TaxTMI Updates e-Newsletter
Nov 09,2019

Plant and machinery - input tax credit - pipelines laid outside the factory premises - factory (ordinary parlance / dictionary meaning) - exclusion clause of definition

Factory (ordinary parlance / dictionary meaning) - FSRU - Whether the Floating Storage Re-gasification Unit (FSRU) constitutes a 'factory' for the purpose of the exclusion in the explanation to Section 17(5). - HELD THAT: - The Appellate Authority examined the absence of a definition of 'factory' in the CGST Act and found it impermissible to import a definition from another enactment in the present context. The Authority resorted to ordinary/dictionary meanings and held that 'factory' in common parlance requires (i) a building, set of buildings or establishment and (ii) manufacturing activity. The FSRU was found to satisfy both parameters: it comprises built structures (walls/roof/establishment) and hosts the regasification (manufacturing) activity. Consequently, the FSRU was held to be a 'factory' within the contextual meaning of the provision, rejecting the AAR's contrary view that another statute's definition must be adopted. [Paras 16, 18, 21, 22]

FSRU is to be construed as a 'factory' for the purposes of the exclusion in the Explanation to Section 17(5).

Pipelines laid outside the factory premises - exclusion clause of definition - plant and machinery - Whether the tie-in pipeline connecting the FSRU to the National Grid falls within the exclusion 'pipelines laid outside the factory premises' and therefore is excluded from 'plant and machinery'. - HELD THAT: - Having held the FSRU to be a 'factory' in the contextual, ordinary sense, the Authority interpreted the adjacent use of 'premises' as qualified by 'factory' so that 'factory premises' embraces the FSRU. On that basis the tie-in pipeline - laid from the FSRU to the National Grid - was held to be a pipeline laid outside the factory premises and thus expressly excluded from the definition of 'plant and machinery' in the Explanation to Section 17(5). The Authority declined to accept submissions that the exclusion must be narrowly read to require land-based buildings only, observing that contextual meaning of 'premises' in the exclusion prevails over the literal dictionary emphasis urged by the appellant. [Paras 26, 27, 28]

The tie-in pipeline is a 'pipeline laid outside the factory premises' and is excluded from 'plant and machinery' under the Explanation to Section 17(5).

Input tax credit - Section 17(5)(c) and 17(5)(d) - plant and machinery - Whether input tax credit (ITC) is available on goods and services used for construction of the tie-in pipeline from the FSRU to the National Grid. - HELD THAT: - Because the tie-in pipeline was held to be excluded from the definition of 'plant and machinery' as a 'pipeline laid outside the factory premises', the conditions that would permit ITC for construction of plant and machinery are not met. The Authority therefore concluded that the statutory bar in Section 17(5)(c) and (d) applies and ITC on goods and services for constructing the tie-in pipeline is not available to the appellant. The Authority accordingly modified the earlier AAR ruling to the extent of upholding denial of ITC. [Paras 10, 28]

ITC on goods and services used for construction of the tie-in pipeline is not available under Section 17(5)(c) and 17(5)(d).

Final Conclusion: The Appellate Authority modified the AAR in substance by holding that the FSRU qualifies as a 'factory' in ordinary parlance, that the tie-in pipeline is a pipeline laid outside the factory premises and thus excluded from 'plant and machinery', and consequently the appellant is not entitled to claim input tax credit on goods and services used for construction of that pipeline under Section 17(5)(c) and (d).

Jurisdiction of advance ruling on place of supply - determination of place of supply excluded from advance ruling - advance ruling beyond jurisdiction - set aside of impugned advance ruling

Jurisdiction of advance ruling on place of supply - determination of place of supply excluded from advance ruling - Whether the Appellate Authority for Advance Ruling had jurisdiction to decide taxability of advisory and management fees collected from overseas investors insofar as the question required determination of the place of supply. - HELD THAT: - The advance ruling provisions enumerate a specific and exhaustive list of questions on which a ruling may be sought. Section 97(2) identifies classification, applicability of notifications, time and value, admissibility of input tax credit, determination of liability to pay tax, registration requirement and whether an activity amounts to supply. Determination of the 'place of supply' is not included in this list. Since taxability of the impugned transactions (in particular, whether fees received from overseas investors constitute export/zero-rated supplies) necessarily requires determination of the place of supply, that question falls outside the scope of matters on which an advance ruling can be given. For that reason, the authority which issued the advance ruling transcended its jurisdiction in concluding on taxability based on the AIF being the recipient and the place of supply being within taxable territory. The impugned AAR ruling therefore could not stand and has been set aside. [Paras 17, 18, 19]

The question involving determination of place of supply is beyond the jurisdiction of the advance ruling forum; the impugned AAR ruling is set aside and no ruling can be passed on the said question.

Final Conclusion: The AAR's conclusion on taxability of the advisory and management fees (which required determination of place of supply) was beyond the statutory scope of advance rulings and is set aside; no ruling can be given by the advance ruling authority on that question.

Advance ruling void ab-initio for suppression of material facts - Maintainability of advance ruling application where question is pending in earlier proceedings - Proviso to Section 98(2) - application not to be admitted if question raised is already pending in proceedings - Section 104 - power to declare advance ruling void on fraud, suppression or misrepresentation - Condonation of delay in filing appeal under Section 100 - sufficient cause - Composite supply versus supply of goods - application of Schedule II (Para 1(a) and Para 6(b)) - Locus of concerned/jurisdictional officer to file appeal against advance ruling

Advance ruling void ab-initio for suppression of material facts - Section 104 - power to declare advance ruling void on fraud, suppression or misrepresentation - Proviso to Section 98(2) - application not to be admitted if question raised is already pending in proceedings - The Advance Ruling was obtained by suppression of material facts and is void ab-initio. - HELD THAT: - The Appellate Authority examined the chronology and evidence of investigations initiated by DGGI (intelligence, search on 05.02.2019, statements recorded) prior to the filing of the ARA application (25.02.2019). The facts show that proceedings concerning the same question of classification of supplies were pending/initiated against the franchisor and franchisees before the ARA application was filed, and that the applicant/franchisor exercised control over franchisees including billing/classification (billing software, franchise agreement). A partner's statement admitted awareness of DGGI investigations and that the ARA application was filed following discussions with the franchisor without disclosing those investigations to the AAR. Given that Section 98(2) forbids admission where the question is already pending in proceedings in the case of the applicant and Section 104 empowers declaring rulings void if obtained by suppression, the Authority found deliberate suppression of material facts that were critical to admission and determination of the ARA application. Reliance on authorities regarding fraud/suppression established that a decision obtained by playing fraud on the authority is a nullity. On these findings the AAR order was held vitiated and declared void ab-initio. [Paras 166, 167, 168, 169, 170]

The impugned Advance Ruling is declared void ab-initio and set aside for suppression of material facts.

Condonation of delay in filing appeal under Section 100 - sufficient cause - The delay in filing the appeal by the Appellant was condoned. - HELD THAT: - The Appellate Authority considered the appellant's explanation that crucial facts were brought to its notice by DGGI letters received after communication of the AAR order and that time was required to decide on filing an appeal. Exercising the discretion under the proviso to Section 100(1)/(2), the Authority was satisfied that sufficient cause existed to permit filing within the additional period and accordingly condoned the delay. [Paras 160]

Delay in presentation of the appeal is condoned.

Locus of concerned/jurisdictional officer to file appeal - Proviso to Section 98(2) - application not to be admitted if question raised is already pending in proceedings - The Appellate Authority accepted that the jurisdictional/concerned officer could be aggrieved and validly file the appeal notwithstanding earlier submissions to the AAR. - HELD THAT: - Although the jurisdictional officer had earlier made submissions before the AAR that were accepted, later disclosure that proceedings on the same issue were pending and that those facts had been suppressed by the applicant altered the position. The Authority held that the jurisdictional officer had a valid reason to be aggrieved when the suppressed facts came to light, and that the officer's filing of the appeal was therefore maintainable. The Authority rejected the contention that the remedy under Section 104 or Section 102 before the AAR rendered an appeal impermissible in such circumstances. [Paras 166, 167]

The appeal by the jurisdictional/concerned officer is maintainable and may be entertained.

Final Conclusion: The Appellate Authority condoned the delay, entertained the appeal by the jurisdictional/concerned officer, and allowed the appeal: the Advance Ruling dated 19.03.2019 is set aside and declared void ab-initio on the ground that it was obtained by suppression of material facts.

Investigation of offences under the Indian Penal Code vis-a -vis special statutes - jurisdiction of police to seize property under the Code of Criminal Procedure - saving of special law procedure and non-derogation by special enactments - primary jurisdiction of specialized agency where principal offence is under a special Act - prohibition on roving or fishing enquiry by police - requirement of coordination and simultaneous investigation by multiple agencies - protection against double punishment under Section 26 of the General Clauses Act

Investigation of offences under the Indian Penal Code vis-a -vis special statutes - saving of special law procedure and non-derogation by special enactments - Whether the State police may investigate offences under the IPC even if the same or related acts are covered by special statutes such as the Customs Act or GST statutes. - HELD THAT: - The Court held that offences falling under the Indian Penal Code may be investigated by the police even though the same facts may also give rise to offences under special statutes. Sections 4 and 5 of the CrPC preserve the applicability of the Code subject to any specific contrary provision in a special enactment; absent an express exclusion in the special law, the procedural provisions of the CrPC and the investigatory competence under the IPC are not displaced. The court relied on precedents establishing that special enactments do not ipso facto oust police jurisdiction to investigate penal offences discovered in the course of transactions governed by special Acts, while noting that where a special statute contains contrary procedure that must be followed, that procedure will prevail. [Paras 41, 42, 43]

Police have jurisdiction to investigate offences under the IPC even if the same acts are also cognisable under the Customs Act or GST Acts, subject to any specific procedural ouster in those special statutes.

Jurisdiction of police to seize property under the Code of Criminal Procedure - Whether the initial detention and seizure of trucks and goods by the Assam Police was without authority. - HELD THAT: - Applying the facts that police acted on credible information, detained multiple trucks, sent documents for tax verification and conducted local enquiries which disclosed anomalies, the Court concluded that the initial seizure by the police could not be characterised as without authority. The seizure was effected in the course of investigating alleged criminality (forgery, cheating, conspiracy) within the police's investigatory domain under the CrPC. [Paras 55]

The initial seizure and detention by the Assam Police was not without authority.

Primary jurisdiction of specialized agency where principal offence is under a special Act - requirement of coordination and simultaneous investigation by multiple agencies - Whether the investigation and custody of seized goods should continue with the police when the principal offence disclosed is smuggling under the Customs Act. - HELD THAT: - The Court found that where the investigative facts show the principal criminal activity to be smuggling under the Customs Act and offences under the IPC (forgery, use of forged documents) are ancillary to that principal offence, primary responsibility for investigation and custody of articles lies with the competent customs authorities. In such circumstances the police should hand over the seized goods and vehicles to the Customs authorities for further investigation, although the Customs authority may seek police assistance. This allocation reflects the special competence of the agency empowered by the special statute to investigate the principal offence while avoiding duplication and undue prolongation of coercive measures. [Paras 44, 54, 55]

Where smuggling under the Customs Act is the principal offence, the police should hand over seized goods and vehicles to the Customs authorities for further investigation.

Prohibition on roving or fishing enquiry by police - jurisdiction of police to seize property under the Code of Criminal Procedure - Whether the police may conduct a roving or fishing enquiry and initiate investigation on mere suspicion without requisite information under the CrPC. - HELD THAT: - The Court reiterated that police investigatory power commences on receipt of information as envisaged by Sections 154/155 CrPC and that there is no provision authorising police to act as a general intelligence-gathering agency disconnected from an identifiable cognisable offence. While investigation of a revealed IPC offence may surface leads to offences under special laws, initiation of a roving enquiry or investigation on mere suspicion (without requisite information) is impermissible and susceptible to misuse. [Paras 46, 48]

Police cannot conduct a roving or fishing enquiry; initiation of investigation requires appropriate information under the CrPC.

Requirement of coordination and simultaneous investigation by multiple agencies - prohibition on roving or fishing enquiry by police - How investigations by multiple agencies should be conducted when offences arising from the same transaction fall under different statutes and investigating agencies. - HELD THAT: - The Court directed that different investigating agencies, being arms of the State, should coordinate and, as far as possible, commence simultaneous investigations into distinct offences arising from the same or interconnected criminal transactions to avoid duplication, prolonged detention, multiple coercive actions and infringement of constitutional rights. Agencies should notify one another when investigations disclose offences within another agency's remit so that investigations proceed expeditiously and without undue prolongation of custody. [Paras 49, 53]

Investigating agencies must coordinate and, where feasible, investigate simultaneously to prevent multiplicity of coercive actions and protect accuseds' rights.

Protection against double punishment under Section 26 of the General Clauses Act - Whether prosecution under multiple enactments for the same act leads to double punishment. - HELD THAT: - The Court affirmed that Section 26 of the General Clauses Act permits prosecution under either or any of the enactments applicable to the same act but protects against being punished twice for the same offence. This principle governs the stage of prosecution and punishment, and does not preclude investigation by different agencies where statutory ingredients of distinct offences are satisfied. [Paras 33, 43]

An offender may be prosecuted under more than one enactment for the same act, but shall not be punished twice for the same offence as per Section 26 of the General Clauses Act.

Final Conclusion: The Assam Police lawfully initiated detention and seizure on credible information and may investigate offences under the IPC even if related offences arise under the Customs Act or GST statutes; however, where the investigation reveals that the principal offence is smuggling under the Customs Act, the police should hand over seized goods and vehicles to Customs for further investigation. Police must not conduct roving or fishing enquiries, and multiple investigating agencies should coordinate and, where practicable, investigate simultaneously; prosecution under multiple statutes is permissible subject to the bar on double punishment under Section 26 of the General Clauses Act.

