TaxTMI Updates e-Newsletter
Oct 15,2016

Condonation of delay - dismissal for delay / want of prosecution - judicial interference with High Court orders in respect of dismissal for delay

Condonation of delay - Delay in filing the special leave petition was condoned. - HELD THAT: - The Court exercised its discretion to condone the delay in filing the special leave petition. Although the High Court had dismissed an earlier petition for delay, the Supreme Court independently allowed condonation of the delay in presentation of the present special leave petition, indicating acceptance of the explanation for the procedural lapse insofar as filing before this Court is concerned.

Delay in filing the special leave petition is condoned.

Dismissal for delay / want of prosecution - judicial interference with High Court orders in respect of dismissal for delay - Whether this Court should interfere with the High Court's order dismissing the petition on the ground of delay. - HELD THAT: - The Court considered the impugned High Court order which dismissed the petition for delay and found no reason to interfere. The Supreme Court agreed with the High Court's conclusion that there was no justifiable reason for the earlier delay which led to dismissal. On that basis, despite having condoned the delay for filing the special leave petition, the Court concluded that interference with the High Court's order was not warranted.

No interference with the impugned order; the High Court was right to dismiss the petition on the ground of delay.

Final Conclusion: The special leave petition is dismissed; delay in filing the petition before this Court is condoned and any pending applications stand disposed of.

Deduction under Section 80-O - gross receipts versus income included in total income - Overriding effect of Section 80AB on Chapter VIA deductions - Allocation of corporate expenses with nexus to exempt income - Advisory jurisdiction under Section 256(1) of the Income Tax Act, 1961

Deduction under Section 80-O - gross receipts versus income included in total income - Overriding effect of Section 80AB on Chapter VIA deductions - Deduction under Section 80-O is to be computed with reference to the amount of income of that nature as included in the gross total income after applying the provisions of the Act, and not simply on gross receipts without application of Section 80AB. - HELD THAT: - The Court examined whether the deduction under Section 80-O is to be allowed on gross receipts or only on that part of receipts which forms part of the assessee's total income after applying the Income-tax Act. Reliance was placed on this Court's decision in Asian Cable Corporation Ltd. (No.2) which held that income earned in foreign exchange for services must be considered on a net basis pursuant to Section 80AB. The Apex Court's decision in A. M. Moosa was noted for the proposition that Section 80AB has an overriding effect over all Sections of Chapter VIA. The statement of case and earlier Tribunal directions showed that corporate expenses must be taken into account to the extent they have nexus with the earning of the income; however the specific controversy referred was whether Section 80-O could be applied dehors Section 80AB. The Court declined to enlarge the reference to a separate question of prorata allocation on a notional basis, and answered the referred question by holding that Section 80AB governs computation of the amount eligible for deduction under Section 80-O, so that the deduction cannot be allowed simply on gross receipts ignoring the computation mandated by the Act. [Paras 8, 9, 10, 12, 14]

Answered in the affirmative against the assessee: deduction under Section 80-O is to be restricted to that part of receipts included in gross total income after applying Section 80AB and other provisions of the Act.

Final Conclusion: Reference answered against the assessee: deduction under Section 80-O is not to be allowed on gross receipts independent of computation under the Act; Section 80AB applies and the deduction must be computed with regard to income as determined under the Act. Reference disposed of; no order as to costs.

Maintainability of writ petition in presence of a statutory appeal - election between alternative remedies - parallel remedies and multiplicity of litigation - extraordinary circumstances exception to the alternative remedy rule - transfer of assessment proceedings without following prescribed procedure - service of notice under assessment proceedings and dispute as to receipt

Maintainability of writ petition in presence of a statutory appeal - election between alternative remedies - parallel remedies and multiplicity of litigation - Whether the writ petition under Article 226 is maintainable where the petitioner has already filed the statutory appeal against the same assessment order. - HELD THAT: - The Court held that where alternative remedies exist the aggrieved party must elect one forum and cannot pursue concurrent remedies in multiple forums in respect of the same subject matter, since permitting parallel remedies would lead to multiplicity of litigation and risk of conflicting orders. The Court applied established principle that a petitioner who has availed the statutory appellate remedy prior to or while invoking writ jurisdiction cannot ordinarily maintain a writ petition unless there exist extraordinary circumstances rendering the statutory remedy ineffectual. The petition disclosed no such extraordinary situation; the pendency of the appeal was not even disclosed in the writ petition and there was no material showing that the statutory remedy would be futile or inadequate. In these circumstances the Court declined to exercise discretionary writ jurisdiction and held the petition not maintainable. [Paras 5, 6, 15, 16, 17]

Writ petition dismissed as not maintainable; parties to bear their own costs and pending application disposed of.

Extraordinary circumstances exception to the alternative remedy rule - transfer of assessment proceedings without following prescribed procedure - service of notice under assessment proceedings and dispute as to receipt - Whether any exceptional circumstances existed to warrant interference by the writ Court with the assessment and transfer orders despite the availability and invocation of the statutory appeal. - HELD THAT: - The Court considered the petitioner's contentions concerning improper transfer of the case and disputed service of notices but found no extraordinary or exceptional circumstances that would justify bypassing the appellate remedy. The Court observed that the petition did not adequately disclose the pendency of the statutory appeal and there was no material to show that the appellate process would be inefficacious or that orders were being wilfully flouted. Absent such a showing, the discretionary jurisdiction under Article 226 was not exercisable to entertain the petition challenging transfer or assessment orders. [Paras 2, 3, 4, 16, 17]

No extraordinary circumstances found; Court refused to interfere and dismissed the petition, leaving the appellant to pursue the statutory appeal.

Final Conclusion: The High Court dismissed the writ petition challenging transfer and assessment orders relating to Assessment Year 2001-2002 as not maintainable because the petitioner had already availed the statutory appellate remedy; no extraordinary circumstances existed to warrant interference by the writ Court, and the appellate authority shall decide the appeal uninfluenced by the observations in this order.

Deduction under Section 80IB(10) - inclusion of terrace and canopy as part of residential unit - plan approval and commencement of construction for applicability of amended Section 80IB(10)(d) - statutory disallowance under Section 40A(ia) and its impact on computation of deduction under Section 80IB

Deduction under Section 80IB(10) - inclusion of terrace and canopy as part of residential unit - Whether the Tribunal was justified in granting deduction under Section 80IB(10) by excluding terrace and canopy from the residential unit when used exclusively by respective units - HELD THAT: - The Court recorded that this question stands concluded against Revenue by earlier precedent relied upon by the parties. Learned Counsel for Revenue conceded that the issue is covered by this Court's decision in Commissioner of Income Tax Vs. Happy Home Enterprise and by the Court's order in Revenue's appeal in Income Tax Appeal No.1628 of 2013 (CIT v. M/s. Raviraj Kothari Punjabi Associates). In view of those authorities, the question does not give rise to any substantial question of law and therefore is not entertained. [Paras 3]

Question not entertained as it is concluded by earlier decisions; no substantial question of law arises.

Plan approval and commencement of construction for applicability of amended Section 80IB(10)(d) - deduction under Section 80IB(10) - Whether the amended provisions of Section 80IB(10)(d) apply w.e.f. 01.04.2005 where plan was approved and construction commenced prior to that date - HELD THAT: - The Court accepted learned Counsel's concession that this issue is governed by the same line of authority referred to in the preceding issue. Consequently, the question does not present a substantial question of law in the present appeal and is not entertained for the reasons recorded. [Paras 3]

Question not entertained as covered by existing precedent; no substantial question of law arises.

Statutory disallowance under Section 40A(ia) and its impact on computation of deduction under Section 80IB - deduction under Section 80IB(10) - Whether the disallowance under Section 40A(ia) should be included in eligible profit for computing deduction under Section 80IB(1), thereby rendering Section 40A(ia) redundant - HELD THAT: - The Court observed that an identical question has been admitted in another appeal but distinguished the present facts: Revenue in the instant case does not dispute the assessee's entitlement to the benefit under Section 80IB. Even if the expenditure were disallowed for failure to deduct tax at source and added back to income, that additional income would still qualifyingly attract the 100% deduction under Section 80IB(10) on the present facts. Given this factual position, admitting the question here would be academic. The Court expressly limits its conclusion to the facts of this case where entitlement under Section 80IB is not disputed by Revenue. [Paras 4]

Question not entertained as academic in the factual context of this appeal; no substantial question of law is answered.

Final Conclusion: The appeal is dismissed; questions raised by Revenue are not entertained for the reasons stated, and there is no order as to costs.

Penalty for failure to furnish return under Section 271F - Reasonable cause for exemption from penalty under Section 273B - Effect of seizure and delayed furnishing of seized documents on timely filing of returns - Maintainability of writ petition challenging levy of penalty - Allegation of malafide conduct by revenue officer - Bonafide mistake in description of counter affidavit

Penalty for failure to furnish return under Section 271F - Reasonable cause for exemption from penalty under Section 273B - Effect of seizure and delayed furnishing of seized documents on timely filing of returns - Penalty levied under Section 271F for non-filing of returns for the assessment years 2008-09 to 2014-15 was not sustainable and was set aside. - HELD THAT: - The Court examined whether the petitioner had a reasonable cause for delay in filing returns such that protection under Section 273B (applicable to proceedings under Section 271F) would apply. The materials show that documents and books were seized in a search on 27.11.2013 and the petitioner and her husband repeatedly sought copies; photostat copies and seized materials were furnished on 02.06.2015. The Assessing Officer had itself recorded the petitioner's explanation of ill-health and surgery and complied with the request for copies. Given that the department accepted and facilitated furnishing of seized documents before completion of assessment, the Court held that the cause pleaded for belated filing was reasonable. Applying that yardstick to penalty proceedings under Section 271F, the Court concluded that penalty could not be sustained where a reasonable cause for non-filing existed and therefore the impugned penalty orders had to be set aside. [Paras 10, 14, 15, 16, 17]

Penalty orders under Section 271F for assessment years 2008-09 to 2014-15 are set aside on the ground of reasonable cause for delay in filing returns.

Allegation of malafide conduct by revenue officer - Allegations of malafide conduct by the Assessing Officer were rejected as vague and not germane to the legal issue. - HELD THAT: - The petitioner contended that the penalty proceedings were tainted by malafide because she had earlier approached the Court regarding the officer's functioning. The Court found these allegations vague and not material to the determinative question of whether there was reasonable cause for non-filing. The Court therefore did not accept the malafide contention and treated it as not affecting the legal decision on penalty. [Paras 18]

Allegations of malafide are eschewed and do not affect the setting aside of the penalty on other grounds.

Bonafide mistake in counter affidavit - Maintainability of writ petition challenging levy of penalty - Incorrect description in the counter affidavit (as counter of the first respondent) was a bonafide mistake and did not vitiate the proceedings; maintainability objections based on alternate remedy were not determinative in the circumstances. - HELD THAT: - The Court noted that the counter affidavit, although described incorrectly in its title, was filed on behalf of the Assessing Officer and the misdescription was a bona fide mistake. The explanation offered by Revenue was accepted. Additionally, while the Revenue relied on alternate remedy and earlier authorities, the Court observed that writ jurisdiction can be exercised where good grounds exist; on the facts the Court proceeded to decide the petition on merits and grant relief. The procedural defect in the counter affidavit therefore did not preclude adjudication. [Paras 19]

The misdescription in the counter affidavit is a bonafide mistake and is acceptable; it does not prevent disposal of the petition on merits.

Final Conclusion: The writ petition is allowed; the penalty orders under Section 271F for the assessment years 2008-09 to 2014-15 are set aside on the ground that the petitioner has established a reasonable cause for delay in filing returns. Allegations of malafide are rejected; the procedural misdescription in the counter affidavit is held to be a bonafide mistake. No costs.

