TaxTMI Updates e-Newsletter
Jul 20,2016

Royalty - fee for technical services - Article 12(3) of the DTAA - distinction between transfer of copyright and sale of a copyrighted article - business income under Article 7 - treaty provisions prevail where more beneficial (Section 90(3) principle)

Royalty - fee for technical services - Article 12(3) of the DTAA - distinction between transfer of copyright and sale of a copyrighted article - business income under Article 7 - Whether consideration received by the assessee on sale/licence of pre packaged software constituted 'royalty' or 'fee for technical services' under the DTAA or was taxable as business income. - HELD THAT: - The Court applied the ratio of Director of Income Tax v. Infrasoft Limited: to qualify as 'royalty' under Article 12(3) the payment must be for transfer of all or any rights in respect of the copyright (including a licence) so as to enable the recipient to enjoy the copyright rights themselves. The mere acquisition of a copy of a copyrighted product, or a non exclusive/non transferable licence that only enables internal use and incidental acts of copying necessary to operate the program, does not divest the copyright owner of rights nor confer rights co extensive with the copyright owner. Such transactions are payments for purchase/use of a copyrighted article and are to be treated as business income (Article 7), not royalty. The Court noted the earlier treatment of the subsequent amendment to Section 9(1)(vi) but declined to re examine the issue because the DTAA provisions, being more beneficial to the assessee, apply (in accordance with the principle that treaty provisions prevail where more beneficial). The matter was therefore held to be covered by the Infrasoft decision and not answerable in favour of the Revenue.

Issue answered against the Revenue; the consideration was not taxable as 'royalty' under the DTAA but governed as business income; appeals dismissed.

Final Conclusion: The appeals by the Revenue are dismissed. The DTAA's definition of 'royalty' (Article 12(3)) as interpreted in Director of Income Tax v. Infrasoft Limited governs the issue; payments for sale/licence of pre packaged software that only confer a copy or limited internal use licence are not 'royalty' but business income, and the treaty provisions prevail where more beneficial.

Genuineness of transaction - Forfeiture of deposit as business expenditure - Concurrent findings of fact - Burden of proving collusion - Characterisation of payment independent of recipient's accountal - Substantial question of law

Genuineness of transaction - Forfeiture of deposit as business expenditure - Concurrent findings of fact - Characterisation of payment independent of recipient's accountal - Tribunal and CIT(A) correctly held that the agreement of sale was genuine and that the forfeited amount of Rs. 2.40 crores could be allowed as expenditure; Revenue failed to establish collusion rendering those findings perverse. - HELD THAT: - The Tribunal and the CIT(A) recorded concurrent findings of fact that the assessee entered into a genuine agreement to purchase property, the vendor confirmed receipt of the part payments, and subsequent dishonour of cheques and withdrawal of a ready buyer led to forfeiture in terms of the agreement. The vendor's confirmation to the Assessing Officer and the advert/title verification before entering the agreement supported genuineness. The Court observed that the manner in which the vendor has shown the receipt in its accounts does not determine the nature of the payment in the hands of the payer; the Revenue did not demonstrate that the parties' conduct amounted to a collusive device to transform the nature of the payment. Absent any showing that the concurrent fact-findings of the CIT(A) and Tribunal were perverse or arbitrary, no substantial question of law arises warranting interference with their conclusions. [Paras 4, 5, 7]

Revenue's challenge rejected; findings of the lower authorities on genuineness and allowance of the forfeited amount upheld.

Final Conclusion: The appeal is dismissed; the Tribunal's order upholding the CIT(A)'s deletion of the addition in respect of the forfeited amount is sustained and does not raise any substantial question of law.

Arm's length price - transfer pricing - base erosion - Section 92(3) exclusion - mandatory computation of income under Section 92 - CBDT Circular No.14 of 2001 - Authority for Advance Ruling limitation on determination of fair market value

Arm's length price - transfer pricing - mandatory computation of income under Section 92 - Section 92(3) exclusion - Whether an arm's length price adjustment was required in respect of interest-free loan advanced by the non-resident assessee to its wholly owned Indian subsidiary - HELD THAT: - The Tribunal held that Section 92 mandates computation of income arising from international transactions with associated enterprises by reference to arm's length price and that the statutory use of arm's length pricing is mandatory unless the specific exclusion in Section 92(3) applies. The assessee's contention that Section 92(3) must be read holistically to take into account 'overall' tax impact on all associated enterprises (including future tax shields from carry forward losses) was rejected. Section 92(3) refers to the effect on income or loss "computed on the basis of entries made in the books of account in respect of the previous year", and therefore contemplates impact on profits/losses for the year in question and not speculative or discounted future tax advantages. The Tribunal further observed that ALP adjustments made in the hands of the non-resident do not automatically translate into corresponding deductions in the hands of the Indian associated enterprise under Indian law, and that the second proviso to Section 92C(4) does not operate as the assessee had suggested. Reliance on foreign guidance, including ATO rulings, was held inapposite because the Indian provisions do not confer the discretion available under the Australian regime. The CBDT circular stating legislative intent against applying ALP where overall tax incidence in India decreases was held to reflect intent but not to override the clear statutory words; intent cannot be used to override unambiguous statutory provisions. The Tribunal therefore rejected the base-erosion argument and concluded that transfer pricing provisions could be invoked to compute income on an arm's length basis even where the transaction was interest-free at book value. [Paras 28, 29, 33, 39, 40]

Transfer pricing provisions apply and an arm's length price adjustment can be made in respect of the interest-free loan; the base-erosion contention is rejected.

Quantification of arm's length adjustment - remand - Whether quantification of the arm's length price adjustment was finally determined by the Special Bench - HELD THAT: - The Special Bench declined to adjudicate the quantification of the ALP adjustment because quantification arguments were not advanced before it. The Bench directed that the quantification/quantum aspect be placed before the Division Bench for determination and permitted the parties to raise any other issues not dealt with by the Special Bench before the Division Bench in accordance with law. [Paras 40]

Quantification of the ALP adjustment remanded to the Division Bench for adjudication.

Final Conclusion: The Special Bench held that the transfer pricing provisions (Section 92) apply and an arm's length price adjustment can be made in respect of the interest free loan to the Indian subsidiary for the assessment years before the Tribunal; the base erosion argument was rejected. Quantification of the ALP adjustment has been remanded to the Division Bench for determination.

Bogus loss - transactions among group concerns - circuitous route of transactions - setting-off business loss against interest income - test of human probabilities - adverse inference from documentary insufficiency - colourable device to evade tax - verification of movement of goods

Bogus loss - transactions among group concerns - circuitous route of transactions - adverse inference from documentary insufficiency - test of human probabilities - Whether the trading loss of Rs. 12,46,51,755/- claimed by the assessee on cotton knitted fabrics for AY 2009-10 is genuine or liable to be disallowed as self created by transactions among related/group concerns - HELD THAT: - The Tribunal upheld the authorities' finding that the loss was not genuine but self created by a circuit of transactions among group companies. The conclusion rests on the contemporaneous pattern where trading losses closely mirrored interest income across years, indicating intent to set off interest by manufacturing loss; the movement of goods showed a circular route between related entities with common directors/shareholders; transportation charges were minimal and supported by self made vouchers inconsistent with the volume of purported trade; on site verification failed to support storage or actual trading operations; and documentary evidence did not establish real movement of goods. The Tribunal distinguished relied precedents as factually inapposite because those decisions involved transactions with non related parties and proper documentation. Applying the test of human probabilities and treating the transactions as a colourable device to shift profits within the group, the Tribunal followed co ordinate bench authority and sustained the addition. [Paras 3]

Trading loss disallowed as self created; addition confirmed and appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal for AY 2009-10, upholding the disallowance of the claimed trading loss on the ground that the loss was manufactured through circuitous transactions among group concerns and not a genuine business loss.

Tax deduction at source - fee for technical services - characterisation of software expenditure as revenue or capital - depreciation classification of UPS as part of computer hardware - website development as capital expenditure - remand for verification of nature of payments

Tax deduction at source - fee for technical services - remand for verification of nature of payments - Deletion of disallowance under section 40(a)(ia) in respect of subscription payments to non-residents was set aside and matter remitted to Assessing Officer for fresh verification of nature of services. - HELD THAT: - The Tribunal observed that although the recipients are non-residents without PE in India and payments were made outside India, the determinative question is whether the payments fall within the nature of technical services (fee for technical services) attractable to tax under the Act and requiring withholding under section 195. The authorities below had not examined the invoices to determine whether the services rendered by non-residents constituted technical services. In view of this lacuna, the Tribunal set aside the CIT(A)'s deletion of the disallowance and remitted the matter to the Assessing Officer to verify the nature of services rendered by the non-residents and decide afresh after hearing the assessee. [Paras 6]

Order of deletion set aside; matter remitted to Assessing Officer for fresh verification and decision.

Characterisation of software expenditure as revenue or capital - test of enduring benefit - Expenditure on purchase of software held to be revenue in nature and disallowance deleted. - HELD THAT: - Relying on the approach in the cited authority, the Tribunal held that the test of enduring benefit is not conclusive; the real intent and whether the expenditure creates fixed capital must be examined. Software application acquired to enable the assessee to carry on business more efficiently, which does not create a new source of income or fixed capital but fine-tunes business operations, is revenue expenditure. Applying that reasoning to the facts, the Tribunal held the software expenses are revenue in nature and directed deletion of the disallowance by the Assessing Officer. [Paras 8]

Disallowance on account of software purchases deleted; expenditure treated as revenue.

