TaxTMI Updates e-Newsletter
Aug 04,2014

Deemed income under Section 69B - Valuation by Departmental Valuation Officer - Appropriate construction cost rates (CPWD vs PWD) - Remand for fresh determination of cost of construction

Appropriate construction cost rates (CPWD vs PWD) - Valuation by Departmental Valuation Officer - Use of CPWD rates by the Departmental Valuation Officer to estimate the cost of construction at Virudhunagar is not justified. - HELD THAT: - The Assessment relied on a departmental valuation which adopted CPWD rates prevailing in metropolitan cities such as Delhi. The Court found no justifiable ground for applying city/CPWD rates to construction in Virudhunagar where local PWD rates for the district are available. In the absence of vouchers and supporting material in the assessee's accounts the matter was rightly referred to the Valuation Officer, but the Valuation Officer erred in selecting rates applicable to distant metropolitan areas rather than local PWD rates for Virudhunagar, rendering the valuation incorrect. [Paras 7, 8]

The adoption of CPWD rates for Virudhunagar is erroneous and cannot be sustained.

Deemed income under Section 69B - Remand for fresh determination of cost of construction - The matter is remitted to the Assessing Officer to determine cost of construction using PWD rates for Virudhunagar for 1998-99 and to recompute the deemed income under Section 69B accordingly. - HELD THAT: - Having held that CPWD rates were wrongly applied, the Court directed that the proper course is to remit the case to the Assessing Officer for application of the PWD rates applicable to Virudhunagar District in the year 1998-99 to ascertain the correct cost of construction. The Assessing Officer is to recompute the unexplained investment/deemed income under Section 69B on that basis. The Court declined to entertain the separate contention that reference to the Valuation Officer was unnecessary, noting lack of supporting vouchers in the assessee's accounts. [Paras 8, 9, 10]

Case remitted to the Assessing Officer for fresh computation applying Virudhunagar PWD rates for 1998-99 and recomputation of deemed income under Section 69B; referral to Valuation Officer was not held to be unnecessary.

Final Conclusion: The High Court set aside the valuation based on CPWD rates, remitted the matter to the Assessing Officer to apply PWD rates for Virudhunagar for 1998-99 and to recompute the deemed income under Section 69B accordingly; the referral to a Valuation Officer was not found to be unwarranted.

Unexplained investments presumed as income under Section 69 - Obligation on assessee to explain source of investments - Block assessment under Chapter-XIVA - Parity of assessment procedure between block and regular assessments - Higher penal tax rate in block assessments under Section 158BA

Unexplained investments presumed as income under Section 69 - Obligation on assessee to explain source of investments - Block assessment under Chapter-XIVA - Quantification of undisclosed income for block assessment where assessee failed to explain the source of investments. - HELD THAT: - The Court held that once undisclosed income is noticed the assessee is under an obligation to explain the source of the investments which yielded that income and, in absence of a satisfactory explanation, Section 69 permits treating the investment as income. While the procedure for allowances and other aspects in block assessments under Chapter-XIVA follows the same principles as in regular assessments, the distinguishing feature is the higher penal rate of tax under Section 158BA. During the Tribunal proceedings the departmental representative suggested that the undisclosed income could be taken at the figure of Rs. 50,00,000/-, and since the respondent failed to explain the source of the undisclosed amounts when given the opportunity, the Court accepted the departmental figure as the appropriate basis for taxation instead of the lower figure adopted by the Tribunal. The Court therefore substituted the Tribunal's quantification and directed tax to be computed on the accepted undisclosed income figure. [Paras 6, 8, 9, 11, 12]

Undisclosed income for the block period is fixed at Rs. 50,00,000/- and tax shall be paid on that amount in place of the figure determined by the Tribunal.

Final Conclusion: Appeal allowed in part; respondent directed to pay tax on undisclosed income of Rs. 50,00,000/- for the block period 1993-94 to 1997-98; no order as to costs.

Deduction under section 80IB(10) r.w.s. 80IB(1) - sale of unutilized FSI - development and construction of a housing project - segregation of profits arising from construction activity and from transfer of FSI - marginal underutilization versus substantial underutilization of FSI

Deduction under section 80IB(10) r.w.s. 80IB(1) - sale of unutilized FSI - segregation of profits arising from construction activity and from transfer of FSI - marginal underutilization versus substantial underutilization of FSI - Whether profit derived from sale of unutilized FSI is eligible for deduction under section 80IB(10) r.w.s. 80IB(1) when it is not derived from the business activity of development and construction of a housing project. - HELD THAT: - The Court followed the Division Bench decision in Tax Appeal No. 549/2008 (paras 28-32) which held that income from sale of unutilized FSI is conceptually distinct from income arising from development and construction of housing units and, therefore, is not automatically eligible for deduction under section 80IB(10). The Division Bench explained that while marginal underutilization of FSI may not defeat a claim, substantial underutilization ordinarily requires bifurcation of profits and exclusion of amounts attributable to sale of unutilized FSI unless special grounds justify the shortfall. Applying that principle, the Court noted that the Assessing Officer had recorded and computed the total permissible FSI, the FSI utilized and the unutilized FSI (paras 12) and that those factual findings were not disputed by the assessee. In the absence of any special grounds for underutilization and given the undisputed AO computation, there was no need to remand the matter for further quantification. Consequently the claim of deduction in respect of profit attributable to sale of unutilized FSI was not maintainable and the substantial question was answered in favour of the revenue. [Paras 28, 29, 30, 31, 32]

The profit attributable to sale of unutilized FSI is not eligible for deduction under section 80IB(10) r.w.s. 80IB(1); the substantial question is answered in favour of the revenue and against the assessee.

Final Conclusion: The Tax Appeal is allowed; deduction under section 80IB(10) r.w.s. 80IB(1) cannot be claimed in respect of profit attributable to sale of unutilized FSI for A.Y. 2009-10, and no remand for quantification is directed because the AO's undisputed computations are on record.

Remand for fresh adjudication - compliance with appellate directions - speaking order requirement - scope of appellate direction

Compliance with appellate directions - speaking order requirement - remand for fresh adjudication - Validity of the CIT(A)/ITAT directions remitting the matter to the Assessing Officer to pass a fresh order addressing whether 10% of duty drawback should be treated as indirect overheads and the requirement that the AO pass a speaking order giving effect to the ITAT's earlier direction. - HELD THAT: - The High Court examined the orders of the CIT(A) and the Tribunal and found that both authorities had directed the Assessing Officer to examine the appellant's claim regarding treating 10% of duty drawback as direct/indirect overheads and to pass a consequential, speaking order in light of earlier Tribunal decisions. The Court observed that such a remand to the AO for fresh consideration in accordance with appellate directions does not give rise to any substantial question of law warranting interference. Since the Tribunal confirmed the CIT(A)'s remand directing the AO to comply with and give effect to the earlier directions, there was no legal error in remitting the matter for fresh adjudication nor any basis shown to set aside that course. The Court therefore declined to interfere with the appellate authorities' direction that the AO should consider relevant decisions and record reasons in a speaking order when deciding the extent of indirect expenses attributable to exports.

The High Court dismissed the Revenue's appeal and upheld the remand directing the AO to consider the specified issue and pass a speaking, consequential order.