Arm's Length Price - Transactional Net Margin Method (TNMM) - application of Rule 10B(1)(e) to TNMM - comparability analysis - filters in transfer pricing - segmental data - Profit Level Indicator (PLI) - Operating Profit to Operating Cost (OP/OC)

Transactional Net Margin Method (TNMM) - comparability analysis - filters in transfer pricing - segmental data - Operating Profit to Operating Cost (OP/OC) - Validity of excluding certain comparable companies from the set used for determining the Arm's Length Price under the TNMM for AY 2011-12. - HELD THAT: - The Tribunal excluded four of the comparables relied upon by the Assessing Officer/Transfer Pricing Officer on the ground that relevant segmental data necessary for an accurate TNMM comparison was not available or could not be reliably ascertained. The Court accepted the ITAT's approach that TNMM requires application of appropriate filters based on accurate denominators - costs, sales or assets - as contemplated by the statutory methodology. Mere availability of a proportion of turnover allocable to software product sales does not ipso facto supply the detailed segmental information required to compute reliable Operating Profit to Operating Cost (OP/OC) ratios or other Profit Level Indicators (PLI). The decision distinguishes TNMM's requirement of accurate base-data from a CUP-type comparison and holds that approximation of segmental profitability can lead to materially incorrect ALP conclusions. Applying these principles to the record, the Court found no error in the ITAT's exclusion of the said comparables and rejected the revenue's contention that segmental data on the record was adequate to retain them. [Paras 10, 11]

The exclusion of the identified comparables from the comparable set for TNMM was upheld and the revenue's appeal dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal and upheld the Tribunal's exclusion of the specified comparables for the purpose of ALP determination under the TNMM for AY 2011-12, holding that TNMM requires accurate segmental data and appropriate filters and that available turnover proportions were insufficient to retain those comparables.

Speculative transaction - jobbing activity - Section 43(5) proviso (c) - set off of business loss - substantial question of law

Speculative transaction - jobbing activity - Section 43(5) proviso (c) - set off of business loss - Jobbing activity undertaken by the assessee to guard against business loss is not a speculative transaction within the meaning of Section 43(5) proviso (c) of the Act and the resulting loss is allowable as set off against business profits. - HELD THAT: - The Tribunal, following the order of the CIT(A), held that the transactions entered into by the assessee were jobbing transactions undertaken in the ordinary course of business to guard against business loss. On a plain reading of Section 43(5) proviso (c) of the Act, jobbing activity carried out to guard against loss falls outside the definition of speculative transaction. Consequently, the loss claimed on such jobbing transactions is not a speculative loss and may be set off against business profits. The Court agreed with this determinative construction of proviso (c) and observed that there was no dispute that the transactions were jobbing transactions; hence the statutory exclusion applied and the loss of Rs. 60.37 lakhs was allowable as set off. Having reached this conclusion, the Court found that the question as framed did not raise any substantial question of law requiring interference. [Paras 7, 8, 9]

The jobbing activity in the present facts is not a speculative transaction within Section 43(5) proviso (c); the loss is allowable as set off and the appeal does not raise a substantial question of law.

Final Conclusion: Appeal dismissed; the Tribunal's decision upholding that jobbing transactions done to guard against business loss are excluded from speculative transactions under Section 43(5) proviso (c) and that the loss is allowable as set off is affirmed.

Penalty under section 271(1)(c) for concealment or furnishing of inaccurate particulars of income - post-search return treated as a return filed under section 139 - deeming fiction of concealment in explanation 5 / explanation 5A to section 271(1)(c)

Penalty under section 271(1)(c) for concealment or furnishing of inaccurate particulars of income - post-search return treated as a return filed under section 139 - Validity of deletion by the Tribunal of the penalty levied under section 271(1)(c) where the assessee filed a return declaring the impugned on money receipts and the return was accepted in assessment without any addition. - HELD THAT: - The Tribunal found, and this Court concurs, that the assessee filed a return admitting the on money receipts within the accounting period relevant to the search and that the Assessing Officer framed the assessment accepting the return without making any addition. In those circumstances the deeming characterisation of concealment relied upon by Revenue was not attracted and there was no factual foundation for treating the subsequently filed return as an act of concealment or furnishing of inaccurate particulars. The Tribunal correctly followed the view of the jurisdictional High Court that where no addition is made following a post search return which is accepted in assessment, penalty under section 271(1)(c) is not leviable. Given that no income was sought to be evaded and the return was accepted, the imposition of penalty under section 271(1)(c) could not be sustained on the facts of the case. [Paras 3, 6]

Tribunal's deletion of the penalty was correct and is upheld.

Deeming fiction of concealment in explanation 5 / explanation 5A to section 271(1)(c) - scope for invoking explanation provisions to sustain penalty after search - Whether the Assessing Officer could validly invoke the deeming provisions (explanation 5 or 5A) to sustain penalty despite acceptance of the return. - HELD THAT: - The Court noted that the assessee itself was not directly subjected to search or survey but incriminating material emerged from a group search. While Revenue could have sought to rely upon the deeming fiction contained in explanation 5 (or explanation 5A as applicable) to bring the matter within the scope of penalty provisions post search, no such addition was made in the assessment. In absence of any finding of concealment or of tax sought to be evaded-and with the return admitted and accepted-there was no basis to invoke section 271(1)(c) against the assessee on the facts before the Court. Consequently, the Tribunal did not err in declining to sustain the penalty when the assessment contained no adverse addition. [Paras 6]

Although explanations to section 271 could in principle be relied upon after a search, on the facts (accepted return and no addition) the Assessing Officer could not sustain the penalty; Revenue's contention in this regard fails.

Final Conclusion: The tax appeal is dismissed; the Tribunal's deletion of the penalty under section 271(1)(c) is upheld as the assessee's post search return was accepted in assessment without addition and no concealment or tax evasion was established.

Assessment under section 153A in concluded proceedings - Requirement of incriminating material to disturb concluded assessments - Distinction between abated and unabated assessments under section 153A - Reassess versus assess under section 153A - Unexplained cash credit u/s 68

Assessment under section 153A in concluded proceedings - Requirement of incriminating material to disturb concluded assessments - Unexplained cash credit u/s 68 - Whether additions made as unexplained share application monies under section 68 in assessments framed under section 153A for AYs 2008-09 and 2009-10 (concluded on the date of search) could be sustained in the absence of any incriminating material found during the search - HELD THAT: - The Tribunal held that section 153A distinguishes between abated (pending) and unabated (concluded) assessment years and, therefore, where an assessment year stood concluded on the date of search (whether by assessment under section 143(3) or processing under section 143(1) with time for issuance of notice under section 143(2) expired), the Assessing Officer cannot disturb the finalised income for that year under section 153A unless incriminating material relatable to that concluded year is found in the course of the search. The Bench reasoned that this interpretation preserves the statutory bifurcation between 'assess' (relating to abated years) and 'reassess' (relating to concluded years where incriminating material is found) under section 153A, and cited and followed recent authoritative pronouncements of coordinate and higher fora including the decision of the Hon'ble Delhi High Court in Kabul Chawla and relevant Tribunal precedents such as ACIT vs Kanchan Oil Industries Ltd and DCIT vs Aggarwal Entertainment (Del Trib) , which support the requirement of some nexus to search material before disturbing concluded assessments. The AO's own remand report admitted absence of incriminating material pertinent to the concluded years. Since the question was decided on this preliminary legal ground, the Tribunal expressly refrained from pronouncing on the merits of the additions made under section 68. [Paras 10, 11]

Additions towards share application monies for AYs 2008-09 and 2009-10 cannot be sustained in the absence of any incriminating material found during the search; the appeals are allowed.

Final Conclusion: The Tribunal allowed the assessee's appeals for AYs 2008-09 and 2009-10, holding that concluded assessment years could not be disturbed under section 153A without incriminating material relating to those years; the Tribunal did not decide the merits of the additions under section 68.

Deduction under section 80IA(4) - Infrastructure facility (including airport and cargo facility) - Proviso to section 80IA(4) - transferee enterprise entitlement - Requirement of agreement with Central/State Government or statutory authority - Recognition/approval by government departments and 'Regulated Agent' status

Infrastructure facility (including airport and cargo facility) - Deduction under section 80IA(4) - Whether the cargo facility operated and maintained by the assessee constitutes an "infrastructure facility" eligible for deduction under section 80IA(4). - HELD THAT: - The Tribunal held that the Explanation to section 80IA(4) expressly includes airports within the definition of "infrastructure facility" and that cargo handling is an integral part of an airport. The factual matrix - GHIAL having developed the airport, Menzies having provided facilities, GHIAL leasing the cargo terminal to the assessee and the assessee having the responsibility to operate and maintain the cargo facility pursuant to the concession granted by the Government of India - places the assessee's activity squarely within the scope of operating and maintaining an infrastructure facility. The Tribunal accepted earlier coordinate decisions treating cargo/CFS operations as infrastructure for the purposes of section 80IA(4) and observed that each enterprise is entitled to deduction only in respect of the activity it carries on, avoiding any impermissible duplication of claims. On these grounds the cargo facility operated by the assessee was held to be an infrastructure facility eligible for deduction under section 80IA(4). [Paras 7]

Cargo facility operated and maintained by the assessee is an "infrastructure facility" within section 80IA(4) and eligible for deduction in relation to the activity carried on by the assessee.

Proviso to section 80IA(4) - transferee enterprise entitlement - Requirement of agreement with Central/State Government or statutory authority - Recognition/approval by government departments and 'Regulated Agent' status - Whether the assessee was required to have a separate agreement directly with the Central/State Government or a statutory authority, or whether the agreement/rights granted by GHIAL pursuant to the Government's concession and governmental recognitions suffice for claiming deduction under the proviso to section 80IA(4). - HELD THAT: - Relying on the proviso to section 80IA(4) and authoritative precedents where transferee enterprises operating under subcontract or sub-concession were held entitled to deduction, the Tribunal concluded that a direct, independent agreement between the assessee and the Government is not an indispensable condition for claiming deduction. The concession granted by the Government to GHIAL (recognising HIAL/GHIAL's right to grant service-provider rights and sub-rights) and the subsequent grant of operation/maintenance rights by GHIAL to the assessee, together with governmental recognitions (such as registration as a regulated agent and other approvals), satisfy the scheme envisaged by the proviso. The Tribunal rejected the narrow view that only an original transferor can claim deduction or that approvals by departments (e.g., Customs) are insufficient; it nonetheless observed that the mere regulatory label of "Regulated Agent" under the Aircraft (Security) Rules, 2011 does not by itself constitute a Government agreement, but in the present factual context the overall recognition and concessionary framework obviated the need for a separate agreement directly with the Government. The Tribunal also noted that the question whether GHIAL is a statutory body need not be decided for the present conclusion. [Paras 7]

A separate and independent agreement directly between the assessee and the Government is not necessary where the assessee derives its rights to operate and maintain the infrastructure facility from a concession/assignment by an entity (GHIAL) authorised by the Government; the proviso to section 80IA(4) covers such transferee enterprises.

Final Conclusion: The Tribunal allowed the appeals for AYs 2009-10, 2010-11 and 2011-12, holding that the cargo facility operated by the assessee is an infrastructure facility under section 80IA(4) and that the assessee need not have a separate agreement directly with the Government where it operates under rights granted by GHIAL pursuant to the Government's concession.

Technical services - facility versus service distinction - deduction of tax at source - disallowance under section 40(a)(ia) - Explanation 2 to Section 9(1)(vii) - scope of technical/managerial/consultancy services - application of binding precedent

Technical services - facility versus service distinction - deduction of tax at source - disallowance under section 40(a)(ia) - Whether settlement and custody fees paid to NSDL/CDSL constitute fees for technical services attracting TDS under Section 194J and, consequently, are disallowable under section 40(a)(ia). - HELD THAT: - The Tribunal examined whether the payments to NSDL/CDSL involved specialised, exclusive or customised services rendered by human efforts such that they would qualify as "technical services" for the purpose of TDS under Section 194J and the consequential disallowance under section 40(a)(ia). Relying on the reasoning of the Hon'ble Supreme Court in CIT v. Kotak Securities Ltd., the Tribunal noted that services which are fully automated, available to all users alike, lack exclusivity and do not cater to special individual needs of a user are facilities rather than "technical services." The Tribunal found that the activities of NSDL/CDSL in providing settlement and custody facilities are automated, common to all clients and not rendered as special or bespoke services involving a human technical element. Consequently, such payments do not fall within the ambit of "technical services" and are not subject to TDS under Section 194J; therefore no disallowance under section 40(a)(ia) can be sustained. The Tribunal further observed that the facts in the present case align with those considered by the Supreme Court and that the earlier contrary appellate orders based on the Bombay High Court view were superseded by the Supreme Court decision.

The addition of the amount treated as expenditure under "Settlement and Custody Fees" is deleted; the disallowance under section 40(a)(ia) is set aside and the appeal is allowed.

Final Conclusion: The Tribunal held that settlement and custody fees paid to NSDL/CDSL are payments for facilities and not for "technical services"; accordingly TDS under Section 194J was not attracted and the consequent disallowance under section 40(a)(ia) was deleted, allowing the appeal for AY. 2007-08.