Depreciation classification of UPS as part of computer hardware - coordinate bench precedent - Depreciation on UPS allowed at 60% (computer rate) rather than 15%. - HELD THAT: - The Tribunal followed earlier coordinate-bench decisions in the assessee's own case and other Tribunal precedents holding UPS attached to computers to be part of computer hardware eligible for depreciation at 60%. Revenue did not produce higher-court authority overturning those decisions. Accordingly, the Tribunal directed the Assessing Officer to allow depreciation on UPS at 60%. [Paras 9]

UPS depreciation allowed at 60%; Assessing Officer directed to grant relief.

Website development as capital expenditure - tax deduction at source - Expenditure on website development held to be capital expenditure; disallowance for non-deduction of TDS under section 194J sustained. - HELD THAT: - The Tribunal accepted the assessee's contention that website development amounted to creation of a new asset with long-term impact and enduring benefit for the company. As such the payments were capital in nature and not liable to be treated as fees for professional or technical services under the TDS provisions invoked by the Assessing Officer; however, on the issue before the Tribunal the CIT(A)'s conclusion that the disallowance under the relevant TDS provision was justified was upheld. [Paras 10]

Disallowance relating to website development upheld; ground in assessee's favour dismissed.

Final Conclusion: The Revenue appeal is allowed for statistical purposes insofar as the deletion of disallowance for subscription payments is set aside and remitted for verification; the assessee's cross-objection is partly allowed - software expenditure recharacterised as revenue and UPS depreciation allowed at 60% - while the claim on website development and related TDS disallowance is dismissed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Levy of penalty not automatic upon disallowance - Requirement to establish concealment or furnishing of inaccurate particulars before imposing penalty - Assessing Officer's duty to make out an independent case for penalty - Alternative characterisation of a claim as business loss under section 37(1) - Non-speaking or cryptic appellate order insufficient to sustain penalty

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - Levy of penalty not automatic upon disallowance - Assessing Officer's duty to make out an independent case for penalty - Non-speaking or cryptic appellate order insufficient to sustain penalty - Whether penalty under section 271(1)(c) was rightly levied and confirmed in respect of a disallowance of bad debt claimed as share application money - HELD THAT: - The Tribunal found that the AO did not demonstrate concealment of income or furnishing of inaccurate particulars; the penalty was levied mechanically on account of the disallowance. The assessee's claim was disallowed under the provision relating to bad debts, but no finding was recorded that the claim was bogus or could not alternatively be allowable as a business loss under the law. The AO's premise that absence of scrutiny would have permitted excess carry forward was factually incorrect because the return was time-barred and losses could not be carried forward. The CIT(A)'s four-line cryptic order simply affirmed the AO without independent reasoning. Reliance was placed on Supreme Court authority condemning automatic imposition of penalty upon mere disallowance and requiring that the conditions of section 271(1)(c) be established. Given the absence of any material showing deliberate concealment or inaccurate particulars, and the mechanical nature of the levy and confirmation, the Tribunal held the penalty unsustainable and deleted it. [Paras 3]

Penalty under section 271(1)(c) deleted for A.Y 2008-09 as the AO and CIT(A) failed to make out or record any independent case of concealment or furnishing of inaccurate particulars.

Final Conclusion: The appeal is allowed and the penalty imposed under section 271(1)(c) for A.Y 2008-09 is deleted.

Deemed dividend under Section 2(22)(e) - accumulated profits for Section 2(22)(e) - exclusion of share premium from accumulated profits - profit accrues on closing of books - director's current account settlements not treated as loan

Deemed dividend under Section 2(22)(e) - director's current account settlements not treated as loan - Whether withdrawals from company current account, to the extent they settle amounts credited as director's remuneration, rent and similar income items, constitute loans attracting deemed dividend under Section 2(22)(e). - HELD THAT: - The ledger of KBJ Jewellery Pvt. Ltd. shows a current account operated for the assessee with credits representing director's remuneration, rent and similar items and repeated deposits and withdrawals. Credits of income payable to the assessee constitute liabilities of the company. Withdrawals that are payments towards settlement of those liabilities (advances or subsequent payments against amounts already credited) are payments of company liabilities and not fresh loans. On these facts the Tribunal held that such withdrawals, to the extent they discharge liabilities reflected in the current account, cannot be regarded as loans liable to be treated as deemed dividend under Section 2(22)(e). The AO was directed to exclude such withdrawals in computing the loan amount for KBJ Jewellery (P) Ltd and the other companies concerned. [Paras 8]

Withdrawals made to the extent of amounts credited as director's remuneration, rent or similar income are not loans and shall be excluded from computation of loan amount for purposes of Section 2(22)(e).

Accumulated profits for Section 2(22)(e) - exclusion of share premium from accumulated profits - profit accrues on closing of books - How accumulated profits must be computed for the purpose of Section 2(22)(e): whether share premium and proportionate current year profit (or prior deemed dividend) are to be included; and distribution between shareholders. - HELD THAT: - The Tribunal accepted that share premium is not part of accumulated profits and directed exclusion of the share premium balance from accumulated profits. Reliance was placed on authority holding that current year profits accrue only on closure of books; accordingly proportionate profits of the current year are not to be included in accumulated profits for determining deemed dividend. The Tribunal also directed exclusion of any deemed dividend assessed in earlier years when computing accumulated profits for the current year. Further, where both the assessee and his mother received loans from the same companies, the Tribunal upheld distribution of the available accumulated profits between them in proportion to their shareholdings for purposes of assessing deemed dividend. The AO was directed to recompute accumulated profits and deemed dividend accordingly. [Paras 5, 9]

Share premium shall be excluded and current year's proportionate profit shall not be included in accumulated profits; earlier assessed deemed dividend shall be excluded; accumulated profits are to be apportioned between shareholders in proportion to shareholding and the AO shall recompute deemed dividend.

Final Conclusion: Both appeals are partly allowed. The Tribunal modified the CIT(A) orders by directing the AO to exclude withdrawals settling amounts credited as director's remuneration/rent from loan computation, to exclude share premium and current-year proportionate profits (and earlier assessed deemed dividends) from accumulated profits, to apportion accumulated profits between shareholders by shareholding, and to recompute deemed dividend for assessment years 2008-09 and 2009-10.

Reopening of assessment under second proviso to Section 147 - requirement of failure to disclose material facts - Reopening of assessment v. change of opinion - Reopening where issue was considered in original assessment - Reopening to review order of appellate authority - Validity of notice issued under Section 148

Reopening of assessment under second proviso to Section 147 - requirement of failure to disclose material facts - Validity of notice issued under Section 148 - Impugned notices under Section 148 are without jurisdiction insofar as the proviso to Section 147 requires an allegation of failure to disclose material facts and no such allegation was made. - HELD THAT: - The Assessing Officer's reasons do not allege any failure by the assessee to disclose truly and fully all material facts necessary for assessment. As the assessments for the relevant years were completed under Section 143(3), the proviso to Section 147 applies. In the absence of any recorded failure to disclose material facts, the statutory precondition for reopening under the proviso is not satisfied and the notices issued under Section 148 lack jurisdiction. [Paras 7]

Notices quashed for want of jurisdiction due to absence of allegation of failure to disclose material facts.

Reopening of assessment v. change of opinion - Reopening where issue was considered in original assessment - Impugned notices are invalid because they amount to reopening the assessments on the basis of a mere change of opinion where the same issue was considered in the original assessment proceedings. - HELD THAT: - The assessment orders for each of the five years show that the Assessing Officer had considered the question of quantum of expenses deductible from gross dividend for claiming deduction under Section 80M, and had determined a figure (1% of gross dividend). Reopening the assessment on the same question without new material or allegation of nondisclosure constitutes a change of opinion. Reopenings occasioned solely by a change of opinion are not permitted and render the notices invalid. [Paras 8]

Notices quashed as being founded on change of opinion where the issue had been dealt with in the original assessments.

Reopening to review order of appellate authority - Validity of notice issued under Section 148 - Impugned notices are without jurisdiction insofar as they seek to reopen assessments on the very issue which had been considered by the first appellate authority (CIT(A)). - HELD THAT: - The quantum of expenses to be reduced from gross dividend for Section 80M was the subject of the CIT(A)'s orders, which partly allowed the assessee's appeals. Issuing reopening notices to revisit an issue already considered by the appellate authority would amount to the Assessing Officer attempting to review the appellate order; such action cannot be sustained. The fact that Revenue's appeals to the ITAT were pending does not validate reopening on that ground. [Paras 9]

Notices quashed for being an impermissible attempt to review the appellate authority's decision.

Final Conclusion: Writ petition allowed; Rule made absolute. The five notices dated 11 January 2000 issued under Section 148 in respect of A.Y. 1989-90, 1990-91, 1991-92, 1992-93 and 1993-94 are quashed as without jurisdiction.

Reopening of assessment under Section 148 - jurisdiction to complete reassessment - service of notice and proof of delivery - remand for factual inquiry - principles of natural justice

Reopening of assessment under Section 148 - service of notice and proof of delivery - jurisdiction to complete reassessment - remand for factual inquiry - principles of natural justice - Whether the reassessment proceedings (and the impugned show cause notices dated 9th February, 2016 and 18th March, 2016) are without jurisdiction for A.Y. 2008-09 for want of a valid notice under Section 148 issued within the time permitted by law, and the appropriate course when the fact of issuance/service is disputed. - HELD THAT: - The Court found that the petition raises a disputed factual question whether a notice under Section 148 was in fact issued to the petitioner before the expiry of the statutory period for reopening for A.Y. 2008-09. The petitioners' contention that no such notice was received is prima facie supported by an independent communication from the Postal Authorities, while the revenue relies on records and postal acknowledgements asserting issuance and delivery. Given this factual conflict and the revenue's concession that the matter requires investigation, the Court declined to decide the jurisdictional question solely on the papers. Instead, the Court directed a senior officer (Principal Commissioner of Income Tax 15) to determine within eight weeks whether the alleged notice was issued and its date, observing that the inquiry must be conducted in consonance with the principles of natural justice, including allowing affidavit evidence and cross examination of persons tendering evidence. The Court limited the scope of the administrative decision to the factual question of issuance/service of the Section 148 notice; if the Principal Commissioner decides in favour of the revenue, the matter will be restored to the Assessing Officer to proceed. Pending that determination, the alleged notice will be stayed and the impugned show cause notices shall not be acted upon for a period of 12 weeks from the date of the order. All substantive contentions were kept open for determination following the factual inquiry.