Final Conclusion: Appeal dismissed; the CIT(A) and Tribunal were correct to remit the matter to the Assessing Officer to give effect to the Tribunal's earlier directions and to decide, by a speaking order, the extent to which duty drawback may be treated as indirect overheads attributable to exports.

Penalty under Section 271D - penalty under Section 271E - undisclosed income taxed under Section 68 - contravention of Section 269-SS - contravention of Section 269-T - benefit under Section 273-B for reasonable cause/compelling circumstances

Penalty under Section 271D - penalty under Section 271E - undisclosed income taxed under Section 68 - contravention of Section 269-SS - contravention of Section 269-T - Whether penalties under Sections 271D and 271E can be imposed where the Assessing Officer has treated the cash transactions as undisclosed income liable to tax under Section 68. - HELD THAT: - The Tribunal accepted the assessment finding that the cash receipt was treated as unexplained/unidentified income and assessed under Section 68, and held that once the transaction is treated and accepted as income (not a loan or deposit), the foundation for invoking Sections 269-SS/269-T (and hence imposing penalty under Sections 271D/271E) is absent. The Court approved reliance on precedents which hold that an Assessing Officer cannot treat the same amount as income for assessment purposes and simultaneously treat it as a loan for penal proceedings under Section 271D, since sub-section (1) of Section 271D applies only if a person 'takes or accepts any loan or deposit'. Given the Assessing Officer's finding of unexplained income, the Tribunal and this Court found no justification to sustain penalties under Sections 271D and 271E. [Paras 7, 10]

Penalties under Sections 271D and 271E are not leviable where the amount has been treated as undisclosed income subject to tax under Section 68; the Tribunal's deletion of such penalties is upheld.

Penalty under Section 271D - benefit under Section 273-B for reasonable cause/compelling circumstances - Whether penalty under Section 271D is leviable for a cash loan received from an identified lender when the assessee proves genuineness and compulsion, attracting Section 273-B relief. - HELD THAT: - The Commissioner (Appeals) found, on evidence considered, that the cash loan from the named lender was genuine, the lender's identity was proved and compelling circumstances forced the assessee to avail cash to meet immediate liabilities. Relying on Section 273-B, which precludes imposition of specified penalties if reasonable cause is shown, the Tribunal sustained deletion of the penalty. This Court found the appellate authorities' exercise of discretion on the facts and supporting documents to be justified and not warranting interference. [Paras 11, 12, 13]

Penalty under Section 271D deleted by invoking Section 273-B on facts establishing genuineness and compelling circumstances; the Tribunal's confirmation of that deletion is upheld.

Final Conclusion: The Tribunal's orders upholding the Commissioner (Appeals) - declining to impose penalties under Sections 271D and 271E where the cash receipt was assessed as undisclosed income under Section 68, and deleting penalty under Section 271D in respect of a genuine cash loan on grounds of reasonable cause under Section 273-B - are affirmed; the appeals are dismissed.

Rectification of tribunal orders - scope of rectification remedy - non-consideration of judicial decisions - applicability of precedent - writ challenge to rectification refusal

Rectification of tribunal orders - scope of rectification remedy - applicability of precedent - Whether the Income Tax Appellate Tribunal erred in dismissing the rectification application alleging that decisions placed before it were not properly considered. - HELD THAT: - The Tribunal's appellate order (Exhibit P11) expressly referred to the decisions placed by the petitioner and examined the factual grounds raised; on appraisal it found those decisions not applicable to the facts of the case. The Supreme Court decision in Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. was distinguished as there the jurisdictional High Court's decision had not even been placed before the Tribunal, warranting rectification. where, as here, the Tribunal considered the precedents and negatived their applicability, the remedy lies in appeal against that evaluation and not by way of rectification. The High Court confined its review to the limited question whether the rectification application was rightly dismissed and did not enter into adjudication of the substantive grounds; the petitioner was left free to agitate merits before the appropriate forum.

The dismissal of the rectification application by the Tribunal was not interfered with and the writ petition challenging that dismissal is dismissed.

Final Conclusion: The High Court upheld the Tribunal's rejection of the rectification application (relating to assessments for 1996-97 to 2000-01), distinguishing Saurashtra Kutch on its facts, declining to examine substantive merits and leaving the petitioner free to pursue appropriate appellate remedies; writ petition dismissed with costs.

Addition of interest under Section 220(2) during processing under Kar Vivad Samadhan Scheme - Computation of interest terminable to the date of payment under a settlement scheme - Effect of prior payment on inclusion of a year in a declaration under KVSS (treatment as non est) - Demand notice with challan satisfying requirement under Section 156 read with Section 220

Addition of interest under Section 220(2) during processing under Kar Vivad Samadhan Scheme - Computation of interest terminable to the date of payment under a settlement scheme - Demand notice with challan satisfying requirement under Section 156 read with Section 220 - Validity of including interest (under Section 220(2) of the Income tax Act) while processing the petitioner's declaration under the KVSS for the assessment years 1988-89, 1989-90 and 1991-92. - HELD THAT: - The Court held that the designated authority was within power to add interest even though interest had not been earlier quantified, because interest is a legal incidence terminable to the date of payment and under the Scheme the relevant payment date was 31.03.1998. The impugned order added interest only up to that date for computation and gave necessary deductions as envisaged in law. The Department's contention that the penalty orders enclosed demand notices with challans satisfied the requirement under Section 156 read with Section 220 was accepted as supportive of levying interest. The Court found no legal infirmity in including interest for the said three assessment years while processing the declaration under KVSS.

Orders of the designated authority insofar as they include interest for 1988-89, 1989-90 and 1991-92 are upheld.

Effect of prior payment on inclusion of a year in a declaration under KVSS (treatment as non est) - Treatment of declarations for years with prior payment - Whether the declaration and the designated authority's order should be treated as including the assessment years 1986-87 and 1987-88 which the petitioner asserts were already paid and included by inadvertence. - HELD THAT: - The petitioner specifically pleaded that demands for 1986-87 and 1987-88 were already paid and had requested the designated authority to ignore those years; the respondents did not specifically deny this assertion. The Court directed that the order of the designated authority dated 25.02.1999 shall be treated as confined to the three years (1988-89, 1989-90, 1991-92) and that the inclusion of demands for 1986-87 and 1987-88 shall be treated as not having been considered (non est). The Court nevertheless left it open to the authorities to take appropriate proceedings in respect of 1986-87 and 1987-88 subject to statutory limitations and in accordance with the Act.

Inclusion of 1986-87 and 1987-88 is treated as not considered; authorities may initiate appropriate proceedings for those years subject to limitation and statutory provisions.

Final Conclusion: Writ petition disposed: the designated authority's inclusion of interest while processing the KVSS declaration for assessment years 1988-89, 1989-90 and 1991-92 is sustained; the order is confined to those three years, the inclusion of 1986-87 and 1987-88 is treated as not having been considered, and authorities are at liberty to proceed in respect of those two years subject to limitation and the Act.