Genuineness of purchases established by payment through account payee cheque and registered dealer records - inspector's / section 133(6) report cannot sustain addition unless enquiries are proper and responses confronted to assessee - balance sheet sundry creditor reconciled by opening/closing balances and corresponding purchases cannot be treated as unexplained income without further enquiry - transport/incidental charges forming integral part of purchase price - characterization as cost of goods and not a separate contract for services - non deduction under the TDS regime and applicability of section 194C/194I in assessment years determined by effective date - application of section 40(a)(ia) requires both duty to deduct tax and failure to deposit the deducted tax; short or wrong rate of deduction does not automatically trigger disallowance

Genuineness of purchases established by payment through account payee cheque and registered dealer records - inspector's / section 133(6) report cannot sustain addition unless enquiries are proper and responses confronted to assessee - Deletion of addition of Rs. 2,35,500/- for alleged unexplained purchases from M/s Konked International upheld - HELD THAT: - AO disallowed purchases because the departmental inspector could not trace the vendor and the notice under section 133(6) was returned unserved. The Tribunal found that payments were made by account payee cheque, the vendor was a registered dealer with sales tax authorities, and there was no defect in the assessee's books. The CIT(A)'s conclusion that mere non service of notice or an inspector's inability to locate the party did not establish non existence of the transaction was accepted. Reliance was placed on the jurisdictional precedent where payments by account payee cheque and bank encashment rebut the presumption of non existence. In absence of any other material impugning the transaction, the addition was unsustainable. [Paras 7]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Genuineness of purchases established by payment through account payee cheque and registered dealer records - inspector's / section 133(6) report cannot sustain addition unless enquiries are proper and responses confronted to assessee - Deletion of addition of Rs. 4,00,000/- as outstanding liability to M/s Bharat Somani upheld - HELD THAT: - AO treated the sundry creditor as unexplained since the notice under section 133(6) returned unserved. The CIT(A) recorded that payments (part by cheque) and supporting bills, RCs and bank statements were on record, and that AO's treatment was arbitrary. The Tribunal agreed that identity of the party was corroborated by account payee cheque payments and that the AO had not produced other material to displace the documentary evidence. Following the same rationale and authority relied upon in the earlier issue, the addition was unsustainable. [Paras 12]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Transport/incidental charges forming integral part of purchase price - characterization as cost of goods and not a separate contract for services - non deduction under the TDS regime and applicability of section 194C/194I in assessment years determined by effective date - Deletion of addition for non deduction of TDS on transport charges (Rs. 25,32,484/-) upheld for AY 2006 07 - HELD THAT: - CIT(A) found on facts that the suppliers billed transport separately but the total billed amount represented the purchase price; transport was incidental to the supply and suppliers were not transport contractors. The Tribunal observed that section 194C became applicable to individual assessee only from 1.6.2007 and the assessment year in question is 2006 07; therefore the assessee was not liable to deduct TDS under section 194C for that year. On these legal and factual bases, there was no default in TDS deduction attractively invoking section 40(a)(ia). [Paras 16]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Genuineness of purchases established by payment through account payee cheque and registered dealer records - inspector's / section 133(6) report cannot sustain addition unless enquiries are proper and responses confronted to assessee - Deletion of addition of Rs. 14,89,888/- alleged as bogus purchases from M/s Sunidhi Enterprises upheld for AY 2007 08 - HELD THAT: - AO treated part of the purchases as bogus after an inspector's inquiry. CIT(A) found that payments were effected by account payee cheques, the closing balance was subsequently cleared by cheque, and the inspector's enquiry was limited and not confronted with the assessee's explanations. The Tribunal concluded that documentary bank evidence and lack of contrary material meant the CIT(A) was justified in holding the purchases genuine and deleting the addition. [Paras 21]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Balance sheet sundry creditor reconciled by opening/closing balances and corresponding purchases cannot be treated as unexplained income without further enquiry - inspector's / section 133(6) report cannot sustain addition unless enquiries are proper and responses confronted to assessee - Deletion of addition of Rs. 90,752/- on account of alleged excess liability to ESS Refilling Station upheld for AY 2007 08 - HELD THAT: - CIT(A) found that the supplier's response to section 133(6) recorded sales during the year but omitted the opening balance; the assessee furnished reconciliation and ledger copies showing the opening/closing balances agreed. The Tribunal observed that the excess was a balance sheet item and corresponding purchases were admitted; AO should have followed up with further enquiry or confronted the confirmation with the assessee. In absence of such enquiry or contrary material, the addition was not justified. [Paras 25]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Application of section 40(a)(ia) requires both duty to deduct tax and failure to deposit the deducted tax; short or wrong rate of deduction does not automatically trigger disallowance - Deletion of addition of Rs. 17,30,671/- for alleged short deduction of TDS under section 194 I (machine hire) upheld for AY 2007 08 - HELD THAT: - AO disallowed expenses alleging TDS should have been withheld at 10% under section 194 I but assessee deducted at lower rate (2%) under another provision and there was no allegation that deducted tax was not deposited. CIT(A) relied on authorities holding that section 40(a)(ia) has two limbs - duty to deduct and duty to deposit - and shortfall in deduction alone does not mandate disallowance; the assessee can be proceeded against as a default under section 201 but cannot be denied the expenditure. The Tribunal agreed and held the AO's disallowance under section 40(a)(ia) was not sustainable. [Paras 29]

Order of CIT(A) deleting the addition is upheld and Revenue's ground dismissed.

Final Conclusion: Both appeals by the Revenue are dismissed and the orders of the Commissioner of Income Tax (Appeals) dated 12.08.2013 are upheld in all respects for assessment years 2006 07 and 2007 08.

Genuineness of purchases - reliance on statements recorded by Sales Tax authorities - prima facie proof from purchase invoices and bank payments - disallowance of purchases as bogus under the Income-tax Act - estimation of unexplained income on a percentage basis

Genuineness of purchases - reliance on statements recorded by Sales Tax authorities - prima facie proof from purchase invoices and bank payments - disallowance of purchases as bogus under the Income-tax Act - estimation of unexplained income on a percentage basis - Whether purchases of Rs. 70,60,756/- from two dealers were to be treated as bogus and taxed, and whether a 25% estimate by the CIT(A) was sustainable. - HELD THAT: - The AO disallowed purchases of Rs. 70,60,756/- relying on a Sales Tax Department list and on a third party's statement to conclude the purchases were accommodation entries. The assessee produced copies of purchase invoices, ledger entries and bank statements showing payments by account payee cheques and did not dispute corresponding sales. The CIT(A) held that the third party statement did not name the assessee and that, absent corroborative evidence that cash had been returned or that vouchers were fabricated, the AO's addition based on presumptions was unsustainable; the CIT(A) deleted a portion of the addition but proceeded to estimate 25% of the purchases as taxable on a presumptive basis. The Tribunal, after considering coordinate bench precedents which require independent corroboration beyond Sales Tax statements, held that the entire addition was unsustainable and directed deletion of the addition in full. The Tribunal further held that the CIT(A)'s mechanical estimation of 25% lacked any basis because the assessee had placed its overall gross profit ratios on record (showing G.P. between 0.76% and 1.11%) and the G.P. on the impugned transactions (0.68% and 1.19%) was not abnormally low; consequently there was no foundation for the CIT(A)'s 25% estimation and that part was also deleted. [Paras 5]

Addition of Rs. 70,60,756/- deleted in toto; the CIT(A)'s 25% estimate is unsustainable and deleted.

Final Conclusion: Assessee's appeal allowed; Revenue's cross appeal dismissed. The Tribunal deleted the entire addition of Rs. 70,60,756/- and set aside the CIT(A)'s estimate of 25% as without basis.

Allowability of depreciation by a charitable trust where cost of asset was earlier claimed as application of income under section 11 - double deduction - commercial principle of computing income of a charitable trust - precedential weight of conflicting High Court decisions and following jurisdictional High Court - distinction of Escorts Ltd. (double deduction principle) in the context of charitable trusts

Allowability of depreciation by a charitable trust where cost of asset was earlier claimed as application of income under section 11 - double deduction - commercial principle of computing income of a charitable trust - distinction of Escorts Ltd. (double deduction principle) in the context of charitable trusts - precedential weight of conflicting High Court decisions and following jurisdictional High Court - Depreciation is allowable to the charitable trust in respect of assets the cost of which had earlier been allowed as application of income under section 11; allowing depreciation does not amount to an impermissible double deduction in the facts of this case. - HELD THAT: - The Assessing Officer disallowed depreciation on the ground that the cost of the asset had already been allowed as application of income and reliance was placed on the Supreme Court's rule against double deductions in Escorts Ltd. The CIT(A) and the Tribunal, however, examined binding and persuasive authorities (including jurisdictional and other High Court decisions) and held that Escorts Ltd. is distinguishable because it dealt with statutory deductions under provisions relating to business/scientific research and not with application-of-income under section 11 and computation of income of a charitable trust on commercial principles. The Tribunal followed the decision in DCIT v. Sanjeevan Vidyalaya Trust and other High Court precedents which permit depreciation for trusts notwithstanding earlier allowance of the capital cost as application of income, reasoning that commercial accounting requires a depreciation charge in computing income for application to charitable purposes and that where two judicial views exist the decision favorable to the assessee (and the jurisdictional High Court) should be followed. The insertion of clause (d) in section 11(1) w.e.f. 01-04-1989 was considered and held not to have altered the legal position contrary to the view taken by the AO. On this basis the CIT(A)'s allowance of depreciation was upheld. [Paras 6, 7, 11, 12]

The order of the CIT(A) allowing the depreciation claimed by the assessee is upheld and the Revenue's grounds are dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for AY 2010-11, upholding the CIT(A)'s allowance of depreciation to the charitable trust on the ground that such allowance does not constitute an impermissible double deduction in the circumstances and that relevant High Court and Tribunal precedents favor the assessee.

Invalidity of non-specific show cause notice under section 274 - Concealment of particulars of income versus furnishing inaccurate particulars of income - Explanation 5A to section 271(1)(c) - requirement of corroboration with seized material - Return filed under section 153A replaces original return for penalty assessment - Discretion in levy of penalty under section 271(1)(c)

Invalidity of non-specific show cause notice under section 274 - Concealment of particulars of income versus furnishing inaccurate particulars of income - Validity of the show cause notice and penalty where the notice did not specify whether penalty was proposed for concealment or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal examined the show cause notice issued under section 274 and the assessment record and held that the notice and the assessment proceedings failed to specify the exact limb of section 271(1)(c) (i.e., whether penalty was for "concealment of particulars of income" or for "furnishing inaccurate particulars of income"). Reliance was placed on the principles in Manjunatha Cotton & Ginning Factory that a printed form which leaves both limbs intact without striking the irrelevant portion does not satisfy the requirement of law, offends natural justice and renders the notice defective. The Tribunal recorded that the Assessing Officer himself had vacillated between the two limbs in the initiation and imposition of penalty. Applying the stated principles, the Tribunal held that the defect is material and the penalty orders based on such defective notice are invalid and liable to be quashed. [Paras 7]

Penalty orders held invalid and cancelled for want of a specific show cause notice identifying the precise limb of section 271(1)(c).

Explanation 5A to section 271(1)(c) - requirement of corroboration with seized material - Return filed under section 153A replaces original return for penalty assessment - Discretion in levy of penalty under section 271(1)(c) - Whether Explanation 5A could be invoked to sustain penalty where additions accepted in assessments framed under section 153A were based on a lump sum surrender without linking to or corroboration by seized documents, and where returns filed under section 153A were accepted. - HELD THAT: - The Tribunal found that the Assessing Officer had accepted the assessee's returns filed in response to the section 153A notice and made assessments on the surrendered amounts without linking those additions to any specific incriminating documents or other corroborative material seized during search. Following precedents (including Sejal Exports and Suresh Chandra Mittal), the Tribunal held that Explanation 5A cannot be invoked merely on the basis of a surrender unless the addition is attributable to material found in the search and the authority impos ing penalty refers to such material. Where the assessment under section 153A accepts the disclosed income and the additions are not corroborated by seized documents, an inference of concealment or furnishing of inaccurate particulars cannot be drawn beyond doubt. The Tribunal further noted CBDT circulars directing reliance on documentary evidence rather than confessional statements and reiterated that imposition of penalty under section 271(1)(c) is discretionary and not automatic. [Paras 8]

Penalty cancelled because additions were accepted on the basis of an uncorroborated lump sum surrender and the conditions of Explanation 5A were not satisfied; returns under section 153A having been accepted, penalty under section 271(1)(c) could not be sustained.

