice not constituting "information" under section 2(f) - The query in point (5) of the RTI application, seeking 'what are the actual post death benefits', amounts to a request for opinion or advice which does not qualify as 'information' under the RTI Act. - HELD THAT: - The FAA relied on the Supreme Court's ruling in Central Board of Secondary Education & Anr. v. Aditya Bandopadhyay & Ors. that a public authority is not required to provide 'advice' or 'opinion' and that the reference to 'opinion' or 'advice' in the definition of 'information' is limited to such material when it already exists in the public authority's records. Applying that principle, the FAA concluded that the appellant's request for 'actual post death benefits' seeks the Board's opinion or advice and therefore does not fall within the scope of information mandatorily disclosable under section 2(f) of the RTI Act. [Paras 8, 10]

The request in point (5) is for opinion/advice and does not constitute disclosable 'information' under section 2(f); the Board is not obliged to furnish it.

Final Conclusion: The appeal is disposed of: the information sought under points (1)-(4) is not available with and not under the control of the Insolvency and Bankruptcy Board of India, and the matter raised in point (5) is a request for opinion/advice which is not disclosable under the RTI Act.

Provisional attachment - Confirmation of attachment under Section 8(3) of the Prevention of Money Laundering Act (as amended) - Requirement of pending prosecution complaint under Section 45 for confirmation - Continuation of attachment during proceedings - Principles of natural justice - Burden to explain source of funds

Confirmation of attachment under Section 8(3) of the Prevention of Money Laundering Act (as amended) - Requirement of pending prosecution complaint under Section 45 for confirmation - Continuation of attachment during proceedings - Whether the Adjudicating Authority could validly confirm a provisional attachment under the amended Section 8(3) of PMLA when no prosecution complaint under Section 45 was pending at the time of confirmation - HELD THAT: - The Tribunal held that the amended Section 8(3)(a) contemplates that an attachment confirmed under that provision is to "continue during the pendency of the proceedings relating to any offence under this Act" and that, as a matter of purposive interpretation, the prosecution complaint under Section 45 should ordinarily be pending and available for consideration at the time of confirmation so that the Adjudicating Authority can consider the complaint and the evidence collected by the respondent before confirming the attachment. The Bench observed that the amendment (effective 15.2.2013) indicates Parliament's intention that confirmation ought to be contemporaneous with prosecution proceedings (and later amendments reinforce the requirement of an investigation/prosecution within a limited period). The Adjudicating Authority had reserved its order before amendment but pronounced confirmation after the amendment; at the date of confirmation no complaint under Section 45 was pending. The Tribunal expressed a prima facie view that confirmation in the absence of a pending Section 45 complaint is impermissible, but refrained from a final pronouncement in view of the pending writ(s) before the High Court relating to the same issue. [Paras 56, 57, 58, 59, 60]

Prima facie conclusion that confirmation under amended Section 8(3) without a pending Section 45 complaint is not sustainable; Tribunal refrained from final adjudication on this legal question in view of pending High Court proceedings.

Provisional attachment - Burden to explain source of funds - Principles of natural justice - Whether the provisional attachment and its confirmation in respect of the two properties purchased by the appellant and registered in the names of his wife and mother were sustainable on the materials before the Adjudicating Authority and what interim relief was appropriate - HELD THAT: - On the material placed before it the Tribunal noted that the appellant had produced evidence of multiple sources of legitimate income (including agricultural income, professional receipts, partnership remuneration and salary) and had explained the purchase of the two properties (total declared value Rs.9,30,000) as funded from his own sources and gifted to his wife and mother. The Tribunal recorded defects in the Adjudicating Authority's approach: failure to issue notice to or record statements of the persons in whose names properties stood, failure to deal with documentation produced by the appellant, and ignoring evidence of agricultural and other income already disclosed during questioning. While accepting the face value of the discrepancy relied on by the respondent, the Tribunal fashioned an interim remedy to balance competing equities: directing the appellant to deposit by fixed deposit the shortfall (difference between declared income relied on by respondent and property cost) for two years and to furnish an undertaking to deposit a specified sum if ultimately held guilty. Upon compliance the two properties were ordered to be released; if the prosecution complaint ultimately decides in favour of the appellant the amounts were to be returned. [Paras 61, 62, 63, 64, 65]

Directed deposit of the quantified shortfall by way of fixed deposit within four weeks and filing of an undertaking; on compliance the two attached properties were ordered released; the interim directions to stand without prejudice to final adjudication.

Final Conclusion: The Tribunal found serious procedural and substantive infirmities in the confirmation of the provisional attachment: prima facie the amended Section 8(3) requires a prosecution complaint under Section 45 to be pending for a valid confirmation, and on the facts the appellants had demonstrated sources of legitimate income. As an interim remedy the appellant S.V. Srinivas was directed to deposit the identified shortfall by fixed deposit and furnish an undertaking; upon compliance the two attached properties were to be released, with the parties' rights preserved pending final determination of the prosecution proceedings.

Condonation of delay - Classification of services - Service Tax on Works Contract - Erection, Commissioning or Installation Service - Remand for de novo adjudication after perusal of contract - Admission of additional evidence

Condonation of delay - Application for condonation of delay in filing cross objections - HELD THAT: - The Tribunal considered the respondent's application for condonation of delay in filing cross objections and, having noted the reasons cited, exercised its discretion in favour of the respondent. The order records that the delay in filing the cross objections is condoned, thereby permitting the cross objections to be entertained. [Paras 1]

Delay in filing cross objections condoned.

Classification of services - Service Tax on Works Contract - Erection, Commissioning or Installation Service - Liability to Service Tax in respect of work executed for Delhi Metro Rail Corporation (DMRC) - HELD THAT: - The Tribunal examined the Revenue's contention that works carried out for DMRC should be treated differently from works for Delhi Jal Board and may fall within the definition of Erection, Commissioning or Installation Service read with the relevant entries relating to works contracts, while the respondent contends the activity is a Works Contract Service and not liable to tax. The Bench directed production of the underlying DMRC contracts for scrutiny to determine the correct classification. As the relevant agreements were not placed before the Tribunal, it held that a definitive view could not be taken on the record before it and remanded the matter to the Adjudicating Authority for a fresh decision after perusal of the contracts and after granting the assessee an effective hearing. [Paras 14]

Matter remanded to the Adjudicating Authority for de novo adjudication on the Service Tax liability in respect of DMRC contracts after perusal of relevant agreements and after affording effective hearing to the assessee.

Remand for de novo adjudication after perusal of contract - Admission of additional evidence - Scope of proceedings on remand and evidentiary position - HELD THAT: - The Tribunal clarified that its order sets aside the impugned order only insofar as it pertains to DMRC contracts and that the Adjudicating Authority is to proceed de novo. The Tribunal directed that the Adjudicating Authority shall extend an effective hearing to the assessee and indicated that additional evidence may be admitted in accordance with law, thereby leaving admissibility and assessment of such evidence to the Adjudicating Authority. [Paras 16]

Impugned order set aside only in respect of DMRC contracts; Adjudicating Authority to decide de novo, permitting admission of additional evidence as per law and after effective hearing.

Final Conclusion: Delay in filing cross objections is condoned. The Tribunal upheld the dropping of Service Tax in respect of Delhi Jal Board (unchallenged) but set aside the impugned order insofar as it relates to DMRC contracts and remanded that limited issue to the Adjudicating Authority for de novo adjudication after perusal of the relevant contracts, with opportunity for effective hearing and admission of additional evidence as permissible by law.

