TaxTMI Updates e-Newsletter
Sep 03,2021

Availability of alternative statutory remedy - Maintainability of Special Leave Petition under Article 136 - Right to pursue statutory appeal under Section 107 of the UP GST Act

Availability of alternative statutory remedy - Maintainability of Special Leave Petition under Article 136 - Right to pursue statutory appeal under Section 107 of the UP GST Act - Special Leave Petition under Article 136 not entertained because a statutory appeal lies under Section 107 of the UP GST Act. - HELD THAT: - The Court declined to entertain the petition under Article 136 on the ground that an appeal is available under the statutory scheme. The petitioners were directed to pursue the remedy of appeal under Section 107 of the UP GST Act, with liberty to raise all their rights and contentions in that forum. No merits determination was made on the assessment order itself; the decision is confined to the question of maintainability of the Special Leave Petition in the presence of the alternative statutory remedy. [Paras 1, 2]

Special Leave Petition dismissed; petitioners permitted to pursue the statutory appeal under Section 107 of the UP GST Act with all rights and contentions kept open.

Final Conclusion: The Special Leave Petition under Article 136 was dismissed on grounds of maintainability since a statutory appeal under Section 107 of the UP GST Act is available; the petitioners may pursue that appeal with all contentions preserved.

Revision u/s 263 - unexplained unsecured loans taken by assessee - HC [2020 (2) TMI 1021 - GUJARAT HIGH COURT] uphold the decision of ITAT wherein it was held that, PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 as AO had made due enquiries and taken a plausible view and that invocation of Explanation 2 in the revisional order without confronting the assessee was improper - HELD THAT:- SLP dismissed.

Registration under Section 12AA as recognition of charitable status - Approval under Section 80G for deduction of donations - Charitable purpose versus activity in the nature of trade, commerce or business - Effect of interest and service charges on charitable character - Operative scope of the amendment to Section 2(15) (Finance Act, 2008)

Registration under Section 12AA as recognition of charitable status - Approval under Section 80G for deduction of donations - Entitlement of the respondent society to registration under Section 12AA and approval under Section 80G - HELD THAT: - The Tribunal found on facts that the society is genuine, carries out micro finance activities for rural poor women and undertakes other welfare activities (including construction of latrines), and that both State and Central Governments have granted funds to the society. The High Court held that the genuineness and charitable nature of the society's activities were not in dispute and that rejection of registration solely because certain service charges were collected was unsustainable. The court emphasised that the matter was essentially factual and that the Tribunal's factual findings as to genuineness and charitable activity did not warrant interference. [Paras 7, 8, 11, 12]

The Tribunal's grant of registration under Section 12AA and approval under Section 80G to the respondent society is upheld.

Effect of interest and service charges on charitable character - Charitable purpose versus activity in the nature of trade, commerce or business - Whether charging interest and service charges transformed the society's activities into a business, disentitling it from charitable status - HELD THAT: - The CIT had relied on the fact that the society borrowed from banks at a stated bank rate and on lent charging interest and additional service charges, and recorded a conclusion that the effective rate was 35%. The High Court found no material to support the CIT's conclusion of a 35% interest and noted that the recorded rate of interest charged was 15% per annum with separate service charges which are not shown to be recurring in the manner of commercial trading. In view of the Tribunal's factual findings on the society's beneficiaries, activities and the incidental nature of charges for documentation, the Court concluded that the collection of such charges, without more, did not convert the society's activities into a commercial business negating charitable character. [Paras 6, 7, 10]

The collection of interest at 15% and ancillary service charges did not, on the material before the Tribunal, amount to carrying on a business that would defeat charitable status.

Operative scope of the amendment to Section 2(15) (Finance Act, 2008) - Charitable purpose versus activity in the nature of trade, commerce or business - Applicability of the Finance Act, 2008 amendment to Section 2(15) so as to disqualify the society's activities from being charitable - HELD THAT: - Although the Revenue contended that the amended definition excludes activities that involve rendering services for consideration, the High Court observed that the case turned on factual determinations about the nature, genuineness and mode of the society's activities. The Court found that there was no substantial question of law warranting interference and that the Tribunal had addressed factual aspects showing relief to the poor and incidental charges. Consequently, the Court did not accept that the amendment compelled a conclusion against charitable status on the facts before it. [Paras 3, 8, 11]

The amendment to Section 2(15) did not, on the material and findings before the Tribunal, operate to disqualify the society's activities from being charitable.

Final Conclusion: The High Court dismissed the Revenue's appeal, affirmed the Tribunal's grant of registration under Section 12AA and approval under Section 80G to the respondent society, and answered the admitted substantial questions of law against the Revenue, concluding that the factual findings of the Tribunal concerning genuineness of charitable activity and the incidental nature of interest and service charges did not justify withholding registration.

Excessive and unreasonable expenditure - Section 40A(2)(b) of the Income Tax Act, 1961 - genuine commercial decision - allowability of expenditure on purchase of land - assessment year 2007-08

Excessive and unreasonable expenditure - Section 40A(2)(b) of the Income Tax Act, 1961 - The transaction price paid to the company's Directors for purchase of land was not held to be excessive so as to attract disallowance under Section 40A(2)(b). - HELD THAT: - The Assessing Officer invoked Section 40A(2)(b) on the basis that land bought from Directors at Rs. 3 Lakhs per cent was later sold to third parties at an average of Rs. 1.36 Lakhs per cent. The Tribunal and this Court examined the totality of facts including subsequent sales of the acquired land at higher rates (notably at Rs. 2.72 Lakhs and later at Rs. 6.36 Lakhs per cent), the commercial rationale advanced by the assessee (better access and consequent enhancement of value to its adjacent land) and the absence of any allegation of unlawful or non-genuine transactions. Applying the principle that commercial decisions of a company are to be respected unless shown to be mala fide or unreasonable, the authorities found the purchase to be a prudent business decision and not an excessive, unreasonable expenditure attracting Section 40A(2)(b). The Tribunal's factual conclusion that the payments were commercially justified was held to be sustainable on the material on record and distinguishable from precedents where genuineness or propriety was in question. [Paras 8, 11, 12]

Tribunal rightly held that Section 40A(2)(b) did not apply; the payment to Directors was a bona fide commercial decision and not excessive.

Allowability of expenditure on purchase of land - commercial decision - The Tribunal's affirmation of the CIT(A)'s relief to the assessee on allowability of expenditure for purchase of land was upheld. - HELD THAT: - CIT(A) granted relief observing that purchase at Rs. 3 Lakhs per cent was a business decision from which the assessee later benefited. The Tribunal affirmed that conclusion after considering subsequent higher realizations and the commercial rationale. This Court found no infirmity in the appellate authorities accepting the assessee's explanations and noting substantial gains, thereby sustaining the allowability of the expenditure as a business decision rather than disallowing it on the ground of excessiveness. [Paras 8, 12]

Tribunal correctly upheld allowability of expenditure; CIT(A)'s grant of relief sustained.

Disallowance without reason - appellate reasoning - The portion of the CIT(A) order disallowing a sum of Rs. 25,000 per cent was set aside for lack of reasoned basis. - HELD THAT: - While CIT(A) granted overall relief, it directed allowance at Rs. 2,75,000 per cent and disallowance of Rs. 25,000 per cent without giving reasons for the partial disallowance. The Tribunal, and subsequently this Court, found that such disallowance was contrary to the findings recorded by the CIT(A) that the transaction was a prudent commercial decision resulting in benefit to the assessee. In absence of a reasoned foundation for the specific partial disallowance, the appellate tribunals were justified in setting aside that portion of CIT(A)'s order. [Paras 9]

Portion of CIT(A) disallowing Rs. 25,000 per cent was correctly set aside for want of reasons.

Final Conclusion: The Tax Case Appeal by the Revenue is dismissed; the Tribunal's order which held that Section 40A(2)(b) was not attracted, sustained the allowability of the expenditure as a bona fide commercial decision, and set aside the unexplained partial disallowance, is affirmed.

Fee for technical services - royalty - double taxation avoidance agreement - tax deduction at source - transfer pricing

Fee for technical services - royalty - double taxation avoidance agreement - tax deduction at source - Remand to Assessing Officer for fresh examination of whether the payments to the Associated Enterprise constitute royalty or fee for technical services under the India-Sweden DTAA and whether tax was required to be deducted at source. - HELD THAT: - The Tribunal found that neither the Assessing Officer nor the Commissioner (Appeals) examined the nature and type of services actually provided by the Associated Enterprise against the definitions of "royalty" and "fee for technical services" in the DTAA. The AO had merely recorded a disallowance for failure to deduct tax without addressing the assessee's submissions that the payments were for use of common infrastructure and not for purchase of software or technical services. The CIT(A) treated the payment as possibly falling within both royalty and FTS, without analysing the factual matrix or DTAA definitions, and enhanced the disallowance without independent factual findings. Since the impugned payments are covered by the DTAA, the Tribunal held that the question of taxability and the obligation to deduct tax at source must be examined by the AO afresh in light of the DTAA (unless the assessee shows the domestic law to be more beneficial), and directed the AO to verify the agreement, the nature of services (as per the Group I.T. Services Catalogue and other evidence) and any TDS already deducted, with the assessee directed to furnish required information and explanations. [Paras 9, 10, 11]

Matter set aside and remitted to the Assessing Officer for fresh examination of the nature of payments and TDS liability; assessee to furnish required details.

Final Conclusion: The appeal is disposed of by remanding the issue to the Assessing Officer for fresh adjudication on whether the payments to the Associated Enterprise are taxable as royalty or fee for technical services under the DTAA and whether tax was required to be deducted at source; the appeal is treated as allowed for statistical purposes.

Deductibility of ESOP expenses as business expenditure under section 37(1) - Taxability of ESOP benefit as perquisite - Obligation to deduct TDS on perquisites - Timing difference between vesting and exercise of ESOPs - Application of special bench decision in Biocon Ltd. - Verification by assessing officer of TDS deduction or reversal

Deductibility of ESOP expenses as business expenditure under section 37(1) - Timing difference between vesting and exercise of ESOPs - Taxability of ESOP benefit as perquisite - Application of special bench decision in Biocon Ltd. - Claim for ESOP discount amounts is allowable as deduction in the year of vesting under section 37(1), and absence of TDS at the time of vesting does not justify disallowance. - HELD THAT: - The Tribunal accepted the assessee's reliance on the Special Bench decision in Biocon Ltd., which treats the difference between market price and issue price on grant/vesting as allowable expenditure. The only controversy was whether the assessing officer could disallow the deduction because TDS was not deducted at the time of vesting. The Tribunal observed that taxability of the perquisite in the hands of the employee may occur at a different stage (commonly at exercise), and the Special Bench expressly recognized that stage of taxability may differ from stage of deductibility depending on accounting and factual circumstances. Consequently, the assessing officer was not justified in treating the discount as taxable in the employees' hands at vesting merely because TDS was not deducted then, and the deduction is allowable when rights vest as held by the Special Bench and upheld by the Karnataka High Court. [Paras 9, 10, 11, 12]

ESOP expenses are deductible when rights vest; disallowance solely for non-deduction of TDS at vesting is not warranted.

Obligation to deduct TDS on perquisites - Verification by assessing officer of TDS deduction or reversal - Assessing officer is entitled to verify whether TDS was deducted at the time options were exercised or whether the expenditure was reversed when options were not exercised, and to act accordingly. - HELD THAT: - While allowing the deduction at the vesting stage, the Tribunal qualified the relief by permitting the AO to satisfy himself about the ultimate tax treatment: the AO may verify that the assessee has deducted TDS when the option is exercised by the employee, or, if an employee did not exercise the option, that the assessee has reversed the expenditure. This is a limited verification directed to ensure tax consequences are appropriately reflected and does not amount to denial of the deduction on the ground that TDS was not deducted at vesting. [Paras 12]

Matter remitted to the AO for verification of TDS deduction at exercise or reversal of expenditure where options were not exercised; AO to act accordingly.

Final Conclusion: The appeal is allowed insofar as the ESOP discount claimed is deductible at the stage of vesting as held by the Special Bench in Biocon Ltd.; however, the AO may verify compliance regarding TDS at exercise or reversal of expenditure and take consequential action if necessary.

Deduction under section 80P(2)(a)(i) - cooperative society providing credit to members - principle of mutuality - deduction under section 80P(2)(d) - interest from cooperative institutions - assessment of interest income as 'Income from Other Sources' versus business income - allowability of expenses as cost of funds under section 57(iii) - remand for fresh examination in light of Supreme Court decision in Mavilayi Service Co-operative Bank Ltd.