Final Conclusion: The appeals are allowed: penalty orders under section 271(1)(c) for AYs 2006-07 to 2010-11 are cancelled-first because the show cause notice did not specify the precise ground for levy and thereby was defective, and secondly because the additions accepted under section 153A were based on an uncorroborated lump sum surrender not linked to seized material, so Explanation 5A could not sustain the penalty.

Anti-dumping duty - sunset review - dumping margin determined on best available information under Rule 6(8) - injury determination under Rule 11 and Annexure II - Rule 23 - time limit for review and extension under Rule 17(1) proviso - natural justice and participation / post-disclosure hearing - return on investment benchmark for domestic industry

Anti-dumping duty - sunset review - Validity of the Designated Authority's final findings and the consequent Customs notification continuing anti-dumping duty on imports of Phenol from South Africa. - HELD THAT: - The Tribunal examined the DA's sunset review process and the materials on record and found that the DA followed the procedure under the AD Rules. The DA determined export price and dumping margins on the basis of the best available information and assessed injury to the domestic industry taking into account volume of imports, demand growth, price effects and comparative landed values. The Tribunal noted the dumping margin arrived at by the DA (about 40-50%) and the DA's findings on increased import volume and undercutting. The Tribunal found no infirmity in the investigation or its conclusions and no basis to interfere with the DA's findings or the Customs Notification continuing anti-dumping duty.

Appeal dismissed; findings of the Designated Authority and the Customs Notification upheld.

Rule 23 - time limit for review and extension under Rule 17(1) proviso - Whether the DA violated Rule 23 of the AD Rules by not completing the review within 12 months of initiation. - HELD THAT: - The Tribunal held that Rule 17 provisions apply to reviews under Rule 23 and that the Central Government has discretion, under the first proviso to Rule 17(1) read harmoniously with Article 11.4 of the WTO Agreement (as explained in Fairdeal Polychem LLP v. UOI ), to extend the 12 month period. On that basis the Tribunal found no violation of Rule 23 and no procedural infirmity in the duration of the investigation.

No breach of Rule 23; period for completion of review was extendable and thus not invalid.

Natural justice and participation / post-disclosure hearing - Whether the appellants were denied natural justice because they did not file full imported questionnaire responses and whether further hearing was required after disclosure. - HELD THAT: - The Tribunal observed that the appellants had not filed a complete imported questionnaire response and that the DA nevertheless recorded and considered submissions made by them to the extent relevant. The Tribunal accepted the DA's approach that, once disclosure is made, there is no requirement for an additional hearing of all parties as a matter of course, and that the appellants' limited participation did not render the proceedings vitiated for want of natural justice.

No violation of natural justice; appellants' limited participation does not invalidate the investigation.

Return on investment benchmark for domestic industry - Validity of adopting 22% as return on investment for the domestic industry in injury calculation. - HELD THAT: - The Tribunal was informed that the 22% return on investment figure was applied in accordance with long-standing practice and agreed norms. In the absence of any record showing that the figure was arbitrary or inconsistent with established norms, the Tribunal accepted the DA's use of 22% for the purposes of injury calculation.

Use of 22% ROI by the DA was held to be acceptable.

Dumping margin determined on best available information under Rule 6(8) - injury determination under Rule 11 and Annexure II - Lawfulness of the DA's method in determining dumping margins and injury (including reliance on best available information and the application of Rule 11/Annexure II standards). - HELD THAT: - The Tribunal noted that the DA applied Rule 6(8) in determining export price and dumping margin on best available information and applied Rule 11 read with Annexure II in assessing injury-considering import volumes, demand growth, price effects and landed values. The Tribunal found that the DA's methodology and application of the statutory criteria for injury were in accordance with the AD Rules and established practice, and that the conclusions on dumping margin and injury were supported by the factual findings recorded.

DA's methodology in determining dumping margin and injury upheld.

Final Conclusion: The appeal is without merit and is rejected; the Designated Authority's sunset review findings and the Customs Notification continuing anti-dumping duty on imports of Phenol from South Africa are affirmed.

Non-Injurious Price - best utilization of raw materials and utilities - normation - construction of cost under Annexure III to the Anti Dumping Rules, 1995 - lesser duty rule - causal link between dumping and injury

Non-Injurious Price - best utilization of raw materials and utilities - normation - construction of cost under Annexure III to the Anti Dumping Rules, 1995 - causal link between dumping and injury - Whether the Designated Authority was correct in constructing the Non Injurious Price (NIP) for the domestic industry on the basis of best utilization/normation instead of relying on actual cost data submitted by the domestic industry. - HELD THAT: - The Tribunal examined Annexure III to the Anti Dumping Rules, 1995, which prescribes elements and principles for determining cost of production for working out the NIP, including consideration of best utilization of raw materials, utilities and production capacities to nullify injury caused by inefficient utilization. India follows the lesser duty rule; NIP is a hypothetical fair selling price and its construction may require normation. The Tribunal held that the DA is bound to apply the principles in Annexure III and that application of best utilization/normation is not contingent upon a separate, explicit finding identifying inefficiency in each case. Where other causes of injury (apart from dumping) are identified, normation is to be applied to address such causes; in a normal situation the DA must follow the Annexure III method. The Tribunal also noted that the appellant did not place specific empirical data challenging the DA's cost construction. Given that the DA followed the statutory principles, the Tribunal found no ground to interfere with the NIP constructed on the normation/best utilization basis.

The appeal against the quantification of anti dumping duty was dismissed; the DA's construction of NIP using best utilization/normation principles was upheld.

Final Conclusion: Appeal dismissed. The Designated Authority correctly applied the Annexure III normation/best utilization principles in constructing the Non Injurious Price; no interference warranted in absence of empirical proof to the contrary.

Sunset review - likelihood of recurrence of injury - anti-dumping duty - dumping margin - surplus capacity - post-POI trends - continuation and enhancement - price pressure of dumped imports

Sunset review - likelihood of recurrence of injury - surplus capacity - dumping margin - post-POI trends - price pressure of dumped imports - Validity of the Designated Authority's final finding in the sunset review sustaining anti-dumping duty on Steering Knuckles originating in or exported from China PR. - HELD THAT: - The Tribunal upheld the DA's conclusion that revocation of anti-dumping duties would likely lead to recurrence of injury to the domestic industry. The DA's likelihood analysis, though projecting future events, was supported by relevant factors: the exporter had spare production capacity (about 15%), a positive dumping margin was recorded, imports continued to enter the Indian market and post-POI trends indicated a substantial increase in imports when duties were relaxed. The Tribunal observed that a negative price injury in the current period alone was not decisive for revocation; instead, the DA was entitled to consider continued imports, attractive Indian prices post-revocation, and the exporter's limited alternative markets. The Tribunal found the DA's analysis adequate and in line with earlier authority, notably P. T. Asahimas Chemicals vs. DA, MoF , and declined to interfere with the conclusion to continue the anti-dumping duty.

The DA's sunset-review finding sustaining anti-dumping duty on Steering Knuckles from China PR is upheld and the appeal is rejected.

Final Conclusion: The Tribunal rejected the appellant's challenge and upheld the Designated Authority's final finding in the sunset review sustaining anti-dumping duty on Steering Knuckles from China PR; the related stay application is disposed of.

Transaction value - related party transactions - technology transfer agreement - technical know how and royalty - acceptance of declared price - application of mind

Technology transfer agreement - technical know how and royalty - related party transactions - Whether any technology transfer agreement existed or any royalty/technical know how payment was made or payable which could vitiate the transaction value declared for imports from a related party. - HELD THAT: - The Tribunal found on the material placed before the authorities and on the written confirmation by the appellant that no technology transfer agreement had been executed between the parties and no payments other than invoice payments for bimetal goods had been made to the foreign supplier. The appellant had specifically informed the lower authorities by letter that Clauses 7(a), 7(b) and 7(c) of the Joint Venture Agreement contemplated a technology transfer agreement but no such agreement had been entered into and no royalty or licence or trademark users agreement had been signed or paid for. The Dy. Commissioner recorded that no technical know how or royalty was paid or payable and accepted the declared invoice/transaction value after comparing list and invoiced prices on a test basis. In these circumstances the Tribunal held that there was no basis to impugn the declared transaction value on account of alleged technology transfer or royalty payments.

No technology transfer agreement or royalty payment existed or was payable; the relationship did not affect the transaction value and the declared price was correctly accepted by the Dy. Commissioner.

Transaction value - acceptance of declared price - application of mind - Whether the Commissioner (Appeals) was justified in setting aside the Dy. Commissioner's order accepting the transaction value. - HELD THAT: - The Tribunal examined the Commissioner (Appeals) order and the record. The appellant had participated in the Dy. Commissioner's personal hearing and had submitted letters confirming absence of any technology transfer agreement or royalty payments. The Tribunal found that the grounds on which Commissioner (Appeals) set aside the Dy. Commissioner's order were based on a conjectural possibility of payments under Clauses 7(a)-(c) rather than on any material showing that such agreements or payments existed. The impugned order was characterised as having been passed without adequate application of mind to the documentary record and submissions on file. In view of the material before the adjudicating authority and the Dy. Commissioner's findings, the Tribunal concluded that the Commissioner (Appeals) erred in setting aside the acceptance of declared transaction value.

The Commissioner (Appeals) order setting aside the Dy. Commissioner's acceptance of the transaction value was set aside for lack of application of mind; the appeal by the importer is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that no technology transfer agreement or royalty payments existed to affect the transaction value and that the Commissioner (Appeals) erred in setting aside the Dy. Commissioner's acceptance of the declared price; the impugned order is set aside and the Dy. Commissioner's acceptance stands.

Scheme of Arrangement - Demerger - Transfer of Demerged Undertaking - Restructure of Share Capital - Utilisation of Securities Premium Account - Accounting Standard 14 - Sanction under sections 391 to 394 of the Companies Act, 1956 - Dispensing with shareholder meetings on written consent - Unsecured creditors' approval - Public interest

Scheme of Arrangement - Demerger - Sanction under sections 391 to 394 of the Companies Act, 1956 - Public interest - Sanction of the proposed scheme of arrangement involving demerger of the Trading Undertaking of the Demerged Company and transfer to the Resulting Company - HELD THAT: - The court considered the petitions, the convening and results of creditors' meeting, publication of notice, the affidavits filed including observations of the Regional Director and the reply thereto. Meetings of equity shareholders were dispensed with on account of unanimous written consents; the unsecured creditors' meeting was convened and the scheme was unanimously approved by those present and entitled to vote. The court examined objections (or the absence thereof), the replies on accounting treatment and statutory compliance, and found the observations of the Regional Director did not survive. On the facts and submissions, and having regard to interest of shareholders, creditors and public interest, the court concluded the scheme merits sanction and accordingly sanctioned it. [Paras 4, 6, 8, 9, 10]

Scheme of arrangement involving demerger and transfer is sanctioned.

Accounting Standard 14 - Accounting treatment in demerger - Validity of the accounting treatment proposed in the scheme with reference to Accounting Standard 14 - HELD THAT: - The Regional Director questioned compliance with AS 14 regarding clauses 9.2 and 9.6. The petitioner explained that AS 14 is not applicable to the proposed demerger as structured and that the proposed treatment accords with accounting principles; any deviation would be disclosed in the first financial statements of the Resulting Company after effectiveness. On that basis and considering the explanations recorded in the additional affidavit, the court found no further directions necessary. [Paras 8, 9]

No directions issued; proposed accounting treatment accepted subject to requisite disclosure in first financial statements.

Utilisation of Securities Premium Account - Restructure of Share Capital - Permissibility of utilising the Securities Premium Account for adjusting the value of net assets of the Demerged Undertaking - HELD THAT: - The Regional Director observed that utilisation may not be permissible under Section 52 of Companies Act, 2013. Petitioners relied on precedent under the Companies Act, 1956 (Section 78 read with Sections 100-103) and submitted that the procedure under those provisions permits such utilisation following requisite court sanction. The petitioners also relied on Division Bench authority of this Court to the like effect. The court accepted the petitioners' position and recorded that no further direction was necessary in this regard. [Paras 8, 9]

Utilisation of the Securities Premium Account for the proposed adjustment is permitted in the manner envisaged in the scheme; no further directions issued.