Carry forward of unabsorbed depreciation - limitation of six years - All six appeals, relating to Assessment Years 1997-98 to 2002-03, were dismissed because the contested question on carry forward of unabsorbed depreciation after eight assessment years was held to be covered by the earlier decision in Hindustan Unilever Ltd.[2016 (7) TMI 1245 - BOMBAY HIGH COURT] leaving no substantial question of law as held by HC [2018 (8) TMI 598 - BOMBAY HIGH COURT]

HELD THAT:- Delay condoned. As the identical matter has already been dismissed by this Court, hence this special leave petition is also dismissed.

Levy of penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - admissibility of statement recorded during survey under section 133A as sole basis for penalty - reasonable and bonafide explanation under section 273B - obligation on assessing officer to verify documentary evidence in penalty proceedings

Levy of penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - admissibility of statement recorded during survey under section 133A as sole basis for penalty - reasonable and bonafide explanation under section 273B - obligation on assessing officer to verify documentary evidence in penalty proceedings - Whether the penalty imposed under section 271(1)(c) for the surrendered commission is sustainable where the surrender was recorded during a survey and the assessee produced documentary evidence and explanations that the payments were genuine. - HELD THAT: - The Tribunal found that the director of the assessee had surrendered an amount during a survey, but there was no specific incriminating material identified in the survey statement or in the assessment order to demonstrate that the surrendered commission payments were bogus. The assessee produced documentary evidence-including confirmations, payee returns showing inclusion of commission income, TDS-compliant account-payee cheque payments and an explanatory letter stating the surrender was to buy peace and avoid prolonged litigation. The Tribunal held that a mere statement recorded under section 133A, absent corroborating evidence pointing to bogus transactions, cannot be treated as conclusive proof of concealment for the purpose of levying penalty under section 271(1)(c). Where the assessee places relevant evidence and a bona fide explanation on record during penalty proceedings, the assessing officer is obliged to verify and inquire into that material rather than mechanically rely on the surrender or assessment addition. Applying section 273B principles, the Tribunal concluded that the explanation and documents furnished by the assessee constituted a reasonable and bonafide explanation; in the absence of contrary findings by the AO, penalty could not be sustained. [Paras 5]

Penalty under section 271(1)(c) deleted as the surrender recorded during survey, unsupported by specific incriminating material and rebutted by documentary evidence and a bona fide explanation, did not justify levy of penalty.

Final Conclusion: Appeal allowed; penalty imposed under section 271(1)(c) for Assessment Year 2014-15 deleted.

Furnishing of recorded reasons for reopening assessment as mandatory jurisdictional requirement - Reassessment order bad in law for failure to furnish recorded reasons when requested - Right of assessee to receive reasons to enable objection before the Assessing Officer

Furnishing of recorded reasons for reopening assessment as mandatory jurisdictional requirement - Reassessment order bad in law for failure to furnish recorded reasons when requested - Validity of reassessment framed under section 143(3) r.w.s. 147/148 where recorded reasons for reopening were not furnished to the assessee despite request - HELD THAT: - The Tribunal found on the record that the assessee had requested the Assessing Officer to furnish the recorded reasons for reopening on more than one occasion and the Revenue did not place any material to show that the reasons were furnished. Relying on the principle laid down by the Supreme Court in GKN Driveshafts (India) Ltd. and subsequent decisions of the Bombay High Court, the Tribunal held that furnishing recorded reasons when requested is a mandatory, jurisdictional requirement because it enables the assessee to object to the reasons before the AO. Failure to comply with this obligation renders the reassessment order vitiated. Applying these authorities to the facts, and in the absence of any contrary binding decision or proof of compliance by the Revenue, the Tribunal concluded that the reassessment order was bad in law and therefore liable to be set aside. (Decision paragraphs: 5-7) [Paras 5, 6, 7]

Reassessment order framed under section 143(3) r.w.s. 147/148 set aside as bad in law for failure to furnish recorded reasons for reopening when requested

Final Conclusion: The appeal is allowed and the reassessment order is set aside for non-furnishing of recorded reasons for reopening; consequential grounds on merits were not adjudicated as academic.

Anonymous donation under Section 115BBC - addition under section 68 relating to identity, genuineness and creditworthiness - allowability of depreciation where cost was earlier treated as application of income under section 11 - application of Supreme Court precedent on depreciation of charitable trusts

Anonymous donation under Section 115BBC - addition under section 68 relating to identity, genuineness and creditworthiness - Whether the donations received by the assessee are anonymous donations liable to tax under Section 115BBC. - HELD THAT: - The Tribunal held that the legal tests for additions under section 68 and for treatment as an anonymous donation under Section 115BBC are different. Section 115BBC treats a donation as anonymous where the recipient does not maintain records indicating the name and address of the donor. In the instant case the assessee had the names and addresses and produced ITRs and letters from donors indicating donations for trust purposes. Applying the statutory definition, the receipts could not be treated as anonymous donations within the meaning of Section 115BBC. Consequently the finding that the receipts were anonymous and taxable under Section 115BBC was not sustained. [Paras 8]

Donations held not to be anonymous; not taxable under Section 115BBC.

Allowability of depreciation where cost was earlier treated as application of income under section 11 - application of Supreme Court precedent on depreciation of charitable trusts - Whether depreciation claimed on assets (the cost of which had earlier been allowed as application of income under section 11) is allowable. - HELD THAT: - The Tribunal followed the Apex Court's reasoning that depreciation is an appropriate allowance in computing the income of a charitable trust even where the cost of assets was treated as an application of income in earlier years. The Supreme Court has recognised that income of a trust must be computed on commercial principles and that normal depreciation can be allowed. On that basis the Tribunal allowed the depreciation claimed by the assessee. [Paras 9, 10]

Depreciation claim allowed in accordance with the Supreme Court precedent.

Final Conclusion: Appeal allowed: donations not taxable as anonymous receipts under Section 115BBC; depreciation claim allowed.

Jurisdiction to issue reassessment notice - prematurity of writ against non-final proceedings - distinction between lack of jurisdiction and erroneous exercise of jurisdiction - reassessment proceedings and show-cause notice - opportunity to be heard / audi alteram partem - speaking order requirement - remand for fresh consideration

Jurisdiction to issue reassessment notice - prematurity of writ against non-final proceedings - reassessment proceedings and show-cause notice - Whether the communication in annexure-C constitutes a final reassessment order amenable to writ jurisdiction - HELD THAT: - The Court found that annexures A to D, and annexure-C in particular, are not final reassessment orders but communications initiating reassessment proceedings. Paragraphs 3 and 4 of annexure-C expressly record that there is "relevant material for forming a reasonable belief" and that the petitioner "will be afforded adequate opportunity to explain" his case and that the resultant order will follow objective appraisal of evidence. The judgment reiterates the settled principle that a court or authority acting wholly without jurisdiction renders its action void, but distinguishes that from an erroneous exercise of jurisdiction which is challengeable only after a final order. Given that the Deputy Commissioner has not passed a final adjudicative order and has undertaken to afford the petitioner an opportunity to be heard, the petition seeking to quash the notices is premature. The Court therefore declined to entertain the writ against a non-final communication, observing that premature interference is not warranted where the authority has yet to exercise its adjudicatory power. [Paras 2, 3, 4, 9]

Petition dismissed as premature insofar as it seeks to quash the communication in annexure-C; the communication is not a final order and therefore not presently amenable to writ relief.

Opportunity to be heard / audi alteram partem - speaking order requirement - remand for fresh consideration - Whether the petitioner's objections must be considered and a speaking order passed by the Deputy Commissioner during reassessment proceedings - HELD THAT: - The Court noted the petitioner's contention that objections (referred to in para 21.2 of the petition) were not considered before issuance of the communication. Observing that the communication itself preserves the petitioner's right to be heard, the Court held that the proper course is to permit the reassessment process to proceed and to require the authority to examine all contentions raised. The Court directed that if the petitioner files detailed explanations and supporting documents pursuant to the communication, the Deputy Commissioner shall consider each contention and pass a speaking order after due consideration in accordance with law. This direction preserves the petitioner's remedy while avoiding premature judicial intervention. [Paras 9]

Liberty reserved to the petitioner to raise objections before the Deputy Commissioner; Deputy Commissioner directed to consider every contention and pass a speaking order after due consideration.

Final Conclusion: Writ petition dismissed as premature against non-final communications initiating reassessment; petitioner granted liberty to present detailed objections and the Deputy Commissioner directed to consider all contentions and pass a speaking order in accordance with law.

Assessment framed on a non-existent entity - amalgamation/merger resulting in cessation of the amalgamating company - void ab initio assessment - doctrine of merger - clerical errors curable under Section 292B - succession to business and assessment of successor under Section 170

Assessment framed on a non-existent entity - void ab initio assessment - doctrine of merger - Validity of assessment framed by the Assessing Officer in the name of the amalgamating company which had ceased to exist pursuant to a court approved scheme of amalgamation. - HELD THAT: - The Tribunal held that the amalgamating company ceased to exist with effect from the appointed date under the scheme of amalgamation approved by the High Court; the Assessing Officer was aware of this fact yet proceeded to assume jurisdiction and framed assessment in the name of the dissolved/amalgamating entity. Relying on the principle endorsed by the Supreme Court and the High Courts that an assessment completed against an entity which has ceased to exist as a result of an approved amalgamation is a substantive illegality and not a mere procedural defect, the Tribunal concluded that the assessment so framed is void ab initio. The Tribunal distinguished cases where a mere clerical error was held curable under Section 292B on their peculiar facts and recorded that where the jurisdictional basis itself is contrary to the legal effect of amalgamation, the defect cannot be so cured. The Tribunal therefore set aside the entire assessment as having been framed on a non existent person and declared it null and void.

Assessment framed in the name of the amalgamating (non existent) company is void ab initio and is quashed.

Succession to business and assessment of successor under Section 170 - clerical errors curable under Section 292B - Consequences for the merits of additions and other grounds once the assessment is quashed, and whether objections on merits require adjudication. - HELD THAT: - Having quashed the assessment as void for having been framed against a non existent entity, the Tribunal held that its earlier observations on various merits based grounds (additions and disallowances) became academic and infructuous. The Tribunal refrained from expressing any opinion on the correctness of the substantive additions and left those matters open for appropriate proceedings, noting also the statutory framework concerning succession to business and the limited applicability of Section 292B where the defect is substantive rather than clerical.

Merits of the additions and other grounds were not adjudicated and are left open; consequential observations are rendered academic by quashing the assessment.

Final Conclusion: The assessment framed on M/s. Churu Trading Co. Pvt. Ltd. (which had ceased to exist pursuant to a court approved amalgamation) for A.Y.2012 13 is quashed as void ab initio; the assessee's appeal is allowed, the revenue's appeal is dismissed, and the merits of additions are left open as academic.

Taxability of non competition and non solicitation fees as business income under section 28(va) - Article 7 of India Qatar DTAA - taxation of business income and requirement of permanent establishment - Onus on revenue to prove existence of permanent establishment or business connection in India - Appellate authorities may entertain a new claim made during assessment proceedings even if not amended in the return and assessed income may be reduced below the returned income

Appellate authorities may entertain a new claim made during assessment proceedings even if not amended in the return and assessed income may be reduced below the returned income - Whether the assessee could make and have entertained before the AO and on appeal the claim of non taxability (treaty benefit) although the revised return could not be filed within time. - HELD THAT: - The Tribunal accepted the CIT(A)'s view that a claim raised during assessment proceedings can be entertained by appellate authorities even if not made by way of a timely revised return. The CIT(A) relied upon the jurisdictional High Court decision in Pruthvi Brokers and related authorities to hold that appellate authorities are empowered to consider legitimate claims which the assessee could not place on record earlier, and that restriction identified in Goetze India applies to the Assessing Officer and not to appellate fora. The Tribunal further noted precedent that assessed income may be made below returned income where higher authority directions or proper adjudication require it, and that tax authorities should not penalise taxpayers for bona fide omissions when the claim is otherwise legally tenable. The AO had adjudicated the claim on merits in the assessment order; hence there was no procedural bar to the claim being entertained on appeal. [Paras 5, 8]

The claim of non taxability raised during assessment proceedings was rightly entertained by the CIT(A) and could be adjudicated notwithstanding that it was not part of a timely revised return.

Taxability of non competition and non solicitation fees as business income under section 28(va) - Article 7 of India Qatar DTAA - taxation of business income and requirement of permanent establishment - Onus on revenue to prove existence of permanent establishment or business connection in India - Whether the non competition and non solicitation fees received by the non resident assessee were taxable in India despite the DTAA, by virtue of business connection or permanent establishment arising from shareholding or other facts. - HELD THAT: - The Tribunal accepted that the receipt constituted business income assessable under section 28(va). However, applying Section 90(2) and Article 7 of the India Qatar DTAA, the Tribunal held that business income of a non resident is taxable in India only if it is attributable to a permanent establishment in India. The AO had merely asserted that prior shareholding created a business connection and therefore a taxable nexus, but produced no material to establish any continuing business connection or any PE in India after the sale of shares. The facts showed that the shares were sold and the non compete agreement was entered into subsequently as an independent contract restricting the assessee from competing; there was no evidence that the assessee carried on business in India or had a PE during the relevant year. Consequently the revenue failed to discharge the burden of proving PE or business connection; following co ordinate decisions (Trans Global and authorities cited), the Tribunal upheld the CIT(A)'s conclusion that the non compete fees were not taxable in India under Article 7. [Paras 5, 8]

The non competition and non solicitation fees received by the non resident assessee are not taxable in India as they are not attributable to any permanent establishment or business connection in India; the CIT(A)'s grant of treaty relief was correct.

Final Conclusion: The appeal filed by the revenue is dismissed; the CIT(A)'s order allowing the assessee's claim of non taxability of the non compete and non solicit fees under the India Qatar DTAA is upheld.