Taxability of share of legal heir in sale proceeds - restriction of addition to declared share of heir - treatment of unexplained investment in house - evidentiary burden on revenue to controvert assessee's explanation - judicial restriction of income-tax additions on facts

Taxability of share of legal heir in sale proceeds - restriction of addition to declared share of heir - evidentiary burden on revenue to controvert assessee's explanation - Whether the addition on account of proceeds of sale of a house belonging to the assessee's father can be made fully in the assessee's hands or must be restricted to the assessee's hereditary share. - HELD THAT: - The Tribunal found from the sale agreement that the property belonged to the late father and was sold by his legal heirs; the assessee was one of seven legal heirs with a 1/7th share. Revenue did not controvert the assessee's factual position before the Tribunal. Applying these findings, the Tribunal restricted the addition to the assessee's 1/7th share of the sale proceeds and rounded the assessed share to the stated amount. The High Court saw no error in this factual and legal conclusion and declined to interfere with the restriction of the addition to the assessee's share. [Paras 4, 14, 15]

Addition on account of sale proceeds restricted to the assessee's 1/7th hereditary share; appeal dismissed on this point.

Treatment of unexplained investment in house - restriction of addition on facts - evidentiary burden on revenue to controvert assessee's explanation - Whether the addition made by the Assessing Officer for unexplained investment in construction of a house should be sustained in full or can be restricted on the Tribunal's factual assessment. - HELD THAT: - The Assessing Officer noted lack of new corroborative evidence to substantiate the assessee's claim that funds belonged to the deceased father. The Tribunal, after considering the material, allowed partial credit to the contention that some expenditure may have been incurred by the father and, in the interests of justice, restricted the addition to a reduced sum. The High Court agreed with the Tribunal's factual appraisal and the exercise of discretion in restricting the addition to the lesser amount. [Paras 6, 36]

Addition for unexplained investment in house restricted to the lesser amount as held by the Tribunal; appeal dismissed on this point.

Final Conclusion: On the issues addressed, the Tribunal's factual findings and consequent restriction of additions - (i) limiting the taxability of sale proceeds to the assessee's 1/7th hereditary share, and (ii) reducing the addition for unexplained house investment - are upheld; the appeal is dismissed insofar as these questions are concerned.

Taxation of prepaid interest on allotment of bonds - inclusion of interest income in year of receipt versus proportionate basis - spread of upfront one-time interest over period of debentures - deferred revenue expenditure / amortisation of upfront interest - precedential effect of a Supreme Court decision approving a High Court view

Taxation of prepaid interest on allotment of bonds - inclusion of interest income in year of receipt versus proportionate basis - spread of upfront one-time interest over period of debentures - deferred revenue expenditure / amortisation of upfront interest - Whether interest received on three-year IDBI capital bonds, though received upfront, was to be taxed wholly in the year of receipt or on a proportionate basis over the bond period - HELD THAT: - The Court held that the question is no longer open in view of the Supreme Court's decision in Rakesh Shantilal Mardia, which approved the Bombay High Court's view in Taparia Tools Ltd. The approved principle is that an upfront one-time payment of interest on allotment operates as deferred revenue expenditure (or creates an asset) since the benefit accrues over the period of the debentures; accordingly the liability/benefit must be spread over the period of the debentures rather than being fully brought to tax in the year of receipt. Applying that precedent to the facts, which involve interest received on three-year IDBI capital bonds, the tribunal was correct to tax the interest on a proportionate basis and to delete the addition made by the Assessing Officer and sustained by the CIT(A). Reliance on contrary High Court decisions is not helpful in view of the binding Supreme Court authority. [Paras 5, 6]

Question answered against the revenue and in favour of the assessee; the tribunal correctly held that the interest is to be taxed on a proportionate basis and the appeal is dismissed.

Final Conclusion: The tax appeal is dismissed: the interest received upfront on the three-year IDBI capital bonds is to be spread and taxed proportionately over the debenture period in accordance with the Supreme Court-approved principle, and the tribunal's deletion of the addition is upheld.

Advance tax payment does not substitute filing of return - treatment of income as undisclosed income due to non-filing of return despite payment of advance tax - block assessment to be made as ordinary assessment under Section 158BH - remand for fresh consideration of connected issues

Advance tax payment does not substitute filing of return - treatment of income as undisclosed income due to non-filing of return despite payment of advance tax - The Tribunal's conclusion that payment of advance tax dispenses with the obligation to file a return and prevents the income for that year from being treated as undisclosed income is incorrect. - HELD THAT: - The court held that payment of advance tax, by itself, does not absolve an assessee of the statutory obligation to file a return disclosing total income for the relevant assessment year. Absent a return, the assessing officer is not placed to examine particulars of income, expenditure and deductions, and therefore non-filing may lead to treating the income for that year as undisclosed. The judgment of the Hon'ble Supreme Court in Commissioner of Income Tax v. B.R. Shah was cited as settling the ambiguity and supporting the proposition that advance tax payment does not cure non-filing of return and its legal consequences.

The Tribunal's view was set aside on this point; payment of advance tax does not prevent the income from being treated as undisclosed where no return has been filed.

Block assessment to be made as ordinary assessment under Section 158BH - remand for fresh consideration of connected issues - The matters were remanded to the Tribunal for fresh consideration of all controversies and issues arising in the block assessments, to be dealt with afresh in accordance with law. - HELD THAT: - While allowing the appeals on the principal point, the court observed that block assessments under Chapter XIVB are required to be made 'as if' ordinary assessments, as mandated by Section 158BH. Because the Tribunal's erroneous conclusion on the key question may have bearing on other findings, the court found it appropriate to set aside the Tribunal's orders and remit the entire matters to the Tribunal for reconsideration and disposal of all aspects afresh, with opportunity to both parties.

The appeals were allowed in part by setting aside the Tribunal's orders and remitting the matters to the Tribunal for fresh consideration of every aspect urged before it.

Final Conclusion: The appeals are allowed; the Tribunal's conclusion that payment of advance tax cures non-filing of return is set aside and the matters are remanded to the Tribunal for fresh consideration and disposal of all issues in accordance with law, with liberty to both parties; no order as to costs.

Penalty under Section 271(1)(c) for concealment or inaccurate particulars - Application of Section 41(1) - reversal of allowance/deduction treated as business income - bona fide mistake and absence of mala fide intention as a defence to penalty - unilateral write-off of debts versus creditor waiver or time bar declaration

Penalty under Section 271(1)(c) for concealment or inaccurate particulars - Application of Section 41(1) - reversal of allowance/deduction treated as business income - bona fide mistake and absence of mala fide intention as a defence to penalty - Whether penalty under Section 271(1)(c) could be sustained in respect of the amount representing interest written off by the Bank which was not shown as income. - HELD THAT: - The court accepted the view of the Commissioner and the Tribunal that although the I.T.O. added the written off interest to income under Section 41(1), the Assessee's omission to show the amount did not demonstrate mala fide concealment but arose from a reasonable, arguable understanding of the statutory provision. Where an amount and the scope of Section 41(1) admit of genuine difference of interpretation, invoking penal provision under Section 271(1)(c) is not warranted. The Supreme Court authorities relied upon support the proposition that bona fide mistakes in understanding applicable law preclude penalty. Accordingly the penalty in respect of the Bank written off interest was set aside.

Penalty under Section 271(1)(c) in respect of the interest written off by the Bank is not sustainable and was rightly set aside.