Factual dispute as to issuance/service of the Section 148 notice remanded to Principal Commissioner of Income Tax 15 for determination (to be completed within eight weeks) with directions to follow natural justice; stay of the alleged notice and of action on the impugned show cause notices for 12 weeks; if the Principal Commissioner upholds issuance, proceedings to be restored to the Assessing Officer.

Final Conclusion: The writ petition was disposed by remanding the disputed factual question of issuance and date of the Section 148 notice for A.Y. 2008-09 to the Principal Commissioner of Income Tax 15 (decision in eight weeks with opportunity for evidence and cross examination), with an interim stay preventing action on the contested show cause notices for 12 weeks; all other contentions left open.

Deduction under Section 36(1)(iii) - rectification under Section 154 - consideration of departmental communications and revisional orders - remand for fresh consideration - withdrawal of appeal as infructuous

Rectification under Section 154 - consideration of departmental communications and revisional orders - deduction under Section 36(1)(iii) - remand for fresh consideration - withdrawal of appeal as infructuous - Whether the orders and documents issued under Section 154 and departmental communications were taken into consideration by the CIT (Appeals) and the Tribunal and the consequence thereof - HELD THAT: - The Court observed that after the assessment order the assessee obtained rectification orders under Section 154 which reduced assessed income and that the Assessing Officer had, by order dated 12.08.2010, upheld the assessee's contention. These orders and related departmental communications were not considered by the CIT (Appeals) or the Tribunal when disposing of the appeals against the assessment order. The Court did not express any opinion on the correctness or effect of the Section 154 orders themselves but held that such orders and documents ought to have been placed before and considered by the CIT (Appeals) and the Tribunal. The Court noted that, depending on the effect of the rectification orders, the assessee might seek to have the appeals allowed to be withdrawn or dismissed as infructuous, but left any such application and the merits of the claim under Section 36(1)(iii) open for determination by the Tribunal on reconsideration. [Paras 7, 8, 9, 10]

Impugned orders set aside and matter remanded to the Tribunal for fresh consideration of the Section 154 orders, departmental communications and consequent issues; parties' contentions on merits kept open and Tribunal to decide any application for withdrawal or dismissal as infructuous.

Final Conclusion: The impugned order is set aside and the matter is remanded to the Tribunal for fresh consideration of the rectification orders under Section 154 and related departmental communications; all substantive contentions are left open for adjudication by the Tribunal, including any application to withdraw or dismiss the appeals as infructuous.

Obligation under Section 220(6) to consider stay applications independently - parameters in KEC International Ltd. for grant of stay - CBDT instructions on deposit for stay and their scope - review by Principal Commissioner/Commissioner of Income Tax of Assessing Officer's stay decision - attachment under Section 226(3) of the Income Tax Act

Obligation under Section 220(6) to consider stay applications independently - parameters in KEC International Ltd. for grant of stay - CBDT instructions on deposit for stay and their scope - Validity of the Assessing Officer's orders dated 6th April, 2016 refusing a full stay and directing deposit of 15% relying on CBDT instructions. - HELD THAT: - The Court found that the Assessing Officer, while rejecting the stay applications, did not apply the parameters laid down by this Court in KEC International Ltd. and that the statutory obligation under Section 220(6) to consider stay applications independently cannot be obliterated merely by administrative instructions of the CBDT. The Court recorded that the impugned orders relied upon the CBDT instructions dated 29th February, 2016 to direct deposit of 15% as condition for stay, but emphasized that the Assessing Officer must consider stay applications on merits and may, in a fit case, grant a complete stay in accordance with the KEC parameters. Despite this finding, because the petitioners failed to seek review of the Assessing Officer's orders before the Principal Commissioner/Commissioner, the Court refrained from disturbing the orders at this stage. [Paras 6, 7]

The Assessing Officer did not follow the KEC parameters and his obligation under Section 220(6) to consider stay independently remains; however, the orders dated 6th April, 2016 are not disturbed due to the petitioners' failure to seek review.

Review by Principal Commissioner/Commissioner of Income Tax of Assessing Officer's stay decision - attachment under Section 226(3) of the Income Tax Act - Relief to be granted pending review and effect of existing attachments issued under Section 226(3). - HELD THAT: - The Court directed that the petitioners may within one week file applications for review before the Principal Commissioner/Commissioner of Income Tax challenging the Assessing Officer's orders dated 6th April, 2016. The Principal Commissioner/Commissioner is to consider and dispose of those review applications in accordance with the KEC parameters. Pending such review and disposal, and for a further period of two weeks from receipt of the Commissioner's orders by the petitioners, the Revenue is restrained from taking further action consequent to the notices dated 8th June, 2016 under Section 226(3), specifically from withdrawing amounts or giving further directions in respect of the frozen/attached accounts. The Court, however, left the attachments in existence but curtailed further action to preserve the petitioners' ability to seek review. [Paras 8]

Petitioners directed to seek review within one week; Principal Commissioner/Commissioner to decide in accordance with KEC; Revenue restrained from further action under the S.226(3) notices until disposal and for two weeks thereafter, while attachments remain but withdrawals and further directions are stayed.

Final Conclusion: Writ petitions disposed directing petitioners to apply within one week to the Principal Commissioner/Commissioner for review of the Assessing Officer's orders; Principal Commissioner/Commissioner to decide in accordance with KEC International Ltd.; Revenue restrained from acting further on the Section 226(3) notices pending such review and for two weeks after receipt of the review orders, attachments to remain but withdrawals and further directions in respect of the frozen accounts restrained; no order as to costs.

Penalty for concealed or inaccurate particulars under Section 13 of the Interest Tax Act, 1974 - independence of penalty proceedings from quantum assessment - bona fide claim and full disclosure as defence to penalty - interpretation of interest for the purposes of Section 2(7) of the Interest Tax Act, 1974 - effect of acceptance of quantum order on penalty liability

Penalty for concealed or inaccurate particulars under Section 13 of the Interest Tax Act, 1974 - independence of penalty proceedings from quantum assessment - bona fide claim and full disclosure as defence to penalty - effect of acceptance of quantum order on penalty liability - Validity of deletion of penalty imposed under Section 13 of the Interest Tax Act, 1974 in respect of disputed deduction of interest aggregating Rs. 91.21 crores. - HELD THAT: - The Court held that penalty proceedings under Section 13 are independent of quantum proceedings and require satisfaction that particulars were inaccurate or chargeable interest was concealed. On the facts the assessee had made full disclosure in its interest-tax return and advanced a bona fide contention-based on an existing High Court decision-that the amounts did not fall within the definition of interest under Section 2(7). The Assessing Officer himself acknowledged that all particulars were disclosed in the reassessment order. Reliance was placed on the Tribunal's and CIT(A)'s findings and on the principle that merely making a claim which is ultimately disallowed does not, by itself, constitute furnishing inaccurate particulars warranting penalty. Acceptance of the quantum order against the assessee does not ipso facto establish concealment or inaccurate particulars sufficient to sustain penalty under Section 13. [Paras 6, 7, 9, 10]

Penalty deleted; imposition of penalty under Section 13 not sustainable where there was full disclosure and a bona fide claim regarding the taxability of the amounts.

Final Conclusion: Appeal dismissed. The Tribunal and CIT(A) were justified in deleting the penalty; no substantial question of law arises.

Principle of mutuality - taxability of transfer of occupancy rights attached to shares - concurrent findings of fact and perversity standard - admissibility of issues not raised before the Tribunal - impairment of land by utilisation of FSI

Principle of mutuality - taxability of transfer of occupancy rights attached to shares - concurrent findings of fact and perversity standard - Whether profit from sale of residential units was assessable in the hands of the respondent-assessee - HELD THAT: - Both the CIT(A) and the Tribunal found as a fact that the right to occupy the flats was attached to the shares of the respondent-company and that no flats or other assets of the respondent-company were sold in the subject year; what was transferred was the shareholder's shares (by M/s. Calico Associates) and the consideration for that transfer was taxed in the hands of that shareholder as capital gains. The Revenue did not demonstrate that these concurrent factual findings were perverse or arbitrary. On that basis the Tribunal correctly held that there was no sale by the respondent-company attracting assessment of profit in its hands under the Act. [Paras 3, 4, 5, 6]

The profit from sale of residential units was not assessable in the hands of the respondent-assessee; the transfer taxed was the shareholder's sale of shares carrying occupancy rights.

Impairment of land by utilisation of FSI - admissibility of issues not raised before the Tribunal - concurrent findings of fact and perversity standard - Whether the use of FSI amounted to impairment of the assessee's land and rendered sale proceeds taxable in the hands of the respondent-company - HELD THAT: - The question of impairment of land by utilisation of FSI was not canvassed before the Tribunal and hence did not arise from the Tribunal's order. Separately, the CIT(A) found that the land continued to be owned by the respondent-assessee and that no FSI attached to the land had been transferred. That factual finding has not been shown to be perverse or arbitrary, and therefore the contention based on alleged impairment/use of FSI was not accepted. [Paras 7]

The contention of impairment of land by use of FSI was not entertained as it was not raised before the Tribunal; in any event the finding that no transfer of FSI occurred and the land remained with the assessee stands.

Final Conclusion: The concurrent factual findings that the shares (carrying occupancy rights) were sold and taxed in the hands of the shareholder, and that no asset or FSI of the respondent-company was transferred, were held not to be perverse; the questions framed do not raise substantial questions of law and the appeal is dismissed.