Determination of fair market value as on 01-04-1981 - reliability of valuer's report based on non identical comparables - use of sub-registrar guideline rates to determine fair market value - notional book value on capital introduction cannot be equated to fair market value - comparability principles in valuation (size, location, land use)

Reliability of valuer's report based on non identical comparables - comparability principles in valuation (size, location, land use) - Valuation report of the approved valuer based on sale of residential plots could not be accepted as determinative of the fair market value of the impugned industrial land as on 01-04-1981. - HELD THAT: - The Tribunal examined the valuer's report and found that all eight comparables relied upon were residential housing plots of 1,750 to 2,400 sq.ft. located within municipal limits, whereas the subject was an industrial land parcel outside municipal limits and of much larger extent. The Court held that residential plot rates in a developed area, quoted per sq.ft., are not readily comparable with per acre rates of industrial/agricultural land outside city limits; differences in size, location, access and amenities materially affect market value. In the absence of any evidence showing positive characteristics of the subject land that would make it command rates similar to the residential comparables, the AO was justified in rejecting the valuer's report as the sole basis for fixation of fair market value. [Paras 6, 7, 10]

Valuer's report rejected as a sufficient basis for determining fair market value on 01-04-1981.

Use of sub-registrar guideline rates to determine fair market value - determination of fair market value as on 01-04-1981 - Sub-registrar guideline rates (available only from 1989) cannot, by themselves, be treated as the fair market value as on 01-04-1981; AO's approach of relying solely on back worked guideline rates was unsustainable. - HELD THAT: - The Tribunal noted binding authority that sub-registrar guideline rates are not automatically equivalent to fair market value. Here the guideline rates were available only from 1989 and were back worked to 1981 using a cost inflation index; the Tribunal held that such an approach cannot alone determine FMV particularly where the guideline rates themselves were not available for 1981 and where the AO relied on rates for converted lands and agricultural plots that did not match the subject's characteristics. Consequently, the AO's determination based solely on sub registrar data was not acceptable. [Paras 3, 8, 9]

AO's reliance solely on back worked sub-registrar guideline rates for fixation of FMV as on 01-04-1981 rejected.

Determination of fair market value as on 01-04-1981 - notional book value on capital introduction cannot be equated to fair market value - Having rejected the valuer's comparables and the sole reliance on sub registrar rates, the Tribunal fixed the fair market value of the impugned industrial land as on 01-04-1981 at a rate equal to one third of the valuer's per sq.ft. rate, i.e., Rs. 11 per sq.ft., and directed the AO to adopt that rate. - HELD THAT: - The Tribunal observed that neither party produced directly comparable sale instances for similarly situated industrial land; the valuer's per sq.ft. figure (derived from residential comparables) and the sub registrar approach were both found inadequate. Applying guided estimation in the factual backdrop - industrial land outside municipal limits, larger parcel size and absence of identical comparables - the Tribunal considered the valuer's rate as instructive but reduced it to one third to reflect the material differences and thereby fixed FMV at Rs. 11 per sq.ft. The Tribunal also noted earlier findings that the notional book value credited on capital introduction could not be treated as FMV. [Paras 9, 11, 12]

Fair market value as on 01-04-1981 fixed at Rs. 11 per sq.ft.; AO directed to adopt this rate.

Final Conclusion: The appeal is partly allowed: the valuation report of the approved valuer and the AO's sole reliance on back worked sub-registrar rates were rejected as insufficient to determine fair market value for 01-04-1981; the Tribunal fixed the fair market value at Rs. 11 per sq.ft. and directed the AO to adopt that rate for Assessment Year 2007-08.

Interference with completed assessments under section 153A in absence of incriminating material - Requirement of incriminating material unearthed in search for reassessment of concluded years - Deletion of additions made under post-search assessments when no nexus with seized material - Penalty under section 271(1)(c) linked to additions deleted as lacking basis in seized material

Interference with completed assessments under section 153A in absence of incriminating material - Requirement of incriminating material unearthed in search for reassessment of concluded years - Completed assessments can be reopened under proceedings triggered by a search only if there is incriminating material discovered in the search or other post-search material relatable to the seized material. - HELD THAT: - The Tribunal applied the principle laid down by the Delhi High Court in CIT v. Kabul Chawla, holding that while section 153A enables assessment or reassessment for the relevant six years, interference with a completed assessment is permissible only on the basis of incriminating material unearthed during the search or other material that can be connected to the seized material. Absent such nexus, assessments that were concluded on the date of search cannot be arbitrarily altered; the Assessing Officer must make additions only on the basis of seized or post-search material relatable thereto. The Tribunal found no reference in the assessment, remand report or appellate orders to any incriminating material seized in the search that could justify the impugned additions for the concluded years, and therefore followed Kabul Chawla to disallow interference with the completed assessments. [Paras 6, 7]

Principle applied: deletions or confirmations of additions in completed assessments require incriminating/seized material; absent such material, interference is impermissible.

Deletion of additions under section 153A where no seized material supports loan and deemed-dividend findings - Treatment of capital gain versus income from other sources when not supported by search material - Additions made in assessment year 2005-06 - (a) unexplained loan treated under the relevant provisions, (b) deemed dividend treated as loan from ATS Infrastructure Ltd, and (c) recharacterisation of short-term capital gain as income from other sources - were not supported by any incriminating material seized and therefore were to be deleted. - HELD THAT: - On review of the assessment order, the remand report and the panchanama, the Tribunal found that (a) the addition on account of an alleged unexplained loan from Mr. Prem Sheth, (b) the addition by treating amounts from ATS Infrastructure Ltd as deemed dividend, and (c) the tax treatment converting declared short-term capital gain into income from other sources were made without any reference to documents or incriminating material seized during the searches of 15/2/2008 and 20/2/2008. Applying the Kabul Chawla principle, the Tribunal concluded that the Assessing Officer had no basis in seized material to disturb the already completed assessment for AY 2005-06 and accordingly deleted these additions; the CIT(A) had already deleted two of these additions on merits, and the Tribunal extended deletion to the remaining addition as unsupported by the search record. [Paras 7, 8, 11]

All three additions for AY 2005-06 are deleted for lack of incriminating material arising from the search.

Penalty under section 271(1)(c) linked to additions deleted for want of seized material - Penalty levied under section 271(1)(c) for AY 2005-06, to the extent founded upon the impugned addition that has been deleted for lack of incriminating material, does not survive and is to be set aside. - HELD THAT: - The penalty order had been predicated on the Assessing Officer's view that the assessee furnished inaccurate particulars or concealed income related to the addition treated as income from other sources. Since the Tribunal has deleted the underlying addition (the recharacterised gain) on the ground that it was not supported by any incriminating material seized during the search, the basis for the penalty evaporates. Accordingly, the Tribunal allowed the assessee's appeal against the penalty and set aside the levy imposed under section 271(1)(c). [Paras 12, 15, 16]

Penalty under section 271(1)(c) for AY 2005-06 is quashed to the extent it depended on the deleted addition.

Deletion of additions for assessment year 2006-07 in absence of incriminating seized material - Additions deleted by the CIT(A) for assessment year 2006-07 - deemed dividend and cessation of liability under the relevant provisions - were sustainable because the assessing officer made those additions without any incriminating material seized in relation to the concluded assessment year. - HELD THAT: - Although the Revenue filed appeal, the Tribunal examined the record and the position that the searches occurred when proceedings for AY 2006-07 were concluded on the date of search. The Tribunal held that, for the same reasons applied to AY 2005-06, the Assessing Officer could not have made the additions in respect of the concluded assessment year in the absence of incriminating material unearthed during the search. The assessee, though not an appellant, was permitted to support the CIT(A)'s deletion; the Tribunal followed the relevant High Court authority and dismissed the Revenue's appeal, upholding the deletions made by the CIT(A). [Paras 17, 20, 21]

Grounds of Revenue's appeal for AY 2006-07 dismissed; deletions by CIT(A) upheld for lack of seized incriminating material.

Final Conclusion: Following the principle that completed assessments can be reopened under search-triggered proceedings only on the basis of incriminating material seized or post-search material relatable to it, the Tribunal deleted the impugned additions for AY 2005-06 and quashed the related penalty; similarly, the Tribunal dismissed the Revenue's appeal for AY 2006-07 and upheld the deletions made by the CIT(A). All four appeals in the batch were accordingly disposed of.

Appropriation of profit - deductibility of excessive sugarcane price - clause 3 and clause 5A of the Sugar Cane (Control) Order, 1966 - application of section 40A(2) - sale at concessional price - loss of potential profit versus appropriation of profit - determination of cost price for taxability - remand to the Assessing Officer for fresh determination

Deductibility of excessive sugarcane price - appropriation of profit - clause 3 and clause 5A of the Sugar Cane (Control) Order, 1966 - application of section 40A(2) - remand to the Assessing Officer for fresh determination - Whether the addition on account of excessive sugarcane price paid to members and non-members should be sustained or required fresh determination. - HELD THAT: - Following and applying the decision of the Hon'ble Supreme Court in Tasgaon SSK Ltd., the Tribunal held that Statutory Minimum Price payable under clause 3 (SMP) is deductible in full, but the difference between SMP and the additional purchase price/SAP determined under clause 5A may contain a component that is an appropriation of profit. The Tribunal set aside the impugned order and remitted the matter to the Assessing Officer to examine the manner and modalities in which SAP/additional purchase price/final price under clause 5A was fixed. The AO is directed to call for and consider the assessee's statements of accounts, balance sheet and material supplied to the State Government to determine the component attributable to distribution/appropriation of profit (which is not deductible) and the remainder which is a deductible business expense. With respect to payments to non-members, the Tribunal directed that the AO consider them under the criteria of section 40A(2) to determine whether amounts paid were excessive or unreasonable. The assessee must be afforded a reasonable opportunity of hearing in the fresh proceedings.

Impugned addition set aside and matter remitted to the AO for fresh determination in accordance with the Supreme Court's articulation in Tasgaon SSK Ltd.; deduction to be allowed for SMP and profit component of clause 5A payments to be disallowed after AO's exercise; non-members' payments to be examined under section 40A(2).

Sale at concessional price - loss of potential profit versus appropriation of profit - determination of cost price for taxability - remand to the Assessing Officer for fresh determination - Whether the difference between market/levy price and concessional price of sugar sold to members should be treated as appropriation of profit and added to the assessee's income. - HELD THAT: - The Tribunal analysed the nature of concessional sales and distinguished between (a) simple foregoing of potential profit where sugar is sold to members at a price above cost but below market price (which is not appropriation of profit and not taxable), and (b) cases where sugar is sold below the factory's cost price, which entails an appropriation/distribution of profit to members and is chargeable to tax. Applying the principle that one cannot earn profit from oneself, the Tribunal held that a mere loss of potential profit cannot be equated to appropriation of profit. The Tribunal set aside the impugned additions to the extent they taxed mere potential profit and remitted the matter to the AO to first ascertain the correct cost base of sugar (including direct and indirect costs - i.e., all debits to trading and P&L account) and then make additions only to the extent concessional sale prices are below that cost. The assessee is to be given a reasonable opportunity of hearing in the fresh proceedings.

Impugned additions set aside and remitted to the AO to determine cost price and to restrict additions to the extent concessional sales are below cost (i.e., appropriation of profit); mere difference between market/levy price and concessional price (where above cost) not to be charged as appropriation of profit.

Remand to the Assessing Officer for fresh determination - Whether the matters should be remitted for fresh adjudication by the Assessing Officer in conformity with the Tribunal's exposition. - HELD THAT: - The Tribunal found the facts of the present appeal to be mutatis mutandis similar to those in the referenced batch of appeals and, following the precedents and detailed directions, set aside the impugned order and remanded the issues (both excessive cane price and concessional-sale difference) to the Assessing Officer for fresh determination as per the articulated legal tests and procedural directions. The Tribunal emphasised that the assessee must be afforded reasonable opportunity of hearing in the fresh proceedings and that the Assessing Officer should apply the tests laid down (including examination of accounts, balance sheet, material supplied to State Government, and application of section 40A(2) as appropriate).

Matters remitted to the Assessing Officer for fresh determination in conformity with the Tribunal's directions and the Supreme Court precedent; assessee to be given opportunity of hearing.

Tax neutral misstatements of figures - Whether alleged incorrect mention of certain amounts by the CIT(A) warranted interference. - HELD THAT: - The appellant contended that certain amounts were wrongly mentioned by the CIT(A). The assessee also conceded that such mistakes were tax neutral. The Tribunal, noting that the alleged errors had no tax consequences, declined to examine or decide on these clerical/mathematical discrepancies in the impugned order.

Claim regarding wrong mentioning of certain amounts not adjudicated as they are tax neutral; no relief granted on this ground.

Final Conclusion: The appeal is partly allowed for statistical purposes: impugned additions on account of excessive sugarcane price and concessional sale of sugar are set aside and remitted to the Assessing Officer for fresh determination in accordance with the Supreme Court's and Tribunal's directions (with the assessee being given opportunity of hearing); clerical misstatements alleged are not examined as they are tax neutral.

Appropriation of profit - loss of potential profit - deductibility of excessive sugarcane price and profit component - remand to Assessing Officer for determination of cost and profit component - validity of reassessment/initiation of proceedings and change of opinion - no profit from self

Appropriation of profit - loss of potential profit - no profit from self - remand to Assessing Officer for determination of cost and profit component - Taxability of difference between market/levy price and concessional sale price of sugar supplied to members for A.Y. 2007-08 and A.Y. 2012-13 - HELD THAT: - The Tribunal held that sale of sugar to members at a price lower than the market price is, in general, a foregoing of potential profit and not an appropriation of profit. Appropriation of profit presupposes that profit has been earned from business operations and is then passed on to members; by parity with the reasoning in Tasgaon SSK Ltd. and the principle that one cannot make profit from oneself, mere concessional sales do not automatically amount to appropriation. However, where the concessional sale price is below the factory's cost price, the shortfall represents an appropriation/distribution of profits (income earned in business passed to members) and is taxable. Consequently the impugned additions were set aside insofar as they taxed the straight difference between market/levy price and concessional price; the matters were remitted to the Assessing Officer to first ascertain the cost price (including direct and indirect costs forming the trading/P&L cost base) and to make additions only to the extent the concessional sale price is below such cost, allowing the assessee opportunity of hearing. [Paras 4, 22, 23, 25]

Impugned additions set aside and matters remitted to the AO to determine cost of sugar and to tax only that part of concessional sale (if any) which is below cost, on the basis explained.