Admissibility of electronic evidence - Section 36B of the Central Excise Act - veracity of digital data - examination and cross-examination of GEQD officials - remand for de novo adjudication - computation on receipt basis - cum-tax benefit - reliance on documents from separate proceedings

Admissibility of electronic evidence - Section 36B of the Central Excise Act - veracity of digital data - Admissibility and veracity of data retrieved from seized electronic devices and compliance with Section 36B - HELD THAT: - The Tribunal found that the demand of service tax is founded entirely on data retrieved from laptops, CPUs and pen drives seized during search and subsequently examined by the GEQD. The appellant challenged the authenticity and admissibility of the GEQD print-outs and contended that the conditions prescribed under Section 36B were not satisfied. Given that the GEQD report is the basis for the demand and that the Adjudicating Authority had earlier doubted possible manipulation and had not examined the GEQD officials, the Tribunal concluded that these evidentiary issues require fresh adjudication. The Adjudicating Authority is directed, in de novo proceedings, to consider the appellant's submissions on non-compliance with Section 36B and to afford appropriate opportunity to test the veracity of the digital material. [Paras 11, 12]

Issue remanded for de novo adjudication with directions to examine compliance with Section 36B and to determine the veracity/admissibility of the GEQD-retrieved data.

Examination and cross-examination of GEQD officials - veracity of digital data - Requirement to examine and permit cross-examination of GEQD officials whose report is relied upon - HELD THAT: - The Tribunal noted that the Adjudicating Authority had not examined the GEQD official and that the earlier Tribunal order in related central excise proceedings had specifically directed personal examination and cross-examination of the concerned GEQD officials because the entire case rested on their report. For parity and because the GEQD report underpins the service tax demand, the Tribunal directed that the Adjudicating Authority must examine the concerned GEQD officials in a personal hearing and permit cross-examination in the presence of the assessee or its representative in the de novo proceedings. [Paras 11, 12]

Directed examination and opportunity for cross-examination of GEQD officials in de novo adjudication.

Computation on receipt basis - remand for de novo adjudication - Re-computation of service tax on receipt basis for the period upto 31.03.2011 - HELD THAT: - The appellant contended that service tax applicable up to 1.4.2011 was payable on receipt basis and that the Adjudicating Authority computed tax otherwise. The Tribunal directed that in the de novo proceedings the Adjudicating Authority must consider the appellant's submission on recomputing service tax on receipt basis for the period upto 31.03.2011 and decide the matter afresh. [Paras 12]

Directed re-computation on receipt basis for the relevant period to be considered in de novo adjudication.

Cum-tax benefit - remand for de novo adjudication - Consideration of appellant's claim for cum-tax benefit - HELD THAT: - The Tribunal observed that the Adjudicating Authority should, during the de novo proceedings, examine the appellant's contention that it is entitled to cum-tax benefit which was denied below. This entitlement and its applicability must be re-examined and decided in the fresh adjudication. [Paras 12]

Directed that the claim for cum-tax benefit be considered and decided in de novo proceedings.

Reliance on documents from separate proceedings - remand for de novo adjudication - Use of documents said to belong to separate proceedings as part of the present adjudication - HELD THAT: - The appellant challenged reliance upon certain evidence that formed part of separate central excise proceedings and which were not made available as RUDS in the present service tax proceedings. Given the interlink between the two sets of proceedings and the Tribunal's earlier directions in the related central excise matter, the Tribunal considered it necessary that the Adjudicating Authority re-examine any extraneous documentary reliance in the de novo adjudication and ensure appropriate disclosure and opportunity to the appellant. [Paras 10, 11, 12]

Directed that reliance on documents from separate proceedings be re-examined and addressed in the de novo adjudication with due opportunity to the appellant.

Remand for de novo adjudication - Validity of the impugned order - HELD THAT: - After considering the centrality of the GEQD report to the demand and the procedural lacunae identified (non-examination of GEQD officials, doubts on data veracity, and related issues), the Tribunal found that the impugned order could not be sustained. The appropriate remedy, in the circumstances, is to set aside the impugned order and remit the matter for fresh adjudication, keeping all issues open for redetermination consistent with directions given. [Paras 12, 13]

Impugned order set aside and matter remanded for de novo decision.

Final Conclusion: The impugned adjudication order is set aside and the matter is remanded for de novo adjudication; the Adjudicating Authority is directed to examine and allow cross-examination of the GEQD officials, to decide on the admissibility of digital evidence under Section 36B, to reconsider recomputation on receipt basis (upto 31.03.2011), to adjudicate the claim for cum-tax benefit and to reassess any reliance on documents from separate proceedings, with reasonable opportunity to the appellant.

Business auxiliary service - promotion or marketing or sale of the goods produced or provided by or belonging to the client - sale of goods purchased by distributor not constituting service to principal - commission linked to performance of distributor's sales group as consideration for sales promotion - distinction between commission on own purchases and commission on sales group's purchases - remand for quantification and fresh adjudication

Business auxiliary service - promotion or marketing or sale of the goods produced or provided by or belonging to the client - sale of goods purchased by distributor not constituting service to principal - commission linked to performance of distributor's sales group as consideration for sales promotion - distinction between commission on own purchases and commission on sales group's purchases - remand for quantification and fresh adjudication - Whether the appellant's activities in a multilevel marketing arrangement attract service tax as business auxiliary service and, if so, the correct basis for quantifying the taxable amount - HELD THAT: - The Tribunal applied its earlier reasoning in Charanjeet Singh Khanuja (paras 12-13) and directed that the adjudicating authority re-examine the matter. The Tribunal endorsed the view that where a distributor purchases goods from the principal and resells them in retail, such resale does not amount to providing promotion/marketing/sale service to the principal because ownership of goods passes to the distributor on purchase; consequently profit on such retail sales and any volume-discount style commission linked to the distributor's own purchases are not service consideration. By contrast, activity of sponsoring or enrolling other persons who become distributors and thereby generating commissions linked to the performance (volume of purchases) of that sponsored sales group constitutes marketing/sales of goods belonging to the principal; such group-linked commission falls within business auxiliary service and is chargeable to service tax. The Tribunal observed that the impugned orders did not distinguish between commission attributable to the distributor's own purchases and commission attributable to the purchases of the distributor's sales group, and therefore remanded the matter for fresh adjudication limited to correct quantification of tax on the commission attributable to the sales group, directing the adjudicating authority to follow principles of natural justice. [Paras 2, 3]

Impugned order set aside; matter remitted to the adjudicating authority to reconsider taxable character and quantify service tax on group-linked commission in light of the Tribunal's directions in paragraphs 12 and 13 of Charanjeet Singh Khanuja, observing principles of natural justice.

Final Conclusion: The Tribunal set aside the impugned appellate order and remitted the matter to the adjudicating authority for fresh consideration and quantification, following the principles stated in Charanjeet Singh Khanuja (paras 12-13) and after affording opportunity under the rules of natural justice.

Manpower recruitment and supply agency services - service tax liability - contract for lump-sum work with deployment of own skilled and unskilled manpower - confirmation of demand for service tax collected but not deposited - application of settled Tribunal decisions

Manpower recruitment and supply agency services - contract for lump-sum work with deployment of own skilled and unskilled manpower - service tax liability - Whether the demands of service tax framed against the respondent under the category of manpower recruitment and supply agency services were rightly set aside by the first appellate authority. - HELD THAT: - The Tribunal found that the work orders issued by M/s Exide Industries Ltd. were for lumpsum jobs and that the respondent deputed its own employees to perform the work under the respondent's direction and supervision. The first appellate authority recorded this factual finding and held that the adjudicating authority was incorrect in confirming the demands. The Tribunal accepted the first appellate authority's conclusion, noting that where a contractor supplies and deploys its own skilled and unskilled manpower to execute a lumpsum contract, such activity does not fall within the scope of manpower recruitment and supply agency services as contended by Revenue. The Tribunal further observed that the first appellate authority relied on settled Tribunal decisions (including Divya Enterprises v. CCF) in support of its conclusion. Revenue's appeal was limited to the demands set aside by the first appellate authority; demands confirmed insofar as service tax collected but not deposited were left intact by the first appellate authority and were not the subject of the present appeal. [Paras 3, 4, 5, 6]

The impugned order-in-appeal was held to be correct and legal; the demands set aside by the first appellate authority were upheld.

Final Conclusion: The Tribunal upheld the first appellate authority's setting aside of the service-tax demands under the category of manpower recruitment and supply agency services and held the impugned order to be correct and legal; Revenue's appeal against those set-aside demands failed.