Penalty under Section 271(1)(c) for concealment or inaccurate particulars - Application of Section 41(1) - reversal of allowance/deduction treated as business income - unilateral write-off of debts versus creditor waiver or time bar declaration - Whether penalty under Section 271(1)(c) could be sustained in respect of amounts the Assessee itself wrote off as bad debts (claimed as time barred or untraceable) without creditor waiver or judicial/time bar determination. - HELD THAT: - The court agreed with the Tribunal that the factual situation here differs materially from the first item. A unilateral entry by the Assessee writing off debts does not have the same effect as a creditor's waiver or a judicial/time bar finding; therefore the Assessee was under an obligation to reflect such write offs as income unless circumstances bringing the amount outside Section 41(1) (such as creditor waiver or time bar adjudication) existed. The Tribunal's conclusion that the penalty proceedings in respect of the unilateral write off were sustainable was upheld.

Penalty under Section 271(1)(c) in respect of the debts written off unilaterally by the Assessee is sustainable and the Tribunal's order in that regard is affirmed.

Final Conclusion: Both appeals are dismissed: the Court upheld the Tribunal's setting aside of penalty in respect of the Bank written off interest (bona fide mistake in interpreting Section 41(1)) and affirmed the Tribunal's conclusion sustaining penalty for the unilateral write off of debts; no order as to costs.

Penalty under Section 271(1)(c) for concealment of income - Deduction under Section 80HHC - debatable claim - Disclosure of all material facts in the return - Where two opinions are possible, penalty not leviable

Penalty under Section 271(1)(c) for concealment of income - Deduction under Section 80HHC - debatable claim - Disclosure of all material facts in the return - Where two opinions are possible, penalty not leviable - Whether penalty under Section 271(1)(c) could be sustained for AY 1999-2000 and AY 2000-01 where deduction under Section 80HHC was disallowed by the Assessing Officer - HELD THAT: - The Court agreed with the Tribunal and CIT(A) that the assessee had disclosed all material facts in the returns and that the claim for deduction under Section 80HHC involved debatable questions (unit wise deduction, exclusion of excise duty and sales tax from turnover) on which two opinions were possible. As the controversy over the allowance of the deduction was arguable, the disallowance could not be equated with concealment of income or furnishing of inaccurate particulars, and therefore imposition of penalty under Section 271(1)(c) was not warranted. The Tribunal had accordingly deleted the penalty for AY 1999 2000 and, on the basis of identical facts, also for AY 2000 01; the High Court found no reason to interfere with these conclusions. [Paras 5, 6]

Penalty under Section 271(1)(c) deleted for AY 1999-2000 and AY 2000-01; revenue's appeals dismissed.

Final Conclusion: The High Court dismissed the revenue appeals, upholding the deletion of penalties under Section 271(1)(c) for AY 1999-2000 and AY 2000-01 since the Section 80HHC deduction claim was debatable and the assessee had disclosed material facts, so no concealment or inaccurate particulars was established.

Retrospective amendment to Section 80HHC - Prospective operation of tax amendments - Constitutional validity of retrospective tax legislation - Quashing of assessments and demands founded on retrospective amendments - Validity of administrative circulars denying deductions retrospectively

Retrospective amendment to Section 80HHC - Constitutional validity of retrospective tax legislation - Prospective operation of tax amendments - The retrospective operation of the amendments to Section 80HHC effected by the Taxation Laws (Amendment) Act, 2005 is impermissible and the amendments are to operate only prospectively. - HELD THAT: - The Court accepted the reasoning in Avani Exports (Gujarat High Court) and the Division Bench decision in CIT v. Jayanita, observing that the impugned amendments were introduced to overcome earlier decisions and that retrospective operation which is detrimental to a class of assessees whose assessments were pending could not be sustained. The court held that such substantive amendments may be given retrospective effect only if they operate for the benefit of the assessee; where they are detrimental, retrospective operation is invalid. Applying that principle, the Court held the 2nd, 3rd and 4th provisos to Section 80HHC(3)(c) shall not have retrospective effect and must operate from the date of amendment onwards. [Paras 3, 4]

The amendment to Section 80HHC introduced by the Taxation Laws (Amendment) Act, 2005 is not operative retrospectively and shall have prospective operation only.

Quashing of assessments and demands founded on retrospective amendments - Validity of administrative circulars denying deductions retrospectively - Consequential reliefs flowing from the declaration of non-retrospectivity were granted, including relief in respect of the assessment year 2000-01 and related demands and orders. - HELD THAT: - Having held that the amendments to Section 80HHC cannot be given retrospective effect, the Court allowed consequential prayers seeking relief against notices, assessments and demands raised by giving effect to the retrospective amendments. The Court thereby directed that the retrospective operation not be applied against the petitioner and granted reliefs consequential to the primary declaration, which encompass the challenge to the demand and orders in respect of assessment year 2000-01 and the related contention against the administrative circular to the extent it seeks to deny deductions retrospectively. [Paras 5, 6]

Consequential reliefs were granted; the retrospective application of the amendment shall not be pressed into service against the petitioner and related orders/demands for assessment year 2000-01 stand affected accordingly.

Final Conclusion: The writ petition is allowed to the extent that the amendments to Section 80HHC brought by the Taxation Laws (Amendment) Act, 2005 shall not operate retrospectively but only prospectively; consequential reliefs sought by the petitioner, including those related to the assessment year 2000-01, are granted.

Deletion of demand under section 201(1) and 201(1A) - bar of limitation for remittances made prior to 31.03.1998 - applicability of Section 44B to reimbursement of demurrage - concurrent findings of fact not vitiated by perversity or error of law apparent on the face of the record

Deletion of demand under section 201(1) and 201(1A) - bar of limitation for remittances made prior to 31.03.1998 - Appeal admitted on the substantial question whether the Tribunal was justified in deleting the demand under sections 201(1) and 201(1A) holding that defaults for remittances made prior to 31.03.1998 are barred by limitation. - HELD THAT: - The Court found that the Revenue framed multiple substantial questions of law but the appeal merited admission only on the first question because the Court is seized of an identical controversy concerning the same assessee for an earlier assessment year. The matter raising limitation of claims in respect of remittances prior to 31.03.1998 is therefore sufficiently substantial to justify admission and further adjudication. Consequently the appeal is admitted on that question and directed to be heard along with related pending Income Tax Appeals involving the same controversy. [Paras 1, 6]

Appeal admitted on the stated substantial question of law and directed to be heard along with the specified pending appeals.

Applicability of Section 44B to reimbursement of demurrage - concurrent findings of fact not vitiated by perversity or error of law apparent on the face of the record - Whether the Tribunal was justified in holding that the provisions of Section 44B are not applicable to the reimbursement of demurrage paid on import of crude oil. - HELD THAT: - The Court recorded that both the Commissioner (Appeals) and the Tribunal found as a matter of fact that the two conditions envisaged by subsection (1) of Section 44B were not satisfied in the present case. The payments in question were held to be reimbursements of expenses incurred on behalf of the assessee and not sums falling within the description of amounts deemed to be profits and gains of the business of operation of ships under Section 44B. The High Court observed that the view taken by the lower authorities is a possible view rooted in the peculiar facts of the case and is not perverse or tainted by an error of law apparent on the face of the record; accordingly the question does not amount to a substantial question of law warranting interference. [Paras 5]

Second question rejected as not constituting a substantial question of law; appeal dismissed to that extent.