Validity of reassessment/initiation of proceedings and change of opinion - Validity of initiation of reassessment proceedings for A.Y. 2007-08 in respect of concessional sale of sugar - HELD THAT: - The Tribunal examined the original assessment order and found no indication that the Assessing Officer had considered or formed any opinion on the concessional sale issue during the original assessment. Because the AO had not examined the matter in the original proceedings, the initiation of reassessment could not be characterized as a mere change of opinion; the AO legitimately issued notice under section 148 and the initiation of reassessment was held to be valid, following relevant precedent. [Paras 7]

Reassessment initiation upheld; ground challenging initiation dismissed.

Deductibility of excessive sugarcane price and profit component - remand to Assessing Officer for determination of cost and profit component - Deductibility of excessive sugarcane price paid to members and non-members for A.Y. 2009-10 (and A.Y. 2012-13 grounds Nos.1-5) - HELD THAT: - The Tribunal followed the Supreme Court's analysis in Tasgaon SSK Ltd. that Statutory Minimum Price (SMP) paid at the season's start is deductible, but the difference between SMP and the additional purchase price/SAP determined under clause 5A may contain a component of distribution of profit. The AO must undertake an exercise-examining accounts, balance sheets and materials submitted to the State Government-to determine what part of the additional price represents profit (appropriation/distribution) and what part is deductible expenditure. For payments to non-members, the AO should consider section 40A(2) to determine whether payments are excessive or unreasonable. Accordingly, the impugned additions were set aside and remitted to the AO for fresh determination in conformity with the Supreme Court's directions, with a reasonable opportunity to the assessee. [Paras 6, 10]

Impugned orders set aside; matter remitted to the AO to determine the profit component in the additional cane price and allow deduction only to the extent not constituting distribution of profit.

Income from undisclosed sources - Addition of unexplained agricultural income for A.Y. 2012-13 - HELD THAT: - The assessee claimed agricultural income but failed to produce evidence of sale of agricultural produce or of agricultural expenses when called upon before the Assessing Officer and at the first appellate stage. In absence of any supporting material, the Tribunal declined to disturb the first appellate authority's finding which restricted agricultural income to the amount accepted by the AO and treated the balance as unexplained income. The factual lack of evidence justified the addition. [Paras 20]

Addition of Rs. 3,83,063/- treated as income from undisclosed sources sustained; grounds disallowed.

Remand to Assessing Officer for determination of deduction and set off - Allowing deduction under section 80P(2)(c) and 80P(2)(d) and set off of carry forward losses for A.Y. 2012-13 - HELD THAT: - The First Appellate Authority remitted these matters to the AO for verification. The Tribunal observed that the CIT(A) lacked authority to remit in that manner but, at the assessee's request, directed that the AO examine the claims afresh and decide after affording reasonable opportunity of hearing. The Tribunal therefore set aside the impugned order and remitted the issues to the AO for proper verification and decision in accordance with law. [Paras 22]

Impugned order set aside and matter remitted to the AO to examine claims for deduction under section 80P(2)(c), 80P(2)(d) and carry forward set off, with opportunity of hearing.

Tax neutral clerical mistakes - Claims as to mistaken mention of certain amounts in the impugned order for A.Y. 2012-13 - HELD THAT: - The assessee pointed out errors in figures mentioned by the CIT(A) but conceded they were tax neutral. The Tribunal declined to examine these clerical mistakes as they had no tax consequences. [Paras 23]

No relief granted on tax-neutral mistakes; issue not examined.

Final Conclusion: The Tribunal partly allowed the appeals for statistical purposes: issues of concessional sale of sugar and excessive cane price were set aside and remitted to the Assessing Officer for fresh determination consistent with the reasoning explained (tax only where concessional sale is below cost; and to segregate profit component in additional cane price as per Tasgaon directions), reassessment initiation for A.Y. 2007-08 was upheld, unexplained agricultural income addition was sustained, and claims under section 80P and carry forward set off were remitted to the AO for verification after hearing.

Appropriation of profit - deductibility of business expenditure - remand for determination of profit component under Clause 5A of the Sugar Cane (Control) Order, 1966 - application of section 40A(2) of the Income tax Act, 1961 to payments to non members - sale of sugar to members at concessional price - loss of potential profit versus appropriation of profit - cost price as the benchmark for determining appropriation of profit on concessional sales

Appropriation of profit - remand for determination of profit component under Clause 5A of the Sugar Cane (Control) Order, 1966 - application of section 40A(2) of the Income tax Act, 1961 to payments to non members - Deletion of addition made by the Assessing Officer in respect of excessive sugarcane price paid and remittance of the matter to the Assessing Officer for fresh determination in accordance with the law and precedent. - HELD THAT: - The Tribunal held that the issue is governed by the Supreme Court's decision in Tasgaon SSK Ltd., which recognised that (a) the Statutory Minimum Price (SMP) paid under Clause 3 is deductible in full, and (b) the differential between SMP and the additional/final price under Clause 5A (SAP/additional purchase price) may contain a component that is an appropriation of profit and therefore not deductible. The Supreme Court directed the assessing officer to examine accounts, balance sheet and material supplied to the State Government to segregate the profit component from deductible expenditure. For non members, the determining officer is to apply section 40A(2) to decide whether payments are excessive. Following that precedent, the Tribunal set aside the impugned order and remitted the issue to the file of the AO to (i) allow deduction of amounts attributable to Clause 3, (ii) identify and disallow that portion of Clause 5A payments which represents appropriation/distribution of profit after examining financial records and submissions, and (iii) apply section 40A(2) in respect of payments to non members, giving the assessee reasonable opportunity of hearing. [Paras 4]

Matter remitted to the Assessing Officer to determine, in conformity with the Supreme Court's reasoning in Tasgaon SSK Ltd., the profit component embedded in Clause 5A payments (to be treated as appropriation of profit and disallowed) while allowing the remainder as deductible expenditure; payments to non members to be examined under section 40A(2).

Sale of sugar to members at concessional price - loss of potential profit versus appropriation of profit - cost price as the benchmark for determining appropriation of profit on concessional sales - Challenge to the restriction of addition in respect of sale of sugar at concessional price - matter remitted to the Assessing Officer for fresh determination limited to appropriation of profit where concessional sale price is below cost. - HELD THAT: - The Tribunal analysed authorities including Sir Kikabhai and the Supreme Court's approach in Tasgaon and Krishna SSK matters. It drew a distinction between (i) simple loss of potential profit when sugar is sold to members at a price below market but above or equal to cost, which is not taxable, and (ii) appropriation/distribution of profit where sugar is sold to members at a price below the factory's cost, thereby diverting profit to members. The Tribunal held that the CIT(A)'s straight addition of the difference between market/levy price and concessional price was incorrect to the extent it taxed notional/potential profit. The correct approach is to first ascertain the cost price (including direct and indirect costs - all debits to Trading and Profit & Loss account) and then make addition only to the extent the concessional sale price is below such cost (that shortfall being treated as appropriation of profit). The AO is directed to determine cost and make additions, allowing the assessee reasonable opportunity of hearing. [Paras 7]

Impugned order set aside and remitted to the Assessing Officer to determine cost price and to make additions only where concessional sale price to members is below cost (the shortfall being appropriation of profit); loss of potential profit is not chargeable to tax.

Final Conclusion: Following precedents (including the Supreme Court's decision in Tasgaon SSK Ltd.), the Tribunal allowed the Revenue's appeal for statistical purposes by setting aside the impugned order and remitting both contested issues to the Assessing Officer for fresh determination in conformity with the legal principles stated: segregate and disallow any profit component in Clause 5A payments and, in respect of concessional sugar sales, disallow only the extent by which concessional price is below the duly ascertained cost price; assess the position for non members under section 40A(2), with reasonable opportunity to the assessee.

Levy of interest under section 234B - Levy of interest under section 234C - Adjustment of seized cash towards tax liability under section 132B - Advance tax liability arising on surrender of income on date of search

Levy of interest under section 234B - Adjustment of seized cash towards tax liability under section 132B - Whether interest under section 234B is leviable after the date on which the assessee applied for adjustment of cash seized towards its tax liability. - HELD THAT: - The Tribunal held that the Assessing Officer's computation contained a mistake apparent on record by failing to give credit for the cash seized which the assessee had sought to have adjusted towards its advance/self-assessment tax liability. Relying on co-ordinate decisions and the construction of the provision for dealing with seized assets, the Tribunal observed that where the department is in possession of cash belonging to the assessee and the assessee has requested adjustment of that cash against an existing tax liability arising on a specific date, credit ought to be given from that date; the assessee should not be penalised for the department's inaction. Applying that principle to the present facts (where the assessee had made applications for adjustment), the Tribunal set aside the order and directed recomputation of interest under section 234B, if at all leviable, only up to the date when the assessee made the application for adjustment of the seized cash towards income tax liability. [Paras 13]

Interest under section 234B, if leviable, to be recomputed only up to the date when the assessee applied for adjustment of the seized cash; Assessing Officer's computation set aside as containing a mistake apparent on record.

Levy of interest under section 234C - Advance tax liability arising on surrender of income on date of search - Whether interest under section 234C is leviable where the assessee surrendered undisclosed income on the date of search (31/03/2011). - HELD THAT: - The Tribunal held that where the surrender of income occurred on the last day of the financial year (the date of search, 31/03/2011), the liability to pay advance tax arose only on that date and not prior thereto. Consequently, there was no deferment of income invoking instalment/advance-tax obligations earlier in the year, and interest under section 234C could not be levied. The order of the Assessing Officer levying interest under section 234C was therefore held to be a mistake apparent on the record and set aside. [Paras 13, 14]

Interest under section 234C cannot be levied because the advance tax liability arose only on 31/03/2011 when the income was surrendered; Assessing Officer's levy of section 234C interest set aside.

Final Conclusion: The appeal is partly allowed: interest under section 234C is deleted, and interest under section 234B, if at all leviable, shall be recomputed only up to the date on which the assessee applied for adjustment of the seized cash towards its tax liability.

Safe harbour +/-5% range in transfer pricing (second proviso to sub section (2) relating to arm's length determination) - application of Transactional Net Margin Method (TNMM) in benchmarking international transactions - proportionate allocation of transfer pricing adjustment to a business segment (manufacturing segment) - rectification of assessment under section 154 and effect of subsequent rectification orders on contested adjustment

Safe harbour +/-5% range in transfer pricing (second proviso to sub section (2) relating to arm's length determination) - proportionate allocation of transfer pricing adjustment to a business segment (manufacturing segment) - application of Transactional Net Margin Method (TNMM) in benchmarking international transactions - Whether the final transfer pricing adjustment insofar as attributable to the manufacturing segment falls within the +/-5% safe harbour and is therefore to be treated as at arm's length and not liable to be added back. - HELD THAT: - The Tribunal recorded that after two rectification orders the Assessing Officer's final TP adjustment relatable to the manufacturing segment was Rs. 4,10,82,956 (recorded figure), which equals 3.86% of the operating cost of the manufacturing segment (total international transactions for that segment Rs. 1,06,25,38,120). The Tribunal accepted the CIT(A)'s conclusion that since the variation between the ALP so determined and the actual transaction price does not exceed the +/-5% range prescribed by the relevant proviso, no adjustment can be made and the international transactions are to be treated as at arm's length. The Tribunal also noted that the TPO had applied TNMM and had allocated the adjustment on a proportionate basis to the manufacturing segment by rectification orders, and that those rectified figures produce the sub 5% variation. On that basis the Tribunal found no infirmity in the CIT(A)'s direction to delete the addition and dismissed the Revenue's grounds as lacking merit. [Paras 9, 11]

The transfer pricing adjustment attributable to the manufacturing segment falls within the +/-5% safe harbour and is deemed to be at arm's length; the addition is deleted.

Rectification of assessment under section 154 and effect of subsequent rectification orders on contested adjustment - Whether the cross objection filed by the assessee remains maintainable after disposal of the Revenue's appeal. - HELD THAT: - The Tribunal noted that, in view of its dismissal of the Revenue's appeal (which resulted from the rectified TP adjustment falling within the +/-5% range), the assessee's cross objection became infructuous. The Tribunal therefore dismissed the cross objection. [Paras 12]

The assessee's cross objection is dismissed as infructuous.

Final Conclusion: The Revenue's appeal is dismissed and the addition determined by the Assessing Officer/TPO is deleted because the final, rectified TP adjustment attributable to the manufacturing segment falls within the permissible +/-5% range and is therefore to be treated as at arm's length; the assessee's cross objection is dismissed as infructuous.

Cost of acquisition under Section 55(2)(ab) of the Act - period of holding of shares including pre demutualisation membership period under Explanation 1 clause (ha) to Section 2(42A)

Cost of acquisition under Section 55(2)(ab) of the Act - Cost of acquisition of shares of BSE Ltd. for capital gains purposes - HELD THAT: - The Tribunal, by majority, held that the cost of acquisition of shares issued on demutualisation of BSE Ltd. is the original cost of acquisition of the membership card. The finding applies notwithstanding that the assessee had claimed depreciation on the membership card in earlier years; the original membership cost constitutes the cost base for the shares under the statutory provision specified in Section 55(2)(ab). [Paras 34, 36]

Cost of acquisition of BSE Ltd. shares is the original cost of the membership card.

Period of holding of shares including pre demutualisation membership period under Explanation 1 clause (ha) to Section 2(42A) - Computation of period of holding of shares of BSE Ltd. issued on demutualisation - HELD THAT: - The Tribunal interpreted clause (ha) inserted in Explanation 1 to Section 2(42A) by the Finance Act, 2003, to include the period for which the person was a member of the recognised stock exchange in India immediately prior to demutualisation or corporatisation in the period of holding of the resulting shares. Applying the clear and unambiguous language of that provision, the Tribunal held that the period of holding of BSE Ltd. shares must be reckoned from the date of original membership of BSE, and not from the date of allotment of shares. [Paras 35]

Period of holding of BSE Ltd. shares is to be reckoned from the date of original membership of BSE, not from the date of allotment of shares.

Final Conclusion: The Tribunal, by a confirming order, allowed the assessee's appeal holding that (i) the cost of acquisition of shares arising from demutualisation of BSE is the original cost of the membership card under Section 55(2)(ab), and (ii) the period of holding of such shares includes the pre demutualisation membership period and is reckoned from the date of original membership.

