TaxTMI Updates e-Newsletter
Aug 17,2015

Reopening of assessment on grounds of income escaping assessment - Revisionary power of the Commissioner under Section 263 - Eligibility for deduction under Section 10A - newly established undertaking - New undertaking versus expansion - physical separateness and new machinery - Change of opinion not a valid basis for reassessment

Reopening of assessment on grounds of income escaping assessment - Revisionary power of the Commissioner under Section 263 - Validity of reassessment proceedings under Section 147 where earlier revision proceedings under Section 263 on same grounds were dropped - HELD THAT: - The Court held that the legal bases for invoking the Commissioner's revisional power under Section 263 and for reopening assessments under Section 147 are distinct. The fact that the Commissioner dropped proceedings under Section 263 does not bar the Assessing Officer from initiating reassessment under Section 147 if he has reason to believe income has escaped assessment. Consequently, the appellate authorities' conclusion that reassessment was impermissible merely because revisionary proceedings were dropped was unsustainable. [Paras 6]

Reopening under Section 147 was not precluded by the prior dropping of proceedings under Section 263; the appellate authorities' finding to the contrary was set aside.

Eligibility for deduction under Section 10A - newly established undertaking - New undertaking versus expansion - physical separateness and new machinery - Change of opinion not a valid basis for reassessment - Whether the two units on the second and sixth floors constituted newly established undertakings eligible for deduction under Section 10A despite being expansions of an existing unit in the same building - HELD THAT: - Applying the principle that a 'newly established undertaking' need not be a new company but must be an identifiable, separate industrial unit with fresh outlay on plant and machinery and capable of existing as a viable unit, the Court found the second- and sixth-floor units satisfied Sub-section (2) conditions of Section 10A. The units were started after 1.4.1994, used new machinery and plant, recruited fresh employees, and were independent operationally even though the assessee maintained a single set of accounts. Common management or absence of separate bank accounts did not negate separateness where investment and identity of each unit could be ascertained from available material. On these facts the assessee was entitled to the benefit under Section 10A for those two units. [Paras 9, 10, 11]

The two units on the second and sixth floors qualify as newly established undertakings under Section 10A and the assessee is entitled to the deduction in respect of those units.

Final Conclusion: Appeals partly allowed: the court held reassessment under Section 147 is not barred by the dropping of revisionary proceedings under Section 263, but on the facts the second- and sixth-floor units qualify as newly established undertakings and the assessee is entitled to deduction under Section 10A for those units.

Power of review of High Court - Inherent jurisdiction of High Courts under Article 215 - Applicability of Code of Civil Procedure provisions to appeals under Section 260A(7) - Formulation of substantial question of law on admission - Recall of judgment for denial of effective hearing

Formulation of substantial question of law on admission - Recall of judgment for denial of effective hearing - Validity of the Division Bench's recall of its earlier judgment on the ground that it had not formulated substantial questions of law before hearing the appeal on merits. - HELD THAT: - The Court accepted the factual finding recorded by the Division Bench that it had earlier reserved a decision on whether substantial questions of law existed and thereafter proceeded to decide the appeal on merits without first formulating those questions and giving the parties an opportunity to be heard thereon. The Division Bench concluded that omission to formulate the substantial questions and to invite the parties' input amounted to denial of effective hearing, and therefore recalled its earlier order in order to decide the appeal after formulating the questions. The Supreme Court recorded that, in view of what the Division Bench itself stated in the review order, there was no ground for interference with that recall.

The Division Bench was justified in recalling its earlier judgment because the omission to formulate substantial questions before deciding the appeal amounted to denial of effective hearing; the recall stands and the appeal may be decided after formulation of the questions.

Power of review of High Court - Inherent jurisdiction of High Courts under Article 215 - Applicability of Code of Civil Procedure provisions to appeals under Section 260A(7) - Whether Section 260A(7) of the Income Tax Act restricts the High Court's power to review its own orders or its inherent jurisdiction under Article 215. - HELD THAT: - The Court held that High Courts, being Courts of Record under Article 215, possess the power of review which inheres in courts of plenary jurisdiction to prevent miscarriage of justice or correct grave errors. The Supreme Court relied on the principle that nothing in the constitutional scheme or the text of Section 260A(7) indicates an intention to curtail or exclude a High Court's inherent review jurisdiction. Section 260A(7) simply provides that provisions of the Code of Civil Procedure that apply to appeals would apply to appeals under Section 260A; that provision does not operate to exclude other provisions of the Code or to abrogate the High Court's inherent jurisdiction to review.

Section 260A(7) does not curtail the High Court's inherent power of review under Article 215; the High Court may exercise review jurisdiction where warranted.

Final Conclusion: The Supreme Court declined to interfere with the High Court's recall of its earlier judgment for want of formulation of substantial questions and affirmed that High Courts possess inherent review power under Article 215 which is not ousted by Section 260A(7); the appeals are disposed of with no order as to costs.

Summary order. Appeal dismissed as not entertained on grounds of nominal tax effect and the matter being very old.

Deduction under section 80HHC - positive income from export business - application of section 80AB

Deduction under section 80HHC - positive income from export business - application of section 80AB - Whether the assessee was entitled to deduction under section 80HHC for AY 1987-88 despite overall loss in tea trading and absence of positive export income, and whether section 80AB was applicable. - HELD THAT: - The Assessing Officer denied the deduction on the ground that section 80AB applied because, after setting off tea trading losses, there was no positive profit attributable to the export business. This Court, relying on the precedent of Jeyar Consultant and Investment Pvt. Ltd. v. CIT, held that to avail benefit of section 80HHC there must be positive income from the export business. Where the net result of the export/trading activities is a loss and there is no positive export profit, the deduction under section 80HHC cannot be allowed. The Assessing Officer's conclusion that the deduction is not permissible and that section 80AB is to be applied was therefore upheld by this Court, and the High Court judgment in favour of the assessee was set aside.

Deduction under section 80HHC for AY 1987-88 denied; section 80AB applies and the Assessing Officer's order restoring refusal of the deduction is upheld.

Final Conclusion: Appeal allowed in part: the High Court order is set aside; the Assessing Officer's order denying the section 80HHC deduction for AY 1987-88 is restored on the ground that no positive income from the export business existed to attract the deduction.

Condonation of delay - application of administrative circular - cascading effect of common principle in group of cases - liberty to approach the High Court for judicial consideration

Condonation of delay - The Court granted condonation of delay in filing the special leave petition. - HELD THAT: - The order records that delay in filing the special leave petition was condoned. No substantive legal question arose from the condonation itself; it was a procedural step permitting the petition to be entertained. [Paras 1]

Delay condoned.

Application of administrative circular - cascading effect of common principle in group of cases - liberty to approach the High Court for judicial consideration - Whether the High Court should apply the Circular dated February 9, 2011 ipso facto in matters where the Circular may have a cascading effect across a group of cases. - HELD THAT: - The Court held that where an administrative circular affects a series of related matters (a cascading effect) because a common principle is involved in subsequent or grouped cases, the High Court should not apply the circular automatically without judicial consideration. In such situations the Department was granted liberty to move the High Court and draw attention to the cascading implications so that the High Court may exercise its discretion rather than applying the circular ipso facto. The Court gave a time-bound liberty of six weeks to the Department to approach the High Court. [Paras 2]

Liberty granted to the Department to move the High Court within six weeks to seek that the Circular not be applied ipso facto in cases having a cascading effect; High Court to exercise judicial discretion.

Final Conclusion: SLP disposed of after condonation of delay and grant of liberty to the Department to approach the High Court within six weeks to seek that the Circular dated February 9, 2011 not be applied ipso facto in matters where it produces a cascading effect across a group of cases.

Depreciation - ownership - sham transaction - factual findings - claim of depreciation on machinery

Depreciation - ownership - sham transaction - Claim for depreciation on machinery held to be unsustainable because the transaction of purchase was a sham and the assessee never became owner. - HELD THAT: - All authorities below recorded as a factual finding that there was no purchase of the machinery from the APSEB and that the transaction was a sham. On that factual basis the courts concluded that the appellant never acquired ownership of the machinery. Because depreciation can only be claimed by the owner of an asset, the claim for depreciation was rightly disallowed. These are pure findings of fact and no question of law arose for this Court to entertain.

Appeal dismissed.

Final Conclusion: The Supreme Court dismissed the appeal, upholding factual findings that the alleged purchase was a sham, the appellant did not become owner of the machinery, and therefore could not claim depreciation; no question of law arose.

Remand for fresh consideration - no expression of opinion on merits - application of binding precedent - assessee permitted to rely on precedent

Remand for fresh consideration - application of binding precedent - assessee permitted to rely on precedent - Matter remitted to the Commissioner of Income-tax (Appeals) for fresh consideration in view of the decision in Morinda Co-operative Sugar Mills Ltd. - HELD THAT: - The Supreme Court granted leave and, relying on its decision in Morinda Co-operative Sugar Mills Ltd., remanded the matter to the file of the Commissioner of Income-tax (Appeals) for reconsideration. The Court expressly refrained from expressing any opinion on the merits of the case. The assessee was specifically permitted to advance the contention before the Commissioner that the second issue is covered in its favour by the Court's earlier decision in CIT v. Ponni Sugars and Chemicals Ltd., thereby allowing reliance on that precedent during re-adjudication.