Interest on delayed payment of duty - determination under Section 11A(2) - payment within three months - Explanation (1) to Section 11AA

Determination under Section 11A(2) - interest on delayed payment of duty - Effect of absence of a determination under Section 11A(2) on liability to pay interest under Section 11AA. - HELD THAT: - Section 11AA imposes interest on delayed payment of duty only where there has been a prior determination under Section 11A(2). The Appellate Tribunal found as a fact that no steps under Section 11A had been taken by the Department and therefore there was no determination under Section 11A(2). In view of that factual finding, which this Court will not disturb in the exercise of limited jurisdiction, the precondition for invoking Section 11AA was not satisfied and interest could not be levied.

Interest under Section 11AA could not be sustained in the absence of any determination under Section 11A(2).

Payment within three months - Explanation (1) to Section 11AA - interest on delayed payment of duty - Whether interest under Section 11AA is payable where the deficit duty was paid within three months of the Supreme Court's determination, having regard to Explanation (1) to Section 11AA. - HELD THAT: - The Appellate Tribunal further held that even if a determination under Section 11A(2) were to be treated as having been made, the assessee paid the deficit duty within three months of the Supreme Court's order. Explanation (1) to Section 11AA operates to treat such payment within three months as compliance for the purposes of avoiding interest. Applying that provision, the Tribunal concluded that no interest could be levied because the assessee discharged the deficit duty within the three-month period specified.

No interest under Section 11AA was payable because the assessee paid the deficit duty within three months in terms of Explanation (1) to Section 11AA.

Final Conclusion: The petitions are dismissed; the Appellate Tribunal's findings that (i) no determination under Section 11A(2) was made and (ii) in any event the assessee paid the deficit duty within three months (thereby attracting Explanation (1) to Section 11AA) are upheld, and the department's claim for interest under Section 11AA fails. No order as to costs.

Rejection of revision applications for non-payment/late fee - Section 35EE-fee requirement for revision applications - Registration and cure of fee defect via notice - Condonation/grace period for fee compliance - Remand for fresh adjudication on merits

Section 35EE-fee requirement for revision applications - Rejection of revision applications for non-payment/late fee - Registration and cure of fee defect via notice - Validity of the respondent's rejection of the petitioner's revision applications on the ground that the prescribed fee was not paid at the time of filing and that the applications were therefore time-barred. - HELD THAT: - The Court examined the respondent's application of sub section (3) of Section 35EE which prescribes the fee for revision applications. While acknowledging that payment of the prescribed fee is mandatory, the Court noted that the respondent's office had itself acknowledged and provisionally registered the four applications and had issued a notice dated 02.06.2014 allowing the petitioner a period of 15 days to cure the shortfall in fee by filing TR 6 challans. The petitioner deposited the additional challans on 19.06.2014 shortly after receiving the notice. The respondent treated the date of primary filing (13.05.2014) as the operative date and held the revision applications time barred because the full fee was paid on 19.06.2014. The Court found that the respondent failed to consider the effect of its own notice which allowed a marginal period to complete the fee formalities and did not examine the circumstances of short delay in compliance; accordingly the respondent's conclusion that the applications were filed only on 19.06.2014 and thereby barred was unsustainable. The Court also observed the substantial delay in issuance of the impugned order and that a personal hearing had been recorded, undermining the rationale for rejection on laches.

The impugned orders rejecting the revision applications as time barred for non payment of the full fee are set aside.

Remand for fresh adjudication on merits - Registration and cure of fee defect via notice - Remedial direction as to the further course of proceedings after setting aside the impugned orders. - HELD THAT: - Having set aside the orders of rejection, the Court directed that the respondent (Central Government authority) must hear the four revision applications on merits. The Court relied on the fact that the office had provisionally registered the applications and given the petitioner an opportunity to cure the fee deficiency; in view of the procedural history and the Court's findings on the incorrect treatment of the fee compliance, the appropriate remedy is fresh consideration on merits rather than dismissal on procedural grounds. The Court therefore remitted the matters for adjudication in accordance with law.

The respondent is directed to hear and decide all four revision applications on merits in accordance with law.

Final Conclusion: The writ petition is allowed: the orders rejecting the four revision applications for laches/non payment of fee are set aside and the Central Government authority is directed to hear and decide the revision applications on merits; no order as to costs.

Condonation of delay in filing revision petitions - revision jurisdiction under Section 35EE of the Central Excise Act - maintainability of appeals to the CESTAT in rebate matters - bonafide mistake doctrine as a ground for condonation

Condonation of delay in filing revision petitions - revision jurisdiction under Section 35EE of the Central Excise Act - bonafide mistake doctrine as a ground for condonation - maintainability of appeals to the CESTAT in rebate matters - Whether the revisional authority erred in refusing to condone the eight-year delay in presenting revision applications under Section 35EE, where the petitioners had prosecuted appeals before the CESTAT which was later held to lack jurisdiction for rebate claims. - HELD THAT: - The Court examined the factual matrix and the reasons recorded by the revisional authority for refusing condonation. The petitioners knowingly pursued appeals before the CESTAT for about eight years despite a specific advisory in the appellate order that revision to the Central Government was the appropriate remedy for rebate disputes. This conduct was held to be a conscious choice and not attributable to ignorance of law or an excusable bona fide mistake. The revisional authority considered the scope of the proviso to sub section (2) of Section 35EE permitting the Government to allow presentation within a further period where sufficient cause is shown; the Court found no perversity or illegality in the authority's objective conclusion that sufficient cause was not made out. The earlier institution of wrong forum appeals and the petitioners' experience in filing numerous revision petitions on similar issues undermined their contention of being misled. Judicial precedents invoked by the petitioners were examined but did not compel interference where the factual finding of absence of sufficient cause was intact. Given these findings, the Court declined to direct the revisional authority to condone delay or to decide the revision petitions on merits.

The revisional authority rightly refused to condone the eight year delay; no interference with the impugned orders is warranted.

Final Conclusion: Writ petitions dismissed; the Court upheld the revisional authority's refusal to condone the long delay in filing revisions where the petitioners had deliberately pursued appeals before an improper forum, and no sufficient cause for condonation was shown.

Aggregate value of clearances for home consumption - exemption as Small Scale Industrial unit - specified goods used as inputs for further manufacture - exclusion from aggregate clearances for determination of SSI eligibility - notification no.8 of 2003

Aggregate value of clearances for home consumption - specified goods used as inputs for further manufacture - notification no.8 of 2003 - exemption as Small Scale Industrial unit - Value of chassis procured duty-paid and used by the manufacturer for fitting bodies is to be excluded from the aggregate value of clearances for home consumption for determining entitlement to the exemption under notification no.8 of 2003. - HELD THAT: - Paragraph 2(vii) of notification no.8 of 2003 makes exemption conditional on the aggregate value of clearances for home consumption not exceeding the prescribed limit. Paragraph 3(b) of the same notification, however, expressly excludes from that aggregate clearances of specified goods which are used as inputs for further manufacture of any specified goods within the factory of production. The chassis and the completed motor vehicle are both specified goods and the chassis, received duty-paid and used by the assessee for fitting manufactured bodies within its factory, falls within the scope of inputs used for further manufacture. Reading the two provisions conjunctively, the value of such chassis must be excluded when ascertaining the aggregate value of clearances for home consumption for the purpose of the exemption. The Tribunal's interpretation to that effect is therefore legally correct. [Paras 5]

Value of chassis used as inputs for further manufacture is not includible in the aggregate value of clearances for home consumption; Tribunal's conclusion upheld.

Remand for factual ascertainment - exclusion from aggregate clearances for determination of SSI eligibility - Proceedings remitted for factual ascertainment and computation in light of the legal conclusion that chassis value is to be excluded. - HELD THAT: - Having declared the legal position that the chassis value is to be excluded under paragraph 3(b), the Tribunal remanded the matter to enable determination of facts and to quantify aggregate clearances accordingly. The High Court finds no error in remanding the case for factual verification and computation consistent with the legal ruling. [Paras 5]

Matter remanded for fact-finding and computation; remand upheld.