Remission or cessation of liability - deemed income under section 41(1) of the Income Tax Act, 1961 - unilateral write off by creditor does not translate into income of the debtor - requirement of remission/cessation occurring in the relevant previous year - principles of natural justice and confrontation of material relied upon by Assessing Officer

Remission or cessation of liability - deemed income under section 41(1) of the Income Tax Act, 1961 - Addition made under section 41(1) on account of alleged cessation of sundry creditors amounting to Rs.81,60,350/- - HELD THAT: - The Court upheld the Tribunal's conclusion that section 41(1) is attracted only where the assessee has obtained a benefit by way of remission or cessation of liability during the previous year relevant to the assessment year. On the record there was no evidence of remission or cessation of the liabilities in the relevant previous year; the assessee continued to show the liabilities in its books and possessed the physical share certificates underlying the transactions. The Assessing Officer's enquiries and external material did not establish that the creditors had given up their rights in the year under consideration, and there was no finding that any cash or equivalent benefit had been obtained by the assessee in that year. Accordingly, invocation of section 41(1) for the year under consideration was not justified. [Paras 3, 6, 7]

Addition under section 41(1) on account of alleged cessation of liabilities was not sustainable and was rightly deleted by the Tribunal.

Unilateral write off by creditor does not translate into income of the debtor - requirement of remission/cessation occurring in the relevant previous year - Whether unilateral entries or write offs in creditors' books operate as income in the hands of the assessee - HELD THAT: - The Court agreed with the Commissioner (Appeals) and the Tribunal that a unilateral act by a creditor (such as writing off a debt in its books) does not ipso facto create taxable income for the debtor. Even if creditors had written off amounts in their books, any cessation would operate in the year in which such write off occurred; there was no material to show such write off or benefit to the assessee in the relevant previous year. Therefore such unilateral acts cannot be universally treated as resulting in income in the assessee's hands absent clear evidence of remission or receipt of benefit in the year under consideration. [Paras 4, 6, 7]

Unilateral write off by creditors does not automatically translate into income of the assessee; no such remission/benefit was shown in the relevant year.

Principles of natural justice and confrontation of material relied upon by Assessing Officer - Whether Assessing Officer's reliance on material not confronted to the assessee and failure to afford adequate opportunity vitiated the proceedings - HELD THAT: - The Court accepted the Commissioner (Appeals)'s finding that the Assessing Officer had not furnished to the assessee all material gathered and relied upon in the assessment order for rebuttal, and that relevant confirmations and supporting documents filed by the assessee were not adequately dealt with. On this basis, and having regard to the need for conformity with principles of natural justice and fair opportunity to rebut adverse material, the Tribunal and Commissioner (Appeals) were justified in sustaining deletion of the addition. [Paras 4, 6, 7]

Assessing Officer's failure to confront the assessee with material relied upon and to afford proper opportunity justified appellate interference; deletion was valid.

Final Conclusion: The High Court found no substantial question of law arising from the Tribunal's order: the addition under section 41(1) was unsustainable for lack of remission or cessation of liabilities in the relevant previous year, unilateral creditor write offs do not ipso facto create income in the hands of the assessee, and procedural lapses in confronting relied upon material supported deletion; the revenue appeal is dismissed.

Exemption from deduction of tax from payment of interest to members by a co-operative society under Section 194A(3)(v) - tax deduction at source on interest on time deposits - prospective amendment effective from 1st June, 2015

Exemption from deduction of tax from payment of interest to members by a co-operative society under Section 194A(3)(v) - tax deduction at source on interest on time deposits - prospective amendment effective from 1st June, 2015 - Whether the Co-operative Bank was required to deduct tax at source while paying interest to its members on time deposits - HELD THAT: - The Court considered the Ministry of Finance Circular No.19/2015 which records that the exemption under Section 194A(3)(v) was amended prospectively so as to exclude payment of interest on time deposits by co-operative banks to their members from the exemption. The amendment was effective from 1st June, 2015; accordingly, a co-operative bank is required to deduct tax at source from interest on time deposits of its members on or after 1st June, 2015. Conversely, pursuant to the circular, a co-operative bank was not required to deduct tax from payment of interest on time deposits of its members paid or credited before 1st June, 2015. Applying this administrative clarification, the Court found no subsisting controversy requiring further adjudication. [Paras 2, 3]

Appeal dismissed; in view of the Ministry of Finance circular, co-operative banks were not required to deduct tax on interest on time deposits paid or credited before 1st June, 2015, and the amendment applies prospectively from 1st June, 2015.

Final Conclusion: The Revenue's appeal is dismissed in view of the Ministry of Finance Circular No.19/2015: the obligation to deduct tax at source on interest on time deposits paid to members arises prospectively from 1st June, 2015, and does not apply to payments made or credited before that date.

Power to formulate foreign trade policy under Section 5 of the Foreign Trade (Development and Regulation) Act, 1982 - judicial restraint in review of executive trade policy - rationality of administrative policy decision - scope of Article 226 judicial review of policy decisions - competence to issue notification under foreign trade law

Competence to issue notification under foreign trade law - power to formulate foreign trade policy under Section 5 of the Foreign Trade (Development and Regulation) Act, 1982 - Validity of the challenged notification as an instrument issued by the Central Government under Section 5 of the Act - HELD THAT: - The Court examined the impugned instrument and concluded that the notification was issued by the Central Government under Section 5 of the Act and not by the Director General of Foreign Trade. Consequently, the procedural challenge that the Director General rather than the Central Government issued the ban is not sustainable. The enquiry therefore proceeds to the merits of the policy decision rather than being defeated on competence grounds. [Paras 9]

Notification is shown to have been issued by the Central Government and the competence challenge on that basis is rejected.

Judicial restraint in review of executive trade policy - scope of Article 226 judicial review of policy decisions - rationality of administrative policy decision - Whether the decision to prohibit export (trade in shark fins) is arbitrary, irrational, or suffers from lack of application of mind - HELD THAT: - The Court applied settled principles that courts must respect executive wisdom in formulating trade policy and must not substitute their own assessment of policy wisdom or efficacy. Citing precedents that confine judicial review of policy to legality and rationality, the Court found that the Central Government considered relevant factors (including minutes of stakeholder meetings and ecological concerns about finning and depletion of sharks). The existence of arguments that sharks are not subject to targeted fishing, or that domestic capture/consumption was not banned, does not render the policy irrational where the executive has bona fide taken into account ecological considerations and chosen a policy response. The Court declined to re-appraise the factual assessments or to test the policy by asking for proof that it will achieve its objectives, noting that executive authorities may experiment bona fide in public interest and that the decision-making process demonstrated consideration of relevant factors. [Paras 12, 13, 14, 18, 19]

The policy decision to ban trade in shark fins is not shown to be arbitrary or lacking application of mind; judicial interference is inappropriate and the challenge on rationality grounds is dismissed.

Final Conclusion: Writ petitions dismissed. The Court upheld the Central Government's notification banning trade in shark fins as lawfully issued and not amenable to judicial reappraisal of policy; respondents were directed to consider, if applied for, requests to permit fulfilment of pending export obligations for such period as they deem fit.

Confiscation of non-bonafide baggage - redemption option and redemption fine - disposal of confiscated goods under Section 150 - refund of sale proceeds after deduction of duty, fine and penalty - jurisdiction and maintainability of revision under Section 129DD read with proviso to Section 129A(1)

Disposal of confiscated goods under Section 150 - refund of sale proceeds after deduction of duty, fine and penalty - Whether the dispute relates to refund of sale proceeds of goods already disposed of under Section 150 and thus concerns adjustment of duty on goods not available for redemption. - HELD THAT: - The record establishes seizure and adjudication resulting in confiscation with an option of redemption on payment of fine and penalty; however the confiscated goods were subsequently disposed of by the Disposal Unit under the statutory mechanism for disposal. The refund order under challenge sanctioned return of the realized sale proceeds after deducting duty, redemption fine and penalty. The Government found that the controversy primarily concerns the refund and adjustments arising from disposal of seized/confiscated goods and whether duty may be charged where goods are not available for redemption. This characterisation distinguishes the matter from appeals against adjudication of imported baggage and places the dispute within the domain of refund/disposal adjustments rather than within the category of orders contemplated by the proviso to Section 129A(1). [Paras 11]

The matter pertains to refund of sale proceeds arising from disposal under Section 150 and to adjustments for duty, fine and penalty on goods not available for redemption; it is not an order of the nature covered by the proviso to Section 129A(1).

Jurisdiction and maintainability of revision under Section 129DD read with proviso to Section 129A(1) - maintainability of revision application before Central Government - Whether the Revision Application under Section 129DD to the Central Government against the Commissioner (Appeals) order is maintainable. - HELD THAT: - Section 129DD permits revision to the Central Government only where the impugned Commissioner (Appeals) order relates to matters specified in the proviso to sub-section (1) of Section 129A. The Government held that the present dispute-being about refund of sale proceeds and adjustments after disposal-does not fall within the class of orders enumerated in that proviso (which pertain to baggage/imported goods issues for Tribunal jurisdictional exclusion). Consequently, the Revision Application under Section 129DD is beyond the jurisdiction of the Central Government. The Government therefore concluded that the present revision is not maintainable and may be dismissed, leaving the applicant free to seek remedy under the appropriate provision (Section 129A). [Paras 9, 11, 12]

The Revision Application under Section 129DD is beyond the jurisdiction of the Central Government and is dismissed as non-maintainable; the applicant may pursue an appeal under Section 129A of the Customs Act, 1962.

Final Conclusion: Revision dismissed as non-maintainable: the dispute relates to refund of sale proceeds and adjustments following disposal under the customs disposal provisions, and therefore does not fall within the category of orders amendable by revision to the Central Government under Section 129DD read with the proviso to Section 129A(1); applicant is at liberty to file an appeal under Section 129A.