Remitted to the Commissioner of Income-tax (Appeals) for fresh consideration; no opinion expressed on merits; assessee may rely on Ponni Sugars precedent for the second issue.

Final Conclusion: Leave granted; appeal disposed of by remitting the matter to the Commissioner of Income-tax (Appeals) for fresh consideration in light of Morinda, with liberty to the assessee to invoke the decision in Ponni Sugars; no opinion on merits expressed.

Entertainment of appeal - tax effect as criterion for admissibility of appeal - dismissal of appeal on preliminary threshold ground

Entertainment of appeal - tax effect as criterion for admissibility of appeal - Whether the appeal should be entertained where the tax effect is Rs. 4,22,830. - HELD THAT: - The Court recorded that the tax effect in the present case is Rs. 4,22,830 and, on that ground alone, declined to entertain the appeal. No adjudication on the merits was undertaken; the matter was disposed of by refusing admission of the appeal on the basis of the quantified tax effect being the determinative threshold ground for non-entertainment.

The appeal was refused entertainment and dismissed without deciding the merits.

Final Conclusion: The Supreme Court dismissed the appeal solely on the preliminary ground that the tax effect was Rs. 4,22,830 and therefore declined to entertain the appeal, leaving the merits undecided.

Winding up of corporate appellant - dismissal of appeal for want of a party to prosecute - non-prosecution due to company liquidation

Winding up of corporate appellant - dismissal of appeal for want of a party to prosecute - Appeals dismissed because the appellant company had been wound up and there was no body to pursue the appeals. - HELD THAT: - The Court recorded counsel's statement that the appellant-company has been wound up and, on that ground alone, concluded that there is no entity available to prosecute the appeals. No other legal question was considered or decided; the dismissal was ordered solely for want of a party to pursue the proceedings.

Appeals dismissed as the appellant-company has been wound up and no body remains to prosecute them.

Final Conclusion: The appeals are dismissed on the sole ground that the appellant-company has been wound up and there is no body to pursue the appeals.

Validity of reassessment under Section 147/148 - Requirement of "reason to believe" for reopening - Finality of intimation under Section 143(1) vis-a-vis reopening - Obligation to dispose objections by a speaking order (G.K.N. Driveshafts)

Obligation to dispose objections by a speaking order (G.K.N. Driveshafts) - Validity of reassessment under Section 147/148 - Failure of the Assessing Officer to dispose of the assessee's objections to the reopening by a speaking order rendered the reopening and consequent assessment legally unsustainable. - HELD THAT: - The Court found that the Assessing Officer did not comply with the mandatory procedure laid down by the Supreme Court in G.K.N. Driveshafts requiring disposal of objections to a reopening with a speaking order. The Commissioner (Appeals) had observed that objections had been filed by the assessee but the AO recorded that no objections were raised; the High Court agreed that this amounted to failure to dispose the objections as required. The Court held that such failure entitled quashing of the reopening and the consequent assessment, and that the Commissioner (Appeals)'s conclusion that the defect was merely a curable technicality was an error of law. [Paras 5, 6, 9]

Reopening and consequent assessment quashed for failure to dispose of objections by a speaking order.

Requirement of "reason to believe" for reopening - Finality of intimation under Section 143(1) vis-a -vis reopening - Validity of reassessment under Section 147/148 - Reassessment under Section 147/148 cannot be sustained where the Assessing Officer had no new tangible material to form 'reason to believe' that income had escaped assessment; intimation under Section 143(1) is not immune from reopening but the statutory standard of 'reason to believe' must be met. - HELD THAT: - The Court examined precedents including CIT v. Orient Craft Ltd. and held that Rajesh Jhaveri does not permit the AO to disturb an intimation under Section 143(1) without satisfying the statutory requirement of 'reason to believe'. In the present case the AO's reasons for belief relied only on the auditor's report which was already enclosed with the return; there was thus no new material to justify reopening. The Court followed the reasoning in Orient Craft that the expression 'reason to believe' must be applied with the same rigour irrespective of whether the earlier outcome was an intimation under Section 143(1) or an assessment under Section 143(3), and that reopening cannot be used to circumvent the safeguards of Section 147. [Paras 12, 13, 15, 16, 17]

Reopening held unsustainable on merits for lack of fresh/tangible material satisfying 'reason to believe'.

Validity of reassessment under Section 147/148 - No substantial question of law arises from the impugned ITAT order; appeal dismissed. - HELD THAT: - The Court noted that the Commissioner (Appeals) had deleted the disallowance on merits and that the Revenue did not challenge that deletion before the ITAT, rendering the Revenue's challenge to the ITAT's conclusion of illegality largely academic. Having considered the procedural defect in disposal of objections and the absence of fresh material to justify reopening, the Court found no substantial question of law warranting interference with the ITAT order. [Paras 8, 9, 22]

Appeal dismissed; no substantial question of law made out.

Final Conclusion: The reopening under Section 147/148 was unsustainable: the AO failed to dispose of the assessee's objections by a speaking order as required by G.K.N. Driveshafts, and, on merits, there was no fresh/tangible material to form the requisite 'reason to believe' where the auditor's report was already part of the return; the appeal is dismissed and no substantial question of law arises.

Profits and gains derived from an industrial undertaking - deduction under section 80-IC - incentives and rebates as ancillary profits - source/origin test for 'derived from' - adjustment of subsidies against corresponding expenses - remand for fresh adjudication on bank interest

Adjustment of subsidies against corresponding expenses - deduction under section 80-IC - Disposal of questions (i) to (iii) concerning freight/transport subsidy and section 80-IC - HELD THAT: - The first three questions were treated as not arising because the assessee did not press a claim that the freight (transport) subsidy received from the Himachal Pradesh Government be included as profits derived from the industrial undertaking and allowed as a deduction under Section 80-IC. The Tribunal's passing observation that transport subsidy should be adjusted against those expenses for which it is given led to the questions, but the court noted that transport subsidy is not admissible under Section 80-IC and there was no substantive grievance on the adjustment principle. [Paras 3]

Questions (i) to (iii) disposed of as not arising; transport subsidy is not admissible under Section 80-IC, and the mere passing observation in the Tribunal's order does not convert the subsidy into a deduction-eligible item.

Profits and gains derived from an industrial undertaking - source/origin test for 'derived from' - incentives and rebates as ancillary profits - deduction under section 80-IC - Whether sales tax deferment rebate (retention of 35% VAT) constitutes 'profits and gains derived from' the industrial undertaking and is eligible for deduction under Section 80-IC - HELD THAT: - Section 80-IC permits deduction only in respect of "profits and gains derived by an undertaking ... from any business"; the words 'derived from' require the profit to have its source in the business itself. A sales tax deferment rebate arises from a government scheme/policy and its source is the scheme, not the industrial undertaking. Following the Supreme Court's reasoning in Liberty India (and Sterling Food) that incentives such as DEPB/duty drawback flow from statutory schemes and are not first-degree sources constituting profits 'derived from' the business, the sales tax rebate is an incentive/ancillary profit and cannot be treated as profit derived from the business for Section 80-IC. Earlier contrary High Court decisions (Delhi) were held to be inconsistent with the Supreme Court and implicitly overruled; the Himachal Pradesh High Court's decision in Kiran Enterprises aligning with this ratio was approved. [Paras 9, 10, 11, 12, 15]

Answered in favour of the Revenue: the sales tax deferment rebate is not a profit 'derived from' the industrial undertaking and is not eligible for deduction under Section 80-IC.

Remand for fresh adjudication on bank interest - Direction to remit the issue of bank interest to the Assessing Officer for fresh adjudication - HELD THAT: - The Assessing Officer treated interest on FDRs (margin money) as income from other sources and disallowed deduction under Section 80-IC. The Tribunal remanded the matter to the AO for fresh adjudication in accordance with law, taking into account relevant judicial authority. Since the Tribunal left the issue open and directed reconsideration, the High Court observed that no substantive question of law arises for interference at this stage. [Paras 16]

No interference with the remand: the matter is left to the Assessing Officer for fresh adjudication as directed by the Tribunal.

Final Conclusion: The High Court: (a) disposed of questions (i)-(iii) as not arising and confirmed that transport subsidy is not admissible under Section 80-IC; (b) held that the sales tax deferment rebate is an incentive flowing from a government scheme and not "profits and gains derived from" the industrial undertaking, and therefore not eligible for deduction under Section 80-IC; and (c) declined to interfere with the Tribunal's remand on the bank interest issue, leaving it for fresh consideration by the Assessing Officer.