Deduction under section 80P(2)(a)(i) - cooperative society providing credit to members - principle of mutuality - remand for fresh examination in light of Supreme Court decision in Mavilayi Service Co-operative Bank Ltd. - Claim for deduction under section 80P(2)(a)(i) in respect of profits from providing credit to members is to be re-examined afresh by the Assessing Officer. - HELD THAT: - The Tribunal observed that the question whether the appellant's business of providing credit to members complies with the principles of mutuality - and therefore qualifies for deduction under section 80P(2)(a)(i) - requires re-examination in the light of the Hon'ble Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. As the legal position has been affected by that decision, the Tribunal set aside the lower authorities' conclusions on this claim and restored the matter to the file of the Assessing Officer for fresh consideration and adjudication in accordance with the law laid down by the Supreme Court.

Issue remanded to the Assessing Officer for de novo examination in light of the Supreme Court decision; no final adjudication on merits by the Tribunal.

Deduction under section 80P(2)(d) - interest from cooperative institutions - assessment of interest income as 'Income from Other Sources' versus business income - Claim for deduction under section 80P(2)(d) in respect of interest income from deposits/investments is to be re-examined afresh by the Assessing Officer. - HELD THAT: - The Tribunal noted conflicting authorities and that coordinate benches have restored identical issues to the Assessing Officer for fresh consideration. In particular, the characterization of interest earned on investments (whether assessable as business income or as income from other sources) and the applicability of section 80P(2)(d) require factual and legal reassessment. Accordingly, the Tribunal restored this issue to the file of the Assessing Officer for fresh adjudication.

Issue remanded to the Assessing Officer for fresh consideration and decision.

Allowability of expenses as cost of funds under section 57(iii) - Alternative contention for allowance of cost of funds under section 57(iii) in respect of interest income is to be re-examined by the Assessing Officer. - HELD THAT: - Because the Tribunal has remanded the primary issue concerning the treatment of interest income and the claim under section 80P(2)(d), it also restored the appellant's alternative claim for allowance of expenses under section 57(iii) for fresh consideration by the Assessing Officer, noting relevant High Court authority relied upon by the appellant that may support the claim.

Alternative claim remanded to the Assessing Officer for de novo consideration along with related issues.

Final Conclusion: The Tribunal set aside the appellate order on the specified issues and restored them to the file of the Assessing Officer for fresh examination in light of the Supreme Court and coordinate-bench decisions; the appeal is treated as allowed for statistical purposes.

Applicability of section 56(2)(vii)(b)(ii) to pre-amendment transactions - taxation of difference between consideration and stamp duty value - effect of agreement for sale with possession and substantial payment vis-a -vis subsequent registered sale deed - non-retrospectivity of newly introduced taxing provision

Applicability of section 56(2)(vii)(b)(ii) to pre-amendment transactions - effect of agreement for sale with possession and substantial payment vis-a -vis subsequent registered sale deed - non-retrospectivity of newly introduced taxing provision - Whether the Assessing Officer was entitled to invoke section 56(2)(vii)(b)(ii) for taxing the difference between stamp duty value and declared consideration where the agreement for sale with possession and substantial payment was executed on 28.03.2013, prior to the introduction of sub-clause (ii) with effect from AY 2014-15. - HELD THAT: - The Tribunal examined the executed agreement to sell dated 28.03.2013, the registered sale deed dated 10.09.2013 and bank records showing payment of about 80% of consideration at the time of the agreement. The sub-clause (ii) of clause (vii) of section 56(2) enabling taxation of the excess of stamp duty value over consideration was introduced only by the Finance Act, 2013 with effect from 01.04.2014 (applicable from AY 2014-15). As on the date of the agreement (28.03.2013) that sub-clause was not on the statute book. The Assessing Officer and the Commissioner (Appeals) invoked the provision without evidence that the agreement was a sham; neither had issued notice to the seller nor established non-genuineness, relying instead on suspicion that the agreement might be antedated. The material on record - the agreement, contemporaneous bank payments and possession taken - supported the assessee's case that substantial transfer and consideration payment occurred prior to the amendment. The Tribunal applied the principle that a taxing provision introduced after a transaction cannot be applied to that transaction where the provision was not in force on the date the transaction was effected. Reliance on co-ordinate Tribunal decisions dealing with similar facts reinforced this conclusion. Consequently, the AO was not entitled to invoke section 56(2)(vii)(b)(ii) in respect of the agreement dated 28.03.2013.

Addition made under section 56(2)(vii)(b)(ii) deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2014-15, holding that sub-clause (ii) of section 56(2)(vii)(b) was not applicable to the agreement dated 28.03.2013 and directing deletion of the addition made under that provision.

Revision under Section 263 - erroneous assessment prejudicial to revenue - Deduction under Section 80IA(4) - eligibility as developer versus works contractor - Agreement/clarification by contracting authority as determinative of contractual status - Debatable view/one of possible views - limits on exercise of revisional powers under Section 263

Agreement/clarification by contracting authority as determinative of contractual status - Deduction under Section 80IA(4) - eligibility as developer versus works contractor - Whether the Principal Commissioner was justified in holding that the assessment was erroneous insofar as prejudicial to the revenue on the ground that there was no agreement between the assessee and the Government and therefore the assessee was a works contractor not entitled to deduction under section 80IA(4). - HELD THAT: - The Tribunal found on the material on record that the contract award initially in the name of the lead partner was subsequently clarified by the Government office by letter dated 27th August 2009 to be considered in the name of the joint venture "AVADH-NIPL (JV)", and that this fact had been placed before the Principal CIT. In view of that clarificatory communication there was no ambiguity that an agreement existed between the assessee (the joint venture/partnership) and the Government department. The Principal CIT's assumption that absence of an agreement made the assessee only a works contractor was therefore not borne out by the record. Having recorded these findings, the Tribunal concluded that the condition of an agreement for claiming the deduction under section 80IA(4) was satisfied on the factual material and that the Principal CIT had not negatived the assessee's contention or the clarificatory letter. The Tribunal accordingly held that there was no violation of the requirements of section 80IA(4) on the ground relied upon by the Principal CIT. [Paras 8]

The finding of the Principal CIT that there was no agreement and that the assessee was a works contractor is set aside; on the record the contract stood in the name of the joint venture and the condition of an agreement under section 80IA(4) is satisfied.

Debatable view/one of possible views - limits on exercise of revisional powers under Section 263 - Revision under Section 263 - erroneous assessment prejudicial to revenue - Whether the AO's allowance of the deduction under section 80IA(4), in circumstances where the question of developer versus works contractor was debatable, rendered the assessment so erroneous and prejudicial to revenue as to justify revision under section 263. - HELD THAT: - The Tribunal recorded that the question whether the assessee acted as a developer or merely as a works contractor under the Explanation to section 80IA(4) was a debatable issue on which more than one plausible view was reasonably possible. The AO had issued specific queries under section 142(1), received the assessee's replies and documentary support (including R.A. bills and the agreement/clarification), and thereafter allowed the deduction. Where the Assessing Officer, after enquiry and verification, adopts one of the possible views, such a view cannot be characterised as an erroneous order prejudicial to revenue within the meaning of section 263. The Tribunal expressly relied on the principle that determination of commencement or character of development is a pragmatic question capable of more than one view and that mere possibility of an alternative view does not render the AO's order erroneous for purposes of revision under section 263 (drawing support from the decision in CIT vs. Ansal Housing & Construction Ltd. as cited in the order). On these grounds the Tribunal held that the Principal CIT's invocation of section 263 was not sustainable. [Paras 8]

Because the issue was debatable and the AO had taken one permissible view after verification, the AO's order could not be treated as erroneous prejudicial to the revenue and could not be revised under section 263.

Final Conclusion: The revisional order passed by the Principal Commissioner under section 263 is quashed; the Tribunal allowed the assessee's appeal and upheld the AO's allowance of the deduction under section 80IA(4) for Assessment Year 2011-2012.

Interest under section 234B - Interest under section 234A - Adjustment of seized cash against tax liability - Settlement Commission order under section 245D(4) - Explanation (2) to Section 132B - prospective application

Interest under section 234B - Adjustment of seized cash against tax liability - Settlement Commission order under section 245D(4) - Extent and computation of interest under section 234B in view of adjustment/availability of seized cash, payments claimed and subsequent Settlement Commission order. - HELD THAT: - The Tribunal held that complete relief against interest under section 234B could not be granted. The assessee had not filed an immediate estimate of income after the search and initially contested the taxability of seized cash; consequently the Settlement Commission later brought substantial cash to tax. However, where the assessee in the return filed on 17.09.2013 owned up cash (high denomination notes) and sought adjustment of seized cash against tax and interest liabilities, no interest under section 234B can be levied beyond 17.09.2013 to the extent that sufficient seized cash existed to be adjusted against the liability determined by that return; the AO was directed to compute interest under section 234B only up to 17.09.2013 on the tax computed in the return filed on that date. The Tribunal further held that if the assessee discharged tax and interest claimed to have been paid on 18.03.2014 (payments to be verified by the AO), interest under section 234B would not be leviable beyond 18.03.2014 to the extent of such payments; the AO was directed to verify and give credit. Finally, because the Settlement Commission brought to tax additional income by order dated 23.09.2015, interest under section 234B is leviable on that additional tax up to the date of the Settlement Commission's order (reference to statutory sub provisions governing such periods was applied).

Interest under section 234B was partially cancelled beyond 17.09.2013 to the extent of adjustment by seized cash; AO to compute 234B interest up to 17.09.2013 on return income, verify claimed payments of 18.03.2014 and, if valid, restrict further 234B liability to 18.03.2014; interest is payable on additional income brought by Settlement Commission up to its order of 23.09.2015.

Interest under section 234A - Search and seizure under section 132(1) - Leviability of interest under section 234A for delayed filing of return after notices under section 153A in the context of search and seizure. - HELD THAT: - The Tribunal upheld the view that the assessee was not entitled to relief from interest under section 234A. The assessee disputed the legality of the search and relied on delay in provision of seized material and on health reasons of the karta; nevertheless the burden to keep and produce records and to file timely returns rests on the assessee. The Tribunal rejected the contention that an intervening search absolved the assessee from the obligation to file returns within time and found no sufficient cause to negate the levy of interest under section 234A.

Interest under section 234A as determined by the lower authorities is upheld.

Explanation (2) to Section 132B - prospective application - Adjustment of seized cash against tax liability - Whether the amendment by Finance Act, 2013 inserting Explanation (2) to section 132B (w.e.f. 01.06.2013) operates retrospectively to deny adjustment of seized cash against tax liability for searches conducted before that date. - HELD THAT: - The Tribunal held that Explanation (2) to section 132B inserted w.e.f. 01.06.2013 is prospective and does not apply to searches conducted prior to that date. Reliance was placed on subsequent judicial developments and administrative acceptance adverse to retrospective application; therefore the amendment could not be applied to the search of 25.02.2011.

Explanation (2) to section 132B is prospective and not applicable to the assessment year 2011-12 search/seizure carried out on 25.02.2011.

Adjustment of seized cash against tax liability - Interest under section 234B - Verification of tax payments claimed to have been made on 18.03.2014 and consequent adjustment of liability. - HELD THAT: - The Tribunal recorded that the assessee claimed to have discharged tax and interest by payments on 18.03.2014 in relation to additional income offered before the Settlement Commission and produced challans/Form 26AS; it directed the AO to verify these claimed payments and to give appropriate credit after due verification. The effect of such verification will determine the period beyond which section 234B interest cannot be levied.

Matter remitted to AO to verify claimed tax payments of 18.03.2014 and to give credit if substantiated; computation of section 234B interest to be adjusted accordingly.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the levy of interest under section 234A; directed limited relief on section 234B interest by restricting liability beyond 17.09.2013 to the extent of seized cash available for adjustment and, subject to verification of payments dated 18.03.2014, by restricting further 234B liability to that payment date; held Explanation (2) to section 132B to be prospective; and remitted to the AO the task of verifying claimed tax payments and recomputing interest as directed.