Final Conclusion: The Tribunal correctly interpreted notification no.8 of 2003 in excluding the value of chassis used as inputs from the aggregate value of clearances for home consumption; the appeal is dismissed and the matter is remanded for factual ascertainment and computation in accordance with that legal conclusion.

Clandestine removal of excisable goods and requirement of corroborative evidence - Penalty under Rule 209A for dealing with excisable goods knowing them to be liable to confiscation - Requirement of physical possession or direct dealing as sine qua non for Rule 209A - Non-supply of relied upon documents and denial of opportunity for cross-examination - Inordinate delay and finality of litigation (interest rei publicae ut sit finis litium)

Clandestine removal of excisable goods and requirement of corroborative evidence - The allegation of clandestine manufacture/removal of cigarettes was not established by the Department. - HELD THAT: - The Tribunal found that clandestine removal is a serious charge requiring strict, corroborative evidence such as supply of extra raw material, extra machinery or power consumption, employment of extra labour, transportation and sale of the finished goods, and contemporaneous incriminating material or worker statements. The record showed absence of such corroboration: no incriminating material was recovered from franchisee factories and no statements of factory workers were recorded to support clandestine removal. Consequently, the Department failed to substantiate the core factual premise of clandestine manufacture/removal. [Paras 17, 20, 21]

Findings of clandestine removal are not sustainable for want of required corroborative evidence; allegation rejected.

Penalty under Rule 209A for dealing with excisable goods knowing them to be liable to confiscation - Requirement of physical possession or direct dealing as sine qua non for Rule 209A - Penalties under Rule 209A could not be sustained against the company, its directors and other alleged persons since there was no evidence of acquisition of possession or physical dealing with the confiscation liable goods or knowledge/reason to believe the goods were liable to confiscation. - HELD THAT: - Rule 209A imposes liability only where a person acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing excisable goods knowing or having reason to believe they are liable to confiscation. The Tribunal applied this principle and the authorities relied upon, observing that physical possession or direct dealing is a must. There was no material showing GTC exercised physical control over KCL's manufacture, nor that directors or employees acquired possession or proceeds or physically handled the confiscation liable goods. Cash receipts without evidence of acquisition or physical dealing do not satisfy Rule 209A's requirements. [Paras 18, 19, 22, 23, 24]

Penalties under Rule 209A on GTC, its directors and the identified persons are unsustainable and are set aside for want of the statutory factual predicates.

Non-supply of relied upon documents and denial of opportunity for cross-examination - Inordinate delay and finality of litigation (interest rei publicae ut sit finis litium) - The long delay in adjudication, the earlier Tribunal remand and the non-provision of relied upon documents and cross examination opportunities rendered re-adjudication futile and contributed to setting aside the impugned order. - HELD THAT: - The record shows protracted proceedings from issuance of show cause notice to adjudication (nearly two decades), and earlier remand by the Tribunal which had directed supply of documents and opportunity for cross examination. The assessee contended that many relied upon documents and 34 departmental witnesses were not made available for cross examination; the Tribunal recognised that, after such long delay, many witnesses might be dead or untraceable and further re examination would serve no useful purpose. In this context and coupled with lack of corroborative evidence, the Tribunal concluded that continuing the adjudication would be prejudicial and contrary to the public interest in finality of litigation. [Paras 7, 26, 27, 28]

Given the procedural failures and inordinate delay, the impugned adjudication cannot be sustained and the matter is not sent back for further futile re examination; the adjudication order is set aside.

Final Conclusion: The Tribunal set aside the impugned adjudication order in toto and allowed all appeals filed by the assessee appellants, holding that clandestine removal was not proved, penalties under Rule 209A were not attracted for lack of physical possession or dealing and, in view of procedural failures and inordinate delay, re adjudication would serve no useful purpose.

CENVAT credit - admissibility of duty-paying documents - short receipt of goods - burden of proof for short-receipt - denial of credit and recovery - interest and penalty consequent to demand

CENVAT credit - short receipt of goods - admissibility of duty-paying documents - denial of credit and recovery - interest and penalty consequent to demand - Whether denial of CENVAT credit of Rs. 3,28,220/- on account of alleged short-receipt of 1,302 MT iron ore pellets was justified - HELD THAT: - The adjudicating authority denied CENVAT credit on the ground that inputs were not received/short-received in the factory premises and treated the provisional duty-paying documents as not admissible. The Tribunal examined the show cause notice, the order-in-original and the appellant's reply and found no material on record demonstrating that the appellant had, in fact, short-received 1,302 MT. The adjudicating authority's finding that the appellant admitted short-receipt was not supported by the appellant's reply, in which the appellant contested the alleged shortage and stated that the entire quantity indicated in the duty-paying documents was received. In absence of evidence of short-receipt or of inadmissibility of the duty-paying documents, the denial of CENVAT credit was unsustainable. Consequential interest and penalty were rendered irrelevant once the demand was set aside. [Paras 4, 5]

Impugned denial of CENVAT credit of Rs. 3,28,220/- set aside; consequent demand, interest and penalty do not survive.

Final Conclusion: Appeal allowed to the extent of setting aside the denial of CENVAT credit of Rs. 3,28,220/-. Cross-objection of the Revenue disposed of; no interest or penalty payable consequent to the set-aside demand.

Demand of MODVAT/CENVAT credit - Reversal of CENVAT credit - Imposition of interest and penalty - Remand for verification of installation and removal of capital goods - Limitation as a defence

Demand of MODVAT/CENVAT credit - Reversal of CENVAT credit - Remand for verification of installation and removal of capital goods - Whether the demand for alleged wrongly availed CENVAT credit on 10 moulds was rightly confirmed. - HELD THAT: - The Tribunal had earlier remanded the matter for limited consideration whether the 10 moulds were factually received in the factory and subsequently removed to job-workers post 21/07/1995. The appellant failed to place any evidence to satisfy that limited remand. In view of the absence of proof that the moulds were received and removed in the manner required, the adjudicating and appellate authorities were justified in confirming the duty liability by way of reversal of CENVAT credit on those 10 moulds. The remand directed by the Tribunal was not complied with by the appellant and therefore could not operate in the appellant's favour. [Paras 4, 6]

Impugned order upheld insofar as reversal of CENVAT credit on the 10 moulds is concerned.

Imposition of interest and penalty - Limitation as a defence - Whether interest liability and penalty imposed on the appellant are sustainable. - HELD THAT: - The period in dispute relates to years prior to 1995 and the matter has been long-standing. Given the disputed nature of the issue and that limitation could have been a ground of contest, the Tribunal/Court took the view that imposing equivalent penalty was not appropriate. On the factual premise accepted in remand proceedings that certain CENVAT credit had been allowed for moulds received and sent to job-workers, the court considered it possible that the appellant might have received the moulds before dispatching them to job-workers. In the exercise of discretion and having regard to the age and contested character of the dispute, the interest and penalty imposed by the lower authorities were set aside. [Paras 5, 6]

Interest liability and penalty imposed by the lower authorities are set aside.

Final Conclusion: The appeal is allowed in part: the duty liability by way of reversal of CENVAT credit on the 10 moulds is upheld, while the interest and penalty imposed by the lower authorities are set aside; the Tribunal's limited remand to verify receipt and subsequent removal of the moulds was not satisfied by the appellant.

CENVAT credit - input service - service tax on hazardous waste disposal - eligibility to avail credit for outsourced hazardous waste disposal - regulatory compliance with pollution control authority - precedent of Tribunal

CENVAT credit - service tax on hazardous waste disposal - input service - eligibility to avail credit for outsourced hazardous waste disposal - Entitlement to avail CENVAT credit of service tax paid by service providers for disposal of hazardous chemicals and waste removed from the factory premises and disposed at the premises of the service provider. - HELD THAT: - The Tribunal noted that the factual position - hazardous residues and chemical wastes generated during manufacture being cleared to an authority nominated by the pollution control regulator and service tax being discharged by the service provider - was not disputed. Although the adjudicating and first appellate authorities relied on the definition of input service in Rule 2(l) of the CENVAT Credit Rules, 2004 to deny credit, the Tribunal applied its earlier decisions on the identical issue. Having regard to precedents where CENVAT credit was allowed in respect of service tax paid for hazardous waste disposal carried out by external service providers, the Tribunal found no reason to deviate and held that the credit could be availed even where disposal occurs at the service provider's premises in order to meet regulatory requirements and enable continued manufacture.