Disclosure of assets and liabilities - Schedule of immovable assets - Requirement for disclosure of list of assets and liabilities of the Demerged Undertaking - HELD THAT: - The Regional Director noted non-disclosure of the full list of assets and liabilities. Petitioners filed a summary of net assets and undertook to submit the complete list of immovable assets of the Demerged Undertaking as on the date of sanction as a schedule to the final order. The court directed that the complete list be lodged as part of the authenticated order and scheme for purposes including stamp adjudication. [Paras 8, 12]

Complete list of immovable assets to be submitted as Schedule with the final order and lodged for stamp adjudication.

Income Tax Department objections - Statutory consultation under Ministry circular - Effect of no response from the Income Tax Department to the Regional Director's invitation for objections - HELD THAT: - The Regional Director had invited the Income Tax Department to raise objections within the statutory 15-day period; no reply was received. The court accepted that the statutory period lapsed without objection and noted petitioners' undertaking to comply with applicable provisions of the Income Tax Act and rules. Consequently, no further directions were considered necessary. [Paras 8]

In absence of response from Income Tax Department within statutory period, no objection is presumed; petitioners to comply with tax law as applicable.

Costs to Central Government Counsel - Quantification of costs payable to the Central Government Standing Counsel - HELD THAT: - The court quantified costs to be paid to the learned Standing Counsel for the Central Government at the specified amount per petition and directed payment accordingly. [Paras 11]

Costs to Central Government Standing Counsel quantified and directed to be paid.

Filing and registration directions - Stamp adjudication - Filing with Registrar of Companies - Directions regarding lodging authenticated order and scheme for stamp adjudication and filing with Registrar of Companies - HELD THAT: - The court directed the petitioner to lodge a copy of the order along with the schedule of immovable assets and the authenticated scheme with the Superintendent of Stamps within the prescribed period for adjudication of stamp duty. It also directed filing of the order and scheme with the Registrar of Companies electronically and physically as per law, and authorised all concerned authorities to act on the authenticated copy issued by the Registrar, High Court of Gujarat. [Paras 12, 13, 15]

Petitioner to lodge authenticated order and schedule for stamp adjudication and to file authenticated copies with the Registrar of Companies as directed.

Final Conclusion: The High Court sanctioned the scheme of arrangement approving the demerger and transfer as proposed, accepted the petitioners' accounting and statutory submissions (including use of securities premium in the prescribed manner), recorded procedural compliances and absence of objections, directed filing and stamping formalities and quantified costs payable to Central Government counsel.

Scheme of Arrangement in the nature of Amalgamation - sanction under Sections 391 to 394 of the Companies Act, 1956 - restructure and reduction of share capital as part of a scheme - interests of shareholders and creditors - statutory compliance and filing with Registrar of Companies - preservation of books and records pursuant to Section 396(a)

Scheme of Arrangement in the nature of Amalgamation - sanction under Sections 391 to 394 of the Companies Act, 1956 - interests of shareholders and creditors - Sanction of the proposed Scheme of Arrangement in the nature of Amalgamation between INI Design Services Private Limited (Transferor) and INI Design Studio Private Limited (Transferee). - HELD THAT: - Having considered the affidavits, the report of the Official Liquidator, the observations of the Regional Director and submissions of the parties, the Court concluded on the material on record that the proposed amalgamation is in the interest of the shareholders and creditors of both companies and is not contrary to public interest. The statutory requisites for sanction under the Companies Act, 1956 have been examined; notices were published, no objections were received, and the conditions for dispensing with meetings where applicable have been recorded. The Court found no surviving objections from the Regional Director that would preclude sanction. Accordingly, the scheme merits and is fit for sanction. [Paras 8, 9, 11, 12]

The Scheme of Arrangement in the nature of Amalgamation is sanctioned.

Restructure and reduction of share capital as part of a scheme - reduction of issued, subscribed and paid up share capital - Sanction of the proposed reduction of the issued, subscribed and paid up share capital of the Transferee Company as an integral part of the Scheme. - HELD THAT: - The Court specifically considered Clauses 5 and 7 of the Scheme relating to cancellation of shares held by the Transferor Company and consequent reduction of the Transferee Company's capital. It was found that the reduction does not involve diminution of liability in respect of unpaid share capital nor payment to shareholders of paid-up capital, and that creditors' interests are not adversely affected. The reduction was therefore authorised as part of the sanctioned scheme, and the prayers in the company petitions relating to reduction and minutes under Section 103(1) were granted. [Paras 7, 13]

The proposed reduction of the Transferee Company's share capital as envisaged in the Scheme is specifically sanctioned and prayers relating thereto are granted.

Preservation of books and records pursuant to Section 396(a) - Official Liquidator report - statutory compliance - Response to the Official Liquidator's report and the assurance regarding preservation of books, records and continuing statutory liabilities of the Transferor Company. - HELD THAT: - The Official Liquidator reported that the affairs of the Transferor Company were not conducted prejudicially to members or public interest and requested that the Transferor Company preserve books and records and not dispose of them without Central Government permission under Section 396(a). The Transferor Company furnished an assurance in an additional affidavit that it will preserve its records and comply with statutory liabilities even after sanction. The Court accepted these assurances and recorded that the Transferor Company shall preserve its books and comply with applicable laws. [Paras 9, 12]

The Official Liquidator's observations are noted; the Transferor Company's assurance to preserve records and comply with statutory liabilities is accepted.

Statutory compliance and filing with Registrar of Companies - adjudication of stamp duty - Directions regarding post-sanction formalities including stamping and filing with the Registrar of Companies. - HELD THAT: - The Court directed that a copy of the order, the schedule of immovable assets transferred, and the Scheme authenticated by the Registrar, High Court of Gujarat, be lodged with the concerned Superintendent of Stamps for adjudication of stamp duty within 60 days. The petitioner companies were also directed to file the order and Scheme with the Registrar of Companies electronically along with INC 28 and a physical copy as required under the Act. Filing and issuance of a drawn-up order was dispensed with and authorities were directed to act on the authenticated copy. [Paras 15, 16, 17, 18]

Petitioner companies directed to comply with stamping and filing formalities; authenticated copy of order and Scheme to be acted upon by concerned authorities.

Costs of Central Government Standing Counsel and Official Liquidator - Quantification and apportionment of costs to be paid to Central Government Standing Counsel and to the Office of the Official Liquidator. - HELD THAT: - The Court quantified costs payable to the Central Government Standing Counsel at a specified amount per petition and directed payment to the learned Standing Counsel. It also quantified costs payable to the Office of the Official Liquidator, to be borne by the Transferor Company. These costs were ordered to be paid as directed in the judgment. [Paras 14]

Costs quantified and directed to be paid to the Central Government Standing Counsel and to the Office of the Official Liquidator as specified.

Observations of the Regional Director, Ministry of Corporate Affairs - Treatment of the observations made by the Regional Director, Ministry of Corporate Affairs. - HELD THAT: - The Court considered each observation of the Regional Director and the petitioners' responses thereto, including rectification of master data, FEMA/RBI compliance certification, lack of objection from the Income Tax Department within prescribed time, absence of complaints, and the conclusion that the Scheme is not prejudicial to shareholders or the public. On the material before it, the Court held that the Regional Director's observations do not survive and that no directions are required to be issued to the petitioner companies in that regard. [Paras 11, 12]

Regional Director's observations do not survive; no further directions to be issued to the petitioner companies on those observations.

Final Conclusion: The Court sanctioned the Scheme of Arrangement by amalgamating INI Design Services Private Limited into INI Design Studio Private Limited, authorised the consequent reduction of the Transferee Company's share capital as part of the Scheme, accepted assurances regarding preservation of records and statutory compliance, directed required stamping and filing formalities and quantified costs payable to the Central Government Standing Counsel and the Official Liquidator; the petitions are disposed of accordingly.

Anticipatory bail u/s 438 Cr.PC - offence under the Prevention of Money Laundering Act - proceeds of crime - provisional attachment under PMLA - requirement of representation of tainted property as untainted for money laundering

Offence under the Prevention of Money Laundering Act - proceeds of crime - requirement of representation of tainted property as untainted for money laundering - Sufficiency of material to oppose anticipatory bail on allegations of money laundering - HELD THAT: - The Court examined the material relied upon by the respondent - bank cash entries, income tax returns and the allegation of purchase and sale of pseudoephedrine - and found them inadequate to sustain the inference that the petitioner had generated proceeds of crime. The recorded cash credits in the business account for 2012 and declared income in ITRs for 2009-2010 to 2014-2015 were modest and did not indicate any exorbitant unexplained income. No documentary evidence was produced to substantiate the alleged purchases/sales of pseudoephedrine, and the respondent failed to show how the petitioner purportedly represented tainted property as untainted, an essential ingredient of the offence under the PML Act. In light of these deficiencies, the Court concluded that the material was insufficient to refuse bail under the PML Act. [Paras 5, 6]

Material on record is insufficient to deny anticipatory bail to the petitioner on money laundering allegations.

Anticipatory bail u/s 438 Cr.PC - provisional attachment under PMLA - Relief to be granted and procedural directions upon allowing the bail petition - HELD THAT: - Having allowed the petition, the Court directed the petitioner to surrender before the designated court on the next date fixed or within a fortnight, whichever is earlier, and left it to the designated court to grant bail on such terms and conditions as it deems fit. The Court noted the existing provisional attachment of the petitioner's flat but found that attachment did not preclude granting the interim relief sought. [Paras 7]

Petition allowed; petitioner to surrender and seek bail from the designated court which may grant bail on appropriate terms.

Final Conclusion: Anticipatory bail allowed: the material proffered by the Enforcement Directorate was held insufficient to establish money laundering culpability or proceeds of crime; petitioner directed to surrender and may seek bail from the designated court which shall pass appropriate orders.

Scope of show cause notice - remand and scope of re adjudication - jurisdictional limitation on adjudicating authority - Franchise Services vs Management Consultancy Service - CBEC Circular F.No. 249/1/2008-CX 4

Scope of show cause notice - remand and scope of re adjudication - jurisdictional limitation on adjudicating authority - Franchise Services vs Management Consultancy Service - CBEC Circular F.No. 249/1/2008-CX 4 - Whether the adjudicating authority exceeded its jurisdiction by reclassifying the activity as 'Franchise Services' when the show cause notice alleged 'Management Consultancy Service' and the remand was limited to consideration of the Board's circular. - HELD THAT: - This Tribunal had earlier remanded the matter to the Commissioner with a specific and limited scope: to decide afresh after considering the Board's Circular F.No. 249/1/2008-CX 4 and the appellants' submissions. The show cause notice originally alleged that the receipts characterized as 'Royalty' fell under 'Management Consultancy Service'. In the impugned order the Commissioner found that the activity did not fall under 'Management Consultancy Service' but nevertheless confirmed demand by treating the activity as 'Franchise Services'. That course exceeded both the original allegation in the show cause notice and the restricted remit of the remand. Quoting a different service head not canvassed in the show cause notice and not within the limited re adjudication directed by this Tribunal amounted to a jurisdictional overreach. Having regard to the limited scope of consideration ordered earlier and the Commissioner's own finding that the activity was not 'Management Consultancy Service', the Tribunal concluded that there was no jurisdiction to sustain the demand on the basis of 'Franchise Services'.

Impugned order set aside; appeal allowed and demand quashed as beyond the scope of the show cause notice and the remand, with consequential relief, if any.

Final Conclusion: The Tribunal held that the Commissioner acted beyond the scope of the show cause notice and the limited remand by reclassifying the activity as 'Franchise Services'; the impugned demand is set aside and the appeal is allowed with consequential relief.

Input service - eligibility of cenvat credit - refund under Rule 5 of Cenvat Credit Rules, 2004 - nexus between input service and output service - interest on delayed refund - denial of credit on procedural/technical grounds

Input service - nexus between input service and output service - eligibility of cenvat credit - refund under Rule 5 of Cenvat Credit Rules, 2004 - Eligibility for refund of cenvat credit in respect of various input services (including outdoor catering, mandap keeper, event management, interior decoration, erection/commissioning, storage/warehousing, technical testing and analysis, photography, cable services and renting of immovable property). - HELD THAT: - The Tribunal examined whether the impugned services had sufficient connection with the respondent's exported output services. The Board's circular and the appellate findings treat the correct test as the nexus between the input service and the provision of the output (export) service - in particular whether absence of the input would adversely affect quality or continuity of the exported service. The Commissioner (Appeals) recorded specific findings that the various services were used in providing continuous IT-enabled export services (for example, catering for round-the-clock operations, mandap keeper for recruitment, interior decoration for modernization of office premises, erection/commissioning for IT equipment installation, event management for business activities), and the Revenue did not produce contrary evidence to displace those findings. Given the findings that the services were used in providing the output service and that service tax had been discharged, the Tribunal found no legal basis to interfere with the Commissioner (Appeals)'s allowance of refund claims in respect of these input services.