Special purpose vehicle (SPV) and double taxation - treatment of construction expenditure as capital work in progress - allocation of profit between developer and SPV by assignment/assumption agreements - distinction between contribution agreement and work contractor relationship - presumption of contractor's profit (8% estimate) and its applicability - capital gain on conversion of a capital asset into stock in trade and applicability of section 45(2)

Special purpose vehicle (SPV) and double taxation - allocation of profit between developer and SPV by assignment/assumption agreements - treatment of construction expenditure as capital work in progress - Whether income from the project 'Lodha Supremus' could be taxed again in the assessee's hands where the same income was assessed and taxed in the hands of SNCML and the assessee functioned as an SPV with construction expenditure shown as capital work in progress. - HELD THAT: - The Tribunal, following the coordinate bench decisions in the assessee's own appeals, accepted the finding that the assessee functioned as a SPV used by SNCML for construction of the project and that the income in question had already been assessed and taxed in the hands of SNCML. The learned CIT(A)'s conclusion that taxing the same income again in the hands of the assessee would result in double taxation was upheld. The Tribunal noted that the audited financials and prior orders (including those of the Settlement Commission as recorded by the coordinate bench) support the view that no profit was rightly attributable to the SPV and that construction costs were reflected as capital work in progress in the assessee's books; consequently the additions directed by the AO were not sustainable. [Paras 4]

Grounds 1 to 6 dismissed; the order of the CIT(A) upholding deletion of additions is affirmed.

Distinction between contribution agreement and work contractor relationship - presumption of contractor's profit (8% estimate) and its applicability - Whether the assessee ought to be treated as a work contractor and taxed on presumed profit at 8% when the agreement with SNCML was a contribution towards construction costs/supervision arrangement and no contractual profit or commission was assigned to the assessee. - HELD THAT: - Relying on the coordinate bench decision, the Tribunal found there was no material to show that the assessee acted as a work contractor for SNCML. The contribution agreement delegated supervision but did not assign any contractual profit or commission to the assessee; the assessee merely received contributions from prospective unit buyers while SNCML determined and offered the project profit to tax. The AO's presumption treating the assessee as a contractor and estimating profit at 8% of cost was therefore contrary to the facts and could not be sustained. [Paras 6, 7]

Grounds 7 and 8 dismissed; the CIT(A)'s deletion of the 8% presumed profit is upheld.

Capital gain on conversion of a capital asset into stock in trade and applicability of section 45(2) - Whether the assessee was liable to capital gains tax under the provision dealing with conversion of capital asset into stock in trade where the godown right was held as investment/capital work in progress and the project sales were effected and taxed in SNCML. - HELD THAT: - The Tribunal concurred with the coordinate bench that the godown right was originally held as an investment and its cost formed part of the project cost in SNCML's books. Section 45(2) (relating to chargeability of capital gain on conversion of capital asset into stock in trade) applies only where there is a conversion followed by transfer within the meaning of the Act. Here there was no conversion by the assessee into stock in trade nor any sale of units by the assessee; all sales were recognised and taxed in SNCML. Consequently, the AO's addition for capital gain was not sustainable. [Paras 10, 11]

Revenue's ground against deletion of capital gain is dismissed; the CIT(A)'s direction to delete the addition is affirmed.

Final Conclusion: Both appeals filed by the Revenue for A.Y. 2015-16 are dismissed; the orders of the CIT(A) deleting the additions and rejecting the AO's alternative treatment are upheld in line with coordinate bench decisions in the assessee's own earlier appeals.

Applicability of section 50C to transfer of leasehold rights - Computation of capital gains - characterization as long-term or short-term - Deduction under section 40(b) - interest to partners payable in terms of partnership deed

Applicability of section 50C to transfer of leasehold rights - Provisions of section 50C do not apply to the transfer of leasehold rights in land and buildings. - HELD THAT: - The Tribunal held that the transaction constituted transfer of leasehold rights and therefore fell outside the ambit of provisions which apply to transfer of land or building. In support, the order refers to precedents declining to extend section 50C to leasehold transfers. On that basis the Tribunal concluded that the substitution of the agreed sale consideration by stamp duty value under section 50C was unsustainable and the addition made by the Assessing Officer was liable to be deleted. The Tribunal observed that acceptance of this plea rendered other related grounds (including those founded on invocation of section 50C) infructuous. [Paras 4]

Addition made by invoking section 50C deleted; section 50C held not applicable to the leasehold-rights transfer.

Deduction under section 40(b) - interest to partners payable in terms of partnership deed - Interest paid to partners allowed as deduction where payment is in terms of the partnership deed (or valid addendum). - HELD THAT: - The Tribunal examined the Profit & Loss account and the partnership documentation and accepted the assessee's production of a deed of addendum dated 01/04/2009 providing for payment of interest to partners. Applying the statutory test for deduction under section 40(b), the Tribunal found that the requisite contractual provision for payment of interest existed and there was therefore no justification for disallowance. Consequently the Assessing Officer's disallowance and the appellate confirmation were set aside and the interest was allowed as deductible. [Paras 5]

Disallowance of interest to partners deleted; interest allowed as deduction under section 40(b) in view of the deed of addendum.

Final Conclusion: Appeal partly allowed: invocation of section 50C set aside for the leasehold-rights transfer and consequential addition deleted; disallowance of interest paid to partners deleted and interest allowed in terms of the partnership addendum; other related grounds rendered infructuous.

Invocation of section 50C and reference to Departmental Valuation Officer - remand for valuation and re-computation of long-term capital gains - date of transfer under section 2(47) - power of Commissioner (Appeals) to enhance assessment and requirement of reasonable opportunity under section 251(2)

Invocation of section 50C and reference to Departmental Valuation Officer - remand for valuation and re-computation of long-term capital gains - Whether the assessment could adopt the SRO/stamp duty value without awaiting or relying on a valuation by the Departmental Valuation Officer and whether the matter should be remitted for fresh valuation and recomputation of capital gains. - HELD THAT: - The Tribunal examined the sequence of events: AO referred the matter to the DVO but completed assessment before receipt of any DVO report. Having regard to conflicting precedents, the Tribunal followed the view that where a reference to the Departmental Valuation Officer has been made (and valuation proceedings have been initiated), the AO ought to await and act upon the DVO's valuation so as to avoid miscarriage of justice. In the facts of the case the AO had made a reference to the DVO and the DVO had called for particulars and a timetable for report; nonetheless the AO finalized the assessment adopting the SRO value. The Tribunal set aside the orders of the AO and the CIT(A) on this aspect and directed remand to the AO with explicit directions to obtain the DVO's valuation, to afford the assessee reasonable opportunity both before the DVO and the AO, and to recompute long-term capital gains in accordance with law after considering the valuation and relevant submissions and documents.

Order set aside and matter remitted to AO to refer to DVO, obtain valuation, afford hearing to assessee, and recompute LTCG de novo in accordance with law.

Date of transfer under section 2(47) - Proper date of transfer for computation of capital gains in respect of the sale of the land. - HELD THAT: - The Tribunal considered the assessee's contention that earlier part payments and alleged oral agreements fixed an earlier date and that the first payment received should be treated as the date of agreement/transfer. On the material placed before it the Tribunal found that the registered agreement of sale cum GPA was executed on 24/01/2011 and that nothing in that document recorded any earlier binding transfer or written agreement effecting transfer under the statutory test. Applying the definition of 'transfer' in section 2(47) read with relevant law, the Tribunal rejected the contention that the date of first payment should be treated as the date of transfer and held that the date of transfer is 24/01/2011.

Date of transfer held to be 24/01/2011; assessee's plea of earlier date based on first payment/oral agreement rejected.

Power of Commissioner (Appeals) to enhance assessment and requirement of reasonable opportunity under section 251(2) - Validity of CIT(A)'s enhancement by disallowing transfer expenses of Rs. 1,35,00,000/- when the AO had accepted those expenses and the matter was not part of the assessment order before the CIT(A). - HELD THAT: - The Tribunal noted that the AO had accepted the transfer expenses while completing the assessment and that the disallowance by the CIT(A) related to an issue not arising out of the assessment order. Relying on coordinate decisions, the Tribunal reiterated that the CIT(A) cannot enhance an assessment on a matter which does not arise from the order under appeal without giving the assessee a reasonable opportunity as required by law; where the enhancement concerns an issue outside the scope of the assessment order it is impermissible for the CIT(A) to make such enhancement. Applying these principles, the Tribunal held that the CIT(A) erred in disallowing the expenditure which the AO had allowed and which was not subject matter of the assessment order before the CIT(A).

Disallowance by the CIT(A) set aside; grounds challenging the CIT(A)'s enhancement (nos. 9-11) allowed.

Final Conclusion: Appeal allowed for statistical purposes: the Tribunal set aside the orders below and remitted the valuation/ computation of long-term capital gains to the Assessing Officer with directions to obtain DVO's valuation, afford the assessee opportunity, and recompute LTCG; separately, the CIT(A)'s enhancement disallowing the transfer expenses was set aside.

Exercise of powers under Section 201(1) and 201(1A) within a reasonable time - limitation where statute is silent - reasonableness test - application of judicial precedents to fix a reasonable period - rectification/recall under Section 254(2) - withholding tax obligations under Section 195 (contextual)

Exercise of powers under Section 201(1) and 201(1A) within a reasonable time - limitation where statute is silent - reasonableness test - application of judicial precedents to fix a reasonable period - Whether the order passed by the Assessing Officer under Sections 201(1) and 201(1A) in respect of AY 2010-11 on 31.03.2017 was passed within a reasonable time such that the Tribunal's reliance on delay to set aside the order was erroneous. - HELD THAT: - The Tribunal examined that although the Act does not prescribe a specific limitation period for passing orders under Sections 201(1) and 201(1A), settled judicial principle requires such statutory powers to be exercised within a reasonable time. The Tribunal applied relevant High Court and Supreme Court authorities which have held that, in the absence of an express limitation, the reasonableness test governs exercise of the power and that, considering the statutory scheme, a period of four years has often been treated as reasonable. The facts show the AO passed the Section 201 orders nearly six years after the relevant assessment year. In view of precedents from the Supreme Court and various High Courts (as relied upon by the Tribunal), the delay in passing the Section 201(1) and 201(1A) order rendered it beyond a reasonable period and vitiated the order. Consequently, the Tribunal's conclusion that the order was not passed within a reasonable time was sustained and did not constitute an error amenable to rectification under Section 254(2). [Paras 4, 5]

The AO's order under Sections 201(1) and 201(1A) passed after almost six years was not within a reasonable time; the Tribunal's view is correct and the miscellaneous application under Section 254(2) is not maintainable.

Final Conclusion: The Revenue's miscellaneous application under Section 254(2) is dismissed; the Tribunal correctly held that the order under Sections 201(1) and 201(1A) was not passed within a reasonable time and therefore the attempted recall/rectification was not warranted.

Eligibility under Vivad se Vishwas - definition of 'appellant' under DTVSV Act - interpretation of CBDT Circular No.9/2020 (FAQ Question No.16) - scope of 'disputed tax' based on draft assessment order - right to appeal under Section 246A of the Income-tax Act - non-filing of objections to draft assessment order - beneficial legislation - liberal construction

Eligibility under Vivad se Vishwas - definition of 'appellant' under DTVSV Act - scope of 'disputed tax' based on draft assessment order - non-filing of objections to draft assessment order - right to appeal under Section 246A of the Income-tax Act - Petitioner is eligible to avail the DTVSV Act benefit despite having not filed objections to the draft assessment order before the DRP and notwithstanding that no appeal had been filed before the specified date. - HELD THAT: - The Court held that the CBDT clarification in Circular No.9/2020 (FAQ No.16) permissibly enlarged the class of eligible 'appellants' by expressly covering persons who received a draft assessment order before the specified date, elected not to file objections with the DRP and were awaiting a final order which could be appealed. The Act does not make filing of an appeal a precondition; the use of the word 'can' in the Circular denotes the existence of a possibility to appeal against a final order, which suffices for eligibility. Treating non-filing of objections as amounting to an admitted tax and excluding such persons would create an artificial and impermissible class of assessees and frustrate the beneficial object of the statute. Further, where the draft order exists and the assessing officer could have issued a final order on or before the specified date (or shortly thereafter), the tax shown in the draft order constitutes 'disputed tax' for purposes of the Scheme. Accordingly, the respondents' contentions that absence of objections or non-filing of appeal before the specified date precludes the petitioner from being an 'appellant' were rejected. [Paras 34, 35, 36, 51, 52]

Writ allowed as to eligibility; impugned rejection set aside and declaration in Form No.1 accepted for processing under the DTVSV Act.