The impugned order denying CENVAT credit is unsustainable; it is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that CENVAT credit of service tax paid for outsourced hazardous waste disposal may be availed notwithstanding that disposal took place at the service provider's premises, and set aside the impugned order.

Duty liability on scrap generated at the job-worker's premises - treatment of scrap arising from job-work of inputs - discharge of Central Excise duty on scrap - binding effect of Tribunal's precedent in the assessee's own case

Duty liability on scrap generated at the job-worker's premises - treatment of scrap arising from job-work of inputs - binding effect of Tribunal's precedent in the assessee's own case - Whether respondent was liable to discharge Central Excise duty on scrap generated at the job-worker's premises where inputs were sent for job-work and the scrap was not returned - HELD THAT: - The first appellate authority set aside the adjudicating authority's demand, interest and penalty after applying the Tribunal's decision in the assessee-respondent's own earlier case (reported at 2016 (2) TMI 554-CESTAT-MUM by order dated 07/01/2016). The Appellate Tribunal (AT) found no error in the first appellate authority following the higher judicial forum's ruling in the identical controversy and, in consequence, found no reason to interfere with that order. The Revenue's contention was therefore rejected because the appeal-subject issue had already been finally decided in favour of the respondent by the Tribunal in the same matter, which the appellate authority correctly applied.

The impugned order setting aside the demand was affirmed; Revenue's appeal is rejected and the respondent's cross-objection in support of the impugned order is disposed of.

Final Conclusion: The appeal by Revenue is dismissed as the Appellate Authority correctly applied the Tribunal's prior decision in the assessee's own case that relieved the respondent of liability to pay Central Excise duty on scrap generated at the job-worker's premises; the impugned order is affirmed and the respondent's cross-objection is disposed of.

CENVAT credit - insurance under Workmen's Compensation Scheme - statutory obligation to ensure employee safety - exclusion under Rule 2(1) of CENVAT Credit Rules, 2004 not covering statutory employee-safety inputs - direct nexus to manufacturing activity

CENVAT credit - insurance under Workmen's Compensation Scheme - statutory obligation to ensure employee safety - direct nexus to manufacturing activity - entitlement to CENVAT credit of service tax paid on insurance policy taken under the Workmen's Compensation Scheme in March 2013 - HELD THAT: - The Tribunal accepted that the insurance policy was obtained in discharge of a statutory obligation arising under labour laws to protect employees. It held that the specific exclusion in Rule 2(1) of the CENVAT Credit Rules, 2004 does not extend to inputs or services utilised for employee safety where such utilisation arises from a statutory obligation. Because the appellant is engaged in manufacture of explosives, the workmen's compensation insurance has a direct nexus to the manufacturing activity. Following the Tribunal's earlier decision in a factually identical appeal and the reasoning in FIEM Industries Ltd. v. CCE, Chennai-III, the impugned order denying credit was held unsustainable and was set aside. [Paras 3, 6]

The CENVAT credit of service tax paid on the Workmen's Compensation insurance in March 2013 is allowable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: Following precedent in an identical matter, the Tribunal allowed the appeal, held that CENVAT credit paid on the Workmen's Compensation insurance (March 2013) is admissible as it relates to a statutory obligation for employee safety and bears direct nexus to the manufacturing activity; the impugned order is set aside.

Reversal of CENVAT credit - Application of Rule 6(3) of the CENVAT Credit Rules, 2004 - Option under Rule 6 - Non availment of credit - Liability to penalty under Rule 15(3) of the CENVAT Credit Rules, 2004

Reversal of CENVAT credit - Application of Rule 6(3) of the CENVAT Credit Rules, 2004 - Option under Rule 6 - Non availment of credit - Whether demand calculated under Rule 6(3) (6% of value of exempted goods) is sustainable where the assessee reversed the entire CENVAT credit attributable to common inputs and input services. - HELD THAT: - The Tribunal accepted the conclusion of the first appellate authority that the option to avail or exercise the provisions of Rule 6(3) is procedural. Relying on the ratio in Jost's Engineering Co. Ltd, the Tribunal held that reversal of the entire credit on service inputs (along with interest) amounts to non availment of credit, and in such circumstances Rule 6(3)(i) would not apply and confirmation of a percentage based demand does not arise. The Tribunal endorsed the view that where the credit initially availed is wholly reversed, the legal consequence is equivalent to non taking of credit and therefore the departmental demand under the percentage method is not sustainable. [Paras 6]

Demand under Rule 6(3) directing payment of an amount equivalent to 6% of the value of exempted goods is not sustainable where the entire attributable CENVAT credit has been reversed.

Reversal of CENVAT credit - Liability to penalty under Rule 15(3) of the CENVAT Credit Rules, 2004 - Whether penalties imposed by the adjudicating authority stand where the assessee reversed the entire credit. - HELD THAT: - The Tribunal, following the appellate reasoning reproduced from Jost's Engineering, noted that reversal of the entire credit leads to non availment and renders confirmation of percentage based demand and related penalties unsustainable. The first appellate authority had set aside the penalties; the Tribunal found no reason to interfere with that conclusion and accepted that the reversal disentitles the department to confirm the demand and penalties imposed by the adjudicating authority. [Paras 6]

Penalties imposed by the adjudicating authority are not sustainable where the assessee has reversed the entire CENVAT credit attributable to the exempted goods.

Final Conclusion: The Revenue appeal is rejected. The impugned order upholding the respondent's reversal of the entire CENVAT credit and declining to confirm the percentage based demand and related penalties is upheld for the period October 2013 to April 2015.

CENVAT credit eligibility of service tax paid - definition of input service under the CENVAT Credit Rules, 2004 - exclusion of specific services from input service - rent-a-cab service for employee transport treated as input service - insurance of factory premises, plant and machinery as input service - waste management/disposal services mandated by Pollution Control Board as input service - precedential consistency of Tribunal decisions

Rent-a-cab service for employee transport treated as input service - definition of input service under the CENVAT Credit Rules, 2004 - CENVAT credit of service tax on rent-a-cab services used for picking up and dropping employees between the nearest railway station and the manufacturing factory is admissible. - HELD THAT: - The Tribunal held that where rent-a-cab services are utilised to transport employees between the nearest railway station and the manufacturing factory, such services are in relation to the manufacturing activity and are not for personal consumption. Identical questions have been decided in favour of the assessees by this Bench and other Benches, and no reason was found to depart from those consistent precedents. The finding rests on the application of the CENVAT Credit Rules, 2004 definition of input service and the established view that employee transport in this factual setting qualifies as an input service eligible for credit. [Paras 4]

Credit allowed for rent-a-cab services used for employee pickup/drop to the factory.

Insurance of factory premises, plant and machinery as input service - CENVAT credit eligibility of service tax paid - CENVAT credit of service tax on insurance services for factory premises and plant and machinery is admissible to the manufacturer. - HELD THAT: - The Tribunal observed that insurance taken in respect of the factory building and plant and machinery is integrally connected to the manufacturing activity. Prior Tribunal decisions on similar facts have held that such insurance services qualify as input services and credit is admissible. Having regard to those precedents and the undisputed nature of the insurance cover, the claim for credit was held to be allowable. [Paras 5]

Credit allowed for insurance services covering factory premises and plant and machinery.