Final Conclusion: The appeal is admitted solely on the substantial question concerning whether the Tribunal was justified in deleting the demand as barred by limitation for remittances prior to 31.03.1998 and is to be heard with the related pending appeals; the challenge to the Tribunal's conclusion that Section 44B is not applicable to the reimbursement of demurrage is dismissed as not raising a substantial question of law.

Royalties and licence fees related to the imported goods - transaction value must be relatable to import of goods - condition of sale of the goods being valued - transfer of technology / technical know-how - Rule 9(1)(c) of the Customs Valuation Rules, 1988 - Interpretative Note to Rule 4 - price actually paid or payable

Royalties and licence fees related to the imported goods - Rule 9(1)(c) of the Customs Valuation Rules, 1988 - transaction value must be relatable to import of goods - transfer of technology / technical know-how - Whether the licence fee and royalty payable to the foreign collaborator are includible in the assessable value of the capital goods imported from the collaborator under Rule 9(1)(c) of the Customs Valuation Rules, 1988. - HELD THAT: - The agreement between the parties grants transfer of the Basic Float Process Technology and Additional Technology and provides for a lump sum licence fee and a continuing royalty at 3% on internal and export sales for manufacture of float glass (paras. 5-6). Rule 9(1)(c) applies only to royalties and licence fees that are related to the imported goods and payable as a condition of the sale of those goods. On a plain reading the agreement shows the payments are for transfer of manufacturing know how and are tied to sales of finished float glass, not to the importation or sale of the capital goods themselves (paras. 6-8). The Tribunal relied on the Supreme Court's reasoning in Toyota Kirloskar that the transaction value must be relatable to the import and that technical assistance or royalties connected to post import manufacturing activity are not necessarily a condition of import (paras. 9-11). The Court distinguished decisions where the agreement expressly included the cost of imported components or made supplier assistance in relation to imported items a contractual condition (Matsushita) - facts not present here (paras. 12-13). Applying these principles, the licence fee and royalty are not shown to be a condition of sale of the imported capital goods and therefore are not includible under Rule 9(1)(c) (paras. 11, 14). [Paras 7, 8, 9, 11, 14]

Licence fee and royalty payable to the foreign collaborator are not includible in the assessable value of the imported capital goods under Rule 9(1)(c) CVR, 1988; inclusion set aside.

Final Conclusion: The impugned orders upholding addition of licence fee and royalty to the value of imported capital goods are set aside; the appeal is allowed with consequential relief.

Natural justice - speaking and reasoned order - opportunity of hearing - remand for fresh hearing - judicial writing guidelines

Speaking and reasoned order - judicial writing guidelines - Impugned appellate order is non-speaking and lacks required reasons and issue-wise determination. - HELD THAT: - The appellate authority failed to list the points in dispute and to record issues, arguments and reasons for its conclusion, thereby not discharging its statutory and judicial duty to produce a self speaking order. The judgment refers to established guidelines on how judicial orders should be written and holds that an appellate order must identify the issues, record submissions and evidence, and state reasons for the decision so that the ratio decidendi is discernible. The impugned order, being a one sentence allowance of the Revenue's appeal without such steps, does not meet that standard and cannot be said to be passed by application of mind. [Paras 1, 2, 3, 4]

Impugned appellate order is defective for being non speaking, lacking issue wise determination and reasons.

Natural justice - opportunity of hearing - remand for fresh hearing - Whether the defects of denial of hearing and non recording of respondent's submissions are curable at the appellate stage and appropriate remedial directions. - HELD THAT: - The Court found that the respondent was deprived of the process of justice because the appellate order lacked recording of the respondent's arguments and evidence, amounting to a patent violation of natural justice. Such a defect touching the root of the matter is not curable at the appellate level. Consequently, the proper remedy is to remand the matter to the appellate authority for fresh consideration after granting a fair hearing. The remand is directed to ensure the respondent is given opportunity to file for hearing, the submissions and evidence are recorded, and a speaking and reasoned order is passed within a specified period. [Paras 3, 4, 5]

Appeal remanded to the appellate commissioner to grant fair hearing, record submissions and evidence, and pass a speaking and reasoned order within three months; respondent to seek fixation of hearing.

Final Conclusion: The Court found the impugned appellate order to be non speaking and violative of natural justice, disposed of the stay application and remanded the appeal to the commissioner (Appeals) for fresh hearing and disposal with a speaking and reasoned order within three months.

Admissibility of depreciation on imported capital goods - de-bonding of units and recovery of duty foregone on capital goods - partial discharge of export obligation and its effect on concession - computation of depreciation in accordance with Board Circular No.14/2004-Cus

Admissibility of depreciation on imported capital goods - partial discharge of export obligation and its effect on concession - Depreciation is allowable on capital goods imported duty free by an EOU even where the export obligation has been only partly discharged. - HELD THAT: - The Court accepted that Notification No.95/93 Cus permits de bonding and levy of duty foregone on capital goods covered by para 7, but observed there is no clause in the notification denying depreciation where the export obligation has been only partly discharged. Revenue's contention that full recovery of duty foregone must be made without any concession because export obligation was not fully performed was rejected as unreasonable. Once export obligation has been discharged even partially, the benefit of depreciation on capital goods must be allowed in computing the value for recovery of duty foregone. The determination accordingly entitles the respondent to claim depreciation. [Paras 5]

Depreciation shall be allowed when calculating duty payable on de bonded capital goods despite only partial fulfilment of export obligation.

Computation of depreciation in accordance with Board Circular No.14/2004-Cus - de-bonding of units and recovery of duty foregone on capital goods - The quantum and method of applying depreciation are to be determined by the adjudicating authority in accordance with the Board's Circular No.14/2004 Cus. - HELD THAT: - The Court noted that Circular No.14/2004 Cus prescribes depreciation rates - 20% per annum of original value for computers and peripherals and 10% per annum for other capital goods - for clearances by EOU/EHTP/STP units. That circular provides the appropriate basis for calculating depreciation on the imported capital goods for the purpose of computing duty recoverable on de bonding. The matter was therefore set aside and remanded to the adjudicating authority to compute the admissible depreciation and consequential duty recoverable in accordance with the circular's mandate. [Paras 6, 7]

Matter remanded for computation of depreciation and resultant duty recoverable by the adjudicating authority applying the rates prescribed in Circular No.14/2004 Cus.

Final Conclusion: Appeal allowed in part: respondent entitled to depreciation on imported capital goods despite partial discharge of export obligation; matter remanded to the adjudicating authority to calculate the admissible depreciation and resultant duty recoverable in accordance with Board Circular No.14/2004 Cus.