Leviability of interest under Section 201(1A) of the Income Tax Act - assessee in default for non-payment of tax deducted at source - assessment of the payee as determinative of revenue loss and cessation of interest liability - no loss to revenue where payee assessed as not liable to tax

Leviability of interest under Section 201(1A) of the Income Tax Act - assessee in default for non-payment of tax deducted at source - Whether interest under Section 201(1A) is payable by the assessee from the date of deduction of TDS until actual payment notwithstanding subsequent assessment of the payee as not liable to tax - HELD THAT: - The Court accepted that Section 201(1A) prima facie imposes interest from the date tax was deductible until the date of actual payment. However, where the payee has been assessed and held not liable to tax (confirmed by the Assessing Officer), there is no resultant loss to the revenue. In such circumstances continuation of interest liability beyond the date on which the payee's assessment establishes absence of tax liability would permit the revenue to obtain an undue benefit despite no tax being ultimately payable by the payee. The Court relied on the comparable reasoning in Commissioner of Income Tax v. Rishikesh Apartments Co-op. Housing Society Ltd. and concluded that when the payee's assessment determines that no tax is payable, interest under Section 201(1A) ceases to run as there is no loss to the revenue to be remedied by charging further interest. [Paras 12, 15, 16, 19]

Interest under Section 201(1A) shall not be leviable against the assessee beyond the date on which the payee's assessment establishes that the payee is not liable to tax; accordingly, the Tribunal and CIT(A) were right in limiting interest to the date of assessment of the payee companies.

Final Conclusion: Substantial question answered against the revenue and in favour of the assessee: where payee companies were assessed as not liable to tax for the relevant years, the assessee's liability to pay interest under Section 201(1A) does not continue beyond the date of those payee assessments.

Revenue expenditure - current repairs - capital expenditure - allowability of expenditure - replacement/renewal of worn-out fittings - expenditure incurred to enhance business profit

Revenue expenditure - current repairs - capital expenditure - allowability of expenditure - replacement/renewal of worn-out fittings - expenditure incurred to enhance business profit - Whether the expenditure of Rs. 28,40,587 incurred on laying marble flooring is allowable as revenue expenditure/current repairs and not capital expenditure. - HELD THAT: - The assessee explained that marble imported at the stated cost was used to replace flooring of toilets at the lobby, banquet hall and restaurants because those heavily used areas required early replacement. The Assessing Officer characterised the cost of marble as capital expenditure and added the amount, while allowing labour and cutting costs as revenue expenditure. The Appellate authorities - the Commissioner (Appeals) and the ITAT - treated the cost of the marble as revenue expenditure and deleted the addition. This Court, applying the principle that expenditure incurred to improve or maintain business premises (including replacement where necessitated by heavy use) may constitute revenue expenditure and having regard to the earlier decision treating similar hotel alterations as revenue expenditure, held that the ITAT rightly affirmed the CIT(A)'s conclusion that the cost of marble was allowable as revenue expenditure/current repairs rather than capital expenditure. [Paras 4, 6]

Cost of marble used to replace flooring in heavily used hotel areas is revenue expenditure/current repairs and is allowable; the ITAT's affirmance of the deletion was correct.

Final Conclusion: The question for AY 1996-97 is answered in favour of the assessee; the addition disallowing the cost of marble is set aside and the appeal is disposed of.

Rectification under Section 154 - deduction under Section 35D(2)(c)(iv) - private placement versus public issue - scope of Section 154(1A) as a bar to rectification - functus officio and limits of review jurisdiction - review petition for error apparent on face of record

Rectification under Section 154 - deduction under Section 35D(2)(c)(iv) - private placement versus public issue - scope of Section 154(1A) as a bar to rectification - Whether the Assessing Officer could rectify the assessment under Section 154 in relation to the claim of deduction under Section 35D for expenses incurred in connection with private placement of shares. - HELD THAT: - The Court found that the very contention that Section 35D deduction was not allowable because the expenditure related to private placement (and not a public issue) had been expressly raised by the revenue in the appeal and recorded in the Court's order. The matter was held to be one of opinion dependent on the exact nature of the transaction and was debatable; consequently it fell outside the limited scope of rectification under Section 154. The review attempt to treat the issue as open to rectification also conflicted with the facts set out in the revenue's memo of appeal, and Section 154(1A) operated as a bar where the issue had been the subject of appellate/revision consideration. The appropriate remedy for disagreement with the Court's view was an appeal, not review or a post-order rectification by the Assessing Officer. [Paras 4, 5, 6, 7]

Rectification under Section 154 was not permissible in the facts of these cases in respect of the claimed Section 35D deduction relating to private placement; the issue was debatable and had been the subject of appellate/revision proceedings.

Functus officio and limits of review jurisdiction - review petition for error apparent on face of record - Whether the review petitions filed by the revenue should be entertained or dismissed and whether costs should be imposed. - HELD THAT: - The Court held that review is an exceptional remedy confined to situations involving new and important evidence or a glaring error apparent on the face of the record. The review grounds asserted were contrary to the admissions in the revenue's own memo of appeal and did not show any such error or new material. The Court also criticised re-arguing of the appeal under the guise of review and emphasised the need to conserve judicial time. On that basis both review petitions were found to be misconceived and liable to be dismissed. [Paras 7, 8, 9]

Both review petitions dismissed; costs imposed on the Commissioner of Income Tax to ensure care in filing review petitions.

Final Conclusion: Both review petitions filed by the revenue were dismissed as misconceived; the Assessing Officer could not invoke Section 154 to reopen the question of Section 35D deduction in these facts, and costs were imposed on the Commissioner of Income Tax (payable to the Legal Services Authority, Mumbai) to deter casual filing of review petitions.

Treatment of currency seized during search - retention under section 132(5) versus appropriation towards tax - meaning of "existing liability" for retention and application of seized assets - application of retained assets under section 132B - effect of seizure on computation of interest under sections 234A, 234B and 234C

Treatment of currency seized during search - retention under section 132(5) versus appropriation towards tax - meaning of "existing liability" for retention and application of seized assets - application of retained assets under section 132B - effect of seizure on computation of interest under sections 234A, 234B and 234C - Whether cash seized and retained under Section 132(5) of the Income-tax Act 1961 amounts to payment of tax (or discharges advance tax liability) and therefore must be treated as tax paid for computing interest under Sections 234A, 234B and 234C, or whether such retained cash is only held in custody and can be applied as tax only in accordance with Section 132B upon filing of return or completion of assessment. - HELD THAT: - The Court held that Section 132(5) empowers the Income-tax Officer to retain assets in custody and to estimate undisclosed income, compute tax, interest and penalty and to specify amounts required to satisfy any "existing liability", but does not itself appropriate seized assets as payment of tax. The phrase "retained in his custody" indicates custody, not appropriation. "Existing liability" in Section 132(5)(iii) must be a liability that is determined or crystallized and therefore capable of specification in the order; it does not include an undetermined advance tax liability for the relevant year prior to assessment or return. Section 132B prescribes the modes in which retained assets may be applied - including application towards existing liabilities - but no order under Section 132B had been passed in the present case. In absence of a return by the assessee surrendering the seized amount as payment of tax or a regular assessment determining the liability, the seized cash could not be appropriated towards tax and therefore could not be treated as payment of advance tax for the purpose of computing interest under Sections 234A, 234B and 234C. Thus the CIT(A)'s and Tribunal's conclusions that the liability stood discharged from the date of the Section 132(5) order were not sustainable. [Paras 9, 11, 12, 13]

Seized cash retained under Section 132(5) is held in custody and does not amount to payment of tax; "existing liability" means a crystallized/determined liability; retained assets can be applied under Section 132B or upon filing of return/regular assessment, and therefore the cash seized cannot be treated as discharge of advance tax for interest computation under Sections 234A, 234B and 234C.

Final Conclusion: The question framed was answered in the negative; the appeals are allowed in favour of the Revenue, holding that cash retained under Section 132(5) does not amount to payment of tax and cannot be treated as discharge of advance tax for computation of interest under Sections 234A, 234B and 234C absent application under Section 132B, filing of return surrendering the amount, or completion of a regular assessment.