Waste management/disposal services mandated by Pollution Control Board as input service - CENVAT credit eligibility of service tax paid - CENVAT credit of service tax on waste management/disposal services used for treatment and disposal of factory waste mandated by the Pollution Control Board is admissible. - HELD THAT: - The Tribunal found that waste management and treatment services were obtained for disposal of waste generated during manufacturing and were required to be performed in accordance with Maharashtra Pollution Control Board guidelines. Such statutory environmental compliance renders the services necessary for continuing the manufacturing activity; Tribunal precedents have recognized credit for such services where non-compliance would jeopardize factory operations. Relying on those decisions, the Tribunal found no reason to disallow the credit. [Paras 6]

Credit allowed for waste management/disposal services mandated by the Pollution Control Board.

Final Conclusion: The impugned order is set aside and the appeal is allowed: CENVAT credit was held admissible for rent-a-cab services used for employee transport to the factory, for insurance of factory premises and plant and machinery, and for waste management/disposal services mandated by the Pollution Control Board, for the period May 2011 to March 2015.

Refund of excise duty - unjust enrichment - evidence of non-passing of incidence of duty - chartered accountant's certificate as evidence - remand and finality due to inordinate delay

Chartered accountant's certificate as evidence - evidence of non-passing of incidence of duty - unjust enrichment - Whether the evidence produced by the appellant, including the Chartered Accountant's certificate, established that the incidence of excise duty was not passed on and therefore rebutted the plea of unjust enrichment, entitling the appellant to refund for the period 26/11/1982 to 13/05/1984. - HELD THAT: - The Tribunal found that the Chartered Accountant's certificate, on examination of ledger accounts and relevant accounting documents, recorded that excise duty paid during the period in question was shown as 'Recoverable' in the balance sheet and had not been charged to the profit and loss account even as on 31/03/2017. This certificate was treated as probative evidence that the duty was not passed on. The first appellate authority's conclusion that the appellant had not produced documentary evidence of price increases or relevant price-lists was insufficient in view of the accounting evidence. The Tribunal therefore concluded that the requirement to show non-passing of incidence was satisfactorily met by the appellant's evidence and that the rejection of the refund claim on the ground of unjust enrichment was not warranted. [Paras 6, 7]

The impugned rejection of the refund claim on the ground of unjust enrichment was set aside and the appellant found entitled to the refund for the period in question.

Remand and finality due to inordinate delay - refund of excise duty - Whether the prolonged and repeated remands and inordinate delay in adjudication required the proceedings to be brought to finality and warranted setting aside the impugned order. - HELD THAT: - The Tribunal noted the lengthy procedural history: initial decisions, appeals, remands and multiple adjudications spanning decades. The adjudicating authorities had repeatedly taken up and rejected the claim, and there was significant lapse of time since the original refund claim. Given the delay and the fact that the appellant had paid duty under protest and earlier succeeded on substantive entitlement, the Tribunal concluded that the matter should be finally disposed of rather than subjected to further remands. In view of this delay and the evidentiary position favouring the appellant, the Tribunal exercised its power to set aside the impugned order and grant final relief. [Paras 7, 8]

In view of the inordinate delay and the need for finality, the impugned order was set aside and the appeal allowed with consequential relief.

Final Conclusion: The impugned order rejecting the refund claim was set aside and the appeal allowed; the appellant's refund claim for the period 26/11/1982 to 13/05/1984 is accepted and the matter is finally disposed of with consequential relief.

CENVAT credit - inputs - consumption in manufacturing - Rule 2(k) of the CENVAT Credit Rules, 2004 - precedential tribunal decisions

CENVAT credit - inputs - consumption in manufacturing - Rule 2(k) of the CENVAT Credit Rules, 2004 - Whether CENVAT credit of central excise duty paid on welding electrodes consumed in the factory for fabrication of machinery is allowable as credit on inputs. - HELD THAT: - The Tribunal noted that the factual position-receipt, consumption and use of welding electrodes in the appellant's manufacturing activity-was not in dispute. Applying the definition of "inputs" under Rule 2(k) of the CENVAT Credit Rules, 2004 and following earlier tribunal decisions on identical factual and legal questions, the Tribunal held that welding electrodes consumed in the factory for fabrication of machinery qualify as inputs and therefore attract admissibility of CENVAT credit. The Tribunal relied on its prior reasoning in like matters and concluded that credit could not be denied on the pleaded facts. [Paras 4, 5]

Impugned orders set aside; appeals allowed and CENVAT credit on welding electrodes permitted.

Final Conclusion: CENVAT credit of central excise duty paid on welding electrodes consumed in manufacture of machinery is allowable; impugned orders quashed and appeals allowed.

CENVAT credit admissibility - short receipt of inputs - provisional duty paying documents and CENVAT credit

CENVAT credit admissibility - short receipt of inputs - provisional duty paying documents and CENVAT credit - Denial of CENVAT credit on account of alleged short receipt of inputs and admissibility of credit where duty documents were provisional - HELD THAT: - The adjudicating authority denied CENVAT credit of Rs. 1,38,449/ treating inputs as not received/short received and had issued a broader show cause alleging inadmissibility of credit where duty was paid on provisional invoices. The Tribunal examined the show cause notice, the adjudication order and the appellant's reply and found no material on record to establish that 6,440 MTs were short received. The show cause notice did not allege that the appellant had to show cause for non receipt of 6,440 MTs, and the appellant had specifically contested the short receipt figure and maintained that the full quantity as per duty paying documents was received. In absence of evidence to prove short receipt, the finding disallowing credit was unsustainable. Consequently the demand based on that disallowance was set aside and, because the demand was vacated, interest and penalty were held not to arise. [Paras 4, 5]

Impugned denial of CENVAT credit of Rs. 1,38,449/ set aside; consequential demand, interest and penalty do not arise.

Final Conclusion: Appeal allowed to the extent of setting aside the denial of CENVAT credit; cross objection disposed of; no interest or penalty payable as the demand has been vacated.

Condonation of delay - sufficient cause / sufficient explanation - governmental / State delay and impersonal machinery - payment of costs as condition for condonation - preference for adjudication on merits over dismissal for procedural delay

Condonation of delay - sufficient cause / sufficient explanation - governmental / State delay and impersonal machinery - payment of costs as condition for condonation - preference for adjudication on merits over dismissal for procedural delay - Whether the delay of 541 days in filing the tax appeal by the State should be condoned. - HELD THAT: - The Court examined the State's explanation that after communication of the Tribunal's order administrative approvals were sought from the Finance Department and papers were handed to the Government Pleader's (GP) office, but due to inadvertence the papers did not reach the concerned law officer; once discovered in March 2017 the papers were re-collected, the appeal drafted and filed. In absence of any averments or evidence of mala fides at the GP office, and having regard to the institutional and impersonal nature of governmental decision-making, the Court found the explanation sufficient to cover the period of delay. The Court relied on the established approach that, while Government is bound by limitation like any litigant, courts may adopt a liberal, justice oriented construction of "sufficient cause" where delay results from procedural red tape or institutional processes, particularly when substantial public revenue is involved and no gross negligence or bad faith is shown. In view of these considerations and precedents where similar State delays were condoned subject to costs, the Court held that condonation is appropriate here but that a cost should be imposed as a salutary measure. [Paras 9, 10, 11]

Delay of 541 days is condoned and the tax appeal is permitted to be filed, subject to payment of costs by the applicant.

Final Conclusion: Civil Application allowed; delay in filing the tax appeal of 541 days is condoned on payment of costs by the State (Rs.25,000/- payable to the respondent by the specified date), and the matter may proceed to be adjudicated on merits.