Interpretation of CBDT Circular No.9/2020 (FAQ Question No.16) - declaration form requirements - beneficial legislation - liberal construction - The requirement in the declaration form to indicate that time to file objections with the DRP has not expired does not preclude eligibility where an assessee chose not to file objections and awaited a final order; the Circular must be read as a whole and liberally. - HELD THAT: - The Court observed that the declaration form is a rule-based document and cannot be used to defeat statutory eligibility determined by the Act and the authorised clarification. Reading the isolated sentence in the Circular to deny benefit where time to file objections had expired would contradict the earlier part of the FAQ which expressly contemplates an assessee declining to file objections and awaiting a final order that 'can' be appealed. Such a literal reading would render the clarification otiose and frustrate the statute's object. Given that the DTVSV Act is a beneficial enactment, the Court favoured a liberal construction of the Circular and the statute so as to effectuate settlement of disputes rather than a narrow literalism that would deny relief. [Paras 46, 47, 48, 49, 50]

The declaration-form prescription does not defeat the petitioner's claim; the Circular is to be applied so as to permit acceptance and processing of the petitioner's declaration under the Scheme.

Final Conclusion: The writ petition is allowed; the order rejecting the declaration dated 30.04.2021 is set aside and the Designated Authority is directed to accept and process the petitioner's Form No.1 declaration under the DTVSV Act, issue Form No.3 and permit payment of the declared disputed tax within the notified time.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - statutory notice under section 274 for initiating penalty proceedings - distinction between concealment of income and furnishing inaccurate particulars of income - penalty must be imposed only on the ground notified in the penalty notice

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars of income - statutory notice under section 274 for initiating penalty proceedings - penalty must be imposed only on the ground notified in the penalty notice - distinction between concealment of income and furnishing inaccurate particulars of income - Validity of the penalty levied under section 271(1)(c) where the penalty notice referred to one limb but the assessing officer levied penalty on the other limb - HELD THAT: - Section 271(1)(c) contains two distinct limbs - concealment of particulars of income and furnishing inaccurate particulars of income - and the assessing authority must specify in the statutory notice which limb is invoked. A penalty proceeding is distinct from the assessment proceedings and must stand on the basis of the statutory notice; an omnibus or vague notice that does not confine the assessee to the specific ground renders subsequent levy on a different ground invalid. In the present case the AO's notice under section 274 mentioned the limb of furnishing inaccurate particulars of income, but the AO's penalty order imposed penalty for concealment of income; the CIT(A) confirmed penalty by treating the case as one of furnishing inaccurate particulars. Reliance placed by the tribunal on precedents including Mohd. Farhan A. Shaikh v. DCIT and CIT v. Samson Perinchery underscores the principle that an order imposing penalty must be confined to the ground on which proceedings were initiated and cannot be sustained if imposed on a fresh ground of which the assessee had no notice. Given the mismatch between the ground mentioned in the notice and the ground on which penalty was levied by the AO (and the CIT(A)'s confirmation addressed the other limb), the levy of penalty under section 271(1)(c) was vitiated and liable to be quashed. [Paras 8, 9, 10, 11]

Penalty levied under section 271(1)(c) quashed due to defect in the notice and mismatch between the limb invoked in the notice and the limb on which penalty was imposed.

Final Conclusion: The appellate tribunal allowed the appeal and quashed the penalty imposed under section 271(1)(c) for Assessment Year 2010-11 on the ground that the penalty proceedings were initiated for furnishing inaccurate particulars of income but penalty was imposed for concealment of income, thereby invalidating the levy.

Articles of jewellery - Unwrought gold - Classification under Harmonized System / ITC(HS) - Interpretation of import policy notifications limited to specified Exim codes - Restriction versus prohibition under the Import Policy - Seizure and confiscation under Chapter XIV of the Customs Act - Assessment of Bill of Entry - Liability for warehousing charges on unlawful detention

Articles of jewellery - Unwrought gold - Classification under Harmonized System / ITC(HS) - Imported items described in the panchanama are classifiable as Articles of Jewellery under ITC(HS) 7113 19 10 and not as unwrought gold under 7108. - HELD THAT: - The panchanama showed 250 oval pieces each of 20 g bearing a floral motif on one side and the mark 'FINE GOLD, 999.9' on the other; the goods had been worked to a finished, wearable form. The term 'unwrought' in heading 7108 denotes gold not subjected to refining/working. Given the finished shape, imprinted design and provision for suspension (protrusion, hole and ring), the imported items have attained the character of articles of jewellery and fall within the item description 7113 19 10. The court placed weight on chapter notes and item descriptions in the Import Policy and on the distinction between headings and item descriptions under ITC(HS), rejecting the respondents' broad characterisation of the goods as 'gold bars' or 'unwrought' metal. [Paras 38, 39, 45, 48]

Goods are classifiable under CTH/EXIM Code 7113 19 10 as 'Articles of Jewellery, of gold, unstudded'.

Interpretation of import policy notifications limited to specified Exim codes - Restriction versus prohibition under the Import Policy - Notification amending policy conditions to 'restricted' for 'gold in any form' applies only to the Exim codes expressly specified in the notification and does not, by that amendment, convert items classified under 7113 19 10 into 'restricted' or 'prohibited' goods. - HELD THAT: - The notification relied upon by respondents (No.36/2015-2020) amends policy condition against specified Exim codes under heading 7108. The court held that an amendment specified against particular Exim codes cannot be widened to apply to different headings/item descriptions. If the amendment were intended to cover all 'gold in any form', there would have been no need to identify Exim codes. The court also noted that classification under ITC(HS) is governed by the Harmonized System and does not change merely because the policy condition is altered; consequently, items correctly classifiable under 7113 remain so notwithstanding amendments to policy conditions applicable to other Exim codes. The court rejected the respondents' contention that purity (24 carat) or potential need to alloy for jewellery-making automatically excludes the items from 7113, observing that the Import Policy does not restrict 'articles of jewellery' by carat and that export rules demonstrate awareness of jewellery purity limits, supporting a construction that import classification is not purity based. [Paras 54, 56, 58, 59, 79]

Amendment to policy condition applies only to the Exim codes specified in the notification (7108 series); it does not transform goods properly classifiable under 7113 19 10 into 'restricted' or 'prohibited' goods.

Seizure and confiscation under Chapter XIV of the Customs Act - Assessment of Bill of Entry - Liability for warehousing charges on unlawful detention - Seizure effected on 05.06.2021 was set aside as unjustified; respondents were directed to assess the Bill of Entry filed by the petitioner under CTH 7113 19 10 within five days and to bear warehousing charges until release. - HELD THAT: - The court observed that until seizure the respondents had not raised classification doubts and had raised only FTA/FTA related queries; the panchanama descriptions were held to be inaccurate (labeling the items 'gold bar' despite their finished pendant characteristics) and thereby vitiated. Given the court's classification and its conclusion that the notification relied upon did not apply to the goods, the seizure could not be sustained as rendering the goods 'prohibited' under the Customs Act. Accordingly the court ordered prompt assessment of the bill of entry in accordance with the correct classification and directed the respondents to bear warehousing charges incurred during detention. I.A. No.4 seeking modification of the interim release order was dismissed as consequential. [Paras 71, 72, 73, 77, 84]

Seizure set aside; respondents to assess Bill of Entry No.3892849 dt.10.05.2021 as CTH 7113 19 10 within five days and to bear warehousing charges; I.A. No.4 dismissed.

Final Conclusion: Writ petition allowed. Seizure of the imported consignment dated 05.06.2021 set aside; the respondents directed to assess the Bill of Entry No.3892849 dt.10.05.2021 under CTH/EXIM Code 7113 19 10 within five days and to bear warehousing charges until release; consequential interlocutory application dismissed; no order as to costs.

Validity of show cause notice - scope of review under Section 16 of the FTDR Act - jurisdictional limitation for review (two year proviso) - show cause under Section 14 as independent fresh cause of action - action on intelligence report alleging forged or false documents - distinction between adjudicated order and administrative certificate - power to suspend or cancel licence under Section 14-D - penalty for submission of forged or false documents under Section 11(3)

Distinction between adjudicated order and administrative certificate - scope of review under Section 16 of the FTDR Act - Whether the redemption certificate issued on the basis of information furnished by the licencee is an adjudicated order reviewable only under Section 16 - HELD THAT: - The Court held that the redemption certificate issued by the licensing authority on the basis of statements and documents furnished by the petitioner cannot be treated as an adjudicated order for all purposes. Section 16 (review) applies to decisions or orders passed after adjudication or where statutory review is appropriate; it becomes relevant only after an order of suspension or cancellation under Section 14-D has been passed. A certificate issued merely on the basis of the licencee's information is not a final adjudicated order that forecloses subsequent action where contra-materials are discovered. Accordingly, the redemption certificates in the present facts were not immune from fresh proceedings initiated on the basis of later intelligence alleging forgery or falsehood. [Paras 5, 6, 21, 24, 33]

Redemption certificates issued on information supplied by the petitioner are not to be treated as adjudicated orders reviewable exclusively under Section 16.

Show cause under Section 14 as independent fresh cause of action - action on intelligence report alleging forged or false documents - penalty for submission of forged or false documents under Section 11(3) - Whether issuance of a show cause notice under Section 14 based on a Directorate of Revenue Intelligence report alleging forged or false documents constitutes a fresh cause of action and is maintainable - HELD THAT: - The Court accepted the respondents' contention that where the Directorate of Revenue Intelligence furnishes a report indicating that documents submitted for obtaining a certificate are forged, tampered with or false, that report gives rise to a fresh cause of action. In such circumstances Section 14 (giving of opportunity) must be followed to afford natural justice, and proceedings for suspension or cancellation (Section 14-D) and penalties (Section 11(2)/(3)) may lawfully be initiated. The scheme of the Act contemplates initiation of action on discovery of such contra-materials; therefore a show cause notice under Section 14 is not necessarily barred as being an impermissible review under Section 16. [Paras 16, 23, 24, 26, 31]

A show cause notice under Section 14 premised on an intelligence report alleging forged or false documents is a fresh cause of action and is maintainable to enable initiation of suspension/cancellation proceedings and penalties.

Jurisdictional limitation for review (two year proviso) - scope of review under Section 16 of the FTDR Act - Whether the impugned show cause notice is vitiated for being issued beyond the two year limitation period in the proviso to Section 16 - HELD THAT: - The Court found that the petitioner failed to establish that the present proceedings were governed exclusively by Section 16's review mechanism and its two-year proviso. Since the show cause notice was issued under Section 14 based on a fresh intelligence report and not as an exercise of review of a prior adjudicated order, the two-year limitation applicable to review under Section 16 was not dispositive. The authority's initiation of proceedings based on new materials cannot be equated with a barred review under Section 16; therefore the limitation argument did not succeed on the facts. [Paras 4, 6, 19, 29, 35]

The challenge based on the two-year limitation under Section 16 fails because the proceedings were initiated as fresh action under Section 14 on intelligence materials, not as a time-barred review under Section 16.

Power to suspend or cancel licence under Section 14-D - show cause under Section 14 as independent fresh cause of action - Whether suspension or cancellation under Section 14-D requires antecedent proceedings under Section 14 and whether review under Section 16 applies post such orders - HELD THAT: - The Court explained the statutory sequence: Section 14 requires giving an opportunity before making orders of penalty or confiscation; Section 14-D contemplates suspension or cancellation of licence (with provision for post-facto hearing within six months); and Section 16 provides for review of such decisions. Therefore, Section 16 operates after a decision such as suspension or cancellation is taken; prior to such finality, proceedings initiated under Section 14 (including on DRI report) are distinct and must be permitted to proceed so that, if and when a final order under Section 14-D is passed, review under Section 16, subject to its proviso, would become relevant. [Paras 24, 25, 31]

Section 14 proceedings must precede suspension/cancellation under Section 14-D; review under Section 16 is attracted only after such final orders are passed.

Validity of show cause notice - distinction between adjudicated order and administrative certificate - Whether the impugned show cause notice dated 20.07.2016 is without jurisdiction and hence liable to be quashed - HELD THAT: - Applying the foregoing conclusions to the facts, the Court held that the petitioner did not establish a jurisdictional defect in the issuance of the show cause notice. The notice expressly invoked Section 14 for action under Sections 10, 11(2) and 14-D based on the DRI report alleging fraudulent procurement of EODCs. Because the notice was issued as part of a fresh action arising from intelligence indicating forged/false documents and not as a disguised time-barred review of a final adjudicated order, it was not liable to be quashed on jurisdictional grounds. The petitioner was, however, afforded extended time to file its explanations. [Paras 31, 33, 34, 35]

The impugned show cause notice is not vitiated for want of jurisdiction and is not quashed; the petitioner may file its defense within the extended time granted.