The Commissioner (Appeals)'s findings upholding eligibility of the listed input services for cenvat credit/refund are affirmed; the Revenue's appeals on this issue are dismissed.

Interest on delayed refund - Liability to pay interest on delayed sanction of refund. - HELD THAT: - The Commissioner (Appeals) held that interest is payable on delayed sanction of refund. The Tribunal found no reason to differ with that conclusion and upheld the appellate finding on interest.

Interest on delayed refund as held by the Commissioner (Appeals) is sustained.

Denial of credit on procedural/technical grounds - eligibility of cenvat credit - Whether denial of credit is sustainable where supporting documents lack certain particulars but contain basic details (service availed, tax paid, details of provider and recipient). - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s approach that where documents contain the basic particulars showing the service availed, tax paid and parties to the transaction, credit cannot be denied on mere procedural or technical deficiencies. The determinative requirement is proof of utilization of the service and payment of service tax; absent dispute on these elements, technical omissions in documentation do not justify denial of credit.

Denial of credit on isolated technical/documentary grounds is not sustained; the Commissioner (Appeals)'s acceptance of the claims on this basis is affirmed.

Final Conclusion: In view of the appellate findings on eligibility of the input services, interest on delayed refund and the insufficiency of Revenue's contrary evidence, the appeals filed by the Revenue are dismissed and the impugned orders of the Commissioner (Appeals) are affirmed.

Cenvat credit - principle of natural justice - input services used for trading vs manufacturing - limitation and suppression - double demand / duplication of demand - pre-deposit for interim relief

Cenvat credit - principle of natural justice - Whether denial of Cenvat credit of Rs. 1.20 Crore on the basis of alleged discrepancies in documents was sustainable. - HELD THAT: - The Tribunal found that the disputed credit related to services falling under the category specified in Rule 6(5) and that there was no finding that the input services were not received or that payments were not made. The Adjudicating Authority relied upon a Superintendent's report noting document discrepancies but did not afford the appellant adequate opportunity to explain those discrepancies. In those circumstances, disallowance solely on the basis of reported documentary irregularities without giving the appellant a chance to be heard constituted a gross violation of the principle of natural justice, rendering the disallowance unsustainable at the prima facie stage. [Paras 6]

Denial of Cenvat credit of Rs. 1.20 Crore is prima facie unsustainable for want of opportunity to explain discrepancies; relief granted accordingly for interim purposes.

Input services used for trading vs manufacturing - Cenvat credit - Whether Cenvat credit of approximately Rs. 80 Lakhs attributable to trading activity was admissible to the appellant. - HELD THAT: - The Tribunal recorded that the said portion of credit was admittedly attributable to trading activity and therefore prima facie not admissible to a manufacturer. The record did not allow the Tribunal to treat that credit as legitimately used in manufacture. This finding was made on the merits at the prima facie stage. [Paras 6]

Cenvat credit of approximately Rs. 80 Lakhs attributed to trading activity is prima facie not admissible.

Limitation and suppression - Whether the demand relating to the trading-attributed credit was barred by limitation or constituted suppression preventing limitation defence. - HELD THAT: - The Tribunal observed that although the appellant filed Cenvat returns and monthly returns, it could not be ascertained from the record that part of the services were used for trading activity; hence the department had no occasion to discern the alleged misuse from the returns. On this basis the Tribunal held there was suppression of fact, and consequently the limitation defence was not tenable at the prima facie stage. [Paras 6]

The demand relating to credit used for trading is not barred by limitation, the Tribunal finding prima facie suppression of fact.

Double demand / duplication of demand - Cenvat credit - Whether an additional demand of Service Tax of Rs. 1,03,95,824/- could be sustained where the same amount was the subject of disallowed Cenvat credit and had been utilized for payment of duty. - HELD THAT: - Relying on the principle that once wrongly availed Cenvat credit is disallowed, it would be impermissible to also demand an equal amount as service tax in respect of the same sum already treated as erroneously availed, the Tribunal held that making two demands on the same amount would amount to duplication. Applying the reasoning of the cited authority, the Tribunal considered the Service Tax demand to be prima facie not sustainable. [Paras 6]

The Service Tax demand of Rs. 1,03,95,824/- is prima facie not sustainable as it would amount to double/duplicative demand on the same amount.

Pre-deposit for interim relief - Interim relief to be granted pending adjudication and quantification of dues. - HELD THAT: - Weighing the foregoing prima facie conclusions, the Tribunal exercised its power to grant interim relief subject to a condition of pre-deposit. The appellant was directed to make a specified pre-deposit within a stipulated time, failing which the interim direction would not operate; compliance was to be reported by a fixed date. [Paras 6]

Interim relief granted subject to the appellant making the directed pre-deposit within the prescribed period; balance of adjudged dues waived for interim purposes upon compliance.

Final Conclusion: The Tribunal granted interim relief: denial of Rs. 1.20 Crore credit was set aside at the prima facie stage for want of opportunity to explain discrepancies; Rs. 80 Lakhs credit attributable to trading was held prima facie not admissible and not time-barred; the Service Tax demand equal to the disallowed credit was prima facie unsustainable as duplicative; conditional interim relief ordered subject to specified pre-deposit and reporting of compliance.

Manufacture - excisable goods - duty payable - extended period of limitation - cum-duty valuation - suppression of facts / mis-declaration - remand for fresh consideration

Manufacture - excisable goods - duty payable - Activity of profiles cutting from M.S. plates amounts to manufacture of excisable goods and duty is payable. - HELD THAT: - The parties and the Tribunal proceeded on the common premise that the product so produced is duty able. The appellant's counsel conceded on the merits that dutyability of the product is not in dispute. The Tribunal records no quarrel on the merit that duty on the process carried out by the appellant is payable and therefore the finding as to manufacture/excisability stands upheld. [Paras 5]

Finding that the activity amounts to manufacture and duty is payable is upheld.

Extended period of limitation - cum-duty valuation - suppression of facts / mis-declaration - remand for fresh consideration - Extended period of demand and the question of cum-duty price were not decided on merits and are remanded for fresh consideration. - HELD THAT: - The Tribunal noted that the issues of invocation of the extended period and of computing the value on a cum-duty basis were not raised before the lower authorities. As both limitation and valuation involve mixed questions of law and fact and may turn on factual matters such as suppression or mis-declaration, the Tribunal considered it appropriate to remit these matters. The original authority is directed to examine whether any suppression of facts or mis-declaration exists and to determine valuation (including cum-duty price) accordingly, and thereafter re-quantify the demand and penalty. [Paras 5]

Matter remanded to the original authority to decide afresh on limitation and cum-duty valuation and to re-quantify demand and penalty.

Final Conclusion: There is no dispute on dutyability - the activity is treated as manufacture and duty is payable; the questions of extended period of limitation, cum-duty valuation and consequent quantification of demand and penalty are remitted to the original authority for fresh consideration and recomputation.

Assignment of brand - ownership of brand - admissibility of S.S.I. exemption - manufactured under the name of another person - precedential application and distinction

Assignment of brand - ownership of brand - admissibility of S.S.I. exemption - manufactured under the name of another person - precedential application and distinction - Whether a valid assignment of the brand to the respondent precludes the finding that the goods are "manufactured under the name of another person" and thereby entitles the respondent to S.S.I. exemption Notification No. 8/2001-CE dated 01-03-2001. - HELD THAT: - The Tribunal found there was no dispute about the legal assignment of the brand to the respondent by agreement dated 01-04-2001 and therefore the assignment stands in force. Relying on the principle applied in Collector of C.Ex., Ahmedabad v. Vikshara Trading & Invest P. Ltd., the Tribunal held that a valid assignment renders the assignee the owner of the brand and, consequently, the products cannot be regarded as manufactured under another person's name for purposes of the exemption. The decision relied upon by the revenue (AVA Engineering Co.) was distinguished on facts: in that case the genuineness of the assignment deed was doubtful, whereas no such doubt exists here. For these reasons the Commissioner (Appeals) was correct in allowing the S.S.I. exemption on the basis of the assignment agreement. [Paras 5]

The Commissioner (Appeals)'s order allowing the S.S.I. exemption on the basis of the assignment agreement is upheld and the revenue's appeal is dismissed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)'s finding that a valid assignment of the brand vested ownership in the respondent and thus the goods were not "manufactured under the name of another person", entitling the respondent to the S.S.I. exemption; the revenue's appeal was dismissed.

Binding precedent of a larger bench - impugned order set aside - appeal allowed

Binding precedent of a larger bench - impugned order set aside - Impugned order set aside in consequence of the Larger Bench judgment delivered on 29.08.2016. - HELD THAT: - The hearing of the appeal had been adjourned awaiting the Larger Bench decision in Commnr., Central Excise, Madras v. M/s. Adison & Co. Ltd. The Larger Bench delivered its judgment on 29.08.2016. Applying that binding precedent, the Court set aside the impugned order and allowed the appeal. [Paras 3]

Impugned order is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed and the impugned order is set aside pursuant to the Larger Bench judgment delivered on 29.08.2016; no orders as to costs.

Eligibility of cenvat credit on structural steel items - user test for determining whether inputs constitute parts of capital goods - distinction between movability/immovability (excisability) of plant and the characterisation of fabricated parts - definition and scope of capital goods (including components, spares and accessories) - prospective versus retrospective effect of amendment to definition of input

Eligibility of cenvat credit on structural steel items - user test for determining whether inputs constitute parts of capital goods - distinction between movability/immovability (excisability) of plant and the characterisation of fabricated parts - definition and scope of capital goods (including components, spares and accessories) - Entitlement to cenvat credit on duty-paid structural steel items (angles, channels, beams, plates etc.) used in fabrication of support structures for capital goods during February, 2004 to February, 2005. - HELD THAT: - The original authority erred in treating the excisability or immovability of the larger plant (boiler, sinter plant, melting shop etc.) as determinative of the question whether duty-paid structural steel items used in fabrication of support structures were eligible for cenvat credit. The Tribunal applied the user test as evolved by the Supreme Court and adopted by various High Courts and this Tribunal: the correct inquiry is how the structural items were used and whether they formed parts/components/spares/accessories of capital goods. Structural items fabricated into supports for capital machinery, thereby enabling the machinery to be operable, fall within the ambit of capital goods and are eligible for cenvat credit. Reliance on precedents including the Supreme Court decision in Rajasthan Spinning and subsequent High Court and Tribunal decisions supports allowing credit; the movability or embedding of the overall plant does not preclude classification of fabricated items as parts of capital goods. Applying this legal test to the facts, the Tribunal found the structural items were used in connection with manufacturing machinery and integrated into plant operations, and therefore credit was allowable for the period in question. [Paras 4, 5, 6, 7, 8]

Impugned disallowance of cenvat credit on the structural steel items is set aside and credit is allowed for the stated period.

Final Conclusion: The order of the Commissioner disallowing cenvat credit and imposing penalty is set aside; the appeal is allowed and cenvat credit on the structural steel items used in fabrication of supports for capital goods is held admissible for February, 2004 to February, 2005.

Eligibility of cenvat credit on structural steel used in fabrication of capital goods - user test for classification as capital goods - inputs include goods used in the manufacture of capital goods (Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004) - exemption under Notification No.67/95-CE

Eligibility of cenvat credit on structural steel used in fabrication of capital goods - user test for classification as capital goods - inputs include goods used in the manufacture of capital goods (Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004) - Admissibility of cenvat credit on iron and steel items (angles, channels, beams, plates etc.) used in fabrication of structures supporting capital goods. - HELD THAT: - The Tribunal examined the definition of "input" under Rule 2(k) read with Explanation 2 which treats as inputs goods used in manufacture of capital goods that are further used in the factory. Applying the user test as evolved by the Supreme Court in Jawahar Mills and followed in Rajasthan Spinning & Weaving Mills, and having regard to decisions of the Madras High Court on structural steel, the Tribunal held that where structural steel items are specifically used to fabricate/support capital goods that are integral to manufacturing operations of the factory, such items qualify as inputs or as accessories/components of capital goods. The Tribunal rejected the Revenue's reliance on the Larger Bench decision in Vandana Global for the facts before it, emphasising that supporting structures essential to make capital equipment operable must be treated as within the ambit of capital goods or accessories and therefore cenvatable if other eligibility conditions are met. [Paras 8]

Cenvat credit on the subject structural steel items is admissible; appeal on this issue is allowed with consequential relief.