Tax credit under section 11 of the Gujarat Value Added Tax Act - Reduction of tax credit under clause (b) of subsection (3) of section 11 - Branch transfer and consignment outside the State - Use of taxable goods as raw material sent outside the State for processing and returned - Non obstante clause in clause (b) of subsection (3) of section 11

Tax credit under section 11 of the Gujarat Value Added Tax Act - Reduction of tax credit under clause (b) of subsection (3) of section 11 - Use of taxable goods as raw material sent outside the State for processing and returned - Branch transfer and consignment outside the State - Whether tax credit on duty paid goods used as raw material and sent outside the State for processing (and returned as finished goods) is required to be reduced under clause (b) of subsection (3) of section 11. - HELD THAT: - The Court held that clause (a)(vi) of subsection (3) plainly covers tax credit for goods purchased as raw material for manufacture of taxable goods intended for sale within the State or in the course of interState trade. Clause (b) of subsection (3) imposes a reduction only where the case falls within one of its specific subclauses - consignment or dispatch for branch transfer or to an agent outside the State, raw materials dispatched outside in the course of branch transfer/consignment, or fuels used for manufacture. The concept of branch transfer/consignment has a recognised commercial meaning and denotes transfers where goods are sent to a branch or agent (without sale) for storage/sale on behalf of the transferor. Where raw material is sent outside the State solely for processing at the transferor's unit and is returned as finished goods to the principal place of business in the State before sale, that movement does not constitute a branch transfer or consignment for the purposes of clause (b). Applying these principles, the Court found clause (b) inapplicable to the facts where goods were exported out of the State for manufacture/process and subsequently returned as finished goods; consequently the department could not invoke the prescribed reduction in tax credit. [Paras 11, 12, 13]

Clause (b) of subsection (3) of section 11 did not apply and the tax credit could not be reduced under that provision in respect of raw material sent out of State for processing and returned as finished goods.

Tribunal's jurisdiction to examine merits where appellate order dismissed for non predeposit - Exceptional exercise of appellate finality - Whether the Tribunal could entertain and decide the merits of the assessee's claim when the appellate authority had dismissed the appeal for non fulfilment of the predeposit requirement. - HELD THAT: - The Court observed that ordinarily the Tribunal should not enter into merits where the sole question is the appellate order's dismissal for failure to satisfy the predeposit condition. However, given the peculiar facts of the present proceedings and that a conclusive legal point had been authoritatively decided in related proceedings of the same assessee, remanding or disturbing the Tribunal's decision would be unnecessary. Exercising discretion in these exceptional circumstances, the Court declined to interfere with the Tribunal's merits decision. [Paras 4, 14]

Although ordinarily the Tribunal should not have examined the merits where appeal was dismissed for non predeposit, in the exceptional facts of this case the Court refused to disturb the Tribunal's decision and dismissed the State's appeal.

Final Conclusion: The appeals were disposed as follows: the appeal in the case of the first assessee (Tax Appeal No.1334/2007) was allowed and the Tribunal's judgment reversed on the tax credit point; the State's appeal in Tax Appeal No.731/2017 was dismissed and the Tribunal's favourable decision for the assessee upheld; and in Tax Appeal No.730/2017 the State's challenge was dismissed, the Court declining to disturb the Tribunal's merits decision in the exceptional circumstances described.

Transfer of right to use - taxability under the Gujarat Value Added Tax Act - stage lighting as a specialised service - possession and control - installation and operation by supplier's technicians - allocation of risk and insurance - service tax implication

Transfer of right to use - taxability under the Gujarat Value Added Tax Act - stage lighting as a specialised service - possession and control - installation and operation by supplier's technicians - allocation of risk and insurance - Whether the assessee's transaction amounted to a transfer of right to use equipment and was therefore taxable under the VAT Act or was a supply of specialised stage lighting service not attracting VAT - HELD THAT: - The Tribunal's factual findings, accepted by the High Court, show that the assessee supplied specialised stage lighting requiring specialised equipment, technical know how and operators; equipment was transported, installed, operated and dismantled by the assessee's staff; the customer never obtained possession or control and could not operate the equipment; the assessee retained the risk in transit and during the event and insured the equipment; billing was for the composite service without allocation to transfer of user rights. On these determinative features there was no transfer of controlled possession or of the right to use the apparatus to organisers or hotel management. The Court observed that the activity was therefore a provision of specialised service and not a transfer of right to use attracting VAT, although it may fall for service tax if so prescribed.

The Tribunal's conclusion that the transaction was not a transfer of right to use and hence not taxable under the VAT Act is upheld.

Final Conclusion: The tax appeal is dismissed and the question framed is answered in favour of the respondent; the transaction is held to be a provision of specialised stage lighting service and not a transfer of right to use taxable under the Gujarat VAT Act.

Interim bail - custody and release conditions - medical exigency and family hardship - commercial quantity - furnishing bail bond and surety - reporting to local police and surrender condition

Interim bail - medical exigency and family hardship - commercial quantity - custody and release conditions - furnishing bail bond and surety - reporting to local police and surrender condition - Grant of interim bail to the petitioner for a limited period with specified conditions - HELD THAT: - The petitioner, detained since 24.06.2017 in FIR No.98/2017 under the NDPS Act, was found allegedly in possession of 240 grams of heroin (noted against the commercial quantity of 250 grams). The petitioner sought interim bail on grounds of family hardship arising from his wife's ill-health, the presence of aged dependants and eight children, and the dilapidated condition of his parental house which required urgent repair before the monsoon. The State's report did not confirm the wife's tuberculosis diagnosis but corroborated the structural disrepair of the house. Considering these facts and circumstances, the Court concluded that the balance of convenience and humanitarian considerations warranted a limited grant of interim bail. The Court framed release conditions to address custodial and investigative interests: furnishing a bail bond with surety, reporting to the local police station within specified timeframes, periodic reporting during the bail period, and surrender at the end of the four-week period. [Paras 6, 7]

Interim bail granted for four weeks from release subject to bail bond of Rs. 10,000 with one surety of like amount, reporting to local police within 48 hours and thereafter after 15 days, and surrender at the end of four weeks; petition disposed accordingly.

Final Conclusion: The petition for interim bail is allowed for a period of four weeks on the stated conditions; the petitioner shall comply with the bail bond, surety and reporting and surrender directions, and the petition is disposed of in those terms.

Jurisdiction ratione personae and ratione materiae - personal jurisdiction and purposeful availment under Section 20 CPC - justiciability of investor State treaty arbitrations - sui generis nature of investor State arbitration agreement - competence competence (kompetenz kompetenz) - anti arbitration injunction for abuse of process - abuse of rights / abuse of process doctrine - consolidation of parallel treaty arbitrations as mitigation - limits of non intervention jurisprudence in investment arbitration

Jurisdiction ratione personae and ratione materiae - personal jurisdiction and purposeful availment under Section 20 CPC - This Court has personal jurisdiction over the Defendants and jurisdiction over the subject matter of the suit. - HELD THAT: - The Court applied the purposeful availment/effects principles and found, on the defendants' own assertions before the arbitral tribunal, that the Vodafone entities held substantial economic interests in India, carried on business and asserted investments connected to India. Applying the single economic entity doctrine to the corporate group, the Court concluded the cause of action partly arose within the forum and that the Defendants must be treated as working for gain within the jurisdiction, thereby satisfying Section 20(c) CPC and rendering the Court competent in personam and ratione materiae. [Paras 72, 73, 74, 75]

Court entertained and retained jurisdiction over the Defendants and the subject matter.

Justiciability of investor State treaty arbitrations - sui generis nature of investor State arbitration agreement - limits of non intervention jurisprudence in investment arbitration - There is no threshold bar or inherent lack of jurisdiction in the National Courts to hear suits relating to Bilateral Investment Protection Agreement (BIPA) arbitrations; the investor State arbitration agreement is sui generis and not itself a treaty that ousts domestic jurisdiction. - HELD THAT: - The Court held that ouster of civil court jurisdiction must be express and cannot be lightly inferred. India has not adopted ICSID's exclusionary model and has not enacted legislation ousting jurisdiction over BIPA matters. The agreement to arbitrate arising from a treaty between State and investor is contractual in character (sui generis) and may be governed by international law, but that does not transform it into a treaty that divests national courts of jurisdiction. Consequently, national courts may adjudicate disputes relating to BIPA arbitrations subject to international law principles and appropriate restraint. [Paras 76, 77, 78, 79, 83]

National Courts retain jurisdiction; no inherent or automatic bar to hearing suits touching BIPA arbitrations.