Subordinate authority issuing proceedings - scope of review under Section 16 of the FTDR Act - Whether a subordinate officer (to the officer who issued the redemption certificate) could initiate the present show cause proceedings - HELD THAT: - The Court observed that initiation of proceedings under Section 14 based on discovery of forged or false documents in an intelligence report is properly within the scheme of the Act and may be undertaken by the authorities empowered to act in such circumstances; review under Section 16 by a superior officer would become relevant only after any final order such as suspension or cancellation is passed. Thus, the fact that a subordinate officer issued the show cause notice did not, on the record before the Court, render the initiation impermissible. [Paras 10, 32, 33]

Issuance of the show cause notice by a subordinate officer does not, in these facts, invalidate the initiation of proceedings premised on the intelligence report.

Final Conclusion: The writ petition is dismissed. The High Court held that redemption certificates issued on licencee-supplied information are not adjudicated orders immune from subsequent action; an intelligence report alleging forged or false documents gives rise to a fresh cause of action warranting a show cause notice under Section 14 and, if warranted, suspension/cancellation under Section 14-D, with review under Section 16 being applicable only after final orders. The petitioner is permitted to file its explanations within the extended time granted.

Presumption under Section 123 of the Customs Act - reasonable belief at the time of seizure - smuggled goods / foreign origin - burden of proof on the person from whose possession goods are seized - confiscation under Sections 111(b) and 111(d) of the Customs Act - confiscation of sale proceeds under Section 121 of the Customs Act - penalty under Section 112(b) and Section 114AA of the Customs Act - reliance on domestic purchase invoices and GST records to discharge burden - ingredients for establishing sale of smuggled goods

Presumption under Section 123 of the Customs Act - reasonable belief at the time of seizure - smuggled goods / foreign origin - burden of proof on the person from whose possession goods are seized - reliance on domestic purchase invoices and GST records to discharge burden - Whether the seized gold bars were of foreign origin/smuggled and whether the presumption under Section 123 could be invoked against the respondent - HELD THAT: - The Tribunal examined whether at the moment of seizure there existed reasonable belief that the seized 6 kgs of gold were of foreign origin and smuggled. It noted absence of foreign markings on the bars and that subsequent investigation did not produce positive evidence establishing foreign origin or recent illicit importation. The respondent produced GST purchase/sales invoices, registers, GST returns and other books which were examined by the department and found to be not discrepant. The Tribunal accepted the Commissioner (Appeals)'s finding that the documentary evidence supported domestic licit acquisition and that the respondent thereby discharged the evidential burden envisaged by Section 123. Reliance on precedents (including Shanti Lal Mehta and Tribunal decisions) was applied to hold that reasonable belief at seizure is a prerequisite and cannot be supplied by subsequent assumptions; absent proof of foreign origin, Section 123 presumption was not invocable. [Paras 24, 25, 27, 28]

The presumption under Section 123 does not go in favour of the Revenue; the seized gold bars are not established to be of foreign origin or smuggled and the respondent has discharged the burden of proof.

Confiscation of sale proceeds under Section 121 of the Customs Act - ingredients for establishing sale of smuggled goods - requirement of evidence for sale, knowledge, identity of parties and quantity - Whether the seized Indian currency claimed by the respondent represented sale proceeds of smuggled goods and was liable to confiscation under Section 121 - HELD THAT: - Applying the test laid down in authorities (including Ramachandra and subsequent Tribunal decisions), the Tribunal required proof of (i) a sale, (ii) that the sold goods were smuggled, (iii) that the seller had knowledge or reason to believe they were smuggled, and (iv) identification of seller, purchaser and quantity. The record contained GST sales invoices, cash book entries and a closing cash balance exceeding the seized amount; the department did not establish sale of smuggled goods nor the requisite knowledge/identity/quantity. The Commissioner (Appeals) had found that the documentary trail accounted for the claimed cash and that no evidence established it as sale proceeds of smuggled gold; the Tribunal agreed. [Paras 20, 21, 22, 27, 28]

The seized Indian currency is not established to be the sale proceeds of smuggled goods; confiscation under Section 121 is not sustainable.

Penalty under Section 112(b) and Section 114AA of the Customs Act - reliance on departmental scrutiny of documents - Whether the penalties imposed on the respondent under Section 112(b) and Section 114AA are sustainable - HELD THAT: - The Tribunal considered the adjudicating authority's findings and the Commissioner (Appeals)'s review of the evidence. Given the conclusion that the gold was not shown to be smuggled and that the cash was not proved to be sale proceeds of smuggled goods, there was no justification for imposing penalties under Section 112(b) and Section 114AA. The documents produced by the respondent were examined by the department and no anomalies were found that would sustain the penalties. [Paras 28]

The penalties imposed under Section 112(b) and Section 114AA are not sustainable and are set aside.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal agrees with the Commissioner (Appeals) that the gold bars are not established to be of foreign origin or smuggled, the seized currency is not shown to be proceeds of smuggled goods, and the penalties are not maintainable; the seized gold and the claimed Indian currency are directed to be released to the respondent.

Liquidation under the Insolvency and Bankruptcy Code, 2016 - Priority and distribution of assets in liquidation - Treatment of security deposits/amounts held in trust in liquidation - Jurisdiction of writ courts to direct payment where liquidation underway - Remedies before the liquidator and challenge to liquidator's decision before the NCLT

Liquidation under the Insolvency and Bankruptcy Code, 2016 - Priority and distribution of assets in liquidation - Jurisdiction of writ courts to direct payment where liquidation underway - Whether the writ court can direct the Union of India to pay the petitioner's claimed dues while the corporate debtor is in liquidation and the petitioner's claim has been filed with the liquidator. - HELD THAT: - The petition sought an extraordinary writ to recover admitted dues from the Union of India notwithstanding that the contract was with the corporate debtor (HPCL) which is under liquidation and the petitioner has filed its claim before the liquidator. Once liquidation is underway, the liquidator must follow the IBC's statutory scheme governing admission of claims and distribution of assets in the statutory priority and hierarchy; individual creditors cannot obtain preferential payment by invoking writ jurisdiction. The Court observed that the writ forum cannot be used as a substitute for the statutory insolvency process to secure preference over other creditors, including workmen with unpaid wages. The admitted claim having been filed with the liquidator, the proper course is adjudication and distribution under the IBC rather than an independent direction for payment by the Union of India. [Paras 11, 12]

Writ relief for direct payment was refused; the petitioner must pursue its claim through the liquidation process and cannot be given preference over other creditors.

Treatment of security deposits/amounts held in trust in liquidation - Remedies before the liquidator and challenge to liquidator's decision before the NCLT - Who must decide whether the security deposit (earnest money) is to be treated as an amount held in trust and how such claim is to be dealt with during liquidation. - HELD THAT: - The Court held that the characterisation of the security deposit as an amount held in trust is a matter for the liquidator to consider in the first instance under the IBC. The petitioner has already presented the security deposit as part of its claim before the liquidator; therefore, the liquidator will deal with it in accordance with Section 36 of the IBC and the relevant liquidation process. If the petitioner is aggrieved by the liquidator's view, it is entitled to challenge that decision before the appropriate forum (the NCLT) and pursue remedies in accordance with law. The Court declined to entertain a separate writ in respect of the security deposit while liquidation proceedings and claims adjudication are ongoing. [Paras 5, 12, 15]

The question of whether the security deposit is held in trust shall be decided by the liquidator; the petitioner may challenge the liquidator's decision before the NCLT.

Final Conclusion: The writ petition was dismissed: the petitioner must pursue its admitted claims (including the security deposit) through the liquidation process and, if dissatisfied with the liquidator's treatment, seek recourse before the NCLT; all pending applications were disposed of.

Applicability of the Insolvency and Bankruptcy Code to Government Companies - Distinction between Government Companies and statutory authorities performing sovereign functions - Definition of 'corporate person' and 'corporate debtor' in the Insolvency Code - Separate juristic identity of a company incorporated under the Companies Act - Binding effect of Supreme Court precedent on interpretation of the Insolvency Code

Applicability of the Insolvency and Bankruptcy Code to Government Companies - Definition of 'corporate person' and 'corporate debtor' in the Insolvency Code - Distinction between Government Companies and statutory authorities performing sovereign functions - Separate juristic identity of a company incorporated under the Companies Act - Hindustan Paper Corporation Limited, though wholly owned by the Central Government, is a company within the meaning of the Insolvency and Bankruptcy Code and is therefore amenable to insolvency proceedings under the Code, subject to exclusion of statutory authorities performing sovereign functions. - HELD THAT: - The Court examined the definitions of 'corporate person' and 'corporate debtor' in Sections 3(7) and 3(8) of the Insolvency Code and the definitions of 'company' and 'Government company' in the Companies Act. It accepted the Supreme Court's analysis in Hindustan Construction Company Ltd. that companies incorporated under the Companies Act - including Government Companies as defined under Section 2(45) - fall within the first part of 'corporate person' in Section 3(7) and hence can be treated as 'corporate debtors' under Section 3(8). The Court rejected the petitioners' contention that a Government Company is an instrumentality or arm of the State indistinguishable from statutory authorities such as NHAI; it reiterated the principle that a company incorporated under the Companies Act has a separate juristic identity and is ordinarily a commercial entity, not a sovereign authority. The Court also noted that the Supreme Court in Hindustan Construction Company Limited distinguished between ordinary Government Companies and statutory bodies performing sovereign functions, holding that such sovereign statutory authorities cannot be subjected to the Insolvency Code. The High Court concluded that the Supreme Court's pronouncements on these points are binding and that it is not open to the Court to read out Government Companies from the statutory definition where the Legislature has not done so. Applying these principles, the Court held that Hindustan Paper Corporation Limited is within the ambit of the Insolvency Code and that the insolvency and liquidation proceedings before the adjudicating authority are not without jurisdiction. [Paras 31, 33, 34, 36, 37]

Writ petition dismissed; Insolvency Code applies to the Government Company (Hindustan Paper Corporation Limited) while statutory authorities performing sovereign functions remain excluded from the Code.

Final Conclusion: The High Court dismissed the petition challenging the applicability of the Insolvency and Bankruptcy Code to Hindustan Paper Corporation Limited, holding that Government Companies are covered by the Code (while reserving exclusion for statutory authorities performing sovereign functions) and that the ongoing insolvency and liquidation proceedings are not without jurisdiction.

Power to regulate procedure - directions to file brief written submissions - exchange of written submissions between parties - principles of natural justice - facilitative practice to crystallize issues

Power to regulate procedure - directions to file brief written submissions - facilitative practice to crystallize issues - Impugned directions of the NCLAT directing parties to file brief written submissions are not illegal or beyond the NCLAT's competence. - HELD THAT: - The Court accepted that there may be no specific written rule prescribing filing of written submissions, but held that absence of a codified procedure does not render the NCLAT's directions illegal. Tribunals and Courts commonly direct filing of brief written submissions to facilitate adjudication by crystallizing issues and presenting questions of law and fact concisely. Such practice streamlines proceedings and assists effective adjudication. The Court also noted that the NCLAT limited the submissions to three pages, and criticized the appellant for filing a voluminous paper book of his own volition rather than faulting the Tribunal's direction. [Paras 7, 8, 11]

The direction to file brief written submissions was upheld as lawful and appropriate to facilitate adjudication.

Exchange of written submissions between parties - principles of natural justice - Direction to exchange copies of written submissions between the parties is valid and consistent with principles of natural justice. - HELD THAT: - The Court held that it is a settled practice and a facet of natural justice that when a party files any pleading or document before a Court or Tribunal, a copy should be supplied to the other side so that the latter may effectively meet the case. Allowing a Tribunal to consider a party's written submissions without giving the other side an opportunity to rebut would be unfair. Exceptions exist only where privilege is properly claimed or where documents are highly confidential and may be shown only to the Court. Given that the appellant had filed written submissions before the NCLAT, it was incumbent upon him to share a copy with the respondent to enable effective defence; failure to do so could not be said to cause prejudice warranting interference with the Tribunal's orders. [Paras 9, 10, 11]

The direction to exchange copies of written submissions was upheld as necessary to ensure fairness and effective adjudication.

Final Conclusion: The Letters Patent Appeal is dismissed; the High Court upheld the NCLAT's directions requiring brief written submissions and exchange of copies between parties as lawful and consistent with principles of natural justice.