Exemption under Notification No.67/95-CE - Entitlement to exemption under Notification No.67/95-CE for angles, channels, beams manufactured and captively consumed in fabrication of structural goods. - HELD THAT: - The Commissioner denied benefit of the Notification primarily on the basis that stock accounts and ER 1 returns were not maintained or produced. The Tribunal observed that prima facie the notification would apply where items are captively consumed in fabrication of capital goods, and found that the Commissioner did not examine the details submitted by the appellant. Given the factual nature of the contention and absence of adjudication on the records proffered, the Tribunal directed de novo consideration by the original authority and allowed the appellant one month to produce records, with two months thereafter for the authority to decide. [Paras 9]

Matter remitted to the original adjudicating authority for fresh adjudication on entitlement to Notification No.67/95-CE after examination of records; appellant to produce records within one month and authority to decide within two months thereafter.

Final Conclusion: Appeal partly allowed: (i) cenvat credit on the specified structural steel items held admissible applying the user test and Explanation 2 to Rule 2(k); (ii) claim to exemption under Notification No.67/95-CE remanded to the original authority for fresh consideration of records within the prescribed time frame.

Exemption under Notification No. 06/2006-CE - classification under Chapter Heading 98.01 of Customs Tariff - Project Authority Certificate - eligibility for benefit of exemption for supplies under International Competitive Bidding

Classification under Chapter Heading 98.01 of Customs Tariff - Subject goods 'electric wires & cables' are classifiable under Chapter Heading 98.01 of the Customs Tariff. - HELD THAT: - The Tribunal examined the scope and wording of Chapter Heading 98.01 and concluded that it encompasses all items of machinery as well as components or raw materials required for the initial setting up of a specified power project. Applying that scope to the facts, electric wires and cables supplied for setting up a Mega Power project fall within Chapter Heading 98.01 and hence are classifiable therein. The Tribunal rejected the Commissioner's finding that the subject goods were not classifiable in Chapter Heading 98.01, observing that the chapter wording clearly covers such items when supplied for initial setting up of the project. [Paras 7]

Electric wires and cables held classifiable under Chapter Heading 98.01 of the Customs Tariff.

Exemption under Notification No. 06/2006-CE - Project Authority Certificate - eligibility for benefit of exemption for supplies under International Competitive Bidding - The conditions of Notification No. 06/2006-CE were fulfilled and the appellant was entitled to the benefit of the notification on the basis of the Project Authority Certificate issued for supplies under International Competitive Bidding. - HELD THAT: - The Tribunal recorded that the supplies were made pursuant to International Competitive Bidding for a Mega Power project of 1000 MW or more and that a Project Authority Certificate (PAC) dated 09.09.2005 was furnished by the Additional General Manager of NTPC, Ms. Reeta Bandopadhyay, who was duly authorised to issue such certificate. The Commissioner's contrary conclusion - that the required certificate had not been issued by the CMD of NTPC and therefore conditions were not met - was negatived. On the combined findings that the goods are classifiable under Chapter 98.01 and that a duly authorised PAC was issued, the Tribunal held that the conditions of Notification No. 06/2006-CE were satisfied and the appellant was entitled to exemption. [Paras 7]

Conditions of Notification No. 06/2006-CE held satisfied and appellant entitled to its benefit.

Final Conclusion: Impugned order denying exemption was set aside; appeal allowed and appellant granted consequential relief for having established classification under Chapter 98.01 and fulfillment of conditions of Notification No. 06/2006-CE by production of a duly authorised Project Authority Certificate.

Clubbing of clearances for SSI exemption - SSI exemption entitlement of separately incorporated units - Mutuality of interest and financial flow back - Clandestine manufacture and clandestine removal - Standard of proof and tangible evidence for clandestine clearance - Board's circular treating limited companies as separate manufacturers

Clubbing of clearances for SSI exemption - SSI exemption entitlement of separately incorporated units - Mutuality of interest and financial flow back - Board's circular treating limited companies as separate manufacturers - Clearances of the six manufacturing units cannot be clubbed and each unit is entitled to SSI exemption where no financial flow back or mutuality of interest is established - HELD THAT: - The Tribunal examined the organisational structure, separate registrations, separate factories, distinct investments in capital and machinery, independent financial sources, separate taxation and utility connections, and the Commissioner's on site findings. These facts were not controverted by Revenue. Precedents and Board guidance were considered: absent demonstrable financial flow back, mutuality of interest, or that one unit was a dummy, mere common family relations, occasional common staff or proximity do not justify clubbing. The Tribunal found the facts akin to earlier decisions where separate private limited companies with independent machinery and separate registrations were held entitled to separate exemption limits. Reliance on decisions involving creation of front companies with pervasive control (e.g., MACL) was held inapplicable on facts. [Paras 19, 30]

All six units are independent for SSI exemption purposes; their clearances are not to be clubbed and they retain entitlement to separate exemption limits.

Clandestine manufacture and clandestine removal - Standard of proof and tangible evidence for clandestine clearance - Demand based on alleged clandestine manufacture and clandestine removal is unsustainable for lack of corroborative and tangible evidence and absence of quantification of clandestine clearances - HELD THAT: - The Tribunal applied established criteria requiring tangible evidence for clandestine manufacture/clearance (e.g., excess raw materials, discovery of unaccounted finished goods, statements of buyers, proof of transportation, receipt of sale proceeds). The demand was founded on ICC photocopy data and presumptions; sales tax assessments discredited the alleged clandestine sales and the ICC material was treated as unreliable. No specific calculation or identification of quantity/value attributable to each unit was made; the department had equally apportioned demand without ascertaining unit wise clandestine clearances, contrary to judicial discipline. In these circumstances, and following authorities requiring corroboration, the clandestine removal demand was held unsustainable. [Paras 19, 32, 34]

The demand for duty on account of clandestine manufacture/clearance is set aside for want of corroborative evidence and for lack of quantification; no part of the clandestine clearance demand is sustainable.

Final Conclusion: The Tribunal upheld the adjudicating authority's order: charges of clubbing clearances and of clandestine removal were set aside; the Revenue's appeals were dismissed and the respondents retained the benefit of SSI exemption. Appeals dismissed.

Clandestine clearance of excisable goods - availability of Cenvat credit where only invoices are produced - burden of proof on Revenue to demonstrate removal without payment of duty - job work and direct supply to job worker as sufficiency for receipt of inputs - verification of stock/shortage detected on physical verification - penalty under Cenvat Credit Rules read with Section 11AC

Clandestine clearance of excisable goods - burden of proof on Revenue to demonstrate removal without payment of duty - Demand on account of alleged clandestine clearance of scrap - HELD THAT: - The Tribunal examined the evidence relied upon by Revenue-entries in a slip pad recovered from the security supervisor and the statements of the alleged buyer of scrap which were initially retracted and later retracted-statements withdrawn. The appellants produced a chartered engineer's certificate and production and RG-1 records showing scrap generation and clearance on payment of duty; Revenue did not produce corroborative material such as transport documents, evidence of excess procurement of inputs, excess finished goods clearance, or reliable buyer testimony to establish clandestine removals. In the absence of positive, corroborative evidence and having regard to the retractions and denials by the alleged buyer, the evidence placed by the appellants carried evidentiary value and the benefit of doubt was held to be in their favour. [Paras 10, 11]

Demand on account of clandestine clearance of scrap is set aside.

Availability of Cenvat credit where only invoices are produced - job work and direct supply to job worker as sufficiency for receipt of inputs - Denial of Cenvat credit on the ground that inputs were not actually received but only invoices were available - HELD THAT: - Of the 80 invoices in dispute the record showed that for 34 invoices the description was HR/CR coils; others described sheets or slitted coils. The appellants' case, accepted by the Tribunal, was that coils were sent directly to job workers for slitting/cutting, job work charges were paid, and sheets were thereafter received against job work challans. Statements of suppliers indicated supply of coils to the appellants but Revenue did not produce transporters' statements or other positive evidence contradicting the appellants' case. The adjudicating authority had not considered the job-work evidence creditably. In the absence of contrary positive evidence from Revenue, the appellants were held entitled to credit on the HR/CR coils. [Paras 11]

Denial of Cenvat credit on the ground of non-receipt of inputs is set aside; appellants entitled to avail credit.

Verification of stock/shortage detected on physical verification - clandestine clearance of finished goods - Demand in respect of small-quantity clearance of auto parts and confirmation of duty for shortage detected on stock verification - HELD THAT: - The appellants claimed that certain parts were earlier cleared on payment of duty, returned for repair, and re-cleared without duty; no documentary proof was produced to substantiate that contention, and therefore that defence was not accepted. Separately, the Tribunal upheld the demand arising from shortage of inputs as detected during physical verification of stocks, confirming the duty and interest on that shortage as supported by verification findings. [Paras 12, 13]

Demand in respect of the small-quantity clearance of auto parts is confirmed; duty and interest on shortage detected during stock verification are confirmed.

Final Conclusion: The appeals are disposed by setting aside the demands for wrongful availment of Cenvat credit by the Ludhiana and Gurgaon units and the demand for clandestine clearance of scrap; however, duty and interest confirmed for the shortage of inputs detected on verification and the small-duty demand in respect of certain auto parts are upheld; all penalties are set aside.

Admissibility of panchnama - admissibility of photocopies as evidence - clubbing of clearances - SSI exemption entitlement of separately incorporated companies - clandestine manufacture and clearance - evidentiary requirements for proving clandestine removals

Admissibility of panchnama - admissibility of photocopies as evidence - Panchnama and photocopies relied upon by Revenue are inadmissible and cannot be used to sustain the allegations. - HELD THAT: - The adjudicating authority recorded material defects in the panchnama: panch witnesses were taxi drivers brought by the raiding party, received remuneration from raiding officers, admitted inability to read the panchnama language and remained outside during searches; originals of annexures and certain seized diaries were missing; seized papers lacked signatures of panchas, representatives or seizing officers. Those facts were not denied by Revenue. In these circumstances the panchnama lacks evidentiary value and statements/records seized in reliance on it cannot be accepted. Photocopies of documents not supported by admissible panchnama or original records are therefore not admissible for sustaining the show cause notices. [Paras 14, 15, 16]

Panchnama and photocopies are not admissible; issue answered for respondents.

Clubbing of clearances - SSI exemption entitlement of separately incorporated companies - Clearances of the four companies cannot be clubbed; each separately incorporated unit is entitled to SSI exemption in the absence of financial flow back or mutuality of interest. - HELD THAT: - The record shows each unit is a separately incorporated private limited company with independent registrations (Central Excise, Sales Tax, Income Tax, Director of Industries), separate factories, machinery, workforce, utilities and financing; these facts were not controverted. There is no demonstrable financial flow back or mutuality of interest which would make any unit a dummy or justify treating them as a single manufacturer. The Tribunal applied precedents and examined the departmental allegations and found them distinguishable or unsupported. On this basis the adjudicating authority's finding that the units are independent and entitled to separate SSI limits is sustained. [Paras 17, 18, 19, 24]

Clearances not clubbable; SSI exemption maintained for each respondent unit.

Clandestine manufacture and clearance - evidentiary requirements for proving clandestine removals - Demand based on alleged clandestine manufacture and clearance is unsustainable for want of corroborative evidence and quantification. - HELD THAT: - Revenue's demand rested on data from ICC and alleged private diaries, but sales tax assessments and investigation did not corroborate clandestine sales through trading firms. The Tribunal reiterated the established requirement that clandestine removals must be proved by tangible, corroborative evidence (e.g., excess raw material consumption, discovery of finished goods, identified buyers, receipt of sale proceeds, links between recovered documents and factory activities). Here there was no such corroboration; further, Revenue equally apportioned the unquantified demand among all four units without identifying quantities or values attributable to each unit. In absence of identification/quantification and corroborative evidence, the clandestine removal charge cannot be sustained. [Paras 25, 26, 27, 28]

Demand for clandestine manufacture and clearance is rejected; issue answered for respondents.

Final Conclusion: The Tribunal upheld the adjudicating authority's findings: panchnama and photocopies are inadmissible, the four companies' clearances cannot be clubbed and SSI exemption stands, and the demand for clandestine manufacture/clearance is unsustainable; Revenue's appeals are dismissed and the impugned orders are upheld.