Production of arrested person before the nearest Judicial Magistrate within 24 hours - judicial remand under Section 167 Cr.P.C. - duty of Judicial/Metropolitan Magistrates to receive remand papers and accused - Executive Magistrate to receive remand where Judicial Magistrate not available - magistrate cannot refuse remand on ground of future trial jurisdiction - transmission of remand records and subsequent production before trial court

Production of arrested person before the nearest Judicial Magistrate within 24 hours - judicial remand under Section 167 Cr.P.C. - duty of Judicial/Metropolitan Magistrates to receive remand papers and accused - magistrate cannot refuse remand on ground of future trial jurisdiction - Whether the Additional Chief Metropolitan Magistrate (E.O.I & E.O.II), Egmore was bound to receive the remand papers and remand the person arrested at Customs House notwithstanding that the trial court having territorial jurisdiction would be the Judicial Magistrate, Alandur. - HELD THAT: - The Court relied on its earlier decision in Senior Intelligence Officer, Directorate of Revenue v. M.G. Ranganathan (1993 L.W. (Crl.) Pg.261) holding that the officer effecting arrest must produce the accused before the Judicial Magistrate nearest to the place of arrest within 24 hours and that Judicial/Metropolitan Magistrates are obliged to receive remand papers and the accused for the purpose of Section 167 Cr.P.C. The obligation to receive and consider remand is a safeguard against illegal detention and custodial excesses and is not negated by the fact that the Magistrate who will ultimately try the case is different. The High Court also noted the standing office order of the Chief Metropolitan Magistrate directing that persons arrested by specified agencies be produced before the Additional Chief Metropolitan Magistrate (E.O.I & E.O.II). Applying these authorities and office practice, the learned Additional Chief Metropolitan Magistrate erred in refusing to accept the remand papers and remand the accused on the ground that the Judicial Magistrate, Alandur would have trial jurisdiction. The Court observed that, if the remanding Magistrate considers the trial will be before another court, he may transmit records and the accused may be produced before the trial Magistrate on expiry of the remand period, but that does not excuse the duty to receive and consider remand at the point of arrest/production. [Paras 3, 4, 5]

The refusal to receive remand papers and to remand the accused was incorrect; the Additional Chief Metropolitan Magistrate ought to have received the remand papers and remanded the accused in accordance with the law and practice stated.

Final Conclusion: Writ petition allowed: the Magistrate's refusal to remand the accused arrested at Customs House was set aside and the learned Magistrate directed to follow the law and office practice by receiving remand papers and remanding the accused; records may be transmitted and the accused produced before the trial Magistrate as appropriate.

Full and true disclosure - application for settlement under Section 127-B - failure to cooperate with Settlement Commission - power to remit to adjudicating authority under Section 127-I(1) - adjudication as if no application for settlement filed - no violation of principles of natural justice

Full and true disclosure - application for settlement under Section 127-B - failure to cooperate with Settlement Commission - The Settlement Commission correctly held that the applicants failed to make a full and true disclosure and did not cooperate in settlement proceedings, justifying dismissal of the settlement application. - HELD THAT: - The Court accepted the Commission's finding that an application under Section 127-B must contain a full, true and candid disclosure of undisclosed duty liability and related particulars. On the material placed before the Commission the petitioners had admitted only a small fraction of the department's documentary demand, delayed or sought adjournments without timely requisitioning documents retrieved under mahazar proceedings, and failed to disclose registration of a corruption case during the pendency of proceedings. The Commission afforded opportunities and issued notices; the record showed lack of cooperation and evasive conduct by the applicants, supporting the factual conclusion that they did not come clean for a genuine settlement. The Court held that these factual findings were supported by the record and not susceptible to interference in writ jurisdiction. [Paras 5, 9, 10, 11, 12]

The finding that the petitioners failed to make full and true disclosure and did not cooperate was upheld and the settlement application was rightly dismissed.

Power to remit to adjudicating authority under Section 127-I(1) - adjudication as if no application for settlement filed - The Settlement Commission validly exercised its power under Section 127-I(1) to send the matter back to the Commissioner of Customs for adjudication as if no settlement application had been filed. - HELD THAT: - Having found non-cooperation and failure of true disclosure, the Commission acted within the statutory power conferred by Section 127-I(1) to remit the case to the proper officer for disposal. The Commission directed that the Commissioner proceed with adjudication as if no application for settlement had been made. The High Court found this exercise of power to be lawful and appropriate on the facts and circumstances, the remit being a statutory consequence of the Commission's factual determination of non-cooperation. [Paras 5, 11, 12]

The remittance to the Commissioner for fresh adjudication (treating the matter as if no settlement application had been filed) was upheld as lawful.

No violation of principles of natural justice - There was no breach of principles of natural justice in the Settlement Commission's order rejecting the application and remitting the case. - HELD THAT: - The Court noted that the Commission repeatedly afforded opportunities for hearing and for the petitioners to respond, and recorded that the petitioners did not avail themselves of those opportunities or failed to file substantive replies after being furnished the department's report. Given the procedural steps and notices reflected in the record, the Court concluded that there was no denial of a fair hearing or other procedural infirmity warranting interference. [Paras 6, 10, 11]

The Commission's process did not infringe principles of natural justice and required no interference.

Final Conclusion: The High Court dismissed the writ petitions, upholding the Settlement Commission's conclusion that the applicants failed to make full and true disclosure and did not cooperate, and affirmed the Commission's lawful remittal of the matter to the Commissioner of Customs for adjudication as if no settlement application had been filed.

Requirement to dispatch CAFs by registered post or speed post under ICDR Regulations - liability of issuer for regulatory breaches notwithstanding default by Registrar to Issue - responsibility for false or misleading advertisement and application of the PFUTP framework - power of SEBI to restrain persons from accessing securities market under Section 11(4) of the SEBI Act - promoter liability where conduct benefits consolidation of shareholding and avoids open offer obligations - natural justice - scope of right to cross-examine in regulatory adjudication - standard of proof in civil/regulatory proceedings before SEBI

Requirement to dispatch CAFs by registered post or speed post under ICDR Regulations - liability of issuer for regulatory breaches notwithstanding default by Registrar to Issue - Whether appellant No.1, as issuer, could be held liable for failure to dispatch CAFs as required by ICDR Regulations despite the Registrar to Issue having undertaken the dispatch - HELD THAT: - The Tribunal upheld SEBI's finding that regulation 54(1) of the ICDR Regulations mandated dispatch of the abridged letter of offer with CAFs by registered post or speed post at least three days before opening. Admitted non-dispatch by registered post/speed post could not be excused by attributing the breach to the RTI (Knack) since the issuer bore primary responsibility for compliance. SEBI's further probe into the genuineness of RTI's representations (certificate of posting) was justified; subsequent findings of manipulated records against Knack supported restraint of the issuer. Consequently, the restraint order against appellant No.1 for two years was held to be within SEBI's powers in the facts of the case. [Paras 20, 21, 23]

Appellant No.1 held liable for non-dispatch of CAFs and the restraint from accessing the securities market upheld.

Responsibility for false or misleading advertisement and application of the PFUTP framework - liability of issuer for approval of advertisement drafts - Whether appellant No.1 could be held responsible for the false statement in the rights-issue advertisement and thereby for breach under the PFUTP/ICDR framework despite Vivro having published the advertisement - HELD THAT: - Although the advertisement was published by the merchant banker (Vivro), the Tribunal accepted SEBI's conclusion that appellant No.1 had approved the draft and therefore shared responsibility for the incorrect statement that CAFs had been dispatched by registered post/speed post. Approval of the draft in reliance on representations from the RTI rendered appellant No.1 accountable for the misleading advertisement. SEBI's separate action against Vivro did not absolve the issuer of responsibility where the advertisement was issued in the issuer's name and approval was given by it. [Paras 22]

Appellant No.1 accountable for the false advertisement; this finding supported the restraint imposed.

Promoter liability where conduct benefits consolidation of shareholding and avoids open offer obligations - liability of promoter for connivance with service providers - Whether appellant No.2 (promoter) could be restrained from the securities market on findings of proximate benefit, connections with the RTI and conduct suggesting consolidation of shareholding without open offer - HELD THAT: - The Tribunal sustained SEBI's inference that appellant No.2 benefited from the non-dispatch of CAFs because, as promoter, he stood to subscribe to unsubscribed shares and consolidate shareholding without triggering open offer obligations. Findings recorded in the impugned order concerning prior employment links between Knack's managing director and a group company of appellant No.2, ownership of premises used by Knack, and the issuance of insufficient-cleared cheques by appellant No.2 supported SEBI's adverse inference of orchestration or facilitation. On these factual findings, restraint against appellant No.2 was not interfered with. [Paras 25, 26]

Restraint upheld against appellant No.2 based on proximity to RTI and benefit from the challenged conduct.

Natural justice - scope of right to cross-examine in regulatory adjudication - standard of proof in civil/regulatory proceedings before SEBI - Whether denial of opportunity to cross-examine Vivro, Knack or postal authorities vitiated the SEBI proceedings - HELD THAT: - The Tribunal found no recorded written request by the appellants for cross-examination and no documentary support for the appellants' claim that such an opportunity had been promised. Further, once appellants admitted that CAFs were not dispatched as required and that the advertisement contained false statements, cross-examination of third parties was held to be immaterial to the determinative facts. Given that the RTI had accepted SEBI's findings and separate actions were taken against Vivro and Knack, the Tribunal concluded that principles of natural justice were not breached in the manner alleged. [Paras 24]

No violation of natural justice in the absence of a substantiated request for cross-examination; challenge on this ground rejected.