Classification of ship's bunker fuel as integral part of vessel under EXIM code 89.08 - binding effect of DGFT clarifications under Para 2.3 of the Foreign Trade Policy - customs tariff classification versus import policy classification - confiscation under Section 111(d) of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962

Classification of ship's bunker fuel as integral part of vessel under EXIM code 89.08 - binding effect of DGFT clarifications under Para 2.3 of the Foreign Trade Policy - confiscation under Section 111(d) of the Customs Act, 1962 - penalty under Section 112(a) of the Customs Act, 1962 - Surplus fuel contained in vessels imported for breaking is classifiable under EXIM Heading 89.08 as an integral part of the vessel and therefore not liable to confiscation or penalty under the Customs Act when import policy treats the vessel as free of restriction. - HELD THAT: - The Tribunal accepted the DGFT opinion (F.No.IPC/4/5(684)/97/82/PC-2(A), dt.26.06.2013) that surplus fuel stored in fuel tanks of vessels brought for breaking forms part of the vessel/machinery and is classifiable under EXIM code 89.08. Reliance was placed on Para 2.3 of the Foreign Trade Policy which makes DGFT's decision final and binding on interpretation of FTP and ITC(HS) classification for import policy purposes. Because imports under ITC(HS) 89.08 are free, the Tribunal held that such MGO/HSD contained in vessels for breaking cannot be held liable for confiscation under Section 111(d) of the Customs Act, 1962, and consequential penalties under Section 112(a) are not imposable. The Tribunal noted consistent authority that clarifications issued by the office of DGFT (including by JDGFT) are to be treated as binding for import policy classification. [Paras 4, 5]

Appeals allowed; surplus fuel in vessels for breaking to be classed under EXIM Heading 89.08 and not liable to confiscation or penalty under the Customs Act on that basis.

Customs tariff classification versus import policy classification - binding effect of DGFT clarifications under Para 2.3 of the Foreign Trade Policy - DGFT clarification binding on Customs for import policy/ITC(HS) classification does not bind Customs authorities when classifying goods under the Customs Tariff Act for purposes outside import policy. - HELD THAT: - The Tribunal distinguished the domain of import policy from the independent statutory jurisdiction of Customs under the Customs Tariff Act. While DGFT opinions are final and binding for interpretation of the Foreign Trade Policy and ITC(HS) classification (per Para 2.3 FTP) and therefore control whether an item is restricted or free for import, the Tribunal recognised that such clarifications may not govern classification under the Customs Tariff Act where Customs alone has authority to determine tariff classification for duty assessment and other Customs-specific purposes. [Paras 5]

DGFT clarifications bind for import policy/ITC(HS) classification but are not determinative of Customs Tariff Act classification in the exclusive domain of Customs.

Final Conclusion: The appeals were allowed: surplus fuel in vessels brought for breaking is to be treated as part of the vessel and classifiable under EXIM Heading 89.08 per DGFT clarification, and therefore such fuel is not liable to confiscation or penalties under the Customs Act on the ground of restricted import; DGFT clarifications bind for import policy classification but do not automatically govern separate Customs Tariff Act classification.

Club or association service under Section 65(25a) of the Finance Act, 1994 - Management Consultancy service under Section 65(105)(r) readwith Section 65(65) of the Finance Act, 1994 - service tax liability on amounts received by an apex federation from member cooperative units - reliance on precedents determining club/association character of federations

Club or association service under Section 65(25a) of the Finance Act, 1994 - Management Consultancy service under Section 65(105)(r) readwith Section 65(65) of the Finance Act, 1994 - Whether the amounts collected by the appellant from member cooperative sugar mills were liable to service tax as management consultancy services or fell within club or association service and were not taxable - HELD THAT: - The Tribunal accepted the factual position that the appellant is the apex federation which supervises, monitors and gives guidance to its member sugar mills to improve efficiency. Applying the legal test in the cited decisions, the activities of the federation were held to be in the nature of a club or association service as defined under Section 65(25a) and not attractable as Management Consultancy service under Section 65(105)(r) readwith Section 65(65). The Tribunal relied on its earlier decisions and on the High Court rulings referred to in the judgment, concluding that amounts received from members for supervisory and advisory functions of the federation do not constitute taxable management consultancy service. For these reasons the impugned demand and consequent orders confirming service tax were found unsustainable and set aside. [Paras 6]

The impugned orders confirming service tax on the amounts received by the federation from its member sugar mills are set aside; no service tax is chargeable on those receipts under the facts and law before the Tribunal.

Final Conclusion: Appeals allowed; service tax demands confirmed by lower authorities set aside on the ground that the federation's receipts from member cooperative sugar mills constitute club or association service and not taxable management consultancy service for the periods in dispute.

Penalty for suppression or misdeclaration - Section 73(3) and Section 73(4) - payment after self-ascertainment and its exception - Imposition of penalty under Section 78 - Extended period cases and alternative pre-SCN settlement (25% penalty) - Deliberate excess CENVAT credit / short payment

Section 73(3) and Section 73(4) - payment after self-ascertainment and its exception - Penalty for suppression or misdeclaration - Imposition of penalty under Section 78 - Deliberate excess CENVAT credit / short payment - Extended period cases and alternative pre-SCN settlement (25% penalty) - Whether payment of service tax and interest by the assessee precludes issuance of show-cause notice and imposition of penalty under Section 78 where the department alleges deliberate excess CENVAT credit resulting in short payment over a period - HELD THAT: - The Tribunal held that Section 73(3) protects a person who, on his own ascertainment or on a Central Excise Officer's ascertainment before service of a notice, pays the tax and informs the officer, in which event no notice in respect of the amount so paid shall be served; however sub-section (4) excludes cases where service tax has not been levied or paid or has been short-levied or short-paid. The facts showed repeated excess availment of credit across the months (resulting in a nil or reduced closing balance), constituting short payment over a period and bringing the case within sub-section (4). To accept the plea under sub-section (3) would render sub-section (4) redundant and would defeat the legislative scheme that treats deliberate evasion differently. The Tribunal further observed that the statute itself provides an alternative remedy for persons who wish to avoid higher penalties by making payment with interest and 25% of service tax before issuance of a show-cause notice; allowing the assessee's contention would make that alternative otiose. There is no specific time limit for imposing penalty; accordingly, payment of tax and interest after detection did not preclude initiation of penalty proceedings under Section 78 where the facts materially indicated deliberate excess credit and short payment.

The plea that payment of service tax and interest precludes issuance of a show-cause notice and imposition of penalty was rejected; penalty under Section 78 was sustained and the appeal dismissed.

Final Conclusion: The appeal challenging imposition of penalty under Section 78 was dismissed: where facts disclosed deliberate excess CENVAT credit resulting in short payment over a period, Section 73(4) applies and payment of tax and interest after detection does not bar penalty proceedings; the statutory alternative of payment with interest and 25% pre-SCN was noted but not availed.

Condonation of delay - limitation period and effect of unexplained delay - duty of public authorities and their agencies to provide reasonable explanation for delay - prejudice to Revenue as a ground against condonation - interest reipublicae ut sit finis litium

Condonation of delay - limitation period and effect of unexplained delay - Application for condonation of delay is refused and the delayed appeals and stay applications are dismissed. - HELD THAT: - The Tribunal examined the affidavit filed by the appellant bank which stated that the impugned order was served on 31-3-2011, the file was handed to a Chartered Accountant the same day, the consultant later expressed difficulty, the bank retrieved the files between 3-9-2012 and 8-9-2012 and gave them to its advocate on 15-10-2012. The affidavit did not explain why the bank took no steps to ascertain whether an appeal had been filed between 31-3-2011 and 3-9-2012. The Tribunal found this silence and the explanation of consultant's difficulty to be inadequate and indicative of negligence rather than bona fide difficulty. Relying on the settled principle that limitation bars stale remedies and that public authorities are under a special obligation to act diligently, the Tribunal held that unreasonable and unexplained delay is fatal to an appeal. The Tribunal noted binding guidance that government bodies, their agencies and instrumentalities must furnish reasonable and acceptable explanations for delay and that condonation is an exception, and found that the appellant failed to furnish acceptable reasons. Because the delay was unexplained and the appellant's negligence was patent, the Tribunal declined to exercise its discretion in favour of condonation.