Writ jurisdiction under Article 226 - Discretionary exercise of extraordinary jurisdiction - Duty to disclose relevant and material facts - Suppression of material facts - Challenge to authority to freeze bank accounts - Refusal to exercise jurisdiction for non-disclosure

Writ jurisdiction under Article 226 - Duty to disclose relevant and material facts - Suppression of material facts - Refusal to exercise jurisdiction for non-disclosure - Challenge to authority to freeze bank accounts - Whether the High Court should exercise its discretionary jurisdiction under Article 226 where the petitioner did not disclose material facts including arrest and allegations of evasion of customs duty, while challenging directions to freeze bank accounts. - HELD THAT: - The Court held that invocation of its extraordinary jurisdiction under Article 226 is discretionary and a petitioner must disclose all relevant facts and circumstances bearing on that exercise of power. The non-disclosure by the petitioner of the background facts - specifically the fact of arrest and an allegation of evasion of customs duty to the tune of Rs. 60 crores - amounted to suppression of material facts which were highly relevant to the challenge to the authority directing the freezing of bank accounts. Given this failure to disclose material circumstances, the Court was not inclined to exercise its discretionary jurisdiction and declined to entertain the petition. [Paras 7, 8, 9, 10]

Petition dismissed for suppression of material facts; Court refused to exercise its jurisdiction under Article 226 to entertain the challenge to the freezing of bank accounts.

Final Conclusion: The writ petition challenging directions to freeze bank accounts was dismissed because the petitioner suppressed relevant material facts (including arrest and allegations of large-scale customs duty evasion); the High Court declined to exercise its discretionary jurisdiction under Article 226.

Validity of transfer of settlement application to appropriate bench - Admission under Section 127C contingent on full and true disclosure - Merging of admission order with final order under Section 127D - Effect of unchallenged final order; a decision remains effective until set aside

Validity of transfer of settlement application to appropriate bench - The Principal Bench, Delhi validly transferred the respondent's settlement application to the Additional Bench, Mumbai. - HELD THAT: - The transfer was made by the Chairman of the Principal Bench to the Additional Bench, Mumbai, having regard to the locus of importation, place of issuance of show cause notices and locations of transactions and offices of the respondent. The Court held that the Principal Bench possessed power, jurisdiction and authority to transfer the case to Mumbai and that no illegality was committed in effecting the transfer. [Paras 6]

Transfer to the Additional Bench, Mumbai was valid and not liable to be quashed.

Admission under Section 127C contingent on full and true disclosure - The admission order dated 11th January, 2008 under Section 127C was not liable to be quashed on the ground of non-disclosure. - HELD THAT: - The Settlement Commission recorded satisfaction that the applicant fulfilled the conditions for admission, including full and true disclosure, and allowed the application to proceed under Section 127C; the Bench's subjective satisfaction was expressly noted in its order. The Court declined to interfere with that finding of satisfaction on the material before it. [Paras 8, 9]

The challenge to the admission order was rejected; the admission order stands as a valid act of the Settlement Commission.

Merging of admission order with final order under Section 127D - Effect of unchallenged final order; a decision remains effective until set aside - The admission order merged into the final order passed under Section 127D and, in the absence of any challenge to the final order, the final order remains effective. - HELD THAT: - A final order under Section 127D was passed on 29th February, 2008. The Court observed that admission orders merge with and are subsumed by the final order; consequently the separate existence of the admission order ceases once the final order is passed. Further, the Court relied on the settled principle that even an order alleged to be void subsists and remains effective inter partes until it is set aside by a competent forum. The Union of India had not challenged the final order and had earlier stated it did not intend to challenge it; therefore the final order continues to operate and there was no basis to quash the admission order independently. [Paras 9, 11, 13]

Admission order stands merged with the unchallenged final order under Section 127D, which remains effective until set aside; the writ petition is dismissed.

Final Conclusion: The Principal Bench validly transferred the settlement application to the Additional Bench, Mumbai; the Settlement Commission's admission under Section 127C was based on recorded satisfaction and was not interfered with; the admission subsequently merged into an unchallenged final order under Section 127D which remains effective. The writ petition is dismissed.

Clearance of capital goods to DTA on payment of duty - permission of Development Commissioner - procedural lapse not depriving substantial right - applicability of Customs notification versus EXIM policy - rate of depreciation for determination of customs duty - remand for computation of duty - setting aside of penalty

Clearance of capital goods to DTA on payment of duty - permission of Development Commissioner - procedural lapse not depriving substantial right - Entitlement to clear capital goods imported under concessional notifications to DTA/EPCG holders without prior permission of the Development Commissioner where duty is paid. - HELD THAT: - The appellants cleared lathes to DTA/EPCG holders in August-September 2003 when Notification No.52/2003 was operative. That notification contains no requirement for prior permission of the Development Commissioner. Even if a policy or earlier notification contained such a condition, non-obtaining of permission is a procedural lapse which, in the facts of this case (export obligation fulfilled and no dispute on that point), does not defeat the substantive right to avail the concessional rate under the operative customs notification. The Tribunal relied on prior precedent where penalties imposed for failure to secure such permission were set aside where permission was sought but neither granted nor denied, and treated the requirement as procedural rather than jurisdictional. [Paras 6]

Appellants entitled to clear the capital goods under Notification No.52/2003 and non-obtaining of prior permission does not forfeit the benefit of the notification.

Applicability of Customs notification versus EXIM policy - rate of depreciation for determination of customs duty - remand for computation of duty - Proper rate of depreciation to be applied for computing customs duty on clearance of used capital goods and the forum for recalculation. - HELD THAT: - The operative authority for determining the rate of depreciation applicable to the clearances made in August-September 2003 is Notification No.52/2003 which was in force at the time of clearance. The appellants cannot mix and match by taking concessional duty under the customs notification while applying depreciation rates from the EXIM policy; a customs notification prescribing a rate of depreciation governs the computation. Since the original authorities applied differing bases, the matter is remanded to the original authority to compute the duty payable after applying the depreciation rates specified in Notification No.52/2003. [Paras 7, 8]

Depreciation must be applied as per Notification No.52/2003; matter remanded for recomputation of duty accordingly.

Setting aside of penalty - procedural lapse not depriving substantial right - Validity of penalties imposed for non-obtaining of permission and related procedural infractions. - HELD THAT: - Having held that the requirement of prior permission was procedural and did not strip the appellants of the substantive concession under Notification No.52/2003, the Tribunal found the imposition of penalties for that procedural lapse unjustified. The authorities had not controverted fulfillment of export obligations and the appellants had sought permission; in these circumstances penalties were not warranted and are set aside. [Paras 6, 8]

Penalties imposed are set aside.

Final Conclusion: Appeals partly allowed: appellants entitled to avail concessional duty under Notification No.52/2003 notwithstanding the procedural lapse regarding prior permission; depreciation rates in Notification No.52/2003 govern computation; matter remanded to the original authority for recomputation of duty after applying those rates; penalties set aside.

Classification of Mono Potassium Phosphate - Classification under sub-heading 3105.06 - Restoration of appeal - Monetary limit under revised circular not applicable to customs - Followed precedents

Restoration of appeal - Monetary limit under revised circular not applicable to customs - Application for restoration of appeal allowed and appeal restored to the files of the Tribunal. - HELD THAT: - The Tribunal found that the appeal had been dismissed by applying the revised circular on monetary limits which is not applicable to customs cases. On that basis the dismissal was held to be erroneous. The Registry of Appeal (ROA) application for restoration was therefore allowed and the appeal was restored to the Tribunal's files after hearing the parties, who did not oppose restoration.

ROA allowed and appeal restored for adjudication on merits.

Classification of Mono Potassium Phosphate - Classification under sub-heading 3105.06 - Followed precedents - Department's appeal on classification of Mono Potassium Phosphate dismissed on merits; goods held classifiable under sub heading 3105.06 following Tribunal precedents. - HELD THAT: - After restoration and with consent of the parties, the Tribunal heard the appeal on its merits. The Tribunal noted earlier decisions in which identical or similar goods were held to merit classification under sub heading 3105.06. Applying those precedents, the Tribunal concluded that the department's challenge to the classification lacked merit and affirmed classification under sub heading 3105.06, thereby rejecting the department's case.

Appeal of the department dismissed; classification affirmed under sub heading 3105.06.

Final Conclusion: The ROA application was allowed and the appeal restored; on the merits the department's appeal was dismissed and Mono Potassium Phosphate held classifiable under sub heading 3105.06 in conformity with existing Tribunal decisions.

Business Support Service - Manpower Recruitment or Supply Agency service - reimbursement of expenses for deputed employees - service tax classification of inter-company cost recovery - CBEC clarification on deputation of staff

Business Support Service - Manpower Recruitment or Supply Agency service - reimbursement of expenses for deputed employees - service tax classification of inter-company cost recovery - Whether amounts received by the appellant as reimbursement of establishment/administrative expenses for employees deputed to subsidiary companies are taxable as "Business Support Service" or fall under "Manpower Recruitment or Supply Agency service". - HELD THAT: - The Tribunal examined the nature of the receipts which represented recovery of expenditure incurred by the appellant towards employees posted on deputation with its subsidiary companies. The impugned adjudication had classified these receipts as taxable under the inclusive concept of "Business Support Service". The Tribunal held that the activity-making available staff on deputation on a cost recovery basis-does not fall within the activities listed in the inclusive part of "Business Support Service" and that the adjudicating authority's reasoning to the contrary was not tenable. The Tribunal relied on the Board's clarification which treats organizations making available their staff on deputation (whether or not motivated by profit) as engaged in "Manpower Recruitment or Supply Agency service"; the clarification states that such activity is chargeable under that heading and not under business support services. The Tribunal observed that the adjudicating authority failed to apply this CBEC instruction. Because the show cause notice and demand were framed solely under "Business Support Service", and in view of the Board's clarification, the demand insofar as it is founded on that classification is unsustainable on merits.

Demand of service tax framed under "Business Support Service" set aside; activity is to be classified under "Manpower Recruitment or Supply Agency service" and the impugned order is quashed.

Final Conclusion: The impugned order confirming service tax demand under the category of "Business Support Service" is set aside because the amounts received for deputed employees are not taxable as business support services; the activity is covered by "Manpower Recruitment or Supply Agency service" as per the CBEC clarification, and the appeal is allowed.

Includability of free supplies in assessable value of taxable service - meaning of 'gross amount charged' for determination of taxable value - scope of Explanation (c) to Section 67 relating to modes of payment and book adjustments

Includability of free supplies in assessable value of taxable service - meaning of 'gross amount charged' for determination of taxable value - scope of Explanation (c) to Section 67 relating to modes of payment and book adjustments - Value of explosives supplied free by the service recipient is not includable in the assessable value of the taxable service for the period(s) under adjudication. - HELD THAT: - The Tribunal held that the taxable value must be determined by reference to the gross amount charged by the service provider to the service recipient and that goods or materials supplied free by the service recipient do not form part of that gross amount because no price is charged or amount received by the service provider in respect of such goods. Reliance was placed on the Supreme Court decision in Commissioner of Service Tax v. Bhayana Builders (2018), which interpreted the expression and Explanation (c) to Section 67 as addressing modes of payment and book adjustments and not as expanding the contract value to include free supplies. The Tribunal accepted the reasoning that Explanation (c) does not convert the value of goods supplied free of charge into a form of payment or create a book entry that would bring such value within 'gross amount charged', and that the value of free goods bears no necessary relation to the value of services actually contracted for or billed.

The value of the free supply of explosives by the service recipient is not includable in the taxable value; the impugned order to the contrary is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed: service tax cannot be levied by including the value of free supplies of explosives in the assessable value of the taxable service for the periods under dispute; the impugned order is set aside.

Refund of accumulated CENVAT credit on exported services - eligibility of CENVAT credit of Krishi Kalyan Cess (KKC) - registration status and ST-2 return as condition for taking CENVAT credit - scope of appellate review beyond Original Information/Order (OIO) - requirement of debiting CENVAT credit in ST-3 return for refund claim

Registration status and ST-2 return as condition for taking CENVAT credit - refund of accumulated CENVAT credit on exported services - Whether denial of refund on the ground that invoice address was not reflected in ST-2/registration is sustainable. - HELD THAT: - The Tribunal held that denial of refund on the ground of non-registration or that the invoice address was not reflected in ST-2 is not sustainable. The decision of the Hon'ble Karnataka High Court in mPortal India Wireless Solutions Pvt. Ltd. (as relied upon) and subsequent Tribunal precedents establish that registration is not a condition to take CENVAT credit under the CENVAT Credit Rules, 2004 and that credit is not restricted to services received after registration. Given these authorities and the appellant's production of ST-2 returns showing the address, the rejection on this basis was set aside.

Rejection of refund on the ground of address/registration not sustained; that part of the impugned order set aside and refund claim allowed on this ground.

Eligibility of CENVAT credit of Krishi Kalyan Cess (KKC) - requirement of debiting CENVAT credit in ST-3 return for refund claim - scope of appellate review beyond Original Information/Order (OIO) - Whether the CENVAT credit of Krishi Kalyan Cess is admissible for refund and whether the Commissioner (Appeals) could re-examine eligibility beyond the OIO when the Original Authority did not dispute eligibility. - HELD THAT: - The Tribunal found that KKC was eligible as CENVAT credit under the amended CENVAT Credit Rules, 2004 and the legislative intent reflected in the Finance Act, 2016 and Budget speech. The Original Authority had rejected refund only on the factual ground that the appellant had not debited KKC in ST-3 returns; however, the appellant produced ST-3 returns showing the debit, making the Original Authority's finding factually incorrect. Further, the Commissioner (Appeals) went beyond the scope of the OIO by re-examining the substantive eligibility of KKC though the Original Authority had not disputed eligibility; such an exercise was held to be unsustainable. Consequently the rejection of refund on KKC was set aside.

KKC credit held eligible; factual finding of non-debit in ST-3 rejected on record; Commissioner (Appeals) exceeded OIO and rejection on KKC set aside, refund allowed on this ground.