Power of SEBI to restrain persons from accessing securities market under Section 11(4) of the SEBI Act - liability of issuer for regulatory breaches notwithstanding default by Registrar to Issue - Whether SEBI had jurisdiction under Section 11(4) (and related provisions) of the SEBI Act to pass the restraint order imposed on the appellants - HELD THAT: - The Tribunal held that SEBI is empowered under Section 11(4) of the SEBI Act to restrain persons found to have violated the SEBI Act and regulations from entering the securities market for such period as it deems fit. The insertion of the provision with retrospective effect (from 29/10/2002) was noted; the Tribunal declined to embark on a broader inquiry into the punitive nature of the order and confined itself to the facts showing regulatory violations (non-dispatch of CAFs and issuance of false advertisement) which fell within SEBI's power to impose restraint. Consequently, the restraint order was within the statutory four corners. [Paras 20, 27]

SEBI had jurisdiction to pass the restraint order under Section 11(4) of the SEBI Act; the restraint was within statutory power.

Final Conclusion: The Tribunal found no merit in the appeal and dismissed it; SEBI's restraint order preventing the appellants from accessing the securities market for the period imposed was upheld.

Scheme of Arrangement under Sections 391-394 of the Companies Act, 1956 - Dispensation of convening meetings of shareholders and creditors - Consent of shareholders and creditors in lieu of meetings - Share exchange ratio on demerger

Dispensation of convening meetings of equity shareholders - Consent of all shareholders - Scheme of Arrangement - Requirement of convening meetings of the equity shareholders of the demerged and resulting companies dispensed with - HELD THAT: - The demerged company has five equity shareholders and the resulting company has two equity shareholders. The application placed on record written consents/no objections from all equity shareholders of both companies. The Court examined those consents and found them in order. Having regard to the unanimous board approvals and the filed consents of the equity shareholders, the Court dispensed with the requirement to convene meetings of the equity shareholders to consider and approve the proposed Scheme of Arrangement. [Paras 12, 13]

Requirement to convene meetings of the equity shareholders of both the demerged and the resulting companies is dispensed with.

Dispensation of convening meetings of secured and unsecured creditors - Consent of creditors in lieu of meetings - Scheme of Arrangement - Requirement of convening meetings of the secured and unsecured creditors of the demerged company and the unsecured creditor of the resulting company dispensed with - HELD THAT: - The demerged company had one secured creditor and twenty-four unsecured creditors; the resulting company had one unsecured creditor. The only secured creditor and a substantial majority of the unsecured creditors of the demerged company (representing 99.76% of the unsecured debt) provided written consents/no objections. The sole unsecured creditor of the resulting company also gave written consent/no objection. The Court examined these consents and found them in order. In view of the recorded consents and absence of any pending proceedings under Sections 235-251 (or corresponding provisions under the Companies Act, 2013), the Court dispensed with convening meetings of the secured and unsecured creditors to consider the Scheme. [Paras 10, 12, 13]

Requirement to convene meetings of the secured and unsecured creditors of the demerged company and the unsecured creditor of the resulting company is dispensed with.

Final Conclusion: The joint application is allowed: having examined the filed Scheme, board approvals and the written consents/no objections of the shareholders and creditors, the Court dispensed with convening the specified meetings and permitted the proposed Scheme of Arrangement to proceed on the recorded terms.

Classification of deputation of employees to sister concern - taxability of deputation of employees - Manpower Recruitment and Supply Agency Service - Management Consultancy Service - requirement of reclassification by issuing show cause notice - binding precedents from Tribunal and High Court

Classification of deputation of employees to sister concern - taxability of deputation of employees - Management Consultancy Service - Deputation of the assessee's own employees to its sister concern and recovery of cost therefor is not taxable as Management Consultancy Service or under any other service category considered by the lower authorities. - HELD THAT: - The Tribunal examined whether amounts recovered from the sister concern for deputation of employees attracted service tax under any classified service. The adjudicating authority had initially accepted that the service was not Business Support Service but treated it as Management Consultancy Service; the first appellate authority disagreed. This Tribunal relied on its earlier decisions in Daurala Sugar Works and Daurala Organics holding that deputation of employees to a sister concern does not constitute Management Consultancy Service, and applied that reasoning to the facts here. In absence of any contrary binding decision brought before the Tribunal, the Tribunal held that the recovery for deputation does not fall within the taxable ambit of the service categories asserted by Revenue, and therefore the service tax retained by Revenue is not sustainable. [Paras 6, 8, 9]

The service involved is not taxable as Management Consultancy Service or under any other service category adjudicated; the refund claim must be allowed on this ground.

Manpower Recruitment and Supply Agency Service - requirement of reclassification by issuing show cause notice - The first appellate authority erred in holding the service to be Manpower Recruitment and Supply Agency Service without issuing a show cause notice for reclassification and without that being the case made in the adjudicating proceedings. - HELD THAT: - The Tribunal noted that classification as Manpower Recruitment and Supply Agency Service was neither canvassed in the show cause notice nor decided by the adjudicating authority. Reclassification by the first appellate authority in a manner that imposes a new classification requires affording the assessee an opportunity of being heard by issuing a show cause notice to that effect. No such notice was issued; accordingly the reclassification by the first appellate authority was procedurally improper. Separately, the Tribunal observed that on identical facts the Tribunal in Arvind Mills held deputation to a sister concern and recovery of costs did not amount to Manpower Recruitment and Supply Agency Service, a view upheld by the Gujarat High Court, and applied that binding precedent. [Paras 7]

Impugned reclassification to Manpower Recruitment and Supply Agency Service is unsustainable for procedural want of a show cause notice and on precedential grounds; the reclassification is set aside.

Final Conclusion: Impugned order set aside; appeal allowed and the refund claim of the assessee granted, with consequential relief.

Retrospective exemption from service tax for transmission of electricity - prospective exemption for transmission of electricity - eligibility for exemption in respect of distribution of electricity under Notification dated 22.6.2010 - waiver of pre-deposit - penalty not leviable where retrospective exemption covers major part of demand

Retrospective exemption from service tax for transmission of electricity - prospective exemption for transmission of electricity - waiver of pre-deposit - penalty not leviable where retrospective exemption covers major part of demand - Whether the services rendered by the appellant fall within the exemptions for transmission of electricity and the consequence for imposition of penalty and pre-deposit. - HELD THAT: - The Tribunal noted that Notification No.45/2010-ST dated 20.7.2010 exempts transmission of electricity retrospectively (till 26.2.2010) and that Notification No.11/2010-ST dated 27.2.2010 exempts transmission of electricity prospectively. The appellant asserted that the challenged demands relate to erection/installation and works contract services which in substance were for transmission of electricity for the period October 2005 to September 2010. The Revenue did not dispute the effect of the stated notifications for transmission up to the specified dates. Given that a major part of the demand is covered by the retrospective exemption, the Tribunal held that no penalty should be imposed if on adjudication the exemption is found to apply; accordingly the requirement of pre-deposit was waived and the appeal taken up for disposal. [Paras 5]

Appellant's claim that services relate to transmission of electricity accepted for present purposes; pre-deposit waived and penalty held not leviable if retrospective exemption covers the period in issue.

Eligibility for exemption in respect of distribution of electricity under Notification dated 22.6.2010 - Whether the appellant is eligible for the benefit of Notification No.32/2010-ST dated 22.6.2010 in respect of services rendered from 22.6.2010 to September 2010 (i.e., whether the services for that period relate to distribution of electricity). - HELD THAT: - The Tribunal observed that Notification No.45/2010-ST covered distribution of electricity till 21.6.2010 and that Notification No.32/2010-ST dated 22.6.2010 governs exemption for distribution thereafter. The Revenue contended that the adjudicating authority must verify whether the appellant rendered services that fall within distribution of electricity for the period after 22.6.2010. Both parties agreed that the limited question of eligibility to Notification No.32/2010-ST for the period 22.6.2010 to September 2010 requires scrutiny by the adjudicating authority. Consequently the Tribunal remanded this specific question to the Commissioner for decision on merits, directing that a reasonable opportunity of hearing be afforded to the appellant and that the appellant may file submissions before the adjudicating authority. [Paras 3, 5]

Limited remand to the Commissioner to verify and decide on the appellant's eligibility for exemption under Notification No.32/2010-ST for the period 22.6.2010 to September, 2010.

Final Conclusion: Pre-deposit requirement waived; appeal allowed by way of remand - Tribunal accepted that transmission exemptions (retrospective and prospective) cover the major part of the demand and directed that no penalty be imposed if exemption is found applicable; the limited question of eligibility to Notification No.32/2010-ST for 22.6.2010 to September 2010 is remanded to the Commissioner for fresh decision after affording the appellant a hearing.