Application for condonation of delay dismissed; consequent stay applications and appeals dismissed.

Prejudice to Revenue as a ground against condonation - duty of public authorities and their agencies to provide reasonable explanation for delay - Prejudice to Revenue and failure to give acceptable reasons warranted refusal to condone delay. - HELD THAT: - The Tribunal held that the belated approach by the appellant caused prejudice to Revenue and that where there is considerable delay and the cause of delay is not reasonably explained, condonation should not be granted. The Tribunal referred to judicial authority emphasising protection of Revenue and the need for cogent reasons to condone large delays, and concluded that allowing condonation in the present facts would reward indolence. The Tribunal therefore refused relief to the appellant on the ground that the explanation was neither reasonable nor acceptable and that the interests of Revenue militated against condonation.

Delay not condoned on account of prejudice to Revenue and inadequate explanation; appeals dismissed.

Final Conclusion: The applications for condonation of delay are rejected on the ground of unexplained and inordinate delay coupled with appellant's negligence and prejudice to Revenue; accordingly the related stay applications and appeals are dismissed.

Management or business consultant - services in aid of educational institutions / exemption for services to educational institutions - technical assistance - pre-deposit and stay of recovery - limitation

Management or business consultant - services in aid of educational institutions / exemption for services to educational institutions - Whether the services rendered by the appellant to Manipal University and Sikkim-Manipal University fall within the definition of "management or business consultant" or are activities in aid of educational institutions and therefore not taxable as such - HELD THAT: - The appellant conducted regular and online entrance examinations for the universities using question papers set by the respective universities, supplied infrastructure and manpower, deployed personnel for conduct of examinations, and conveyed results to the universities. The service recipients are educational institutions conducting courses, prescribing curricula and syllabi, and issuing certificates or degrees. The Tribunal found that prima facie these activities did not involve elements of consultancy or technical assistance as envisaged by the statutory definition of "management or business consultant" and were services rendered in aid of educational institutions. On this basis the Tribunal found a strong prima facie case for the appellant against the demand quantified in respect of the two universities. [Paras 3]

Prima facie not taxable as "management or business consultant" services; waiver of pre-deposit and stay of recovery granted in respect of the amounts demanded from Manipal University and Sikkim-Manipal University, subject to the terms of the order.

Management or business consultant - technical assistance - pre-deposit and stay of recovery - Whether the services rendered by the appellant to NASSCOM are taxable as "management or business consultant" services and the consequent pre-deposit requirement - HELD THAT: - The services to NASSCOM involved the appellant preparing question papers on a pattern provided by NASSCOM; there is no evidence that NASSCOM is an educational institution. The Tribunal found that in relation to NASSCOM there was an element of technical assistance by the appellant and hence the case was not prima facie in appellant's favour. The Tribunal did not find a prima facie case on limitation or financial hardship to exempt pre-deposit in this part of the demand. [Paras 4]

Appellant required to pre-deposit the amount demanded in relation to NASSCOM (Rs. 20,00,000) within eight weeks; failure to pre-deposit would affect stay; on compliance there will be waiver of pre-deposit and stay of recovery in respect of penalties and the balance demand subject to the order's terms.

Final Conclusion: Prima facie case made out for set-aside of the demand relating to services rendered to Manipal University and Sikkim-Manipal University (activities in aid of educational institutions) and waiver/stay granted for those amounts; no prima facie case found for services rendered to NASSCOM, and the appellant directed to pre-deposit the quantified amount relating to NASSCOM within eight weeks, with reporting and compliance as ordered.

Service Tax pre-deposit waiver - Classification of services - Scientific and Technical Consultancy Service v. Technical Testing and Analysis Service v. Soil Exploration Service - Revision under Section 84(1) of the Finance Act, 1994 - requirement of a reasoned order - Adjudicating Authority's factual finding based on audit and preventive records - Stay of recovery during pendency of appeal

Service Tax pre-deposit waiver - Stay of recovery during pendency of appeal - Waiver of pre-deposit of disputed service tax and penalties and grant of stay of recovery during pendency of the appeal. - HELD THAT: - The Tribunal found that the applicant had made out a prima facie case for waiver of the pre-deposit and for a stay. The Adjudicating Authority had conducted a detailed examination of invoices, contracts and audit and preventive reports and arrived at a categorical finding that the short payment of service tax was minimal. The Commissioner in revision did not demonstrate, in the revision notice or order, any legal or factual error in the Adjudicating Authority's reasoning nor did he enumerate contrary evidence. In view of the Adjudicating Authority's findings and the absence of reasoned contrary findings in revision, the Tribunal exercised its discretion to waive the pre-deposit and stay recovery pending disposal of the appeal.

Pre-deposit of duty and penalties waived and recovery stayed during pendency of the appeal.

Classification of services - Scientific and Technical Consultancy Service v. Technical Testing and Analysis Service v. Soil Exploration Service - Adjudicating Authority's factual finding based on audit and preventive records - Classification of the services rendered by the appellant was, prima facie, not 'Scientific and Technical Consultancy Service' but related to 'Technical Testing and Analysis Service' and substantial receipts were for 'Soil Exploration Service' which was not taxable. - HELD THAT: - On review of the material placed before the Adjudicating Authority - including invoices, contracts, audit and preventive reports - the Tribunal found that the Adjudicating Authority had reached a clear finding that the appellant's activities related to soil testing/exploration rather than taxable scientific and technical consultancy. The Adjudicating Authority quantified the tax liability as minimal. The Tribunal found no prima facie material in the revision order to displace that factual classification, and noted that soil exploration receipts were not taxable.

Accepted the Adjudicating Authority's prima facie classification that the services were soil testing/exploration (not taxable consultancy) and that taxable liability was minimal.

Revision under Section 84(1) of the Finance Act, 1994 - requirement of a reasoned order - Validity of the revision proceedings in the absence of reasoned findings overruling the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the revision notice and order did not set out how the reasoned findings of the Adjudicating Authority were incorrect in law or fact, nor did it identify evidences contradicting those findings. In those circumstances the revision order lacked the requisite explanation to justify reversing the Adjudicating Authority's detailed factual conclusions. The absence of articulated contrary findings or evidence in the revision proceedings weighed in favour of granting interim relief to the appellant.

Found the revision order to be without adequate reasoned contrary findings and treated that deficiency as a basis for granting interim relief (waiver and stay).

Final Conclusion: The Tribunal, on a prima facie appraisal of the material and noting the lack of reasoned contrary findings in revision, waived the pre-deposit of the disputed service tax and penalties and stayed recovery pending disposal of the appeal, while accepting the Adjudicating Authority's factual classification of the appellant's services as soil testing/exploration with minimal taxable liability.