Final Conclusion: The impugned order rejecting the refund claim (partly on account of invoice address/registration and partly regarding KKC) was set aside and the appellant's appeal allowed; the Tribunal found registration not to be a pre-condition for credit, upheld eligibility of KKC credit, and noted that the Commissioner (Appeals) exceeded the scope of the OIO while re examining eligibility.

Composite contract - Commercial or Industrial Construction Services - taxability prior to 01.06.2007 under composite contracts - taxability after 01.06.2007 - liability of subcontractor for service tax - invocation of extended period of limitation for suppression

Composite contract - taxability prior to 01.06.2007 under composite contracts - Commercial or Industrial Construction Services - Whether the demand confirmed under Commercial or Industrial Construction Services can be sustained for the period prior to 01.06.2007. - HELD THAT: - The Tribunal found on the material on record that the contracts were composite in nature: although cement and steel were supplied by customers, the appellant used other goods and consumables (wood, sand, bricks and other items) for execution of piling works, as supported by VAT filings, a certificate from the Commercial Tax Officer and a Chartered Accountant's certificate showing purchases/consumables for the relevant years. Applying the principle in Larsen & Toubro, the Tribunal held that where a contract is composite and goods are substantially supplied/used by the service-provider, the activity falls outside taxable CICS for the period prior to 01.06.2007. Consequently the demand under CICS for the period prior to 01.06.2007 could not be sustained. [Paras 8]

Demand under CICS for the period prior to 01.06.2007 set aside as contracts held to be composite.

Taxability after 01.06.2007 - Commercial or Industrial Construction Services - Whether the demand confirmed under Commercial or Industrial Construction Services can be sustained for the period after 01.06.2007. - HELD THAT: - The Tribunal considered subsequent authority of the Tribunal in Real Value Promoters and the decision in P. Balakrishnan as being favourable to the appellant. Having found the contracts to be composite and having applied the cited Tribunal decisions for the post-01.06.2007 period, the Tribunal concluded that the demand for the period after 01.06.2007 also could not be sustained in the facts of this case. [Paras 8]

Demand under CICS for the period after 01.06.2007 held not sustainable on the authorities relied upon and set aside.

Liability of subcontractor for service tax - invocation of extended period of limitation for suppression - Whether the department's contention that the appellant, as a subcontractor, is liable and that the extended period was rightly invoked for suppression. - HELD THAT: - The Tribunal noted that a Larger Bench in Melange Developers held that a subcontractor may be liable to pay service tax. The Revenue relied on that and earlier decisions to contend the appellant's liability and suppression. However, the Tribunal found that because the services were held not taxable on merits (composite contracts), the Larger Bench decision on subcontractor liability did not assist the Revenue in sustaining the demand. Although the department invoked the extended period alleging suppression, the Tribunal's conclusion that the underlying demand itself could not be sustained meant that the invocation of the extended period could not stand to support the demand in this case. [Paras 4, 5, 9]

Subcontractor-liability and extended-period invocation did not salvage the demand; extended period not sustained in view of dismissal of the substantive demand.

Final Conclusion: After appreciation of evidence and authorities, the Tribunal set aside the impugned order and allowed the appeal, holding that the demand for service tax under Commercial or Industrial Construction Services for the period 10.09.2004 to 31.03.2008 (SCN period 10.09.2004 to November, 2007) could not be sustained as the contracts were composite and the authorities relied upon did not support the Revenue's case in the facts before the Tribunal.

Supply of Tangible Goods Service - Business Support Service - infrastructural support services - extended period of limitation

Supply of Tangible Goods Service - Business Support Service - infrastructural support services - Classification of licence fee charged under the dealership agreement as supply of tangible goods service rather than business support service. - HELD THAT: - The Tribunal examined the dealership agreement and the nature of facilities provided (land, buildings, tanks, pumps and outfits). The contractual terms preserve with the respondent the right to possess, maintain and remove the outfits, while the dealer has merely the right to use the outfits and premises subject to licence fee. The definition and scope of Business Support Service was analysed and found to be directed to infrastructural support for running an office, which is not the factual matrix here where facilities are provided for storage and supply of petroleum products. Reliance on the Board Circular clarifying Supply of Tangible Goods Service was applied: when goods or outfits fixed to earth are allowed to be used without transfer of possession and effective control, the activity attracts supply of tangible goods service. Applying that principle, the Tribunal held the arrangement is more akin to supply of tangible goods service and that there is no service in the nature of business support service in the transaction. [Paras 6, 8, 9]

The licence fee is properly classifiable as supply of tangible goods service and not as business support service; the Commissioner's conclusion on classification is upheld.

Extended period of limitation - interpretational issue - Validity of invoking the extended period of limitation for the show-cause notice demanding service tax from an earlier period. - HELD THAT: - The Tribunal observed that the department had taken inconsistent views in different proceedings regarding classification of the licence fee (variously treated as renting of immovable property, storage and warehousing, franchise, and supply of tangible goods), demonstrating that the matter was essentially an interpretational issue. In view of this long-standing acceptance by the department of tax paid under supply of tangible goods service and the inconsistent positions taken, invocation of the extended period could not be sustained. Consequently the show-cause notice failed on the ground of limitation. [Paras 7, 10]

Invocation of the extended period of limitation is unsustainable and the show-cause notice is barred on limitation grounds.

Final Conclusion: The appeal is dismissed. The Tribunal upholds the Commissioner's order that the licence fee is taxable as supply of tangible goods service and finds the demand based on earlier classification and extended period of limitation unsustainable.

CENVAT credit admissibility - renting of immovable property as input service - input service nexus with output service - partial allowance of credit on same invoice - proportional disallowance of CENVAT credit

CENVAT credit admissibility - partial allowance of credit on same invoice - renting of immovable property as input service - Whether CENVAT credit can be partly allowed and partly disallowed against the same invoice where the rented premises are partly used by the assessee and partly enjoyed by other companies for no consideration - HELD THAT: - The appellant had paid rent for the entire ground floor and claimed CENVAT credit on the service tax paid. Departmental audit found that portions of the rented premises were used by sister companies free of rent and therefore contended that only a proportionate part of the credit was admissible. The adjudicating authority allowed only one-third of the credit and disallowed the remainder; the first appellate authority upheld that view. The Tribunal examined whether CENVAT Credit Rules, 2004 permit allowing credit in part against the same invoice when an input service is used partly for the assessee's output and partly enjoyed by others. The Tribunal held that, although factually the service was not exclusively used by the assessee, there is no provision in the CENVAT Credit Rules, 2004 that authorises splitting a single invoice to allow credit for part and deny part. Consequently, the appellate order sustaining a proportional disallowance on that basis could not be sustained, and the appeal must be allowed on that legal ground. The Tribunal noted factual differences with precedents relied upon by the parties but rested the decision on the absence of a rule permitting partial allowance against the same invoice. [Paras 6]

Appeal allowed on the ground that CENVAT Credit Rules, 2004 do not provide for partly allowing and partly disallowing credit on the same invoice.

Final Conclusion: The appeal is allowed because the Tribunal found no provision in the CENVAT Credit Rules, 2004 for splitting credit on a single invoice; consequential relief, if any, to follow.

Condonation of delay - stay of recovery of disputed tax - remand for fresh adjudication on merits - pre-deposit condition under Section 35F of the Central Excise Act, 1944 - principles of natural justice - payment of part pre-deposit as basis for stay

Condonation of delay - Delay in filing the appeal of 197 days was condoned. - HELD THAT: - The Tribunal noted that there was a delay of 197 days in filing the appeal and, having considered the appellant's position and the intervening proceedings (including the High Court's order setting aside the Tribunal's dismissal for non-prosecution), the delay was condoned and the appeal was taken up for final decision. The finding is recorded and the appeal proceeds to be adjudicated on merits. [Paras 2]

Delay of 197 days condoned and appeal taken up for final disposal.

Stay of recovery of disputed tax - payment of part pre-deposit as basis for stay - remand for fresh adjudication on merits - principles of natural justice - pre-deposit condition under Section 35F of the Central Excise Act, 1944 - Whether recovery of the unpaid portion of the service tax demand should be stayed and the matter remanded to the first appellate authority for fresh adjudication. - HELD THAT: - The Tribunal examined the fact that the appellant had deposited part of the service tax demand (Rs. 1,03,672 out of Rs. 2,50,780, i.e. approximately 40%) but had not complied with the pre-deposit condition imposed by the Commissioner (Appeals) under the stay order framed in terms of Section 35F. Considering the substantial part-payment made by the appellant and treating that as reasonable, the Tribunal granted a stay of recovery of the remaining unpaid service tax (and stayed recovery of interest and penalties) and remanded the matter to the first appellate authority. The remand was directed for consideration on merits and for passing a reasoned order after following the principles of natural justice. [Paras 5]

Recovery of the unpaid portion of the tax, interest and penalties stayed; the matter remanded to the first appellate authority to decide on merits and pass a reasoned order after affording opportunity under natural justice.

Final Conclusion: The Tribunal condoned the delay of 197 days, stayed recovery of the unpaid portion of the service tax (and interest and penalties) in view of the substantial part payment, and remanded the matter to the first appellate authority for fresh adjudication on merits with a reasoned decision after observing principles of natural justice; appeal disposed accordingly.

Condonation of delay - proviso to Section 35 of the CEA, 1944 - service by pasting / ex parte service - receipt of order for computing limitation - effect of possession/closure on service - remand for decision on merits

Condonation of delay - proviso to Section 35 of the CEA, 1944 - receipt of order for computing limitation - Whether the delay in filing the appeal to the Commissioner (Appeals) was condonable. - HELD THAT: - The Tribunal found on the material on record that the appellant received the OIO on 21.11.2018 and filed the appeal on 18.02.2019. Section 35 requires filing within 60 days of receipt and the proviso permits the Commissioner (Appeals) to allow a further period of 30 days if sufficient cause is shown. The actual delay beyond the 60 day period was approximately 27 days, which falls within the condonable period under the proviso. The Tribunal also held that the decision in Singh Enterprises relied upon by the department was inapplicable because the premise of earlier valid service did not obtain in this case. On these findings the Tribunal held that the Commissioner (Appeals) erred in rejecting the appeal as time barred without condoning the delay. [Paras 6]

Delay of approximately 27 days in filing the appeal is condoned; the Commissioner (Appeals) should decide the appeal on merits.

Service by pasting / ex parte service - effect of possession/closure on service - receipt of order for computing limitation - Whether pasting the hearing notice / OIO on the notice board of the closed factory amounted to valid service on the appellant. - HELD THAT: - The Tribunal noted that the unit had been taken over by the bank in 2013 and was restored to the appellant only on 19.11.2018. The Original Authority recorded that the factory was closed and that a PH intimation letter dated 16.11.2016 was pasted on the notice board, but the panchnama dated 08.02.2017 was not placed on record. Given that the unit was not in the possession of the appellant during the period when the notice was pasted, the Tribunal held that such ex parte pasting did not constitute proper service in law. Consequently, the date of actual receipt (21.11.2018) governed the computation of limitation for filing the appeal. [Paras 6]

Pasting of notice on the closed unit's notice board did not amount to valid service; actual receipt date is operative.

Final Conclusion: Delay in filing the appeal before the Commissioner (Appeals) is condoned and the matter is remanded to the Commissioner (Appeals) for adjudication on merits; appeal allowed by way of remand.

Cenvat credit eligibility on inputs used for fabrication of capital goods - entitlement to credit established by binding precedent - consequences of denial of credit: interest and penalty

Cenvat credit eligibility on inputs used for fabrication of capital goods - entitlement to credit established by binding precedent - Entitlement to Cenvat credit on MS Angles, MS Beams, MS Channels and similar iron and steel products used in fabrication and installation of capital goods. - HELD THAT: - The Tribunal examined whether MS Angles, MS Beams, MS Channels and similar iron and steel products used in fabricating capital goods qualify for Cenvat credit. The adjudicatory authorities had disallowed credit and sought recovery though the appellant contended such items were used in fabrication of capital goods. The Tribunal relied on earlier decisions of this Tribunal and their affirmation by the jurisdictional High Court and the Apex Court, which have held that cement, TMT bars, steel tubes and similar iron and steel items used in fabrication of capital goods are eligible for Cenvat credit. In view of those binding precedents and the facts that these goods were used for fabrication of capital goods, the appellant was held entitled to the credit and the impugned denial set aside. [Paras 7, 8]

The appellant is entitled to Cenvat credit on the specified iron and steel items used in fabrication and installation of capital goods; the impugned order denying such credit is set aside.

Consequences of denial of credit: interest and penalty - Liability to interest and imposition of penalty consequent to the denial and recovery of Cenvat credit. - HELD THAT: - Since the primary denial of Cenvat credit was held unsustainable in view of binding precedents affirming eligibility, consequential demands for interest and penalties founded on the disallowance of such credit could not stand. The adjudication and appellate orders upholding recovery, interest and penalties were liable to be set aside as the foundational disallowance itself was reversed. [Paras 7, 8]

Demands of interest and penalties arising from the disallowed Cenvat credit fail consequentially and such orders are set aside.

Final Conclusion: Appeal allowed; impugned order set aside and consequential relief granted to the appellant in respect of entitlement to Cenvat credit and related demands of interest and penalty.

Eligibility of trade discounts for deduction - proof of passing on discounts to buyers - equalisation formula for quantification of discounts - reliance on Cost Accountant certificate and departmental verification

Eligibility of trade discounts for deduction - Discounts given by the principal manufacturer and passed on to buyers are allowable as deductions from assessable value. - HELD THAT: - The Tribunal found on review of the record that the respondents consistently sought provisional assessment and produced supporting documentation when final accounts were settled. The Commissioner (Appeals) examined the documents, including invoices, credit notes and related records, and concluded that the discounts were known to the parties prior to supply and were in fact passed on to customers. The department's contention that records were insufficient was rejected because the original authority had verified documents and the file was further scrutinised by the Assistant Director (Cost). Having found adequate evidence of discounts being passed on, the Tribunal held that such discounts fall within permissible deductions from value.