Service tax liability on commission paid to agents abroad - Applicability of reverse charge mechanism under Section 66A - Non-retroactivity of reverse charge prior to statutory introduction - Interest liability under Section 75 - Penalty waiver under Section 80

Non-retroactivity of reverse charge prior to statutory introduction - Service tax liability on commission paid to agents abroad - Service tax demand under reverse charge for the period up to 18.04.2006 - HELD THAT: - The Tribunal held that demands for service tax under the reverse charge mechanism for the period from 01.04.2003 up to 18.04.2006 were correctly dropped by the adjudicating authority because the statutory provision charging services under reverse charge (Section 66A) was not in force during that period. The decision follows the Bombay High Court and was upheld by the Apex Court, establishing that the reverse charge levy could not be applied before it was introduced into the statute. [Paras 5]

Demands for the period up to 18.04.2006 are correctly dropped.

Applicability of reverse charge mechanism under Section 66A - Interest liability under Section 75 - Service tax liability on commission paid to agents abroad - Service tax and interest liability under reverse charge for the period 18.04.2006 to 31.03.2007 - HELD THAT: - The Tribunal held that with effect from 18.04.2006 the provisions introducing reverse charge (Section 66A) apply, and therefore the respondent is liable to discharge service tax on commissions paid to agents for procuring export orders for the period 18.04.2006 to 31.03.2007. Consequentially, interest under Section 75 also becomes payable on the confirmed tax demand. [Paras 6]

Service tax for 18.04.2006 to 31.03.2007 and interest thereon are upheld and must be discharged.

Penalty waiver under Section 80 - Interpretation issue contested up to the Apex Court - Imposability of penalties in respect of the confirmed tax amounts - HELD THAT: - Although the Tribunal upheld the tax and interest liability from 18.04.2006, it found that the question involved a matter of statutory interpretation which was being contested up to the Apex Court during the relevant period. In view of this bona fide dispute on interpretation, the Tribunal invoked Section 80 and held that penalties are not imposable on the amounts confirmed by it. [Paras 7]

Penalties in respect of the confirmed tax amounts are not imposable.

Final Conclusion: The appeal is partly allowed: demands under reverse charge are set aside up to 18.04.2006; service tax and interest under the reverse charge mechanism are upheld for 18.04.2006 to 31.03.2007; penalties are waived by invoking Section 80.

Eligibility for exemption under Notification No.32/2004-ST - abatement of 75% of freight charges - requirement of declaration of non availment of CENVAT credit by transport contractors - sufficiency of declarations specifying depots/units - reliance on prior Tribunal and High Court precedent

Eligibility for exemption under Notification No.32/2004-ST - requirement of declaration of non availment of CENVAT credit by transport contractors - sufficiency of declarations specifying depots/units - Whether the appellant, as recipient of GTA services, was entitled to the abatement/exemption under Notification No.32/2004 ST despite the contention that prescribed declarations were absent or not in respect of the units where CENVAT credit was availed. - HELD THAT: - The Tribunal examined the declaration forms produced by the appellant and found they expressly recorded that the transport contractors had not availed CENVAT credit or the benefit of Notification No.12/2003 ST, and that the declarations covered the period in dispute. The declarations identified the specific depots of the appellant (Silvasa at Navi Mumbai and the appellant's Lube Plant I and II), which the Tribunal treated as sufficient to tie the declarations to the relevant units. Having regard to these declarations, the Tribunal concluded that the lower authorities erred in denying the benefit of the 75% abatement under Notification No.32/2004 ST. The Tribunal also relied on an earlier decision in Commissioner of Service Tax v. Cadila Pharmaceuticals, which was affirmed by the High Court, as supporting authority for the appellant's entitlement. On these bases the impugned orders were found to be incorrect and were set aside. [Paras 3, 4]

Impugned orders set aside; appeals allowed and consequential relief granted.

Final Conclusion: The Tribunal allowed the appeals, holding that the declarations produced established the transport contractors' non availment of CENVAT/benefit of Notification No.12/2003 ST and were sufficient in relation to the specified depots/units; accordingly the denial of the 75% abatement under Notification No.32/2004 ST was set aside, with consequential relief.

Condonation of delay - Dismissal for default in pre-deposit - Waiver of pre-deposit - Remand for fresh adjudication - Principles of natural justice

Condonation of delay - Application for condonation of delay in filing the appeal - HELD THAT: - The applicant sought condonation of 34 days' delay, supported by an explanation that the consultant drafting the appeal was incapacitated due to an accident and by a medical certificate dated 31/01/2013. The Revenue raised no objection. Having considered the explanation and the medical evidence, the Tribunal found the reasons satisfactory and exercised its discretion to condone the delay. [Paras 1, 2, 3, 4]

Delay of 34 days in filing the appeal is condoned.

Dismissal for default in pre-deposit - Waiver of pre-deposit - Remand for fresh adjudication - Principles of natural justice - Whether the appeal should be heard on merits despite earlier dismissal for default in making pre-deposit and the consequent direction to the lower authority - HELD THAT: - The Tribunal noted that the Commissioner (Appeals) had dismissed the appeal for default in making the pre-deposit. The appellant thereafter deposited the entire amount of service tax (supported by e-receipts) and the Revenue did not dispute these facts. With consent of both sides, the Tribunal waived the requirement of pre-deposit at the Tribunal stage, proceeded to take up the appeal and concluded that the subsequent deposit of the tax by the appellant rendered it appropriate to remit the matter to the Commissioner (Appeal) for reconsideration on merits. The Tribunal directed that the Commissioner (Appeal) decide the issue afresh without insisting on any pre-deposit and observe the principles of natural justice, leaving all issues open for adjudication on merits. [Paras 5, 6, 7, 8, 9]

Requirement of pre-deposit waived for Tribunal purposes; matter remanded to the Commissioner (Appeal) to decide afresh on merits without insisting on any pre-deposit and observing principles of natural justice; appeal allowed by way of remand.

Final Conclusion: The Tribunal condoned the delay in filing the appeal and, with the parties' consent and in view of subsequent deposit of the disputed tax, waived the pre-deposit requirement for Tribunal purposes and remanded the matter to the Commissioner (Appeal) for fresh adjudication on merits, directing observance of natural justice; appeal allowed by way of remand.

Limitation for filing appeal - requirement of certified copy for filing appeal - computation of date of receipt of order - service by post and postal endorsement as evidence of receipt - remand to appellate authority for fresh decision

Requirement of certified copy for filing appeal - limitation for filing appeal - Whether the plea that a certified copy of the adjudication order is necessary for filing an appeal, and its effect on computation of limitation, should be adjudicated by the Commissioner(Appeals). - HELD THAT: - The appellant for the first time before this Tribunal contended that, in addition to the original/uncertified copy, a certified copy bearing court fee stamp was necessary to file an appeal and that receipt of such certified copy governed the limitation period. This contention was not raised before the Commissioner(Appeals), who therefore had no occasion to consider or record findings on it. In these circumstances the Tribunal concluded that the matter requires fresh consideration by the Commissioner(Appeals) so that he may examine the appellant's contentions about the need for a certified copy and determine the proper computation of limitation in light of that contention. The Tribunal did not decide the substantive question on the merits but directed that the Commissioner(Appeals) decide the issue afresh after giving the parties opportunity to be heard.

Commissioner(Appeals)'s order set aside and the issue remitted for fresh decision on whether a certified copy is required for filing the appeal and how limitation is to be computed.

Service by post and postal endorsement as evidence of receipt - computation of date of receipt of order - Whether the appeal was barred by delay having regard to the department's endorsement of service and the appellant's claim about actual receipt. - HELD THAT: - The Revenue relied on postal endorsement recording service of the adjudication order on a specified date and on subsequent issuance of a recovery letter; the appellant disputed actual receipt and relied on later correspondence and eventual receipt of a certified copy. Because the appellant's new plea about certified copy was not considered below and because the factual and legal interplay between (a) the department's claim of service by post and (b) the appellant's asserted date of receipt (including receipt of a certified copy) is determinative of the limitation question, the Tribunal refrained from resolving the limitation question itself. Instead, it remitted the matter to the Commissioner(Appeals) to examine the evidence of service, the date(s) claimed as receipt by the appellant, and to compute limitation accordingly.

Limitation issue not finally decided by the Tribunal; remitted to the Commissioner(Appeals) for fresh adjudication after examining postal service evidence and the appellant's contention on date of receipt.

Final Conclusion: The Tribunal allowed the appeal by setting aside the Commissioner(Appeals)'s order and remanding the matter to the Commissioner(Appeals) for fresh decision on the appellant's contention regarding the necessity of a certified copy and the correct computation of limitation, without deciding those questions on the merits.

Extension of time for compliance with court order - restoration of appeal upon deposit - adjudication on merits

Extension of time for compliance with court order - Petition dismissed but limited time granted to petitioner to comply with the High Court's orders and directions. - HELD THAT: - The Supreme Court dismissed the petition but granted the petitioner an additional period of three weeks from the date of the order to make the compliance directed by the High Court. The grant of time was conditional and procedural in character, allowing the petitioner a short window to fulfil the requirements previously imposed by the High Court.