Recovery of duties not levied and interest under Section 28 and 28AB - baggage import, declaration obligation and tariff valuation under Chapter XI - seizure and confiscation do not absolve liability for duty and interest - valuation and assessable value for confiscation and redemption

Recovery of duties not levied and interest under Section 28 and 28AB - baggage import, declaration obligation and tariff valuation under Chapter XI - Whether interest under Section 28AB is leviable where dutiable goods imported as baggage were seized for non-declaration and duty is demanded under Section 28. - HELD THAT: - The Government held that duties are chargeable on all goods imported into the country under the charging provision and that Chapter XI (baggage) prescribes the mechanism of declaration and valuation. The applicant failed to declare the seized memory cards as baggage in contravention of the declaration obligation, and the goods were chargeable to duty under the charging provision read with the baggage valuation rules. Where duty has not been paid at the time of import, recovery proceedings under Section 28 are available and, consequently, interest under Section 28AA (now 28AB) is chargeable on the duty not paid. The Government further observed that seizure under Section 110 and eventual confiscation under Section 111 do not extinguish the liability to duty; seizure/confiscation does not preclude demand of duty and interest. The decision relied on the distinction between clearance/assessment provisions applicable to cargo and the special provisions for baggage, finding that the CESTAT decision relied upon by the applicant concerned assessment under Section 47 (not applicable to baggage) and therefore does not govern the facts of this case. On these grounds the impugned order confirming demand of duty and interest was held to be sustainable. [Paras 13, 14, 16]

Interest under Section 28AB is leviable on duty demanded for undeclared dutiable baggage; the impugned Order-in-Appeal upholding demand of duty and interest is sustained.

Seizure and confiscation do not absolve liability for duty and interest - inapplicability of precedent concerned with assessment under Section 47 to baggage cases - Whether seizure of the goods while in departmental possession prevents levy of interest and whether the cited CESTAT decision applies. - HELD THAT: - The Government found that seizure and custody of goods by the Department pursuant to Section 110 do not negate the obligation to pay customs duty or interest thereon when duty was not paid at import. The reliance on the CESTAT decision was rejected because that decision dealt with an order of assessment under Section 47, a provision not applicable to baggage; thus the precedent does not apply to the present facts. The Government also noted that a Government order cited by the applicant did not consider the applicability of Sections 28 and 28AA/28AB and therefore did not assist the applicant. [Paras 14, 15]

Seizure does not bar demand of duty and interest; the precedent relied on by the applicant is inapplicable to baggage and does not affect the impugned order.

Final Conclusion: The Revision Application is rejected; the Order-in-Appeal upholding demand of duty and interest on the undeclared memory cards (with confiscation/redemption and penalties as ordered below) is sustained as devoid of merit.

Proof of export/destination to foreign territory as essential for imposing customs penalties - Separability of violations under the Drugs & Cosmetics Act from offences under the Customs Act - Penalty under Section 114 of the Customs Act, 1962 - Specified area treatment under Notification No.31/2008-CUS(NT) - 50 kms. from Bangladesh land border - Concealment and fabrication of invoices as indicia of illegal activity

Proof of export/destination to foreign territory as essential for imposing customs penalties - Penalty under Section 114 of the Customs Act, 1962 - Separability of violations under the Drugs & Cosmetics Act from offences under the Customs Act - Specified area treatment under Notification No.31/2008-CUS(NT) - 50 kms. from Bangladesh land border - Concealment and fabrication of invoices as indicia of illegal activity - Whether penalties under Section 114 of the Customs Act, 1962 could be sustained against the appellants in the absence of evidence that the seized Phensedyl consignments were destined for export to Bangladesh, notwithstanding concealment and defective documentation and alleged violations of the Drugs & Cosmetics Act. - HELD THAT: - The Tribunal found that the adjudicatory material did not establish that the seized Phensedyl consignments were being taken out of India to Bangladesh. The driver's statement did not admit export to Bangladesh and there was no corroborative documentary evidence identifying the destination as Bangladesh. Although concealment of goods and the preparation of fake vouchers/invoices generate suspicion of illegal activity, such indicia are not by themselves proof of export to a foreign territory. The Tribunal further observed that movement and documentation requirements under the Drugs & Cosmetics Act (relating to a narcotic-containing formulation) may give rise to distinct offences or penalties under that Act, but violations of those statutory procedures cannot be treated as a substitute for the requisite proof under the Customs Act to impose penalties under Section 114. Reference was also made to the Notification treating an area within 50 kms of the Bangladesh land border as a specified area; however, the Revenue failed to demonstrate that the seized goods were within that specified area at any relevant stage. In the absence of evidence on destination or that the statutory territorial criterion under the Notification was met, the essential foundation for invoking Section 114 penalties was missing. [Paras 4]

Penalties under Section 114 of the Customs Act, 1962 quashed as there was no proof the seized goods were destined for export to Bangladesh; concealment and Drugs & Cosmetics Act violations insufficient to sustain customs penalties.

Final Conclusion: Appeals allowed; penalties imposed by the adjudicating authority and upheld by the Commissioner(Appeals) set aside for want of evidence that the seized consignments were intended for export to Bangladesh, with consequential relief, if any.

Statutory obligation to file statement of affairs - failure to file statement of affairs within prescribed time - reasonable excuse - fiduciary duty of directors to preserve company records - obstruction to the winding up process - penal liability under Section 454(5) of the Companies Act, 1956 - alternative sentencing of fine or imprisonment

Statutory obligation to file statement of affairs - failure to file statement of affairs within prescribed time - reasonable excuse - fiduciary duty of directors to preserve company records - obstruction to the winding up process - Respondents' liability for non-compliance with the obligation to file the statement of affairs under Section 454(3) read with Section 454(5) of the Companies Act, 1956 and whether their defences constituted a reasonable excuse. - HELD THAT: - The respondents were promoter directors responsible for the company's affairs up to the winding up order dated 17-10-2003 and were thus statutorily obliged to file the statement of affairs within twenty-one days. The defences - (a) that records were in the custody of RIICO following its takeover of factory premises, and (b) that a dispute with the company's chartered accountant prevented preparation of the statement - were examined and rejected. Correspondence from RIICO established that no books or records were taken into its possession when the fixed assets were taken over. There was no probative material to support the alleged conspiracy or non-cooperation by the chartered accountant. Directors, acting as trustees in a fiduciary capacity, bear the duty to control and preserve company records; it was implausible that records were left unattended in a closed factory for over five years. The belated and incomplete filings in 2015-2016 did not amount to compliance. On these facts the court found the respondents had no reasonable excuse for default and that the offence under Section 454(5) was made out, the default being intentional or resulting from reckless negligence and thereby obstructing orderly winding up and enquiry into the company's affairs.

Respondents guilty of contravening Section 454(3) read with Section 454(5) for failure to file a complete statement of affairs and have no reasonable excuse.

Penal liability under Section 454(5) of the Companies Act, 1956 - alternative sentencing of fine or imprisonment - Appropriate sentence for the breach of Section 454(5) of the Companies Act, 1956. - HELD THAT: - Section 454(5) permits imprisonment of up to two years or a fine up to the daily rate specified, or both. Given the prolonged default and its public interest consequences, but having regard to the facts, the court considered imprisonment in the first instance to be harsh and concluded a monetary penalty would suffice. Although the statutory maximum daily fine would yield a larger sum, the court exercised discretion to impose a lesser punitive amount that would serve the ends of justice. The court directed the fine be deposited in the Common Pool Fund with the Official Liquidator within a specified period and prescribed an alternative custodial sentence in case of non-payment.

Respondents sentenced to pay a fine of Rs. 2,00,000 jointly and severally to be deposited in the Common Pool Fund within six months; in default of payment, they shall undergo simple imprisonment for six months.

Final Conclusion: Application under Section 454 of the Companies Act, 1956 allowed; respondents found guilty of failing to file the statement of affairs without reasonable excuse and sentenced to a fine with a limited alternative period of imprisonment in default of payment.

Realisation of secured assets under the Act of 2002 outside company winding up - Company court to eschew jurisdiction over mortgaged assets where SARFAESI proceedings initiated - Official Liquidator representing workers' interest - Association of Official Liquidator in sale under the provisos to Section 13(9) of the Act of 2002 - Application of Section 13(9) - pari passu obligation towards workmen's dues

Realisation of secured assets under the Act of 2002 outside company winding up - Company court to eschew jurisdiction over mortgaged assets where SARFAESI proceedings initiated - Assignee of secured creditor who has taken possession under the Act of 2002 is entitled to realize mortgaged immovable assets of a company in liquidation outside the winding up proceedings. - HELD THAT: - The Court, applying the legal position enunciated in Pagasus Assets Reconstruction P. Ltd. (supra), held that where a secured creditor or its assignee has invoked the remedies under the Act of 2002 and taken possession of mortgaged assets prior to or notwithstanding a winding up order, the company court must eschew its hands in respect of those assets and the assignee may proceed to realize them under the Act of 2002. The factual finding that the applicant-assignee had taken physical possession of the immovable assets on 07.07.2015 and had proceeded under the Act of 2002 supported entitlement to realize the secured assets outside the liquidation proceedings.

Applicant-assignee entitled to proceed with realization of the mortgaged immovable assets under the Act of 2002; company court will not adjudicate on those assets.