Allow the deduction of discounts as they were established to have been passed on to buyers.

Proof of passing on discounts to buyers - reliance on Cost Accountant certificate and departmental verification - The documentary evidence and expert verification produced by the respondents (including Cost Accountant certificate and verification by departmental cost expert) were sufficient to demonstrate that discounts had been passed on to buyers; the department's challenge to adequacy of proof was negatived. - HELD THAT: - The Tribunal recorded that the respondents furnished voluminous documents-sale invoices, credit notes, price lists, statements and methodology-responding to queries raised by the original authority. Besides the original authority's verification, scrutiny by the Assistant Director (Cost) was undertaken. The Commissioner (Appeals) accepted the Cost Accountant certificate and the departmental verification instead of requiring additional, separate expert opinions or fresh documentary burdensome proof. The department's allegation that the certificate lacked breakup and therefore was unreliable was not accepted in view of the wider documentary matrix and departmental scrutiny.

The evidence and expert verification on record were adequate to establish that discounts were passed on; departmental objections on adequacy of proof are rejected.

Equalisation formula for quantification of discounts - reliance on Cost Accountant certificate and departmental verification - Where discounts are established as having been passed on, their quantification can be determined by an equalisation/average formula based on Cost Accountant certification and accepted principles. - HELD THAT: - The Commissioner (Appeals) applied an equalisation methodology, supported by a Cost Accountant certificate and reliance on precedent permitting averaging methods for quantification. The Tribunal noted the Commissioner relied on authorities upholding the use of equalisation formulae (as affirmed by higher courts) and observed no bar to determining quantum on such basis when the underlying fact of discounts being passed on is established. The department's challenge to quantification methodology was not sustained given the accepted certification and departmental scrutiny.

Quantification of discounts on equalisation/average basis using the Cost Accountant certificate and related verification is permissible.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) finding that the discounts were admissible deductions and that their quantification by equalisation based on the Cost Accountant certificate and departmental verification was permissible; the departmental appeals are dismissed and cross objections disposed accordingly.

Short payment due to calculation error - duty payment default - Rule 8(3A) of Central Excise Rules 2002 - CENVAT Credit adjustment - adjustment of excess duty towards short-paid cess - penalty and interest for default

Short payment due to calculation error - Rule 8(3A) of Central Excise Rules 2002 - duty payment default - penalty and interest for default - Short payment of education cess and higher education cess caused by calculation/clerical error does not constitute a default under Rule 8(3A) where there is an excess balance in duty payments. - HELD THAT: - On scrutiny of the appellant's calculation sheet the Tribunal found that excise duty was paid in excess while education cess and higher education cess were short-paid due to a calculation error. In the absence of any evidence of deliberate default and given that sufficient balance was available (excess duty of the appellant), the Tribunal applied the principle in Essar Steel India Ltd and held that the proviso in Rule 8(3A) cannot be invoked for a mere clerical or computational mistake. The Tribunal reasoned that invocation of Rule 8(3A) presupposes a payment default and cannot be extended to situations where short payment results from bona fide calculation error and could have been remedied by internal adjustment had it been noticed earlier.

The short payment resulting from calculation error is not a default under Rule 8(3A); demand, interest and penalties founded on such default cannot be sustained.

CENVAT Credit adjustment - adjustment of excess duty towards short-paid cess - Excess excise duty paid may be adjusted towards the short-paid education cess and higher education cess; if not yet adjusted, the department should permit such adjustment. - HELD THAT: - The Tribunal observed that the appellant had paid excess excise duty during the relevant period and, upon identification of the short payment of cess, informed the department seeking adjustment of the excess duty towards the arrears of education cess and higher education cess. The Tribunal held that where excess duty exists and short payment of cess is due to calculation error, the excess paid duty ought to be adjusted to make good the short-paid cess. The department's contention that no provision permits such adjustment was not accepted in the facts of this case where the short payment was not deliberate.

Excess duty shall be adjusted towards the short-paid cess; the department is directed to allow such adjustment if not already effected.

Final Conclusion: The Tribunal set aside the impugned order confirming demand, interest and penalties; the appeal is allowed, with directions for adjustment of excess duty towards the short-paid education cess and higher education cess and grant of consequential reliefs.

Deemed inter-state sale arising from works contract - applicability of Central Sales Tax Act provisions on inter-state sale (Sections 3-5) - interpretation of Rule 9(1)(e) - privity of contract not determinative for deduction - remand to Tribunal for fresh consideration

Deemed inter-state sale arising from works contract - interpretation of Rule 9(1)(e) - privity of contract not determinative for deduction - Claim for deduction under Section 3-F(2)(b)(i) of the U.P. Trade Tax Act read with the Central Sales Tax Act insofar as goods imported for execution of works contracts are concerned - final determination remitted for reconsideration - HELD THAT: - The Tribunal rejected the assessee's claim on the premise that the benefit of the Central Act provisions and the corresponding Rule could be invoked only where the works contract was executed outside U.P. and goods were exported from inside U.P. This Court, applying the principle laid down in M/s Comfort Systems v. Commissioner Commercial Tax, U.P., observed that Rule 9(1)(e) and the Central Act must be read to cover transactions where the movement of goods from outside the State occurs solely by reason of a pre-existing works contract, producing a deemed inter-state sale even if there is no privity between the contractee and the original seller. The Tribunal applied the converse approach; therefore its reasoning could not be sustained. The Court did not decide the factual question whether the purchases were independent of the works contracts or whether there were two separate sales; instead the matter was remitted to the Tribunal to re-adjudicate the claim in light of the correct legal principle, permitting the assessee to rely on the existing record and law.

Tribunal's conclusion rejecting the deduction was set aside to the extent that it applied the opposite legal principle; matter remitted to the Tribunal for fresh decision in accordance with the legal principle in M/s Comfort Systems.

Final Conclusion: The Tribunal's order rejecting the deduction claim is not sustainable in law on the principle applied in M/s Comfort Systems; the matter is remitted to the Tribunal for fresh consideration of the claim and evidence in accordance with that principle, and the framed question of law is left unanswered.

Refund of excess input tax credit - interest on delayed refund - opportunity of being heard - decision in accordance with law, rules, regulations, Government policy

Refund of excess input tax credit - interest on delayed refund - opportunity of being heard - decision in accordance with law, rules, regulations, Government policy - Direction to the respondent authority to decide the petitioner's pending refund claim arising from excess input tax credit, with interest, after affording an opportunity of being heard and in accordance with law. - HELD THAT: - The petitioner filed a writ seeking refund for the quarter 1st January 2014 to 31st March 2014 on the ground that input tax credit exceeded output tax liability and had applied for refund which remained pending. The Court did not adjudicate the substantive merits of the refund claim; instead it directed the concerned respondent authority to decide the petitioner's refund claim with interest in accordance with applicable law, rules, regulations and Government policy, taking into account the evidence on record and after giving the petitioner an adequate opportunity of being heard. The Court specified a reasonable timeline for compliance to ensure expeditious disposal but left assessment of entitlement and computation of interest to the respondent's decision-making under the governing legal framework. [Paras 2, 3]

Respondent directed to decide the pending refund claim with interest, after affording an opportunity of being heard and in accordance with law, preferably within eight weeks; writ petition disposed.

Final Conclusion: Writ petition disposed by directing the respondent authority to decide the petitioner's pending refund claim arising from excess input tax credit for the quarter 1st January 2014 to 31st March 2014, with interest and after giving an adequate opportunity of hearing, preferably within eight weeks.

Set-off/adjustment of entry tax against VAT paid - application of tax reduction under Section 4 of the Entry Tax Act - avoidance of double taxation - only one tax payable - remand for correlation exercise and opportunity of personal hearing

Set-off/adjustment of entry tax against VAT paid - application of tax reduction under Section 4 of the Entry Tax Act - avoidance of double taxation - only one tax payable - Adjustment of entry tax liability against VAT already paid for vehicles purchased interstate. - HELD THAT: - The Court applied the precedent of Kasi and Sethu (followed in TVS Motor Company Limited) and its affirmation by the Division Bench, holding that where VAT at the point of sale has been discharged, the Assessing Officer must consider adjustment of entry tax liability out of tax already paid under the TNVAT Act in accordance with the tax-reduction mechanism under Section 4 of the Entry Tax Act. The Court recorded that the legal scheme contemplates payment of one tax and, therefore, relief under the earlier decisions is available to the petitioner subject to verification that VAT was indeed paid in respect of the vehicles in question. [Paras 7, 8]

Petitioner entitled to adjustment of entry tax from VAT paid, in conformity with the cited precedents.

Remand for correlation exercise and opportunity of personal hearing - Scope and procedure for giving effect to the adjustment - remand to Assessing Officer to verify and correlate transactions and to afford personal hearing. - HELD THAT: - Because 141 vehicles are involved, the Court held that the Assessing Officer must undertake a correlation exercise to verify that VAT was paid for each vehicle claimed and to determine the extent of adjustment permissible. The Court observed that the petitioner must place supporting documents and that the reassessment must be done with adequate opportunity of personal hearing. Consequently, the impugned assessment in respect of entry tax and consequential penalty was set aside in part and remitted for fresh exercise limited to correlation and re-assessment in the light of the precedents. [Paras 8, 9]

Assessment set aside in part and remitted to the Assessing Officer for correlation, verification and fresh assessment after giving personal hearing.

Final Conclusion: Writ petition allowed in part; impugned assessment set aside insofar as entry tax and consequential penalty on the interstate purchases are concerned, and the matter is remitted to the Assessing Officer to redo assessment after correlation and giving the petitioner an opportunity of personal hearing, to be completed within six weeks.

Assessment of escaped turnover - scope of Section 16(1)(b) of the Tamil Nadu General Sales Tax Act - reassessment not confined to change of opinion - distinction from Income-tax 'reason to believe' test - concessional rate under Section 3(5) and the Eighth Schedule - effect of Form XVII declarations and seller's liability

Assessment of escaped turnover - scope of Section 16(1)(b) of the Tamil Nadu General Sales Tax Act - reassessment not confined to change of opinion - distinction from Income-tax 'reason to believe' test - Validity of reassessment proceedings initiated under Section 16(1)(b) of the TNGST Act where earlier assessments had accepted concessional rate of tax - HELD THAT: - The Court held that Section 16(1)(b) of the Tamil Nadu General Sales Tax Act confers a wide power to reassess turnover 'for any reason' where turnover has been assessed at a rate lower than that at which it is assessable. The assessing authority need only be of the opinion that turnover liable to tax has escaped assessment; the provision does not import the fetter of a 'reason to believe' test as found in the Income-tax enactment. Prior Division Bench decisions of this Court, including those cited, establish that reassessment under the TNGST Act may be initiated even where the turnover was previously disclosed or assessed at a concessional rate, and that such power is not confined to cases of deliberate concealment but extends to erroneous understanding of the nature of transactions or law. Reliance on the U.P. Trade Tax Act authority invoking 'reason to believe' was therefore inapposite. For these reasons the challenge to jurisdiction was rejected and the reassessment proceedings were held to be within statutory competence. [Paras 6, 7, 8, 9, 11]

The reassessment under Section 16(1)(b) was within the assessing authority's jurisdiction and not invalid merely because it revisited an earlier assessment where a concessional rate had been applied.

Concessional rate under Section 3(5) and the Eighth Schedule - effect of Form XVII declarations and seller's liability - Whether the petitioner was entitled to concessional rate under Section 3(5) in respect of FGRP supplies and whether denial of benefit and assessment at regular rate could be sustained - HELD THAT: - On the merits the Court found that the goods in question (FGRP) fall within the ambit of the Eighth Schedule (which includes machineries, parts and accessories) and that there was no dispute that purchasers were industrial manufacturers who had furnished Form XVII declarations. The Assessing Officer's conclusion that Section 3(5) applied only to 'capital goods' or that the petitioner's cited decisions were inapplicable was incorrect. The petitioner's assertion that the purchasers used the goods in manufacturing activity was raised and not controverted by the assessing authority. Further, the contention that any inquiry into the purchasers' use is incumbent on the seller was rejected: precedent of this Court confirms that how the purchasing dealer dealt with the goods is not the seller's concern and liability for misuse of Form XVII lies on the purchaser. Applying these legal propositions, the denial of concessional rate and reassessment at the higher rate were unsustainable. [Paras 22, 23, 24, 25, 26]

The impugned orders denying concessional rate under Section 3(5) and assessing at the regular rate were quashed; the petitioner was entitled to the concessional rate claimed and the assessments were set aside.

Final Conclusion: The writ petitions were allowed: the challenge to jurisdiction of reassessment under Section 16(1)(b) was rejected, but on the merits the Assessing Officer's denial of concessional rate under Section 3(5) (Eighth Schedule) and related assessments for 2001-02 and 2002-03 were quashed, and the petitioner retained entitlement to the concessional rate evidenced by Form XVII declarations.

Forfeiture of security deposit - termination of contract - detention of equipments as security - concurrent findings of arbitrator and courts - challenge under Section 34 of the Arbitration and Conciliation Act, 1996

Forfeiture of security deposit - termination of contract - challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - The forfeiture of the security deposit consequent to termination of the contract was justified and not liable to be set aside. - HELD THAT: - The Court upheld the concurrent findings of the arbitrator and the courts below that the appellant failed to perform its contractual obligation of transporting the export container to the destination port with due diligence, which resulted in loss of export schedule and third party claims. The respondent's justification for withholding and forfeiting the security deposit - having regard to the heavy claim by the exporter and the bank guarantee furnished to secure release of the container - was held to fall within the contractual terms and to be supportable on the record. The High Court's affirmation of the arbitrator's conclusion that forfeiture was justified was not interfered with. [Paras 11, 15]

Forfeiture of the security deposit upheld; objection under Section 34 dismissed as to this relief.