Non-speaking order - violation of principles of natural justice - consideration of documents acknowledged as received - remand for fresh consideration - no entitlement to personal hearing

Non-speaking order - violation of principles of natural justice - Impugned assessment orders were passed as non-speaking orders without considering documents produced by the petitioner and therefore are in violation of principles of natural justice. - HELD THAT: - The High Court found on a reading of the impugned orders that the assessing authority had passed non-speaking orders and failed to take into account relevant documents produced by the petitioner, notably those dated 02.05.2014 which claimed exemption for the sale of Copra cake. The petitioner had produced an acknowledgement evidencing receipt of those documents by the authority, yet the orders proceed as if no details were furnished. For these reasons the orders were held to be per se illegal and contrary to the obligation to provide reasons and to afford a fair adjudicatory process. [Paras 7]

Impugned orders set aside as passed in violation of natural justice; writ petitions allowed.

Consideration of documents acknowledged as received - remand for fresh consideration - no entitlement to personal hearing - Matters remitted to the assessing authority to consider the documents already filed (including those dated 02.05.2014) and to pass speaking orders afresh; petitioner not entitled to personal hearing. - HELD THAT: - The Court directed that the matters be remitted to the respondent for fresh consideration on merits and in accordance with law, expressly requiring the authority to consider the documents already filed by the petitioner - especially the documents dated 02.05.2014 claiming the exemption - and to pass speaking orders. The remand is for adjudication on merits after consideration of the filed material; the Court also clarified that the petitioner is not entitled to personal hearing in the remitted proceedings. [Paras 8]

Matters remitted to respondent to consider the filed documents and pass speaking orders afresh; no personal hearing to be granted to the petitioner.

Final Conclusion: Writ petitions allowed; impugned assessment orders set aside for being non-speaking and violative of natural justice, and the matters remitted to the assessing authority to consider the petitioner's filed documents (including those dated 02.05.2014) and to pass speaking orders afresh; petitioner not entitled to personal hearing.

Violation of principles of natural justice - ex parte decision - service of summons - setting aside order for want of opportunity of hearing - remand for fresh consideration

Violation of principles of natural justice - ex parte decision - service of summons - setting aside order for want of opportunity of hearing - Whether the Tax Board's order dated 24.08.2009, passed ex parte without service on the petitioner, suffers from violation of principles of natural justice and requires being set aside and remitted for fresh hearing. - HELD THAT: - The High Court found that the averments in the petition about non-service of the Tax Board proceedings were not denied in the Department's reply and, without adjudicating the merits of the penalty controversy, concluded that the Tax Board's revival of the penalty by an ex parte order amounted to a breach of the principles of natural justice. On that established procedural defect, the court set aside the Tax Board's order dated 24.08.2009 and remanded the matter for fresh decision after affording the petitioner an opportunity to be heard.

Order dated 24.08.2009 set aside and matter remitted to the Tax Board for fresh hearing; petitioner directed to appear before the Tax Board on 24.10.2013.

Penalty under section 76(6) of the RVAT Act, 2003 - substitution of clause (b) of sub section (2) - Validity of the penalty imposed on 21.08.2006 in view of subsequent statutory amendment was not decided and was remanded. - HELD THAT: - The court expressly declined to go into the merits, including the contention that clause (b) of sub section (2) of section 76 was substituted with effect from 27.12.2006 and that the penalty dated 21.08.2006 was therefore without authority. That statutory/contention issue was left open for the Tax Board to consider afresh on remand after hearing the parties.

Issue remitted to the Tax Board for fresh consideration and decision on merits.

Mens rea and proof of false or forged documents - tax paid on successive sales - Whether the assessing authority proved mens rea by establishing false or forged documents was not decided and was remanded. - HELD THAT: - The High Court did not examine the substantive contention that the AO failed to prove falsity or forgery or that tax had subsequently been paid on later sales; these factual and legal contentions were left for the Tax Board to adjudicate after providing opportunity of hearing to the petitioner.

Remitted to the Tax Board for fresh adjudication.

Excessive penalty beyond prescribed ceiling - penalty quantification under section 76(6) - Whether the Tax Board was justified in sustaining a penalty in excess of the 30% ceiling prescribed by section 76(6) was not decided and was remanded. - HELD THAT: - The court refrained from addressing the contention that the penalty sustained by the Tax Board exceeded the statutory limit and left the question of penalty quantification to the Tax Board to consider on merits in the fresh proceedings after hearing the parties.

Remitted to the Tax Board for fresh consideration and appropriate decision.

Final Conclusion: Revision petition allowed on grounds of denial of opportunity to be heard; Tax Board order dated 24.08.2009 set aside and the matter remitted for fresh hearing and decision on merits; petitioner directed to appear before the Tax Board on 24.10.2013.

Concessional rate of tax - declaration in form IIIB - concession under Rule 25B of the U.P. Trade Tax Rules, 1948 - single declaration covering transactions of more than one quarter - rate of tax for a commodity remains the same for a complete assessment year

Concessional rate of tax - declaration in form IIIB - single declaration covering transactions of more than one quarter - concession under Rule 25B of the U.P. Trade Tax Rules, 1948 - Acceptance of a single declaration in form IIIB containing sale transactions spanning more than one quarter does not by itself disentitle the dealer to the concessional rate of tax. - HELD THAT: - The Tribunal and the first appellate authority found that the mere fact that a single declaration form IIIB recorded transactions for a period exceeding a quarter is not a sufficient basis to refuse the concession. The High Court agreed, observing that ordinarily the rate of tax for a commodity remains the same throughout a complete assessment year, and therefore an entry of more than one quarter in a single declaration does not, without more, defeat the statutory concession available where a valid form IIIB has been furnished. No illegality was found in upholding the concession granted by the lower authorities.

The challenge by the Revenue was rejected and the concession claimed on the basis of form IIIB was held to be maintainable despite the form containing transactions for more than one quarter.

Final Conclusion: Substantial question of law answered against the Revenue; revision dismissed and the order of the Commercial Tax Tribunal upholding the first appellate authority was affirmed.

Classification of old newspapers as goods for sales tax - liability under State and Central sales tax laws - precedent and binding effect of an earlier Division Bench

Classification of old newspapers as goods for sales tax - precedent and binding effect of an earlier Division Bench - Old newspapers dealt with by the assessee are goods for the purposes of sales tax. - HELD THAT: - The Court examined whether old newspapers fall within the ambit of 'goods' for levy under the Karnataka Sales Tax regime and consequentially under the Central Sales Tax. A Division Bench of this Court had earlier considered the question in United Agencies v. Assistant Commissioner of Commercial Taxes, Bangalore (dated December 24, 2010) and taken the view that such material is taxable as 'goods'. Although the Tribunal's order (dated January 20, 2011) predated availability of that Division Bench judgment and the assessee relied on conflicting Supreme Court authorities, this Bench observed that where an earlier Division Bench has examined and taken a view, that view must be followed unless a contrary Division Bench decision requires reference to a Larger Bench. In the circumstances, the Court followed the earlier Division Bench decision and held that old newspapers constitute 'goods', thereby supporting the view recorded by the lower authority and displacing the Tribunal's contrary conclusion on that issue.

Revision petitions allowed; the Tribunal's order is set aside on this issue and the lower authority's finding that old newspapers are 'goods' is confirmed.

Final Conclusion: The Court allowed the State's revision petitions, holding that old newspapers are 'goods' for sales tax purposes and confirming the lower authority's view while setting aside the Tribunal's contrary order.