Official Liquidator representing workers' interest - Association of Official Liquidator in sale under the provisos to Section 13(9) of the Act of 2002 - Application of Section 13(9) - pari passu obligation towards workmen's dues - Official Liquidator is to be associated in the sale of the mortgaged assets in the interest of workers, and Section 13(9) of the Act of 2002 will apply on realization. - HELD THAT: - While recognizing the assignee's right to realize the assets under the Act of 2002, the Court directed that the Official Liquidator, as representative of the company's workmen, shall be associated with the sale process. The applicant is to inform the Official Liquidator of the sale date by registered post at least ten days in advance. The Court noted that the applicant itself had offered such association and observed that the first and second provisos to Section 13(9) contemplate protecting workers' interests; consequently, on sale, the pari passu obligations under Section 13(9) would be attracted.

Official Liquidator to be associated in the sale process; applicant to give 10 days' registered notice of sale; proceeds to be subject to Section 13(9) obligations in respect of workers' dues.

Final Conclusion: Application allowed: the assignee may realize the mortgaged immovable assets under the Act of 2002 outside the winding up proceedings, subject to association of the Official Liquidator in the sale (with at least ten days' registered notice) and the operation of Section 13(9) in relation to workers' dues.

Repayment of deposits - dismissal for non-compliance of undertaking - inability to repay creditors/depositors - suggestion to Registrar of Companies to take action under section 74(3) of the Companies Act, 2013 - dissolution of committees appointed by the tribunal

Repayment of deposits - dismissal for non-compliance of undertaking - Petition dismissed for default in complying with the undertaking to repay deposits. - HELD THAT: - The Bench had ordered repayment of Rs. 30 crores by the petitioner in three instalments as per the Managing Director's affidavit and recorded that failure to make the repayments would result in dismissal of the petition. The company did not make any of the directed instalments and repeatedly failed to comply with undertakings given on 10-3-2016 and 11-3-2016. Having regard to continued non-compliance and lack of progress in generating funds, the Bench concluded that the petitioner defaulted in complying with the order and dismissed the petition, leaving the depositors free to pursue remedies available under law. [Paras 1, 2, 3, 4, 6]

The petition (CP (T) 10/18/2015) is dismissed for default in making repayment as per the undertaking.

Inability to repay creditors/depositors - repayment of deposits - Bench determined the company is not in a position to repay the broader dues payable to depositors in the near future. - HELD THAT: - The Bench noted that the petitioner failed to pay the Rs. 30 crores due within the time allowed and observed that if it could not meet that obligation, it was unrealistic to expect the company to clear substantially larger outstanding dues to depositors in the near future. Past efforts, including appointment of a Sale Committee to generate funds, had not produced progress. On these developments the Bench concluded that further extension of time would not secure repayment. [Paras 4, 5, 6]

The company is not in a position to repay the depositors in the near future and further time was not granted.

Suggestion to Registrar of Companies to take action under section 74(3) of the Companies Act, 2013 - Bench suggested that the Registrar of Companies be requested to take appropriate action under section 74(3) of the Companies Act, 2013. - HELD THAT: - In view of the company's default in complying with the repayment order and the finding that it could not meet its obligations, the Bench recommended that the RoC concerned be advised to take appropriate action under the statutory provision dealing with default in repayment of deposits. The suggestion is made as a consequence of the dismissal and the factual conclusion of inability to repay. [Paras 6]

RoC concerned is suggested to take appropriate action under section 74(3) of the Companies Act, 2013.

Dissolution of committees appointed by the tribunal - Pending applications by the company in the petition are closed and the Hardship Committee and Sale Committee are dissolved. - HELD THAT: - Following dismissal of the petition for non-compliance and absence of progress in the committees' mandates, the Bench ordered that any applications pending in this petition be closed. The Bench further dissolved the Hardship Committee and the Sale Committee previously appointed in the matter. [Paras 7, 8]

Pending applications are closed and the Hardship Committee and Sale Committee are dissolved.

Final Conclusion: The petition is dismissed for failure to comply with the undertaking to repay deposits; the Bench found the company unable to meet its wider repayment obligations, closed pending applications, dissolved the appointed committees, and suggested that the Registrar of Companies take action under section 74(3) of the Companies Act, 2013.

Condonation of delay - stay of recovery subject to pre-deposit - no prima facie case for complete waiver of confirmed dues and penalties - recovery of service tax from service recipients

Condonation of delay - Delay in filing the appeal was condoned. - HELD THAT: - The appellant explained that the delay of less than one month in filing the appeal was on account of sickness of the proprietor (Hepatitis) and medical treatment. The Tribunal found the reasons for delay to be properly explained and accordingly condoned the delay in filing the appeal before the Tribunal. [Paras 2]

Delay condoned.

No prima facie case for complete waiver of confirmed dues and penalties - recovery of service tax from service recipients - There was no prima facie case made out for complete waiver of the confirmed dues and penalties. - HELD THAT: - The Tribunal observed that the appellant paid the service tax demanded only after issuance of the show-cause notice, and the revenue's case that the service tax had been recovered from the service recipients was noted. In view of these facts the appellant failed to establish a prima facie case justifying full waiver of confirmed dues and penalties, and therefore could not be granted unconditional relief. [Paras 5]

Complete waiver of confirmed dues and penalties refused on prima facie grounds.

Stay of recovery subject to pre-deposit - Stay of recovery of the remaining confirmed dues and penalties was granted subject to a conditional pre-deposit. - HELD THAT: - Balancing the absence of a prima facie case for total waiver against the appellant's position, the Tribunal directed that the appellant shall make a pre-deposit of Rs. 10,000 within eight weeks and report compliance on the specified date. Upon compliance with the pre-deposit condition, recovery of the balance was stayed until disposal of the appeal. The Tribunal also recorded that failure to make the ordered pre-deposit would invite dismissal of the appeal without further notice. [Paras 5, 6]

Stay of recovery granted subject to pre-deposit and reporting; non-payment will result in dismissal.

Final Conclusion: The Tribunal condoned the delay in filing the appeal, declined to grant complete waiver of the confirmed dues and penalties on prima facie grounds, and granted a conditional stay of recovery of the balance subject to a pre-deposit of Rs. 10,000 within eight weeks and reporting of compliance.

Refund of service tax for export-related services - availability of exemption for business auxiliary services to exporters - condonation of non-compliance with procedural conditions in exemption notifications - liberal interpretation of beneficial fiscal provisions

Refund of service tax for export-related services - availability of exemption for business auxiliary services to exporters - condonation of non-compliance with procedural conditions in exemption notifications - liberal interpretation of beneficial fiscal provisions - Entitlement to refund of service tax paid on commission to foreign agents for business auxiliary services used for export during January, 2010 to March, 2010 despite non compliance with certain procedural conditions in Notification No.18/2009 ST. - HELD THAT: - The Tribunal found that the appellants exported the goods and that the commission paid to foreign agents falls within the exemption granted by Notification No.18/2009 ST dated 07 07 2009. The original authority and Commissioner (Appeals) rejected the refund solely on the ground that the appellant had not complied with procedural conditions in the Notification (intimation in Form EXP 1 and filing half yearly Form EXP 2). The Tribunal treated those requirements as procedural formalities intended to facilitate verification rather than substantive conditions going to eligibility. Applying the principle that beneficial fiscal provisions should not be given an unduly restrictive construction, and following the precedents cited in the order that distinguish substantive conditions from technical procedural requirements, the Tribunal held that the non fulfilment constituted a condonable procedural lapse. Since export and payment of service tax were not in dispute and the exemption otherwise applied, the appellants were held eligible for refund, subject to consequential reliefs. [Paras 4, 5]

Non compliance with the procedural conditions of Notification No.18/2009 ST was condoned and the appellants were held entitled to the refund for the period January, 2010 to March, 2010.

Final Conclusion: The appeal is allowed: the Tribunal condoned the procedural lapses under Notification No.18/2009 ST and directed grant of refund of service tax paid on BAS commissions for exports effected in January-March 2010, with consequential reliefs.

Input service - credit of input services - nexus between input service and output services - membership fees as non-business expenditure - eligibility of input tax credit

Input service - credit of input services - nexus between input service and output services - membership fees as non-business expenditure - Whether lifetime membership fees paid to Mumbai Cricket Association claimed as input service credit for providing Chartered Accountant services are allowable - HELD THAT: - The Tribunal examined the nature of the service for which credit was claimed and the documentary record. The Mumbai Cricket Association charged a Lifetime Membership Fee and the appellant did not furnish any breakup showing separate charges for business facilities such as waiting rooms or conference halls. The services rendered by the Club were found to be of a sports and entertainment character rather than business services connected to the appellant's output activity of providing Chartered Accountant services. Absent a demonstrable nexus between the membership fee and the appellant's output services, the lifetime membership fee could not be treated as an input service eligible for credit. The Tribunal therefore upheld the conclusion of the lower authorities rejecting the claim on merits. [Paras 4, 5]

Claim for input service credit in respect of lifetime membership fees paid to Mumbai Cricket Association is disallowed and the orders of the lower authorities are upheld

Final Conclusion: The appeal is rejected; the lifetime membership fees claimed as input service credit are not allowable for lack of nexus with the appellant's Chartered Accountant services and the lower authorities' orders are affirmed.

Sealing and self-certification under ARE-I for rebate - nexus between factory removals and exported goods - ARE-I as primary document to establish identity and export of duty paid goods - conditional notification requires strict compliance

Sealing and self-certification under ARE-I for rebate - ARE-I as primary document to establish identity and export of duty paid goods - Admissibility of rebate where goods were cleared from factory without sealing and without exporter self certification and customs did not examine the consignment - HELD THAT: - The Government examined Rule 18 read with Notification No.19/2004-CE(NT) and the procedures in Chapter 8 of the Excise Manual. ARE-I is the principal document to show that goods removed for export were sealed either by Central Excise or by self sealing with certification. In the present case the claimant neither had sealing by Central Excise nor recorded self sealing certification; further, customs did not open or examine the consignment at export. Where clearances are made without following the prescribed sealing/self certification procedure, it cannot be established that the goods cleared from the factory are the ones actually exported. Leniency in the sealing procedure could facilitate fraud and an alternatively available benefit; accordingly the statutory procedure is mandatory in substance and non compliance disentitles the claimant to rebate. The Government found no infirmity in the Commissioner (Appeals) upholding rejection on this basis. [Paras 8, 9, 12]

Rebate claim rejected because prescribed sealing/self certification procedure was not followed and export of duty paid goods could not be established.