Anti arbitration injunction for abuse of process - abuse of rights / abuse of process doctrine - limits of non intervention jurisprudence in investment arbitration - Indian courts have the inherent jurisdiction to restrain investor State treaty arbitrations in exceptional cases where the arbitration is oppressive, vexatious, inequitable or an abuse of process, subject to stringent safeguards. - HELD THAT: - The Court recognised the general principle that arbitration bargains are to be respected and that kompetenz kompetenz and minimal curial intervention are important, but held that there is no absolute, indefeasible right to arbitrate. Drawing on common law, equity, public international law and comparative jurisprudence, the Court ruled that anti arbitration injunctions may be granted in compelling circumstances, where the applicant approaches the Court in good faith, there is no alternative efficacious remedy, and the petitioner discharges a high burden to show oppression, vexation or abuse. The Court emphasised caution and self restraint in exercising this power. [Paras 104, 111, 115, 118]

Courts may grant anti arbitration injunctions in exceptional cases of abuse, but only sparingly and with strict safeguards.

Consolidation of parallel treaty arbitrations as mitigation - abuse of rights / abuse of process doctrine - Filing multiple claims by entities in a vertical corporate chain under different treaties is not per se an abuse of process; consolidation of parallel proceedings can mitigate risks of double recovery or conflicting awards and the Defendants' undertaking to seek consolidation is binding on them. - HELD THAT: - The Court rejected a categorical presumption that parallel claims by related entities are inherently vexatious. Whether multiple proceedings amount to abuse depends on facts; absurd or opportunistic duplicative proceedings may be vexatious, but substantial reasons can justify parallel proceedings. Given the defendants' offer/undertaking to apply for consolidation before the UK tribunal and the practical benefits of consolidation, the Court found consolidation an adequate safeguard against double recovery or conflicting awards and held the defendants bound by that undertaking. [Paras 120, 122, 126, 127]

Multiple claims are not automatically abusive; consolidation is an appropriate mitigation and the defendants are bound by their undertaking to seek it.

Anti arbitration injunction for abuse of process - The interim injunction dated 22 August 2017 is vacated but was not set aside for wilful suppression; the Court found disclosure deficiencies but gave the plaintiff benefit of doubt. - HELD THAT: - The Court observed that applicants for interim relief must disclose material facts fully and candidly. Relevant communications dated 7 and 11 August 2017 indicating the plaintiff's position were not placed before the Court at the time of the ex parte order. However, accepting the plaintiff's explanation that those communications had not been available to local counsel when the plaint was filed, the Court declined to record a finding of wilful suppression, granted the benefit of doubt to the plaintiff and vacated the interim order in light of subsequent developments. [Paras 129, 131, 132]

Ex parte interim order of 22 August 2017 vacated; no finding of wilful suppression recorded.

Competence competence (kompetenz kompetenz) - The doctrine of kompetenz kompetenz applies: the arbitral tribunal is competent to determine its own jurisdiction and the plaintiff must, in the ordinary course, raise the plea of abuse of process before the constituted tribunal. - HELD THAT: - Article 21 of the UNCITRAL Rules (kompetenz kompetenz) is incorporated in the BIPA and the Court recognised that tribunals have primary competence to examine jurisdictional objections and related pleas such as abuse of process. Although national courts retain a limited supervisory role, the Court applied kompetenz kompetenz with rigour and held that, once the tribunal is constituted, issues of abuse and overlapping jurisdiction ordinarily belong to the tribunal to decide. [Paras 134, 136, 139]

Plaintiff should pursue the abuse of process plea before the constituted arbitral tribunal which has primary competence to decide it.

Abuse of rights / abuse of process doctrine - anti arbitration injunction for abuse of process - The question whether the defendants' invocation of the India United Kingdom BIPA arbitration constituted abuse of process was not finally adjudicated by this Court and is left to the India United Kingdom BIPA Tribunal to decide on the merits. - HELD THAT: - Given that the tribunal under the India United Kingdom BIPA has now been constituted and in view of the kompetenz kompetenz principle, the Court dismissed the suit while expressly leaving the claim of abuse of process open for determination by the tribunal. The Court directed that the tribunal take into account the defendants' undertaking on consolidation and decide the abuse of process issue on merits without being influenced by the Court's observations. [Paras 149, 150]

Issue of abuse of process remitted for fresh consideration and final decision by the India United Kingdom BIPA Tribunal; suit dismissed with liberty to raise the plea before that tribunal.

Final Conclusion: The High Court upheld its jurisdiction to entertain the suit, rejected any categorical ouster of national jurisdiction over BIPA related disputes, recognised that investor State arbitration agreements are sui generis contractual arrangements, affirmed that courts may in exceptional cases grant anti arbitration injunctions for oppression or abuse but must exercise such power sparingly, held that parallel claims by related entities are not per se abusive and that consolidation is an appropriate remedy, vacated the ex parte interim order of 22 August 2017 without finding wilful suppression, and dismissed the suit as infructuous while leaving the question of abuse of process to be decided on the merits by the constituted India United Kingdom BIPA Tribunal (subject to the defendants' undertaking to pursue consolidation).

Surrender of licence and liability to pay fee for whole period - basic licence fee and licence fee as parts of consideration for grant of licence - AMGQ/MMGQ guarantee and monthly instalment of licence fee - recovery of outstanding excise dues on surrender - resettlement and interim settlement adjustment under Rule 20(b) - no distinction between surrender and cancellation for recovery of licence fee

Surrender of licence and liability to pay fee for whole period - basic licence fee and licence fee as parts of consideration for grant of licence - AMGQ/MMGQ guarantee and monthly instalment of licence fee - recovery of outstanding excise dues on surrender - Liability to pay the licence fee (including the instalments relating to MMGQ) consequent to surrender of a retail country-liquor licence - HELD THAT: - The Court construed the term 'fee' in the surrender provision together with the Rules framed under the Excise Act and held that the fee payable on surrender comprises both the 'basic licence fee' and the 'licence fee' (the latter being the excise duty on the Annual Minimum Guaranteed Quantity (AMGQ)). The AMGQ is a guarantee by the licensee to lift specified quantity during the excise year; MMGQ is one-twelfth of AMGQ and the monthly instalment is one-twelfth of the licence fee. Those instalments form part of the consideration for the grant of the licence and, therefore, fall within the 'fee payable for the whole period' which Section 36 makes payable on surrender unless remitted by the competent authority. Rule 19's reference to recovery of 'outstanding excise dues' must be read subordinate to the statutory surrender provision and therefore includes both basic licence fee and licence fee (including MMGQ instalments). Reliance on earlier decisions and executive orders that take a contrary view was rejected as inconsistent with the statutory scheme and Rules.

The petitioner is liable to pay the basic licence fee and the licence fee (including monthly instalments in respect of MMGQ) consequent to surrender of the licence.

Resettlement and interim settlement adjustment under Rule 20(b) - no distinction between surrender and cancellation for recovery of licence fee - Effect of resettlement/interim settlement provisions and whether surrender attracts a different consequence than cancellation regarding recovery - HELD THAT: - Rule 19 requires the Licensing Authority to effect resettlement for the remaining excise year and to recover outstanding dues from security deposit; Rule 20(b) provides that amounts realised during interim settlement are to be adjusted against basic licence fee at regular settlement. The Court held that such adjustments operate in favour of subsequent regular settlement and do not relieve the surrendering licensee of his contractual obligation to pay the licence fee. The suggested distinction between surrender (non-penal) and cancellation (penal) was rejected: both entail retraction from contractual obligations and, under the statutory scheme and taxing-rule interpretation, do not afford a different consequence for recovery of fees.

Resettlement or interim adjustments under the Rules do not absolve the surrendering licensee from liability to pay the licence fee; surrender is not to be treated differently from cancellation for purposes of recovery of the fee.

Final Conclusion: The writ petition was dismissed: the Court upheld the recovery orders and held that the petitioner was liable to pay the basic licence fee and the licence fee (including MMGQ instalments) on surrender, and that resettlement/interim adjustments do not relieve the surrendering licensee of that liability.