Exclusion of period from CIRP on account of COVID-19 lockdown and CoC decision - Liquidation of corporate debtor in terms of section 33 of the Code - Appointment of Liquidator under section 34 of the Code - Public notice and cessation of powers of board and KMP on liquidation - Filing of liquidation order with Registrar of Companies

Exclusion of period from CIRP on account of COVID-19 lockdown and CoC decision - 317 days from 24/03/2020 to 03/02/2021 were excluded from the CIRP period. - HELD THAT: - The Resolution Professional sought exclusion of the period from 24/03/2020 to 03/02/2021 on account of the COVID-19 lockdown and because the Committee of Creditors in their commercial wisdom decided to liquidate the Corporate Debtor on 03/02/2021. The Tribunal, after considering the application and documents, was satisfied that exclusion of the 317-day period was appropriate and directed that the CIRP period be treated as having ended on 18/03/2021. [Paras 6]

The 317-day period from 24/03/2020 to 03/02/2021 is excluded from the CIRP period and the CIRP is deemed to have ended on 18/03/2021.

Liquidation of corporate debtor in terms of section 33 of the Code - Appointment of Liquidator under section 34 of the Code - Public notice and cessation of powers of board and KMP on liquidation - Filing of liquidation order with Registrar of Companies - The Corporate Debtor is ordered to be liquidated and a Liquidator is appointed with ancillary directions for commencement of the liquidation process. - HELD THAT: - Following expiry of the CIRP period and in the absence of any resolution plan or publication of Form G, the Tribunal found no alternative but to order liquidation under section 33(2) read with section 33(1) of the Code. The Tribunal appointed an insolvency professional as Liquidator under section 34(1), subject to possession of the requisite authorisation for assignment, directed handover of records by the RP, required issuance of public notice in the same newspapers used during CIRP, declared cessation of powers of the board and KMP to vest in the Liquidator, preserved the Liquidator's ability to institute proceedings subject to the Adjudicating Authority's approval and directed filing of the liquidation order with the Registrar of Companies. [Paras 10, 11]

IA No. 309/KB/2021 is allowed; the Corporate Debtor is ordered to be liquidated, a Liquidator is appointed with specified directions to initiate the liquidation process and to file the order with the Registrar of Companies.

Final Conclusion: The Tribunal allowed the RP's application to exclude 317 days from the CIRP (CIRP ending 18/03/2021) and, on expiry of the CIRP without any resolution plan, ordered liquidation of the Corporate Debtor, appointed a Liquidator and issued ancillary directions for commencement of the liquidation and statutory compliance.

Limited notice to personal guarantor upon filing to secure presence and inform commencement of interim moratorium - interim moratorium commences on filing of application - premature adjudication of default at the stage of appointment of resolution professional - appointment of resolution professional where application is filed through the same professional - remand for fresh examination and report by resolution professional under Section 99

Limited notice to personal guarantor upon filing to secure presence and inform commencement of interim moratorium - interim moratorium commences on filing of application - Whether, consistent with principles of natural justice and the statutory scheme, limited notice must be given to the personal guarantor when an application under Section 95 is filed, to inform about filing and commencement of interim moratorium. - HELD THAT: - The Tribunal held that the statutory scheme contemplates that interim moratorium commences upon filing of the application and that the Rules require service of the application on the guarantor; nonetheless, keeping the principles of natural justice in view and in light of precedents, a limited notice should be given to personal guarantors on filing so as to secure their presence and to draw attention to the interim moratorium that has commenced. The Court explained that prior to appointment of the resolution professional there is no scope for a full hearing on merits; the stage up to appointment is primarily procedural leading to appointment and collection of evidence by the resolution professional under Section 99, and therefore the limited notice is intended only to inform and secure attendance for the subsequent procedural steps. [Paras 41, 42, 44]

Limited notice to appear should be given to personal guarantors upon filing to inform them of filing and commencement of interim moratorium; no full merits hearing is required prior to appointment of the resolution professional.

Appointment of resolution professional where application is filed through the same professional - remand for fresh examination and report by resolution professional under Section 99 - Whether the Adjudicating Authority could appoint as resolution professional the same insolvency professional through whom the creditor filed the application and whether that appointment vitiates the process. - HELD THAT: - The Tribunal examined the statutory scheme, Rules and Regulations and observed that the Code permits a creditor to file an application through a resolution professional and that Section 97 does not bar the Adjudicating Authority from appointing the same professional. The scheme contains safeguards (including declaration/consent requirements and Section 98 for replacement) and the resolution professional's role under Section 99 is to collect evidence and recommend acceptance or rejection with reasons; the ultimate decision to admit or reject lies with the Adjudicating Authority under Section 100. Accordingly, appointment of the same professional does not per se invalidate the process. [Paras 28, 37, 39]

Appointment by the Adjudicating Authority of the resolution professional who filed the application is permissible; safeguards in the Code, Rules and Regulations and the replacement mechanism under Section 98 address related concerns.

Premature adjudication of default at the stage of appointment of resolution professional - remand for fresh examination and report by resolution professional under Section 99 - Whether the Adjudicating Authority erred in recording a finding of 'default' and stating that it 'allowed' the application at the stage of appointment of the resolution professional. - HELD THAT: - The Tribunal held that recording a definitive finding of default and stating that the application was 'allowed' at the stage of Section 95/Section 97 was premature and contrary to the statutory scheme. The stage of appointment is procedural; substantive adjudication of admission or rejection is to follow receipt of the resolution professional's report under Section 99 and is to be decided under Section 100. Because the Adjudicating Authority had made premature findings of default and based on those findings a report was produced, the Tribunal set aside those observations and the consequent report, and remitted the matter for fresh consideration. The Tribunal directed that the resolution professional give the appellant opportunity under Section 99 and file a fresh report, after which the Adjudicating Authority shall proceed in accordance with law. [Paras 46, 47, 49]

The Adjudicating Authority's premature findings of default and characterization of 'allowing' the application at the appointment stage were set aside; the report consequent to those findings was set aside and the matter remitted for fresh report and further adjudication.

Final Conclusion: Both appeals were partly allowed: the Tribunal set aside the Adjudicating Authority's premature observations finding default and 'allowing' the application at the appointment stage, upheld the appointment of the resolution professional, set aside the report made pursuant to the impugned order, and remitted the matter to the Adjudicating Authority for fresh proceedings - the resolution professional to give the appellant opportunity under Section 99 and submit a fresh report, after which the Adjudicating Authority shall proceed in accordance with law.

Summary order. Application for condonation of delay refused; Civil Appeal dismissed on ground of unexplained delay of 309 days.

CENVAT credit on inputs and input services used for construction of a building or civil structure - nexus between input/input services and output services - amendment to the definition of "input"/"input service" effective 01.04.2011 - availability of credit for services/goods received prior to 01.04.2011 - quantification of admissible CENVAT credit - remand for verification of records and supporting evidence

CENVAT credit on inputs and input services used for construction of a building or civil structure - nexus between input/input services and output services - availability of credit for services/goods received prior to 01.04.2011 - amendment to the definition of "input"/"input service" effective 01.04.2011 - Admissibility of CENVAT credit availed prior to 01.04.2011 on inputs, capital goods and input services used in construction of the mall which were further used/usable for providing taxable output services - HELD THAT: - The Tribunal considered the change in the statutory definition of "input" and "input service" effective 01.04.2011 which excluded goods and services used for construction of buildings, and applied earlier decisions of the Tribunal and High Courts holding that credit availed in respect of inputs and input services used in construction of a mall that is let out as taxable service is admissible where the services/goods were received prior to the amendment. The appellant demonstrated that the credit in dispute pertains to amounts availed before 01.04.2011 and that amounts subsequently reversed and intimated to the Department were recorded. The Tribunal found the line of precedent (including DLF Promenade and other authorities) applicable and held that the entitlement to credit availed prior to 01.04.2011 is established and the impugned denial on this ground is unsustainable. [Paras 15]

Credit availed prior to 01.04.2011 on inputs and input services used in construction of the mall and further used/usable for providing taxable output service is admissible; the impugned order insofar as it denies such credit is set aside.

Quantification of admissible CENVAT credit - burden to produce invoices and records - remand for verification of records and supporting evidence - Whether the quantum of admissible credit can be determined on the record before the Tribunal or requires remand for verification and quantification - HELD THAT: - Although the Tribunal upheld the appellant's entitlement to credit availed prior to 01.04.2011, it observed that the Credit Rules impose conditions and obligations (Rules 4, 6 and 9) whose satisfaction and the admissible quantum cannot be ascertained from the material on record at this stage. The Tribunal noted factual disputes about production and verification of supporting documents and that the Department had alleged non production while Audit had earlier recorded credit and sought explanations. For that limited purpose the Tribunal directed a remand to the adjudicating authority to permit the appellant to file all supporting evidence and for the authority to examine records/documents/certificates and quantify and allow such credit as found admissible. [Paras 18, 19]

Matter remanded to the adjudicating authority for quantification of the admissible credit; appellant to file supporting evidence within two weeks and authority to decide preferably within six weeks.

Final Conclusion: The appeal is allowed to the extent that CENVAT credit availed prior to 01.04.2011 on inputs and input services used in construction of the mall and further used/usable for taxable output services is held admissible; the matter is remanded to the adjudicating authority for verification of records and quantification of the admissible credit with directions for filing and examination of evidence.

Reverse charge mechanism - value for the purpose of service tax - grossing up under Section 195A - tax deducted at source borne by the service recipient - extended period of limitation - cum-tax benefit

Reverse charge mechanism - Liability under reverse charge prior to the introduction of Section 66A of the Finance Act, 1994. - HELD THAT: - The Tribunal followed the decisions of the Bombay High Court and the Supreme Court holding that the liability to pay service tax under the reverse charge mechanism arose only after the insertion of Section 66A with effect from 18.04.2006. Applying that settled position, the Tribunal held that demands for service tax prior to 18.04.2006 cannot be sustained and must be set aside. [Paras 7]

Demand of service tax for the period prior to 18.04.2006 set aside.

Value for the purpose of service tax - tax deducted at source borne by the service recipient - grossing up under Section 195A - Whether the amount of TDS grossed up and borne by the appellant is includible in the taxable value for levying service tax. - HELD THAT: - The Tribunal examined the contractual terms, which provided that the service provider would receive the agreed consideration and that any withholding taxes would be borne by the Indian counterpart. It noted that Section 67 fixes value as the gross amount charged by the service provider, but that where the TDS is legally borne by the recipient and the foreign provider receives only the agreed consideration, the TDS is a statutory obligation and not consideration for the service. The Tribunal relied on precedents of coordinate Benches holding that where TDS is borne by the recipient and not passed on to the foreign provider, the TDS portion cannot be treated as part of the consideration for service tax valuation. Applying these principles to the facts, the Tribunal concluded that the TDS portion borne by the appellant is not includible in the taxable value and the demand based on such inclusion cannot be sustained. [Paras 14, 15]

Demand insofar as it seeks service tax on the TDS portion borne by the appellant is set aside.

Extended period of limitation - Whether the demand invoking the extended period of limitation is sustainable. - HELD THAT: - The Tribunal observed that the question whether reverse charge applied prior to 18.04.2006 was an interpretational issue pending in various fora and that the appellant had discharged service tax on the consideration actually paid. There was no positive finding of wilful suppression or intent to evade tax. On these facts the Tribunal found that invocation of the extended period of limitation was not justified and the demand was time-barred. [Paras 16]

Demand is time-barred; invocation of extended limitation cannot be sustained.

Cum-tax benefit - Entitlement to cum-tax benefit in respect of the remanded verification. - HELD THAT: - The Original Authority had been remanded for verification of any cum-tax benefit. Having held that there is no liability to pay the differential tax (including on the TDS portion), the Tribunal found that the question of cum-tax benefit no longer arises and is therefore without relevance. [Paras 17]

Issue of cum-tax benefit is rendered irrelevant; confirmed demand set aside.

Final Conclusion: Both appeals allowed. The Tribunal set aside the impugned demands for the periods March 2004 to September 2007 and October 2006 to September 2007: (i) no reverse charge liability prior to 18.04.2006; (ii) TDS amounts borne by the appellant are not includible in the taxable value; (iii) the demand is time barred; and (iv) the question of cum tax benefit is rendered academic. Appeals allowed with consequential reliefs as per law.