Nexus between factory removals and exported goods - Effect of mismatch in quantities/weights between ARE I records and shipping documents on establishing identity of exported goods - HELD THAT: - The adjudicating authorities compared particulars recorded in ARE Is with the shipping bill and related export documents and found that quantities and weights did not match. The claimant did not controvert the departmental finding of non matching particulars. In absence of matching particulars and given lack of prescribed sealing/certification, the identity of duty paid goods removed from the factory vis a vis the goods exported could not be satisfactorily established, which supports denial of rebate. [Paras 10]

Mismatch in quantities/weights undermined the required nexus; rebate cannot be granted.

Conditional notification requires strict compliance - Whether condonation or equitable leniency could cure non compliance with mandatory procedural requirements for claiming rebate - HELD THAT: - Government relied on settled Supreme Court and High Court authority that benefits under conditional notifications are subject to strict compliance with conditions and prescribed procedures. A simple procedural omission that defeats the statutory consequences of the condition cannot be treated as directory so as to permit grant of the conditional benefit. Applying these principles, the Government held that the omission to follow the mandatory sealing/self certification procedure could not be condoned and the case law relied on by the claimant was not applicable to justify relief. [Paras 11, 12]

Non compliance with mandatory procedural conditions cannot be condoned; relief refused.

Final Conclusion: Revision application dismissed; the orders of the original authority and Commissioner (Appeals) upholding rejection of the rebate claim are affirmed because prescribed ARE I sealing/self certification procedures were not followed, identity between factory removals and exported goods was not established, and the conditional notification's requirements are mandatory.

Processes not amounting to manufacture - classification under Chapter 73 vs Chapter 72 - identity retention of iron and steel raw material after processing - deemed manufacture under Chapter Note 5 to Chapter 72 - CENVAT credit on duty paid inputs

Processes not amounting to manufacture - classification under Chapter 73 vs Chapter 72 - identity retention of iron and steel raw material after processing - deemed manufacture under Chapter Note 5 to Chapter 72 - Whether cutting/sizing, drilling/punching and galvanizing of MS bars and HA steel ribbed strips amounted to manufacture so as to require classification under Chapter 73 instead of Chapter 72 for the period March 2004 to June 2004. - HELD THAT: - The Tribunal examined whether the processes performed resulted in a new commodity distinct from the input iron/steel. Applying the ratio in the Larger Bench decision in Mahindra & Mahindra and following the Tribunal's earlier decision in CCE, Hyderabad v. K. Ramachandra Rao, it was held that mere cutting to size and drilling/punching which leave the iron/steel inputs retaining their identity do not amount to manufacture. The Tribunal further observed that the provision which treats galvanization of Chapter 72 goods as a deemed manufacture (Note 5 to Chapter 72) came into force only w.e.f. 01.03.2011; consequently galvanization during the material period could not be treated as a deemed manufacturing process. On these grounds the processes carried out by the appellant did not convert the inputs into goods classifiable under Chapter 73 during March 2004 to June 2004, and the demand based on reclassification was unsustainable. [Paras 5, 6, 7]

Impugned demand and classification held unsustainable; the processes did not amount to manufacture for the period March 2004 to June 2004 and the departmental order is set aside.

Final Conclusion: Appeal allowed; the order confirming demand and penalty is set aside and consequential reliefs granted, having found that the processes did not amount to manufacture and the Chapter 72 Note deeming galvanization to be manufacture was not operative during the relevant period.

Transaction value under amended Section 4 - assessable value - cash discount - Cenvat credit - input service - service tax on debit notes

Transaction value under amended Section 4 - cash discount - assessable value - Whether cash discounts offered by the manufacturer must be taken into account in arriving at the assessable value (transaction value) at the time of removal. - HELD THAT: - The Tribunal accepted the legal proposition laid down by the Hon'ble Supreme Court in Purolator India Ltd. that the amendment to Section 4 introduced the concept of "transaction value" and requires the value to be determined transaction-wise at the time of removal. Cash discounts, if known at or prior to clearance and contained in the agreement of sale, form part of the contractual price and must be taken into account in arriving at the price for duty. Consequently, reconciliation of figures by the assessee becomes subsidiary to the legal requirement that cash discounts known at the time of removal be deducted in computing assessable value. Applying that principle, the Tribunal held that the demand based on the contention that customers did not avail the offered discounts cannot be sustained. [Paras 5, 6]

Demand based on non-availment of offered cash discounts is not sustainable; confirmation of duty on this ground set aside.

Cenvat credit - service tax on debit notes - input service - Whether Cenvat credit of service tax availed on the basis of debit notes issued by dealers/consignment agents and service tax paid on sales commission was admissible. - HELD THAT: - The Tribunal recorded that the same issue had already been decided in favour of the appellants in earlier final orders in the appellant's own cases. On that basis the Tribunal held that confirmation of demand on account of availment of Cenvat credit of service tax (raised via debit notes) and related contentions is not sustainable. The prior adjudications disposing of the identical controversy were treated as controlling, leading to rejection of the demand on this ground. [Paras 7]

Demand founded on alleged inadmissible Cenvat credit of service tax (debit notes / sales commission) is not sustainable; such confirmations are set aside.

Final Conclusion: The impugned order is set aside; all four appeals are allowed and the confirmations of demand and imposition of penalty on the appellants are quashed.

CENVAT credit on capital goods - capital goods forming part of manufacturing process - definition of 'factory' and 'precincts' - installation outside registered factory premises and admissibility of credit - procedural registration lapse curable

CENVAT credit on capital goods - capital goods forming part of manufacturing process - installation outside registered factory premises and admissibility of credit - Credit on the Waste Treatment Plant (WTP) installed in the neighbouring unit's premises but physically connected and used in the appellant's manufacturing process is admissible as CENVAT credit on capital goods. - HELD THAT: - The Tribunal accepted that the WTP, though installed at the neighbouring unit (GAIPL), was functionally integrated with the appellant's manufacturing operation through pipelines and served an essential role in protecting and enabling the appellant's Waste Heat Recovery Boiler (WHRB) and overall sponge-iron production. The Tribunal distinguished reliance on the decision interpreting 'precincts' in the Mines Act and instead followed the reasoning in Konark Met Coke Ltd. which recognises that capital goods located outside the physical registered factory premises may still qualify for credit where they are used to generate inputs (power or treated water) that are integral to the manufacture of excisable goods. The Tribunal observed that non-registration of the premises is a procedural lapse and does not disentitle the appellant from credit when the machinery is used for manufacture; such procedural defects are curable by regularisation of the premises.

Impugned order disallowing credit on the WTP is set aside; credit on the WTP is held admissible and the appellant directed to regularise/secure registration of the premises as part of its factory within two months.

Procedural registration lapse curable - definition of 'factory' and 'precincts' - Non-registration of the premises where the WTP was installed is a procedural lapse which can be cured and does not, by itself, disentitle the appellant from claiming credit. - HELD THAT: - The Tribunal noted that the statutory definition of 'factory' does not expressly require that every capital good be within a premises bearing the appellant's registration; where the equipment is transferred to and used by the appellant (here under a lease and by operational integration), the lack of prior registration is procedural. The Tribunal directed the appellant to take steps to include/regularise the premises as part of its factory within the specified period to cure the lapse.

Appellant directed to cure the procedural lapse by registering the premises as part of its factory within two months; failure to do so is ordered as a condition for continued regularisation but does not negate admitted credit in the present order.

Final Conclusion: The Tribunal allowed the appeal, holding that the WTP installed in the neighbouring unit but functionally and physically connected to the appellant's manufacturing process qualifies as capital goods for CENVAT credit; the procedural defect of non-registration is curable and the appellant was directed to regularise the premises within two months.

Assessment under section 4A of Central Excise Act, 1944 - intention for retail sale evidenced by Maximum Retail Price on packaging - Standards of Weights & Measures (Packaged Commodities) Rules, 1977 compliance - valuation of packaged goods for excise - remand for verification of clearance invoices

Assessment under section 4A of Central Excise Act, 1944 - Standards of Weights & Measures (Packaged Commodities) Rules, 1977 compliance - intention for retail sale evidenced by Maximum Retail Price on packaging - valuation of packaged goods for excise - Whether clearance of multi-piece packs bearing Maximum Retail Price attracts valuation under section 4A rather than section 4 of the Central Excise Act, 1944. - HELD THAT: - The Tribunal held that a pre-condition for assessment under section 4A is that the packaged goods be cleared with the Maximum Retail Price (MRP) printed on them, and that the mandate to print MRP flows from the Standards of Weights & Measures (Packaged Commodities) Rules, 1977 rather than from the Central Excise Act. The court analysed the purpose of the Rules-consumer protection at the point of retail sale-and concluded that the manufacturer's intention to sell in retail is evidenced by affixing the required particulars (including MRP) on the package. Whether the package is subsequently broken and its contents sold individually by a retailer is a commercial decision at retail and does not affect the assessment at clearance. Consequently, where a multi-piece pack cleared from the factory bears the retail selling price as required by the Rules, the manufacturer's demonstrated intention to sell at retail governs valuation and entitles assessment under section 4A. The Tribunal also observed that established decisions consistently support treating such compliant multi-piece packs under section 4A and that the lower authorities erred in disregarding the Legal Metrology confirmation without appropriate verification. [Paras 9, 10, 11, 15, 16]

Where multi-piece packs cleared from the factory bear the retail selling price in compliance with the Packaged Commodities Rules, such clearances are to be assessed under section 4A and not under section 4.