Cenvat credit entitlement - Rule 6(3) of the Cenvat Credit Rules, 2004 - exempted final product - conditional exemption - reversal of credit by payment of percentage - separate accounts requirement - manufacture versus clearance

Cenvat credit entitlement - manufacture versus clearance - conditional exemption - Cenvat credit was lawfully available to the manufacturer because inputs were procured and used when the final goods were of dutiable character prior to issue of the exemption certificate. - HELD THAT: - The Tribunal accepted that at the time M/s WCL received the order from M/s WPL (20 July 2012) the final goods were of dutiable character because GMADA had not then obtained the exemption certificate; manufacture thus commenced when the goods were dutiable and cenvat credit was therefore available. The later occurrence of an exemption certificate and subsequent clearance without payment of duty did not retrospectively defeat the entitlement that arose at the time inputs were received and used in manufacture. The decision distinguishes manufacture (the stage when input-credit entitlement crystallises) from clearance (the eventual mode of removal) and follows the principle that a conditional exemption obtained subsequently does not nullify credit lawfully availed when inputs were used for manufacture of dutiable goods. [Paras 7, 11]

Cenvat credit availed by M/s WCL on inputs was in accordance with law and cannot be denied merely because the finished goods were later cleared under an exemption certificate.

Rule 6(3) of the Cenvat Credit Rules, 2004 - separate accounts requirement - reversal of credit by payment of percentage - Rule 6(3) applied where separate accounts of inputs used for dutiable and exempted goods were not maintained, and payment of the prescribed percentage at clearance satisfied the rule. - HELD THAT: - The Tribunal found that the appellants did not maintain separate accounts for inputs used in manufacture of dutiable and exempted goods, bringing Rule 6(3) into play. The appellants complied with Rule 6(3) by reversing an amount equivalent to 6% of the value of exempted final products at the time of clearance through their cenvat account. That compliance fulfils the statutory requirement under Rule 6(3) and precludes a further demand corresponding to the same reversal. [Paras 8, 10]

Provisions of Rule 6(3) were applicable and the appellant's reversal of 6% at the time of clearance met the requirement; therefore the additional demand on that ground is unsustainable.

Exempted final product - manufacture versus clearance - Revenue's contention that the appellants manufactured only exempted goods until 05/11/2012 was rejected as factually untenable. - HELD THAT: - The Tribunal observed that on 05/11/2012 the appellants themselves cleared dutiable goods on payment of duty, which contradicts Revenue's assertion that only exempted goods had been manufactured until that date. The factual record shows manufacture began before the exemption certificate was obtained and that dutiable clearances occurred, undermining the Revenue's contention and supporting the appellants' entitlement to credit at the time of manufacture. [Paras 9, 11]

The Revenue's plea that only exempted goods were manufactured up to 05/11/2012 is not tenable and does not defeat the appellants' credit entitlement.

Final Conclusion: The impugned order denying cenvat credit and imposing demand/penalties was set aside: the appellants lawfully availed cenvat credit when inputs were procured and used for manufacture prior to issuance of the exemption certificate, Rule 6(3) was properly complied with by reversal of 6% on exempted clearances, and the appeals are allowed with consequential relief.

Interpretation of undefined statutory term - ordinary parlance / dictionary meaning - inadmissibility of adopting definition from other enactments - construction of entry in Third Schedule deeming repacking as manufacture - retrospective versus prospective effect of amendment to Third Schedule - clarificatory or substantive character of fiscal amendment

Interpretation of undefined statutory term - ordinary parlance / dictionary meaning - inadmissibility of adopting definition from other enactments - Whether the approach in JCB India Ltd. adopting the definition of 'automobile' from other enactments is correct, and the proper principle for construing 'automobiles' where undefined in the Central Excise enactments. - HELD THAT: - The Tribunal examined its earlier reasoning in JCB India Ltd. and concluded that that decision erred in adopting the definition of 'automobile' from the Air (Prevention & Control of Pollution) Act and in overlooking settled principles of statutory construction. Relying on the Supreme Court in MSCO Pvt. Ltd. and on the guidance that an undefined statutory term must be given the meaning it bears in ordinary parlance (with dictionary meanings to be used cautiously and in context), the Tribunal held it is impermissible to import definitions from non-cognate enactments without justification. Having found the JCB reasoning inconsistent with these principles, the Tribunal declined to accept that decision as authoritative for the present controversy and considered the matter to raise significant questions of law requiring consideration by a Larger Bench. [Paras 6, 7, 8, 9, 10]

The Tribunal disagreed with the reasoning in JCB India Ltd. on this point and referred the question for determination by a Larger Bench.

Retrospective versus prospective effect of amendment to Third Schedule - clarificatory or substantive character of fiscal amendment - Whether the Notification/amendment (Notification No.11/2011 and connected DFO clarification) which included parts of certain chapter 84 goods in the Third Schedule is clarificatory and thus applicable prior to 29.04.2010 or is mandatorily effective only from 29.04.2010. - HELD THAT: - The Tribunal noted the statutory and administrative steps in February/April 2010 and the subsequent Notification of 2011 (with DFO clarification) which addressed inclusion of certain goods in the Third Schedule retrospectively. Given the competing contentions as to whether those changes are clarificatory (and hence applicable to the earlier period) or effect substantive change operative only from 29.04.2010, the Tribunal recorded that the question raises a substantial point of law on the retrospective operation and character of the amendment which ought to be authoritatively resolved by a Larger Bench. [Paras 9, 10]

The question of retrospective applicability of the amendment was referred to a Larger Bench for determination.

Final Conclusion: The Tribunal declined to decide the principal excise-liability controversy on the merits and, finding error in the earlier tribunal decision relied upon and a substantial question regarding the effect of the 2010/2011 amendments, has referred two substantial questions-(definition of 'automobiles' where undefined and the retrospective character of the Third Schedule amendment)-to a Larger Bench for authoritative determination; the appeals were not finally adjudicated on merits pending that reference.

Exemption under Notification No.108/95-CE - supply to United Nations or International Organization for official use - certificate by the International Organization as proof of intended use - interpretation of clause (b)(i) and clause (b)(ii) of the notification - eligibility for central excise exemption

Exemption under Notification No.108/95-CE - certificate by the International Organization as proof of intended use - interpretation of clause (b)(i) and clause (b)(ii) of the notification - Entitlement of the assessee to central excise exemption under Notification No.108/95-CE for clearances made to UNICEF-assisted projects during the specified periods - HELD THAT: - The Tribunal examined the notification as amended to include UNICEF in the annexure and construed clause (b)(i) as providing exemption where goods are supplied to an organization listed in the annexure for projects approved and financed by that organization and certified by that organization that the goods are intended for official use. The assessee produced purchase orders, delivery instructions and certificates issued by UNICEF procurement officers (including a certificate dated 25 June 2001) evidencing that UNICEF had placed purchase orders for supply of bleaching powder for use in UNICEF-assisted projects. The Tribunal found that those documents constituted sufficient proof that the goods were intended for official use by an organization included in the annexure and that the first appellate authority erred in treating the supplies as falling under clause (b)(ii) and in requiring a certificate from an officer not below the rank of Deputy Secretary to the Government of India. Applying the proper construction of clause (b)(i), the Tribunal concluded that the assessee was eligible for the exemption in respect of the clearances covered by the impugned show cause notices.

Three appeals allowed; the assessee entitled to benefit of Notification No.108/95-CE for the clearances in dispute with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that the documentary certificates and purchase orders from UNICEF satisfied the condition for exemption under Notification No.108/95-CE (as amended), and directed consequential relief.

Stock discrepancy threshold of 2% - application of administrative instruction in G.O.Ms.No.200/CT&RA dated 26.2.1988 - assessment of dealer's past performance before ignoring minor discrepancies - appellate tribunal's duty to reappraise and record positive findings when reversing fact-finding - quashing of perverse or non-speaking appellate orders

Appellate tribunal's duty to reappraise and record positive findings when reversing fact-finding - quashing of perverse or non-speaking appellate orders - Whether the Tribunal erred in allowing the Revenue's appeal without independently examining or recording reasons to displace the Appellate Assistant Commissioner's finding that the stock reconciliation and the order allowing the dealer's appeal were proper. - HELD THAT: - The Court examined the Tribunal's order and found that it merely quoted the Assessing Officer's findings and allowed the Revenue's appeal without addressing the Appellate Assistant Commissioner's concurrent consideration of records, documents and the Enforcement Wing's stock reconciliation. The Tribunal did not demonstrate any factual infirmity in the Appellate Assistant Commissioner's conclusions nor did it record specific findings to justify reversing that decision. An appellate body must reappraise evidence and articulate reasons when it departs from a lower forum's fact-finding; failure to do so renders the order perverse and non-speaking. In the present case the absence of any independent analysis or reliance on materials contradicting the AAC's findings justified interference. [Paras 7, 9]

Tribunal's order setting aside the Appellate Assistant Commissioner's order is quashed as perverse for lack of independent fact finding and reasoned consideration.

Stock discrepancy threshold of 2% - application of administrative instruction in G.O.Ms.No.200/CT&RA dated 26.2.1988 - assessment of dealer's past performance before ignoring minor discrepancies - How G.O.Ms.No.200/CT&RA dated 26.2.1988, which advises that stock discrepancies not exceeding 2% of total volume may be ignored, is to be applied in assessments arising from enforcement inspections. - HELD THAT: - The Government Order was intended to avoid unduly penalising dealers for minor stock variations by advising Inspecting Officers not to propose assessments for discrepancies not exceeding 2% and to have regard to the assessee's past performance. The Court noted this concession is not absolute: where an assessee has an adverse history with the Department, the benefit cannot be claimed as a matter of right. Therefore, application of the G.O. requires a specific, case wise consideration of the dealer's performance in prior years; each assessment must be considered on its own facts before ignoring a discrepancy under the administrative instruction. [Paras 4, 5]

G.O.Ms.No.200/CT&RA (26.2.1988) permits ignoring stock discrepancies up to 2% but only after specific consideration of the assessee's past performance; it does not create an unfettered right to ignore discrepancies irrespective of prior adverse records.

Final Conclusion: Writ Petition allowed; the impugned order of the Tribunal dated 22.7.2005 is quashed for want of reasoned factual reappraisal, and the matter stands remitted to give effect to the Appellate Assistant Commissioner's considered findings; no costs and connected petition closed.

Conviction under the NDPS Act for commercial quantity offences - acceptance of trial court's findings by the appellant - sentence as minimum prescribed under the NDPS Act - consideration of period of custody undergone for mitigation of sentence - modification of default sentence in lieu of fine under Section 30 Cr.P.C. - application of prior precedent in reduction of default sentence

Conviction under the NDPS Act for commercial quantity offences - acceptance of trial court's findings by the appellant - Affirmation of the conviction recorded by the trial court. - HELD THAT: - The appellant expressly declined to challenge the trial court's findings of guilt. The High Court noted that the prosecution evidence amply supported the allegations regarding recoveries from the appellant's car and the godown and therefore affirmed the conviction under the NDPS Act for offences involving commercial quantity. No appellate re-evaluation of the evidence was undertaken since the appellant accepted the conviction. [Paras 5]

Conviction under Section 20(b)(ii)(C) read with Section 29 of the NDPS Act is affirmed.

Sentence as minimum prescribed under the NDPS Act - consideration of period of custody undergone for mitigation of sentence - modification of default sentence in lieu of fine under Section 30 Cr.P.C. - application of prior precedent in reduction of default sentence - Modification of the sentence order limited to the default sentence for non-payment of fine; substantive sentence left intact. - HELD THAT: - The Court observed that the substantive sentences of RI for ten years each are the statutory minima and therefore could not be altered. Having regard to the appellant's period of custody (as per Nominal Roll) and his conduct, and relying on the approach in the cited precedent which reduced default imprisonment for non-payment of fine where substantial custody had already been undergone, the Court exercised its power under the procedural provision governing default in payment of fine to reduce the default sentence. Consequently, while the substantive sentences remain unmodified, the default sentence for non-payment of the aggregate fine was reduced to simple imprisonment for one and a half months for each offence. Other terms of the sentence order were left undisturbed. [Paras 6, 8]

Substantive sentences upheld; default sentence for non-payment of fine modified to simple imprisonment for one and a half months under both offences.

Final Conclusion: The appeal is disposed of by affirming the conviction under the NDPS Act and by modifying the sentence only to the extent of reducing the default imprisonment for non-payment of the imposed fine to simple imprisonment for one and a half months for each offence, leaving the substantive sentences otherwise intact.