Petition dismissed; petitioner granted three weeks' time to comply with the High Court's orders.

Restoration of appeal upon deposit - adjudication on merits - Direction to the Customs, Excise and Service Tax Appellate Tribunal to restore the appeal and decide it on merits upon compliance by the petitioner. - HELD THAT: - The Court directed that if the petitioner makes the deposit (i.e., complies within the granted time), the Customs, Excise and Service Tax Appellate Tribunal shall restore the appeal to its file and proceed to decide the matter on merits. This is a conditional direction linking procedural compliance (the deposit) to restoration and substantive adjudication by the Tribunal.

If the petitioner makes the deposit within three weeks, the Tribunal is directed to restore the appeal and decide it on merits.

Final Conclusion: The petition is dismissed; petitioner is granted three weeks to comply with the High Court's directions, and upon such compliance (deposit), the Customs, Excise and Service Tax Appellate Tribunal is directed to restore the appeal and decide it on merits.

Refund of excise duty - interest under Section 11B of the Central Excise Act, 1944 - remand to the Commissioner for fresh decision in accordance with law - Tribunal's failure to decide a specifically raised contention

Refund of excise duty - Whether the Tribunal's rejection of the appellant's claim for refund in cash warrants interference by this Court. - HELD THAT: - The Court considered the Tribunal's decision rejecting the claim for refund in cash and found no ground to interfere with that conclusion. The order records that insofar as the claim for refund in cash is concerned, the Tribunal's rejection is upheld and does not call for interference.

Tribunal's rejection of the claim for refund in cash is upheld; no interference by this Court.

Interest under Section 11B of the Central Excise Act, 1944 - Tribunal's failure to decide a specifically raised contention - remand to the Commissioner for fresh decision in accordance with law - Claim for interest under Section 11B on the refund amount noted by the Tribunal but not decided, and whether it requires fresh consideration. - HELD THAT: - The Court observed that the appellant had claimed interest under Section 11B on a refund sought on 1-6-2001 which was sanctioned in January 2003 and January 2004. Although the Tribunal recorded this contention (noted in para 2.3 of the impugned judgment), it did not adjudicate upon it, and the Commissioner likewise did not address the point. Given the absence of any finding by the Tribunal or the Commissioner on the claim for interest, the Court found the appellant's grievance to be justified and that the matter requires determination in accordance with law.

The matter relating to claim of interest under Section 11B is remanded to the Commissioner for decision in accordance with law.

Final Conclusion: The appeal is disposed of by upholding the Tribunal's rejection of the refund-in-cash claim and by remanding the claim for interest under Section 11B to the Commissioner for fresh decision in accordance with law.

Unjust enrichment - payment under protest - pass-on of tax burden to ultimate consumers - applicability of Section 11B of the Central Excise Act - refund with interest

Unjust enrichment - payment under protest - pass-on of tax burden to ultimate consumers - The question whether the claim for refund is barred by the doctrine of unjust enrichment. - HELD THAT: - The Tribunal had recorded as a finding of fact that the payment for which refund was sought was made under protest and that the assessee had not passed on the burden of the excise duty to the ultimate consumers. On those factual findings, the Court held that the plea of unjust enrichment does not arise and therefore cannot operate to defeat the refund claim. Because the absence of pass-on and the fact of payment under protest are determinative, the Court did not find it necessary to adjudicate further on the applicability of any provision dealing with refunds.

Unjust enrichment does not arise in view of the Tribunal's finding that the payment was made under protest and the burden was not passed on.

Applicability of Section 11B of the Central Excise Act - refund with interest - Relief to be granted to the respondent and the necessity of deciding Section 11B. - HELD THAT: - The Court observed that, given the determinative factual finding on payment under protest and non-pass-on, it was unnecessary to decide the question of whether Section 11B of the Central Excise Act applies to the case. On the basis of the Tribunal's finding and the resultant conclusion on unjust enrichment, the Court proceeded to dispose of the appeal by directing refund of the amount claimed along with interest within a specified time frame. [Paras 2]

Appeal dismissed; amount to be refunded to the respondent along with interest within three months.

Final Conclusion: The appeal is dismissed. In light of the Tribunal's finding that the payment was made under protest and that the duty was not passed on, unjust enrichment was held not to arise; it was unnecessary to decide the applicability of Section 11B. The respondent is entitled to the refund with interest to be paid within three months.

Classification of goods by tariff headings - Loss of identity / essential character of input after manufacture - Rejection of classification based on mere presence of plastic as input - Entitlement to Modvat credit subject to verification

Classification of goods by tariff headings - Rejection of classification based on mere presence of plastic as input - Loss of identity / essential character of input after manufacture - Whether the appellant's manufactured belts are classifiable under Heading 3926.90 as plastics or under Chapter Headings 4201.90, 4010.00 and 5908.00 - HELD THAT: - The Court affirmed the CESTAT's conclusion that the products manufactured by the appellant - namely nylon and leather belt, nylon and rubber belt and nylon and textile belt - are correctly classifiable under Chapter Heading 4201.90, 4010.00 and 5908.00 respectively. The Court rejected the appellant's contention that the mere use of plastic as an input mandates classification under Heading 3926.90, holding that after manufacture the products have lost their identity as plastic and are no longer known in the market as plastic articles. The determinative reasoning is that the essential character and market identity of the finished goods, not the mere presence of a plastic input, governs tariff classification in the facts of this case.

Appeals dismissed; classification under Chapter Headings 4201.90, 4010.00 and 5908.00 upheld and classification under Heading 3926.90 rejected.

Entitlement to Modvat credit subject to verification - Whether the appellant should be given benefit of Modvat credit - HELD THAT: - The Court did not decide the substantive entitlement on the merits but directed that if the assessee is otherwise entitled to Modvat credit, that benefit shall be extended. The statement operates as a direction to grant the credit where entitlement is established, leaving any necessary verification or quantification to the appropriate authority.

Direction given that, if the assessee is entitled to Modvat credit, the same shall be granted.

Final Conclusion: The Court dismissed the appeals on classification, upholding classification of the finished belts under Chapter Headings 4201.90, 4010.00 and 5908.00 on the ground that the products lost their identity as plastics; the Court also directed that Modvat credit be extended to the assessee if otherwise entitled, leaving verification and grant to the appropriate authority.

Tax measure must retain nexus with the taxable sale - sale price of completed sale as measure of VAT - law prohibits taxing a transaction which is not a completed sale - legislative competence under Entry 54/Entry 48, List II of the Seventh Schedule - input tax credit entitlement under VAT scheme

Sale price of completed sale as measure of VAT - tax measure must retain nexus with the taxable sale - law prohibits taxing a transaction which is not a completed sale - legislative competence under Entry 54/Entry 48, List II of the Seventh Schedule - Constitutional validity of Explanation 2 to Section 2(1)(zd) of the DVAT Act which deems the amount received by oil marketing companies to be equivalent to the price on which retail outlets will sell to consumers. - HELD THAT: - The Court found that under the DVAT Act the taxable event is a completed sale and the measure of tax must have nexus with the price component of that completed sale. There are two distinct sales - oil companies to dealers and dealers to consumers - and the prices in the two transactions differ. By deeming the oil companies' sale price to be equivalent to the retail sale price, Explanation 2 seeks to levy VAT on the price of a subsequent sale which has not come into existence at the time the first sale is taxed. This imports into the measure of tax a price related to an event not yet occurred, thereby disconnecting the measure from the taxable event and exceeding the legislative competence under the relevant Entries in List II. Reliance on the principle in State of Rajasthan v. Rajasthan Chemists Association establishes that substituting an assumed or subsequent-sale price for the actual price of the completed sale is impermissible and ultra vires. [Paras 19, 20, 21, 22, 24]

Explanation 2 to Section 2(1)(zd) of the DVAT Act is struck down as ultra vires.

Input tax credit entitlement under VAT scheme - sale price of completed sale as measure of VAT - Validity of omission in Form DVAT-16 of the column enabling dealers to claim input tax credit consequential to the struck down Explanation 2. - HELD THAT: - Because Explanation 2 was declared ultra vires for seeking to measure tax by reference to a subsequent sale price, the concomitant amendment to Form DVAT-16 that omitted the column for claiming input tax credit is unsustainable. The statutory scheme of VAT contemplates adjustment of input tax against output tax and the form must permit dealers to claim such credit consistent with the Act. [Paras 25]

Omission in Form DVAT-16 of the relevant column to claim input credit is declared unsustainable in law.

Evaporation loss and reversal of input credit - assessment on case-by-case basis under VAT rules - The question of entitlement to input tax credit in respect of natural evaporation losses in petrol/diesel. - HELD THAT: - The Court did not decide the evaporation-loss issue on merits. The petitioners elected not to press the matter before this Court and the Bench declined to express any view. The earlier Circular instructing reversal of input credit on evaporated quantities had been held not binding by this Court; assessing authorities are to examine claims for evaporation loss on a case-by-case basis, applying Rule 7(3) of the DVAT Rules and relevant law. [Paras 11, 12, 26]

Left open for determination by the assessing authorities on a case-by-case basis.