Remand for verification of clearance invoices - assessment limited to non-compliant clearances - Whether the adjudication should be remitted for factual verification of invoices to determine if clearances were made as multi-piece packs with retail selling price affixed. - HELD THAT: - Although the Tribunal found the legal test governed by the presence of MRP on the multi-piece pack, it did not resolve the factual question whether the appellant's clearances were in fact made as multi-piece packs bearing the retail selling price. The Tribunal therefore directed a remand to the original authority to verify the relevant invoices and ascertain which clearances were made in multi-piece packs with MRP affixed. The scope of any demand for differential duty was limited to clearances not made in compliant multi-piece packs or in multi-piece packs that do not bear the retail selling price. [Paras 17]

Matter remitted to the Assistant/Deputy Commissioner to verify invoices and confine demand to clearances not evidenced as multi-piece packs bearing the retail selling price.

Final Conclusion: Impugned order set aside; appeals allowed to the extent of holding that clearances of multi-piece packs from factory bearing retail selling price are assessable under section 4A, and matter remitted to the original authority to verify invoices and restrict any differential duty to non-compliant clearances.

Lifting the corporate veil - separate legal entity - attachment of personal property of director - liability of a company not fastened on directors personally - presumption of dealer under VAT law

Separate legal entity - attachment of personal property of director - lifting the corporate veil - Whether the respondent authority could attach the petitioner's personal (residential) property to recover VAT dues assessed against the private limited company of which he was earlier a director. - HELD THAT: - The Court held that a company and its directors are separate legal entities and, in the absence of material permitting piercing of the corporate veil, the liability of a private limited company to pay tax cannot be fastened upon its directors personally. Reliance was placed on earlier decisions of this Court which conclude that personal property of a director cannot be attached for company sales tax/VAT dues unless foundational facts justify lifting the corporate veil. The petitioner had also resigned as director with resignation reflected in Form No.32; no material was placed on record by the respondents to show any facts warranting disregard of corporate personality. The Court therefore did not need to decide questions about liability for dues arising during the period of directorship, because the determinative legal principle is that recovery from a director's personal property requires grounds to pierce the corporate veil which are absent here.

Impugned order of attachment of the petitioner's personal property dated 14.12.2015 quashed and set aside.

Final Conclusion: The petition is allowed; the attachment order against the petitioner's personal property for VAT dues of the company is unsustainable in law in the absence of material justifying lifting of the corporate veil, and is therefore quashed.

Interest on delayed tax under clause (a) of sub-section (4A) of section 47 - interest on assessed shortfall under clause (b) of sub-section (4A) of section 47 - harmonious construction of clauses (a) and (b) of sub-section (4A) of section 47 - discretionary reduction of penalty under sub-section (6) of section 45

Interest on delayed tax under clause (a) of sub-section (4A) of section 47 - interest on assessed shortfall under clause (b) of sub-section (4A) of section 47 - harmonious construction of clauses (a) and (b) of sub-section (4A) of section 47 - Extent and period for levy of interest under sub-section (4A) of section 47 where part payment was made before assessment. - HELD THAT: - Clause (a) mandates payment of interest from the expiry of the prescribed time until the date of actual payment where a dealer does not pay tax within the prescribed period. Clause (b) mandates payment of interest from the expiry of the prescribed time until the date of assessment where the assessed tax exceeds tax already paid. The provisions must be read harmoniously so that clause (a) is not rendered nugatory by clause (b). Where a dealer makes payment after the prescribed date but before the assessment order, interest is payable only up to the date of such payment under clause (a). Where the assessment ultimately shows an excess over amounts already paid, interest under clause (b) is payable on the remaining shortfall from the prescribed date until the date of the assessment order. Applying this construction to the facts, because the dealer had paid the entire amount prior to the assessment order, interest was chargeable only up to the dates of those payments (22.5.1994 and 5.6.1994) and not until the date of the assessment order. [Paras 7, 8, 9]

The Tribunal correctly held that interest was leviable only up to the dates on which the tax was actually paid prior to the assessment order; it was not payable until the date of assessment where full payment occurred before that date.

Discretionary reduction of penalty under sub-section (6) of section 45 - Whether the Tribunal erred in reducing the penalty imposed under sub-section (6) of section 45 to ten per cent in exercise of its discretion. - HELD THAT: - The Tribunal found on the material before it that the dealer had an acceptable explanation and a bonafide belief that turnover tax need not be paid or was required to be deferred; acting on that factual appreciation the Tribunal exercised its discretionary power to reduce the penalty to ten percent. Such exercise of discretion, founded on appreciation of facts and acceptable explanation, does not present a question of law warranting interference by this Court. [Paras 10, 11]

The discretionary reduction of penalty to ten per cent by the Tribunal was a factual and discretionary determination and does not call for interference.

Final Conclusion: The appeal is dismissed. The Tribunal's order that interest was payable only up to the dates of actual payment (and not until the date of assessment where full payment preceded the assessment) and its discretionary reduction of penalty to ten per cent are sustained.

Exemption from stamp duty for purchase of assets of a sick industry - certificate of sickness - rectification relating back to the original certificate - interpretation of an exemption notification in favour of its object - authority and pedigree of issuing officer - remand for fresh adjudication

Exemption from stamp duty for purchase of assets of a sick industry - certificate of sickness - authority and pedigree of issuing officer - Entitlement to stamp duty exemption where the certified unit was declared sick and the certificate of sickness was issued by the Commissioner Industries rather than the General Manager, DIC. - HELD THAT: - The court found that the unit purchased by the petitioner was indisputably a sick unit at the time of the sale and that the certificate of sickness dated 29-1-2008 had been issued by the Commissioner Industries, who is superior to the General Manager, DIC. The court held that a certificate issued by the superior authority ought to satisfy the condition of the exemption notification and should not be disregarded on a hyper literal ground of pedigree. The court endorsed the purposive approach that an exemption notification should be interpreted in light of its object so as not to deny the intended benefit to the targeted person or entity, relying on the principle stated in Johnson & Johnson Ltd. that a narrow reading should be avoided where the intention of the exemption is clear.

Certificate of sickness issued by the Commissioner Industries satisfies the condition for exemption and ought not to be rejected merely because it was not issued by the General Manager, DIC.

Rectification relating back to the original certificate - interpretation of an exemption notification in favour of its object - Effect of the rectification dated 4-12-2012 issued by the General Manager, DIC in respect of the earlier certificate of sickness dated 29-1-2008. - HELD THAT: - The court held that the rectification by the General Manager, DIC of the earlier certificate dated 29-1-2008 relates back to the original certificate and thus cures any perceived technical defect for literal compliance with the notification dated 26-7-2003. In consequence, the certificate, when read together with the rectification, meets the notification's requirement and supplies the condition for exemption from stamp duty.

The rectification dated 4-12-2012 relates back to the certificate dated 29-1-2008 and validates the certificate for the purposes of claiming the exemption.

Remand for fresh adjudication - Appropriate relief where the Tax Board did not consider the rectification and dismissed the revision and review petitions. - HELD THAT: - Because the rectification dated 4-12-2012 was not placed before the Tax Board during the revision proceedings and the review petition was dismissed as not maintainable, the court found it appropriate to set aside the Tax Board's orders and remit the matter for fresh decision. The Tax Board is directed to decide the revision petition afresh, taking into account the rectification, within the period specified by the High Court.

Impugned judgments of the Tax Board are quashed and set aside; the matter is remanded for fresh decision by the Tax Board after considering the rectification.

Final Conclusion: The Tax Board's judgments are quashed and set aside. The petition is allowed; the matter is remanded to the Tax Board to decide the revision petition afresh in the light of the rectification dated 4-12-2012 relating to the certificate of sickness dated 29-1-2008, to be decided within eight weeks of receipt of certified copy of this order.

Section 14 of the Act of 2002 - power to seek magistrate's assistance for taking possession (ministerial/non adjudicatory) - natural justice and notice before Section 14 orders - District Magistrate's role under Section 14 as administrative/executive assistance - post possession remedy under Section 17

Section 14 of the Act of 2002 - power to seek magistrate's assistance for taking possession (ministerial/non adjudicatory) - natural justice and notice before Section 14 orders - District Magistrate's role under Section 14 as administrative/executive assistance - Validity of the District Magistrate's order directing impleadment of legal heirs before issuing certificate under Section 14 of the Act of 2002 and whether borrower/guarantor must be heard before such order is passed. - HELD THAT: - The Court held that Section 14 enables a secured creditor to request the Chief Metropolitan Magistrate or District Magistrate to take possession of secured assets or facilitate their sale; the function performed by the District Magistrate under Section 14 is administrative/ministerial and not adjudicatory. Reliance was placed on decisions which explain the SARFAESI scheme that prioritises quick recovery and limits pre possession procedural protections to those expressly provided in the Act. In that scheme, Section 14 does not contemplate affording the borrower or guarantor a hearing or notice at the stage when the magistrate is requested to assist in taking possession. Accordingly, an order requiring impleadment of all legal heirs before issuing a certificate under Section 14 was held to be legally untenable. The Court nevertheless observed that legal heirs remain free to appear before the District Magistrate to ventilate grievances, and that post possession remedies conferred by the Act (including recourse under Section 17) remain available.

Impugned order of the District Magistrate directing impleadment of legal heirs is set aside; no requirement to afford prior hearing/notice to borrower/guarantor when Section 14 assistance is sought, though legal heirs may appear before the District Magistrate to raise grievances.

Final Conclusion: The petition is allowed to the extent that the District Magistrate's order dated 02.07.2014 is quashed; the parties are directed to appear before the District Magistrate, Jaipur on the stated date and the legal heirs may, if they wish, present their grievances before the District Magistrate.