Refund of service tax on specified services - specified services used beyond the place of removal for export - rebate under Notification No.41/2012-ST - place of removal - entitlement where exporter pays inland haulage charges

Specified services used beyond the place of removal for export - refund of service tax on specified services - entitlement where exporter pays inland haulage charges - Appellant entitled to refund of service tax paid on inland haulage charges in respect of export of excisable goods under Notification No.41/2012-ST - HELD THAT: - The Tribunal held that Notification No.41/2012-ST grants rebate by way of refund of service tax on specified services received by an exporter and used for export of goods, and that for excisable goods the definition of "specified services" includes taxable services that have been used beyond the place of removal. The Bench accepted the appellant's case that the place of removal in the facts was the factory gate and that where the exporter accepted delivery obligations of the goods up to the clients' premises (thereby the services were used beyond the place of removal), the inland haulage services paid by the exporter qualify as specified services. The Tribunal followed its earlier decisions in JAIN IRRIGATION SYSTEMS LTD and Polyplex Corporation Ltd, which held that service tax paid on inland haulage and related services borne by the exporter is eligible for refund where such services are used for export and the exporter bears the charges. Applying those precedents to the facts, the impugned orders denying refund were found unsustainable and were set aside to the extent contested before the Bench.

Impugned order modified; appeal allowed and refund of service tax on inland haulage charges granted with consequential relief according to law.

Final Conclusion: The Tribunal allowed the appeal, holding that service tax paid on inland haulage charges borne by the exporter and used beyond the place of removal for export is refundable under Notification No.41/2012-ST; impugned orders set aside to that extent with consequential relief.

Leasing/rental of workwear - deemed sale versus service tax - transfer of possession and effective control - ownership versus possession - application of precedent and following earlier Tribunal/Commissioner (Appeals) decisions

Leasing/rental of workwear - deemed sale versus service tax - transfer of possession and effective control - ownership versus possession - Whether the appellant's activity of supplying workwear on rent/lease amounts to a service attracting service tax or constitutes a deemed sale for which VAT was discharged - HELD THAT: - The Tribunal applied the contractual terms and earlier decisions in the appellant's own case and of the Chandigarh Bench and Commissioner (Appeals), concluding that under the agreements the workwear, though owned by the appellant, is delivered to and remains in the exclusive possession and effective control of the customer during use. The appellant retained ownership and exclusive responsibility for washing, maintenance and related services, and the customer had exclusive use of the garments; accordingly the transaction does not constitute a service in the nature of supply of tangible goods attracting service tax. In view of these consistent findings in earlier orders on the same issue and identical contractual terms, the Tribunal found it unnecessary to re-open detailed discussion and followed those precedents to set aside the demand.

Demand for service tax set aside; appeal allowed and impugned order quashed for the stated periods

Final Conclusion: Following its earlier decision and the consistent findings of the Chandigarh Bench and Commissioner (Appeals) on identical contractual arrangements, the Tribunal held that renting/ leasing of workwear did not attract service tax for the periods in dispute and allowed the appeal, setting aside the impugned order with consequential relief if any.

Allowability of CENVAT credit on input services - definition of input service under the CENVAT Credit Rules, 2004 - services used in relation to storage up to the place of removal - place of removal under Section 4(3)(c)(iii) of the Central Excise Act, 1944 - credit for commercial or industrial construction service used for setting up a factory

Allowability of CENVAT credit on input services - definition of input service under the CENVAT Credit Rules, 2004 - services used in relation to storage up to the place of removal - place of removal under Section 4(3)(c)(iii) of the Central Excise Act, 1944 - credit for commercial or industrial construction service used for setting up a factory - CENVAT credit was allowable in respect of service-taxed services relating to depots/warehouses outside the factory where goods were cleared, including rent and construction services used for storage up to the place of removal and for setting up the factory. - HELD THAT: - The Tribunal accepted the appellant's contention that the disputed credits related to (a) commercial or industrial construction services used for setting up the factory and (b) rental and related services for depots/warehouses from which finished goods were cleared. Relying on the definition of input service in the CENVAT Credit Rules, 2004 as it stood prior to 01.04.2011, services used in relation to setting up a factory and services used for storage up to the place of removal fall within the ambit of input services. Further, Section 4(3)(c)(iii) of the Central Excise Act, 1944 treats the warehouse from which goods are cleared as the place of removal; therefore services procured for such warehouses are in relation to the manufacture and clearance of final products. The Tribunal followed the coordinate bench decision dealing with identical facts and applied that ratio to hold the impugned demand unsustainable. Consequential benefits, if any, were directed to follow the allowance of credit. [Paras 5, 6, 7]

Impugned orders demanding recovery of CENVAT credit and penalties were set aside and the appeals allowed, the disputed credits being admissible as input services.

Final Conclusion: Appeals allowed; demands and penalties set aside insofar as credits related to construction services used for setting up the factory and to services (including rent) used for storage up to the place of removal/warehouses outside the factory, with consequential benefits as per law.

Interest on differential duty - provisional price at time of removal - date from which interest is chargeable - duty payable for every removal on or before the 6th day of the succeeding month - Section 11AB

Interest on differential duty - provisional price at time of removal - date from which interest is chargeable - Section 11AB - When duty is initially paid on a provisional price at the time of removal and differential duty is paid later upon finalisation of price, interest is chargeable from the date relating to the removal (the due date) up to the date of payment of the differential duty. - HELD THAT: - The Tribunal applied the binding decision of the Larger Bench of the Hon'ble Supreme Court in Steel Authority of India Ltd, which held that where price at removal was provisional and subsequently varied retrospectively, the later-determined price is to be treated as the value at the time of removal. Interpreting the statutory scheme and the rules (including the requirement that duty for every removal be paid on or before the 6th day of the succeeding month), the Court concluded that interest accrues with reference to the month for which duty is determined rather than the month in which final assessment is made. Consequently, interest on the differential duty is chargeable from the due date corresponding to the date of clearance/removal of goods until the date of payment of the differential duty.

The appellant is liable to pay interest on the differential duty from the due date linked to the date of removal of the goods until payment of the differential duty; the impugned order is upheld and the appeal is dismissed.

Final Conclusion: Appeal dismissed; interest on the differential duty is payable from the due date determined by the date of removal/clearance of the goods until the date of payment of the differential duty, in accordance with the Supreme Court's ruling in Steel Authority of India Ltd.

Related person - Rule 8 of the Valuation Rules (110% of cost of production) - valuation of excisable goods on transfer between units of the same legal entity - captive consumption - extended period of limitation - fraud or wilful suppression

Related person - Rule 8 of the Valuation Rules (110% of cost of production) - valuation of excisable goods on transfer between units of the same legal entity - captive consumption - Rule 8 of the Valuation Rules is not applicable to raw coal transferred from the appellant's coal producing unit to its washery unit and the transferor and transferee units cannot be treated as different "persons" for invoking related person valuation. - HELD THAT: - The Tribunal accepted that the transferor (coal producing unit) and the transferee (washery) are parts of the same single legal entity, BCCL, and on the authority of India United Mills held that no different "persons" exist between units of the same company so as to found a show cause notice predicated on a "related person" transaction. Further, Rule 8 applies where excisable goods are not sold but used captively by the assessee or consumed on his behalf in the production or manufacture of other articles. The Tribunal found that the transfer of raw coal to the washery did not amount to captive consumption by a different person and that washing/beneficiation of coal is not production or manufacture of a different article; accordingly the mechanical invocation of Rule 8 was unsustainable. Because the show cause notice's entire foundation rested on a misconceived notion of a "related person" and the mechanical application of Rule 8 without appreciating absence of captive consumption or manufacture, the demand based thereon was vitiated. [Paras 8, 9]

Demand confirmed under Rule 8 quashed; Rule 8 held not applicable and units held not to be different persons for valuation purpose.

Extended period of limitation - fraud or wilful suppression - Extended period of limitation was not invocable in absence of positive evidence of fraud or wilful suppression. - HELD THAT: - The Tribunal examined the show cause notice and found no positive material in the proceedings establishing fraud or deliberate suppression of facts that would justify invocation of the extended limitation period. In consequence the extended period was not applicable to the demand set out in the impugned order. [Paras 10]

Extended period of limitation not attracted; demand cannot be sustained on that ground.

Final Conclusion: The impugned adjudication order confirming duty and penalty is set aside; the appeal is allowed with consequential relief as per law.

Classification as other fertilizers (Heading 3105) - Classification as plant growth regulators (Heading 3808) - essential constituent under Note 6 to Chapter 31 - CBEC circulars on classification of micronutrients - applicability of exemption entry for goods of Chapter 31

Classification as other fertilizers (Heading 3105) - essential constituent under Note 6 to Chapter 31 - CBEC circulars on classification of micronutrients - Whether the chelated micronutrient mixtures (Chelated Zinc, Chelated Iron, MNM Chelated) are classifiable as 'other fertilizers' under Heading 3105 and thus eligible for the Chapter 31 exemption, notwithstanding low percentages of nitrogen in the product. - HELD THAT: - The Tribunal examined the character of the subject goods produced by chelation with EDTA and containing nitrogen derived from ammonia. It noted the absence of any minimum prescribed percentage of nitrogen in Note 6 to Chapter 31 and that the CBEC circulars (including the circular dated 6.4.2016) do not prescribe a minimum percentage to determine whether an element is an 'essential constituent'. The Tribunal relied on the Customs laboratory test reports showing presence of nitrogen (1.8% in chelated zinc, 2.5% in MNM chelated and 3.3% in chelated iron) and observed that the department produced no evidence to show that the detected nitrogen was not an essential constituent of the products. The Tribunal further applied its earlier decision in the appellant's own case for an earlier period, which held that presence of nitrogen, even in low percentages, satisfies Note 6 where the element acts as an essential fertilising constituent. On that basis, the Tribunal concluded there was no reason to classify the goods under Heading 3808 as plant growth regulators and held them to be classifiable under Heading 3105 as other fertilizers. [Paras 9]

The chelated micronutrient mixtures are classifiable as 'other fertilizers' under Heading 3105; the low percentage of nitrogen does not preclude them from being an 'essential constituent' under Note 6 and the goods are not liable to classification as plant growth regulators under Heading 3808.

Final Conclusion: The impugned orders for the stated periods are set aside and the appeals are allowed; consequential reliefs, if any, shall follow as per law.

Input tax credit - reversal of input tax credit - stock transfer for job work and outward manufacture followed by return for sale within the State - invalidity of statutory provision to deny ITC where manufacture takes place outside the State - treatment of mismatch between purchaser's and seller's returns - remand for fresh adjudication and centralized procedure for mismatch cases

Input tax credit - reversal of input tax credit - invalidity of statutory provision to deny ITC where manufacture takes place outside the State - Legality of reversing input tax credit claimed on goods purchased within the State and sent outside the State for conversion where finished goods are returned and sold within the State. - HELD THAT: - The Court applied the legal conclusions in Patina Gold Ornaments Pvt. Ltd. (cited) holding that Clause (ii) of Section 19(2) of the Tamil Nadu VAT Act, 2006 is invalid insofar as it denies availment of ITC for inputs purchased in-state, sent outside the State for conversion and returned for sale within the State. The Court further relied on the same authority to reject the respondent's attempt to retain ITC by invoking Section 19(4) to the extent of the rate prescribed therein, since that would render the relief ineffectual where the subject goods were taxed at a lower rate. Applying those principles to the assessment under challenge, the Court set aside the impugned assessment order insofar as it reversed ITC, and directed reassessment in conformity with the precedents cited, after affording opportunity to the petitioner. [Paras 5]

Assessment order is set aside to the extent it reverses input tax credit; respondents directed to adjudicate afresh in accordance with the Court's precedents and after giving opportunity to the petitioner.

Treatment of mismatch between purchaser's and seller's returns - remand for fresh adjudication and centralized procedure for mismatch cases - Whether assessments based on alleged mismatch between purchaser's and seller's returns can be sustained without a thorough inter-circle/intra-departmental enquiry and adherence to fair procedure. - HELD THAT: - The Court followed earlier decisions including JKM Graphics and related orders, holding that statutory entitlement to ITC requires production of original tax invoices and that reversal solely on the basis of a mismatch, without a detailed inquiry and inter-dealer consultation, is impermissible. The Court endorsed remand to the assessing authority to issue fresh show-cause notice and undertake a thorough enquiry in consultation with the assessing officers of the other end dealer, and called for evolution of a centralized mechanism and fair procedure for dealing with mismatch cases. The Court also observed that petitioners cannot object to limitation when fresh proceedings are properly initiated pursuant to the remand. [Paras 4, 5]

Matters relating to mismatch are remanded for fresh consideration; assessing authorities to issue fresh show-cause notices, conduct thorough enquiries in consultation with other assessing officers and follow the procedures indicated in the cited authorities.

Final Conclusion: Writ petition allowed; the assessment order dated 30.04.2015 (proceedings TIN:33830620047/2012-13) is set aside. Respondents are directed to adjudicate afresh in accordance with the cited precedents, affording opportunity to the petitioner; connected miscellaneous petition closed; no costs.