Detention of equipments as security - concurrent findings of arbitrator and courts - challenge under Section 34 of the Arbitration and Conciliation Act, 1996 - The detention/forfeiture of the appellant's fork lift and hand trolleys was justified and not arbitrary or beyond the contract. - HELD THAT: - The Court accepted the concurrent finding that in view of the appellant's failure and the consequential claims and expenditure incurred by the respondent (including furnishing of a bank guarantee for release of the container), detention of the equipments pursuant to the contract (Clause 5(g) of the tender conditions) was permissible. The arbitrator had considered the contractual right to retain equipments as security and the courts below correctly declined to allow the appellant's counter claims for their release or damages. [Paras 13, 15]

Detention/forfeiture of the fork lift and hand trolleys upheld; related counter claims disallowed.

Final Conclusion: The concurrent findings of the arbitrator and the courts below that the contract was validly terminated and that forfeiture of the security deposit and detention of the equipments were justified are affirmed; the appeal is dismissed.

Appointment of arbitrator under Section 11 of the Arbitration & Conciliation Act, 1996 - Modification of agreed arbitral tribunal by party consent to a sole arbitrator - Independence and impartiality declarations under Section 12 - Time-limits for arbitral proceedings under Section 29A - Seat of arbitration and territorial nexus - Arbitrator's fees in accordance with the Fourth Schedule

Appointment of arbitrator under Section 11 of the Arbitration & Conciliation Act, 1996 - Modification of agreed arbitral tribunal by party consent to a sole arbitrator - Independence and impartiality declarations under Section 12 - Time-limits for arbitral proceedings under Section 29A - Appointment of a Sole Arbitrator by the Court in place of a three-member tribunal and directions to the Arbitrator regarding declarations of independence, impartiality and time for completion of proceedings. - HELD THAT: - The petition under Section 11 seeking court appointment of an arbitrator on behalf of Respondent No.1 was entertained. Although the contract provided for a three-member arbitral tribunal, all parties, through their counsel, jointly requested that the disputes be adjudicated by a Sole Arbitrator. With that consent the Court exercised its power under Section 11 to appoint Mr. Justice (Retd.) A. M. Sapre as Sole Arbitrator. The appointment was made subject to the arbitrator executing the statutory declarations required by Section 12 concerning independence and impartiality and confirming ability to devote sufficient time. The Court also directed that the arbitrator should complete the proceedings within the time-limit specified under Section 29A, and expressly requested completion within a twelve month period. [Paras 4, 5]

Mr. Justice (Retd.) A. M. Sapre appointed as Sole Arbitrator, subject to Section 12 declarations and to complete the arbitration within the Section 29A time-limit (12 months).

Seat of arbitration and territorial nexus - Arbitrator's fees in accordance with the Fourth Schedule - The Seat of arbitration and payment of the Arbitrator's fees were directed by the Court in accordance with the arbitration clause and statutory schedule. - HELD THAT: - The arbitration clause specified New Delhi, India as the seat; the Court directed that the arbitration be conducted at New Delhi as the Seat of arbitration. The Court further directed that the Arbitrator be paid fees in accordance with the Fourth Schedule of the Arbitration and Conciliation Act, 1996 as amended. Ancillary administrative directions (communication of the order to the appointed arbitrator and the date for appearance) were given to facilitate commencement of the proceedings. [Paras 6, 7, 8]

Arbitration to be conducted at New Delhi as the Seat; arbitrator's fees to follow the Fourth Schedule; parties to appear before the Arbitrator on the directed date.

Final Conclusion: Application under Section 11 allowed by consenting modification of the arbitration clause: a Sole Arbitrator (Mr. Justice (Retd.) A. M. Sapre) is appointed subject to Section 12 declarations and completion within the Section 29A period; the Seat is New Delhi and fees are payable as per the Fourth Schedule; matter disposed to enable arbitration to proceed.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and standard of proof (preponderance of probabilities) - Offence under Section 138 of the Negotiable Instruments Act - dishonour of cheque for insufficiency of funds - Probable defence: cheque procured under police pressure / cheque given as security - Proof of legally enforceable debt or liability - Effect of failure to reply to statutory notice

Offence under Section 138 of the Negotiable Instruments Act - dishonour of cheque for insufficiency of funds - Proof of legally enforceable debt or liability - Accused was rightly convicted for commission of offence punishable under Section 138 of the Negotiable Instruments Act - HELD THAT: - Trial evidence established issuance of cheque (Ext. C-3) by the accused, presentation and return of the cheque for insufficient funds, service of statutory notice and the complainant's failure to receive payment. The complainant proved execution of affidavits and related documents showing the accused undertook liability to pay the amount. The trial and appellate courts considered the material and found all ingredients of Section 138 to be proved. This Court, on scrutiny of the record and the reasoning in the courts below, found no illegality or infirmity in those conclusions and accepted that the accused was legally bound to pay and failed to do so despite notice. [Paras 3, 13, 17, 18, 30]

Conviction under Section 138 NI Act was correctly recorded by the courts below and is upheld.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttable presumption and standard of proof (preponderance of probabilities) - Probable defence: cheque procured under police pressure / cheque given as security - Effect of failure to reply to statutory notice - The statutory presumption under Sections 118A and 139 was not rebutted by the accused; the defences raised were not established - HELD THAT: - The court applied the well settled principle that once execution of the cheque is admitted, Section 139 raises a rebuttable presumption that it was issued for discharge of a debt or liability and the accused must raise a probable defence on the preponderance of probabilities. The accused did not lead positive evidence to substantiate pleas that the cheque was procured under police pressure or issued only as security, nor did he reply to the statutory notice. Mere assertions in statement under Section 313 or cross examination attempts without corroborative evidence were held insufficient to rebut the presumption. Earlier authorities and the correct standard of proof were applied to reject the accused's contentions. [Paras 20, 21, 23, 24, 29]

Presumption under Ss.118A and 139 stood unrebutted; accused's defences were rejected.

Rebuttable presumption and standard of proof (preponderance of probabilities) - Proof of legally enforceable debt or liability - Argument that complainant lacked capacity to lend money did not raise a probable defence on the record - HELD THAT: - The court noted the law that an accused can raise a probable defence as to the existence of a legally enforceable debt or the payee's capacity, relying even on materials produced by the complainant. However, on the facts the accused failed to establish such a defence or to shift the evidentiary burden to the complainant. The material on record did not probabilise the accused's contention as required by the settled test, and the courts below correctly treated the statutory presumption as unrebutted. [Paras 25, 26, 28]

Contention regarding complainant's capacity did not constitute a successful probable defence and was rejected.

Effect of failure to reply to statutory notice - Offence under Section 138 of the Negotiable Instruments Act - dishonour of cheque for insufficiency of funds - Failure of accused to make payment after notice and to reply to statutory notice supported criminal liability - HELD THAT: - The court recorded that the accused received statutory notice and did not make payment within the stipulated period nor file any reply, which indicated acceptance of liability and reinforced the inference of commission of the offence. This factual posture, coupled with unrebutted evidence of dishonour, justified maintenance of conviction and sentence. [Paras 2, 18, 23]

Non-response to notice and non-payment supported the conclusion of criminal liability under Section 138.

Conviction and sentence - appellate review - High Court found no grounds to interfere with the concurrent findings of the trial and appellate courts and dismissed the revision petition - HELD THAT: - This Court examined the impugned judgments and the evidence. Finding that both lower courts had dealt with the matter meticulously and that there was no legal error or misappreciation of evidence warranting interference, the High Court upheld the conviction and sentence. The Court also recorded the accused's multiple opportunities for settlement and partial payments but observed the accused's failure to satisfy the balance amount. [Paras 6, 12, 30, 31]

Revision petition dismissed; judgments of conviction and sentence upheld and directions issued for surrender and cancellation of bail.

Final Conclusion: Revision petition dismissed. Concurrent judgments of conviction and sentence under Section 138 of the Negotiable Instruments Act are upheld; statutory presumption under Ss.118A/139 remained unrebutted and accused's defences were rejected. Accused directed to surrender to serve sentence; pending applications disposed and bail bonds cancelled.

Prosecution under the Motor Vehicles Act alongside prosecution under the Indian Penal Code - special law versus general law - application of Section 26 of the General Clauses Act regarding offences punishable under two or more enactments - compoundability and summary disposal under the Motor Vehicles Act - proportionality of punishment - generalia specialibus non derogant

Prosecution under the Motor Vehicles Act alongside prosecution under the Indian Penal Code - special law versus general law - application of Section 26 of the General Clauses Act regarding offences punishable under two or more enactments - Whether prosecution of road traffic/motor vehicle offences can be carried out under the IPC in addition to proceedings under the M.V. Act, and whether the Gauhati High Court was correct in directing prosecution only under the M.V. Act - HELD THAT: - The Court held that there is no conflict between the IPC and the M.V. Act because both statutes operate in different spheres and create independent offences with distinct ingredients and penal consequences. The maxim that a special law displaces a general law (generalia specialibus non derogant) has no application to bar prosecution under the IPC for offences arising from motor vehicle accidents. Section 26 of the General Clauses Act permits prosecution and conviction under two enactments for the same act, the only prohibition being double punishment for the same offence; hence the High Court's categorical direction excluding IPC prosecution was unsustainable. The Court relied on authority and precedent to underscore that an act may attract liability under both a special enactment and the IPC, and set aside the High Court's prohibition accordingly. [Paras 6, 8, 9, 13, 17]

The High Court's directions that road traffic offences shall be prosecuted only under the M.V. Act and that prosecution under the IPC is without sanction of law are set aside; prosecution may lie under both statutes where maintainable.

Compoundability and summary disposal under the Motor Vehicles Act - proportionality of punishment - Whether the summary/compoundable nature and limited penalties under the M.V. Act require that prosecutions for injuries or death in motor accidents cannot be pursued under the IPC - HELD THAT: - The Court observed that Chapter XIII of the M.V. Act provides for summary procedure and compoundability under Section 208, and that several offences under the IPC (e.g., culpable homicide, causing death by negligence, causing hurt/grievous hurt) are non-compoundable and carry stiffer punishments proportionate to the gravity of harm caused. If the M.V. Act were to wholly displace the IPC, offences such as culpable homicide not amounting to murder or causing grievous hurt could become compoundable or be met merely with nominal fines-an outcome inconsistent with principles of proportionality and deterrence. The Court emphasised the need for appropriate punishment under the IPC in serious cases to serve deterrence and to reflect proportionality between crime and punishment, and therefore rejected the High Court's view that Cr.P.C. proceedings must succumb to the M.V. Act. [Paras 5, 10, 11, 12, 16]

The summary and compoundable nature of certain M.V. Act offences does not preclude prosecution under the IPC in cases warranting criminal liability and stricter punishment; the High Court's contrary conclusion is set aside.

Final Conclusion: The appeals are allowed: the Gauhati High Court's directions to prosecute motor vehicle offences only under the M.V. Act and to exclude IPC prosecution are quashed; offences arising from road accidents may be prosecuted under the IPC in addition to proceedings under the M.V. Act where maintainable, subject to the bar against double punishment.

Interim injunction - status quo - restraint on removal of hoardings and displayed advertisements - adjournment for further instructions

Interim injunction - restraint on removal of hoardings and displayed advertisements - status quo - Interim restraint was granted preventing any action to remove the hoardings and displayed advertisements by the petitioners under the agreement until the next date of hearing. - HELD THAT: - The Court granted an interim protective order while the respondent sought time for further instructions. The matter was adjourned to a specified date, and in the interim the Court directed that no exercise for removal of the hoardings and displayed advertisements at public places by the petitioners under the agreement shall take place. This preserves the status quo pending further consideration on the adjourned date.

Matter adjourned; interim order restraining removal of hoardings and displayed advertisements by the petitioners until the next date of hearing was issued.

Final Conclusion: The petition was adjourned to 05.11.2019 and an interim order was made maintaining the status quo by restraining any removal of the hoardings and displayed advertisements by the petitioners under the agreement until that date.

Anticipatory bail - regular bail - non-arrest direction pending bail application - consideration of bail by the trial court - conditions for bail under Section 212(6) of the Companies Act, 2013 - serious economic offences and grant of bail - advanced age and humanitarian grounds in bail

Anticipatory bail - non-arrest direction pending bail application - advanced age and humanitarian grounds in bail - Interim protection from arrest granted for a limited period and anticipatory bail applications allowed subject to exceptions. - HELD THAT: - The Court declined to decide the merits of the rival contentions and observed that the maintainability and statutory conditions would be examined by the trial court. Having regard to the peculiar facts - notably that the petitioner Shri Brij Bhushan is 82 years old, that neither petitioner was arrested during investigation, and that Smt. Ritu Singal is a woman member of the family controlling the business - the Court directed that the petitioners shall appear before the trial court on the fixed date and, if the trial court declines regular bail, such order shall not be given effect to for seven days, during which period the petitioners shall not be arrested. The order was expressly confined to the peculiar facts and was made without adjudicating rival contentions or laying down precedent. [Paras 6, 7, 8, 9]

Petitioners granted interim protection from arrest for seven days after any adverse order on regular bail; anticipatory bail applications allowed subject to all just exceptions and without prejudice to trial court's adjudication.

Consideration of bail by the trial court - regular bail - conditions for bail under Section 212(6) of the Companies Act, 2013 - serious economic offences and grant of bail - Whether the petitioners' bail applications should be finally considered by the trial court and on what footing the Delhi High Court would intervene. - HELD THAT: - The Court declined to examine the respondent's contentions that anticipatory bail is maintainable only during investigation, that Section 212(6) prescribes specific conditions requiring a conclusion that there are reasonable grounds to hold the accused have not committed the offence, and that serious economic offences weigh against bail. Those contentions were left to be considered by the Special Judge at the time of hearing the petitioners' applications for regular bail. The High Court recorded that it found no reason to doubt that the trial court will give proper consideration to the applications and clarified that parties remain free to canvass all contentions before the trial court. [Paras 5, 6, 10]

The trial court is to consider the petitioners' applications for regular bail on merits, including the statutory tests under Section 212(6) of the Companies Act, 2013; the High Court did not decide those contentions and will not preclude full consideration by the trial court.

Final Conclusion: The High Court granted limited interim protection from arrest (seven days' non-arrest period following any adverse order on regular bail) and disposed of the anticipatory bail petitions subject to exceptions, while refraining from adjudicating the substantive legal contentions and directing that the trial court shall consider the regular bail applications on their merits.