Final Conclusion: Explanation 2 to Section 2(1)(zd) of the DVAT Act is declared ultra vires and struck down; the omission in Form DVAT-16 depriving dealers of the facility to claim input tax credit is also unsustainable. The question of evaporation losses is not decided and remains open for assessment authorities to determine on a case-by-case basis.

Principles of natural justice - opportunity of personal hearing - procedure to be followed by Assessing Authority - assessment to the best of its judgment subject to prescribed conditions - remand for fresh consideration

Opportunity of personal hearing - principles of natural justice - procedure to be followed by Assessing Authority - Impugned order passed without affording the personal hearing mandated by Section 22(4) of the Tamil Nadu Value Added Tax, 2006 - HELD THAT: - The Court examined Section 22(4) which requires that where no return is submitted the assessing authority, after enquiry, shall assess to the best of its judgment subject to prescribed conditions and that the dealer must be given a reasonable opportunity of being heard before action is taken. The petitioner received notice and submitted a reply indicating e-filed monthly returns and claimed input tax credit, but was not afforded a personal hearing before the final order was passed. The absence of a personal hearing amounted to a breach of the statutory mandate and principles of natural justice. The respondent's contention that the petitioner should prove the claimed returns and documents goes to merits, but does not cure the failure to afford the required hearing prior to finalising the assessment. [Paras 3, 5, 7, 9]

Impugned order is unsustainable for violation of Section 22(4) and principles of natural justice and is set aside on that ground.

Remand for fresh consideration - assessment to the best of its judgment subject to prescribed conditions - Whether the matter should be remitted for fresh consideration on merits and in accordance with law - HELD THAT: - Having found procedural infirmity in not providing the statutorily mandated opportunity of personal hearing, the Court did not adjudicate the merits of the claimed returns or input tax credit. The matter is remitted to the assessing authority to reconsider and decide afresh after affording the petitioner a personal hearing. The petitioner is permitted to produce relevant documents to substantiate the claimed e-filed returns and input tax credit during the remand proceedings. [Paras 8, 9]

Matter remitted to the respondent for fresh consideration on merits after providing personal hearing; petitioner may file relevant documents.

Final Conclusion: Writ petition allowed; impugned order dated 13.02.2015 set aside for failure to afford personal hearing under Section 22(4) of the 2006 Act and matter remitted to the assessing authority for fresh consideration in accordance with law after giving the petitioner a personal hearing.

Jurisdiction of Employees' Insurance Court - power to grant exemption under Section 87 of the Employees' State Insurance Act - scope of Section 75(1)(g) of the Employees' State Insurance Act - plenary power of the appropriate government to exempt - statutory procedure must be followed when a statute prescribes the mode - orders passed without jurisdiction are nullities

Jurisdiction of Employees' Insurance Court - scope of Section 75(1)(g) of the Employees' State Insurance Act - power to grant exemption under Section 87 of the Employees' State Insurance Act - Whether the Employees' Insurance Court has jurisdiction under Section 75(1)(g) to grant exemption from the operation of the Act - HELD THAT: - The Court held that the power to grant exemption is specifically conferred on the appropriate government by Section 87 and that Sections 87-89 prescribe a two-tier statutory procedure for grant or refusal of exemption, including opportunity to the Corporation to make representations. Section 75(1)(g) deals with disputes between employers and the Corporation concerning contributions, benefits or other dues recoverable under the Act and does not envisage a dispute between an employer and the appropriate government on exemption. Consequently, the Employees' Insurance Court, constituted under Section 74 and empowered by Section 75, lacks jurisdiction to determine the question of grant or validity of an exemption notification made under Section 87. Neither the High Court's direction that parties approach the ESI Court, nor the Corporation's earlier submission to that forum, can confer jurisdiction upon the ESI Court to decide an issue for which the statute vests plenary power elsewhere. The statutory rule that where a statute prescribes a mode of doing an act that mode must be followed was applied to preclude rendering of exemption by the ESI Court in place of the appropriate government. [Paras 9, 11, 12, 13, 14]

ESI Court had no jurisdiction to grant exemption under Section 75(1)(g); the question of exemption falls within the exclusive power of the appropriate government under Section 87 and must be determined according to the statutory procedure.

Orders passed without jurisdiction are nullities - judicial review of exemption orders under Article 226 - Whether the ESI Court's order granting exemption and setting aside demand notices is valid - HELD THAT: - Because the ESI Court acted beyond its jurisdiction in granting exemption, the order is a nullity. The Court noted that orders passed without jurisdiction are non-est and that while exemption orders made by the appropriate government are amenable to judicial review under Article 226, they cannot be determined by the ESI Court under Section 75. Accordingly, the High Court was correct in setting aside the ESI Court's order as not sustainable for want of jurisdiction. Given the absence of jurisdiction, the Supreme Court declined to examine the appellant's factual contentions regarding provision of medical facilities. [Paras 15, 16]

The ESI Court's order granting exemption and setting aside demand notices is a nullity; the High Court rightly set aside that order.

Final Conclusion: Appeals dismissed. The Employees' Insurance Court had no jurisdiction to grant exemption under Section 75(1)(g); exemption is exclusively within the appropriate government's power under Section 87 and orders made by a forum lacking jurisdiction are nullities, hence the High Court's reversal of the ESI Court order was upheld.

Right to privacy as a fundamental right - inference of privacy from Article 21 - contours and source of fundamental rights under Part III - reference to a larger Bench under Article 145(3) - interim restrictions on use and mandatory nature of Aadhaar

Reference to a larger Bench under Article 145(3) - resolution of conflicting precedents - Whether the questions raised concerning the existence and scope of the right to privacy and the correctness of earlier precedents require determination by a Bench of appropriate strength. - HELD THAT: - The Court found that the matters raise far reaching constitutional questions touching the amplitude of fundamental rights under Part III and noted apparent contradictions between earlier larger Bench decisions (M.P. Sharma and Kharak Singh) and subsequent smaller Bench decisions (including Gobind, R. Rajagopal and PUCL) which recognised or referred to a right to privacy. Institutional integrity and judicial discipline require that pronouncements of larger Benches not be ignored by smaller Benches without appropriate explanation. To authoritatively resolve the jurisprudential conflict and scrutinise the ratio of the earlier larger Bench decisions as well as the correctness of later decisions, the Court directed that these matters be placed before the Chief Justice for constitution of a Bench of appropriate strength under Article 145(3). [Paras 12, 13]

Matters referred for decision by a larger Bench; Registry directed to place the matters before the Chief Justice for appropriate orders under Article 145(3).

Right to privacy as a fundamental right - inference of privacy from Article 21 - contours and source of fundamental rights under Part III - Whether the existence, source and contours of the right to privacy are finally decided in these matters by the Court presently hearing them. - HELD THAT: - The Court observed that prior decisions present an unresolved divergence: some larger Bench precedents had cast doubt on a constitutional right to privacy, while later smaller Bench decisions inferred or recognised aspects of privacy from Article 21 and other fundamental rights. The Court did not finally adjudicate the existence or contours of the right to privacy itself; instead it concluded that these substantive questions require authoritative determination by a larger Bench and therefore left them to be decided by that Bench. [Paras 9, 10, 11, 12, 13]

Substantive questions on the existence, source and contours of the right to privacy are not decided on the merits and are to be examined and authoritatively determined by a larger Bench.

Interim restrictions on use and mandatory nature of Aadhaar - protection of personal information pending final adjudication - Interim regime governing issuance and use of Aadhaar cards pending final determination by the larger Bench. - HELD THAT: - Balancing interests pending final adjudication, the Court directed interim measures to protect individual choice and privacy while allowing the Aadhaar project to continue. The Union of India was required to widely publicise that Aadhaar is not mandatory, that production of Aadhaar will not be a condition for obtaining benefits otherwise due, and that Aadhaar/UID will not be used other than for the PDS distribution (including foodgrains and cooking fuel) and the LPG distribution scheme. Further, information collected for Aadhaar shall not be used for other purposes except as directed by a court for criminal investigation. These interim directions follow consideration of representations about potential privacy breaches, the public interest in social welfare implementation, and the absence of an injunction in earlier interim orders.

Interim directions issued: Aadhaar not to be made mandatory; production not to be a condition for benefits; use limited to specified social welfare schemes (PDS and LPG); personal information not to be used for other purposes except by court direction for criminal investigation; Union to give wide publicity of these positions.

Final Conclusion: The Court referred the substantial constitutional questions concerning the existence, source and contours of the right to privacy and the correctness of conflicting precedents to a larger Bench under Article 145(3) for authoritative decision, and in the meantime issued interim directions limiting the mandatory nature and permissible use of Aadhaar and requiring wide publicity that obtaining Aadhaar is not compulsory.