Power of Magistrate to implead accused under Section 319 CrPC - Requirement of statutory notice under Section 138 of the Negotiable Instruments Act - Cognizance under Section 142 of the Negotiable Instruments Act and limitation/proviso - Burden on office-bearer under the proviso to Section 141(1) of the Negotiable Instruments Act

Power of Magistrate to implead accused under Section 319 CrPC - Requirement of statutory notice under Section 138 of the Negotiable Instruments Act - Whether the learned JMFC erred in refusing to implead Mukta Developers and its partner as accused under Section 319 CrPC when the cheques bore the firm's stamp and signatures - HELD THAT: - The Court accepted the factual finding that the cheques bore a stamp indicating "Mukta Developers" and two signatures beneath the stamp, and that the complainant's notice and pleadings did not name or serve Mukta Developers or the other signatory prior to filing the complaint. The learned JMFC considered the trial evidence and concluded the complainant was aware of the transaction and the firm from the cheques themselves; consequently, the late attempt to implead the firm during trial could not be treated as a fresh discovery excusing prior notice requirements. Reliance upon the observations in Amol Shripal Sheth was noted, but the Court held that the statutory scheme under the Negotiable Instruments Act requires adherence to the notice and related provisos; the impleading application could not succeed where no statutory notice had been served on the firm and the complainant's explanation for delay was unconvincing. [Paras 3, 6, 11, 12]

The JMFC did not err in refusing to implead Mukta Developers and its partner as accused under Section 319 CrPC because the cheques and related material showed the complainant's prior knowledge and no statutory notice had been served on the firm.

Cognizance under Section 142 of the Negotiable Instruments Act and limitation/proviso - Burden on office-bearer under the proviso to Section 141(1) of the Negotiable Instruments Act - Whether the attempt to treat the impleading application as a complaint against Mukta Developers was barred by limitation under Section 142(1)(b) of the Negotiable Instruments Act and whether sufficient cause for delay was shown - HELD THAT: - The Court examined the non-obstante language of Section 142 and the proviso permitting cognizance after the prescribed period only if sufficient cause is shown. The application to implead the firm amounted practically to initiating complaint proceedings against Mukta Developers more than two and a half years after the expiry of the period contemplated by the proviso to Section 138. The explanation that the complainant only became aware during trial was rejected on the material: the cheque itself disclosed the firm's identity and the notice addressed to the accused referenced c/o Mukta Developers. In these circumstances there was no justification to condone the delay under the proviso to Section 142(1)(b). The Court also noted the statutory allocation of burden on office-bearers under the proviso to Section 141(1) but found no basis to relieve the complainant from the requirement of timely notice and complaint. [Paras 10, 11, 12]

The attempt to proceed against Mukta Developers was time-barred under Section 142(1)(b) of the Negotiable Instruments Act, and the explanation for delay was insufficient; therefore cognizance could not be taken.

Final Conclusion: Leave to file the appeal is rejected; the order of the JMFC refusing to implead the firm and dismissing related applications is upheld on the grounds of non-compliance with the statutory notice and limitation provisions of the Negotiable Instruments Act, while leaving open any civil remedies.

Material alteration - effect under Section 87 of the Negotiable Instruments Act - Presumption of issuance for discharge of liability and its rebuttal under Section 139 of the Negotiable Instruments Act - Appreciation of evidence not permissible at the stage of quashing under Section 482 Cr.P.C. - Ingredients of offence under Section 138 of the Negotiable Instruments Act where initial credit is reversed - Liability of a party where cheque issued from a jointly held account and cheque was re handed over by non signatory

Material alteration - effect under Section 87 of the Negotiable Instruments Act - Appreciation of evidence not permissible at the stage of quashing under Section 482 Cr.P.C. - Whether the complaint and summoning order could be quashed on the ground of alleged material alteration of the cheque under Section 87 NI Act. - HELD THAT: - The Court held that Section 87 renders an instrument void only as against a party who did not consent to a material alteration, but whether the alteration was made by the payee or with the drawer's consent is a disputed question of fact. Such factual disputes cannot be resolved in proceedings under Section 482 Cr.P.C. The petitioners must adduce evidence at trial to rebut statutory presumptions; the High Court may not appreciate evidence or decide contested factual issues at the quash stage. Reliance on Veera Exports was misplaced because the question of who effected or consented to the alteration requires trial evidence. [Paras 6, 7, 9]

The contention that the complaint must be quashed under Section 87 NI Act for material alteration is rejected; the issue is factual and must be decided at trial.

Ingredients of offence under Section 138 of the Negotiable Instruments Act where initial credit is reversed - Presumption of issuance for discharge of liability and its rebuttal under Section 139 of the Negotiable Instruments Act - Whether offence under Section 138 NI Act is made out where the cheque was initially credited on presentation but the credit entry was subsequently reversed. - HELD THAT: - The Court found that initial credit followed by reversal (on account of protest/complaint) resulting in the amount remaining unpaid satisfies the ingredients of Section 138. The statutory presumption that a cheque was issued for discharge of liability remains operative unless rebutted by evidence; the facts alleged by the complainant that the credit was reversed and payment ultimately remained unpaid sustain the complaint for trial. [Paras 8, 10]

The argument that the offence is not made out because the cheque was initially encashed is rejected; the reversal of the credit leaves the cheque unpaid and the offence ingredients are made out for the purposes of summoning.

Liability of a party where cheque issued from a jointly held account and cheque was re handed over by non signatory - Appreciation of evidence not permissible at the stage of quashing under Section 482 Cr.P.C. - Whether proceedings are maintainable against petitioner No.1 who is not a signatory to the cheque. - HELD THAT: - The Court noted that petitioner No.1 had contractual dealings (lease) with the complainant, the cheque was issued from a jointly held account, and the complainant alleged that petitioner No.1 re handed the altered cheque signed by petitioner No.2. These allegations raise a triable issue as to petitioner No.1's role and liability; such factual contentions cannot be resolved on a quash petition and require evidence at trial. Accordingly, the contention that proceedings are not maintainable against petitioner No.1 was rejected. [Paras 5, 11]

Proceedings against petitioner No.1 are maintainable; the plea that he cannot be proceeded against as a non signatory is rejected at the quash stage.

Final Conclusion: The High Court dismissed the petition and upheld the summoning order: disputes as to material alteration, reversal of encashment, and the role of the non signatory raise triable issues and cannot be decided under Section 482 Cr.P.C.; the matters must be adjudicated at trial.

Anticipatory bail - custodial interrogation - cooperation with investigation - conditions of bail - police remand - prima facie observations not binding on trial court - Siddharam Satlingappa Mhetre principle

Anticipatory bail - custodial interrogation - Siddharam Satlingappa Mhetre principle - Grant of anticipatory bail to the applicant in connection with I-C.R. No. 06 of 2021. - HELD THAT: - Having considered the nature and gravity of the allegations, the material placed on record including pre-FIR correspondence and documents relied on by the applicant, absence of past criminal antecedents, and the settled law cited from the Apex Court, the Court found that custodial interrogation of the applicant is not required at this stage and was inclined to grant anticipatory bail. The Court noted it was not undertaking a detailed examination of evidence but applied the principles governing anticipatory bail as reiterated in Siddharam Satlingappa Mhetre and earlier precedents.

Application under Section 438 CrPC allowed and anticipatory bail granted.

Conditions of bail - cooperation with investigation - Imposition of specific conditions as part of the anticipatory bail order. - HELD THAT: - Bail was made subject to the applicant executing a personal bond with one surety and complying with conditions that include cooperating with investigation, making himself available for interrogation, attending the police station on a specified date and time, not influencing witnesses or tampering with evidence, furnishing and not changing address without permission, and not leaving the country without the trial court's leave (including depositing passport if any). These conditions were imposed as reasonable safeguards to ensure attendance and non-interference with the investigation.

Anticipatory bail granted subject to the enumerated conditions.

Police remand - custodial interrogation - Right of the Investigating Officer to apply for police remand and the procedural consequences if such an application is made. - HELD THAT: - The Court expressly left open the Investigating Officer's right to apply to the competent Magistrate for police remand if considered proper. The Magistrate was directed to decide any such application on merits. The applicant was ordered to remain present before the Magistrate when such an application is heard and thereafter, if remanded, to be treated as in judicial custody for the purpose of entertaining the prosecution's remand application; upon completion of any period of police remand the applicant shall be released immediately subject to the conditions of this anticipatory bail order. The Court preserved the accused's right to seek appropriate remedies against any remand order.

Investigating Agency permitted to seek remand; Magistrate to decide on merits; limited consequences of remand provided and applicant's rights preserved.

Prima facie observations not binding on trial court - Effect of the High Court's prima facie observations on the trial court. - HELD THAT: - The Court clarified that the concerned trial court shall not be influenced by the prima facie observations made by the High Court in this anticipatory bail order, preserving the trial court's impartial adjudicatory function and ensuring that the order granting anticipatory bail does not pre-judge issues for trial.

Trial court directed not to be influenced by the High Court's prima facie observations.

Final Conclusion: Anticipatory bail under Section 438 CrPC granted to the applicant in respect of FIR I-C.R. No. 06 of 2021, subject to specified conditions; Investigating Officer may apply for police remand to the Magistrate who shall decide on merits, and the trial court shall not be influenced by the High Court's prima facie observations.

Quashing of criminal proceedings under Section 482 Cr.P.C. - exercise of inherent jurisdiction sparingly and cautiously - appreciation of evidence not permissible at quashing stage - existence of triable issues to be determined at trial - entrustment of property and ingredients of criminal breach of trust - cognizance after filing of charge-sheet

Quashing of criminal proceedings under Section 482 Cr.P.C. - appreciation of evidence not permissible at quashing stage - cognizance after filing of charge-sheet - Whether the High Court was justified in quashing the criminal proceedings after completion of investigation, filing of charge-sheet and cognizance, by entering into merits of the case. - HELD THAT: - The Court held that the High Court exceeded its jurisdiction by quashing the criminal proceedings after the Investigating Officer had completed the investigation, filed the charge-sheet and the Magistrate had taken cognizance. While the High Court, in exercise of its inherent powers under Section 482 Cr.P.C., may quash proceedings in exceptional cases, it must not act as an investigating agency or appellate court and is not permitted to appreciate evidence or enter into the merits as if conducting a trial. Where material has been collected during investigation and a charge-sheet filed, the existence of prima facie material (and serious triable issues arising therefrom) ought to be left to be examined at trial rather than decided on a quashing application. Applying these principles, the High Court's consideration of contested factual matters and its substitution of merits-based appraisal for trial procedure was impermissible, warranting setting aside of the quashing order. [Paras 9, 13]

High Court erred in quashing the criminal proceedings at the stage after investigation and filing of charge-sheet; that order is set aside and trial to proceed.

Existence of triable issues to be determined at trial - entrustment of property and ingredients of criminal breach of trust - Whether the High Court was correct in concluding that no case was made out for offence under Section 406 IPC and that questions of entrustment and genuineness of documents should be left to civil proceedings. - HELD THAT: - The Court held that it was premature for the High Court to conclude that no case under Section 406 IPC was made out. The joint notarized affidavit dated 27.10.2010 and other documentary conflicts (including two instruments of the same date stating differing facts about payment and possession) were seriously disputed and constituted triable issues. Given allegations of payment, disputed possession, and a dishonoured cheque, the question of entrustment of property could not be finally determined on a quashing application and required adjudication at trial. Similarly, parallel civil proceedings and disputes over document genuineness do not automatically preclude criminal investigation where criminal ingredients are alleged and triable issues exist. [Paras 10, 11, 13]

It was premature to hold that no case under Section 406 IPC was made out; these aspects are triable and must be examined at trial.

Quashing of criminal proceedings under Section 482 Cr.P.C. - existence of triable issues to be determined at trial - Whether the High Court was justified in observing that the complainant lacked locus because the power of attorney was not placed on record. - HELD THAT: - The Court observed that the High Court's finding on locus was premature. The FIR specifically recorded that a power of attorney had been executed by the owner in favour of the complainant, the investigation proceeded with recording of statements of complainant, accused and independent witnesses, and the matter therefore required scrutiny at trial. Whether the complainant possessed locus by virtue of a power of attorney is a factual question to be examined on the basis of evidence during trial rather than decided on a Section 482 petition. [Paras 12, 13]

The High Court's conclusion that the complainant had no locus was unsustainable; locus is a triable factual issue to be decided at trial.

Final Conclusion: The appeal is allowed; the High Court's order quashing the criminal proceedings is set aside and the trial shall proceed in accordance with law on the merits and evidence without being influenced by the observations in these proceedings.